Multi-utility token model
One-token models or two-token models have been a hot topic in the design of economic systems or tokenomics for crypto games - which I prefer to call "crypto games" rather than "web3 games," as the latter term does not describe the characteristics of the games - for a while now. A tweet suggesting a model called "no token model" for web3 games ('1 token model? 2 token model? How about a no token model for web3 games!') got me thinking about how a traditional game designer might interpret a no token model, and it seems to be closer to what is called a multi-utility token model.
Personally, after Axie Infinity, I thought it was fine to just create two tokens directly linked to the blockchain for game projects and use them as utility tokens and governance tokens respectively. This approach has already had successful cases in the market, so there was no need to think deeply about it. However, now is the time to think deeply about it. It is not a matter of how many tokens to link to the game, but fundamentally, we must consider whether it is necessary to directly link tokens to the blockchain in the game itself.
A utility token can be called a "diamond." Diamonds correspond to one-to-one. Diamonds can be exchanged with fiat currency in an in-game marketplace. On the other hand, diamonds cannot be exchanged for fiat currency. Most games strictly control the opposite direction of the trade to comply with South Korean law, so they must control the opposite direction of the exchange. Diamonds can be exchanged for other resources in the game. Resources that players produce themselves can be exchanged through a marketplace that rises, or they can be exchanged for in-game currency or "gold," which is a term that is more familiar to us, in the in-game marketplace. Still, most games strictly control the opposite direction of the trade and this feature is an important part that maintains the traditional game's economic system.
There is no counterpart to governance tokens in traditional games. Crypto games provide a way for game users - distinguished from players - to participate in major decision-making of the game. Governance tokens are used as a means to participate in major decision-making of the game. They can be compared to voting rights in the real world. Crypto games that adopt governance tokens aim to reduce uncertainty about inflation by limiting the total issuance of governance tokens and creating value from the limited issuance itself. They also mainly allow investors to acquire governance tokens.
In this structure, the problems that arise are well-known: the actual in-game players and investors may have different goals, and the players' desires may not be reflected in major decision-making in the game. Traditional games have allowed players to voice their opinions through various means and have had those opinions influence future updates to the game. However, Crypto games that adopt separate governance tokens, can only be influenced by updates through the possession of governance tokens, which means that decision-making can occur in a direction that is unrelated to the wishes of the players. In theory, governance token holders should make decisions from a long-term, player-centered perspective, but there is a possibility that this may not always be the case in practice.
I cannot agree with the statement in the tweet thread that mentioned in the perspective that it is not possible to optimize for multiple goals with just one token. However, I do agree that the Two-Token model did not fail on its own, but rather that the entire economy was unsustainable. However, the explanations listed above do not provide a solid basis for the claim that it is not possible to optimize for multiple goals with just one token. There are still no clear criteria for deciding which token model to adopt in Crypto games, and there are no clear examples of cases where a token model does not only work in a bull market.
Here, Xe propose the No-Token model. The No-Token model is a system in which no currency is integrated into the blockchain that is applied to the game. It is similar to the economic system of traditional games that have been described earlier, in which diamonds, gold, and resources are circulated within the game, and resources are issued through exchange with fiat currency outside of the game. Diamonds can be exchanged for gold and resources, and gold can also be exchanged for resources, but the opposite direction of exchange is restricted. Here, Xe propose the composition of fiat currency - referred to as off-chain currency - and NFT resources that can be used on the blockchain that is integrated into the game.
The game can still control the economy through the issuance and burning of in-game currency. When designing an economic system that directly uses tokens linked to the blockchain in the game, the challenge is to make the in-game economic system work smoothly, even in situations where transactions on the blockchain, which the game cannot control, have a direct impact on the game. It may be theoretically possible, but it is likely to easily break down in practice. Therefore, if tokens linked to the blockchain are made to enter the game through a one-way exchange stage like that between fiat currency and diamonds, it will be possible to apply the same method of designing economic systems for traditional games, using the economic system design know-how accumulated over the past 20 years. From the perspective of traditional games, this is not a problem, but the player's and investor's preferences are not divided at the token level, so the possibility of playing to obtain tokens or short-term decision-making for profit is reduced.
From the perspective of Crypto games, players can still own their investment in the game through the blockchain by tokenizing in-game resources as NFTs. Before being issued as NFTs, in-game resources have no relation to the blockchain, so they do not require a wallet and do not complicate onboarding. Players also do not receive a direct impact from the inflation of fiat currency. Of course, there is a possibility of indirect impact if the price of NFTs decreases. However, when tokens linked to the blockchain are directly used in the game, the in-game economy does not receive a direct impact from external inflation, and it is expected to function the same as before at least within the game. Finally, the need to manage tokens linked to the blockchain is eliminated, making them relatively free from regulation issues.
Although the term "no token model" is somewhat biased compared to the "on-token model" or "two-token model," I think it is more accurate to consider it a "multi-utility token." A true "no-token model" is the same as a traditional game. When tokenizing in-game resources as NFTs, it is important to note that the "T" in NFT still stands for "token." Various in-game resources remain as in-game resources when issued, but can be converted to NFTs and traded through the blockchain when players desire. This token then affects the economy by returning to the game through the conversion process, so it can be correlated to the token in a traditional crypto game. Therefore, this must be defined as a multi-utility token model where in-game entry and exit are slightly restricted.
Once an asset has been issued as an NFT, there is a high possibility that it will not be immediately burned upon returning to the game due to the possibility of technical problems. Some games have experienced technical issues when bringing blockchain assets into the game. Therefore, recently, instead of bringing blockchain assets into the game, in-game assets and NFTs that represent the same assets are checked in the game, and the in-game assets are used immediately while the NFT assets on the blockchain are burned through smart contracts. Therefore, as the game service continues, the NFT assets may gradually increase in quantity.
The so-called multi-utility token model will not have a clear advantage compared to the previous one-token or two-token models. However, there is the possibility that the negative perception towards directly using utility tokens on the blockchain within the game can be reduced relatively when compared to directly collecting resources in the game, and this may allow for more active utilization of the traditional game's sewer mechanics.