Call the orderlies! Grandfather forgot to take the pills again and is starting to get bored!
If you count the number of mentions of the word "pyramid" in our chats CGP, and multiply this by kilometers, then most likely it would be possible to go around the globe and more than 1 time.
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Let's understand
What is the "Pyramid"? By a pyramid, users mean a financial pyramid or Ponzi scheme, which is a system for providing income to members of the structure by constantly attracting funds from new members: income to the first participants in the pyramid is paid at the expense of the subsequent ones. In most cases, the true source of income is hidden, instead a fictitious or insignificant one is declared. It is the substitution or hiding of information that is fraud.
At this point, I propose to linger and introduce one more concept - “Financial Bubble”.
What is the difference between a financial bubble and a pyramid?
A financial bubble is a significant deviation of the price of an asset from its fair value. As a rule, the appearance of a bubble is characterized by a hype, as a result of which the price of an asset rises significantly, which, in turn, causes a further increase in demand. An additional factor for price inflation can be both overstated expectations and inaccurate data. Bubbles are often found in emerging and low-liquid markets. They can both inflate and deflate cyclically.
Everything is like in the hot potato game. You need to have time to warm your hands while holding a potato, then transfer the risky asset to another at a higher price until the music ends (the asset has not collapsed). Due to constant purchase and sale, the asset gains in value. And at one point the buyer ends up, but then you yourself know what ...
A financial bubble is a combination of circumstances and market conditions. It does not have any connection to specific people, except for the general mass of participants in transactions. What not to say about the piraMMMids!
In the pyramid, everything is tied to specific people, and in the vast majority of pyramids there is the principle of network marketing. Unlike a financial bubble in a pyramid, each participant is not just a buyer, but he is also a direct participant in the system. Her link. The task of which is to get infected with an idea and infect others and thereby make a profit. It can be a referral system, an affiliate program, word of mouth and stuff like that. The main thing is to bring more people and then you can earn even more for bread. In a financial bubble, you buy cheaper on the basis of selling at a higher price. Does this sound like cryptogaming? This can be partly present in games.
In short, the financial bubble is all about trade (exchange) and most often in inefficient markets. The pyramid is about distribution funds under the guise of economic activity.
And now about the economy
We touched on distribution and exchange separately in the discussion of the financial bubble and the pyramid, but the real economy is also characterized by consumption and production.
And now let's try to extrapolate these things to crypto games and the real world, remember which of these is present and in which games. Some of the things described may be inaccurate due to comparisons and differences between the digital world and the real one, but economic mechanisms do have a lot in common in their essence. The assumptions about the development of the industry will also be described. You may have a different perspective on this. Hope for understanding.
The economy is the result of the actions of people (characters). The starting conditions for many economies of the countries of the world were approximately the same: There is some valuable resource (tokens). These lands are inhabited (NFT sale and world creation by developers), or these lands have already been inhabited.
The first settlers are motivated to extract (mine) this resource. Then there is production (crafting) and exchange (market for NFT, tokens or other game resources and assets). It is important that there is an element of consumption in the economy. One important aspect that many game developers overlook. Indeed, in the real economy it is one of the driving factors of progress and inflation control. So, in some crypto games, tokens are burned during the breeding process. Or tokens are needed to level up skills. And that's good practice. In the process of developing individuals (gaining skills, experience, pumping), there is a need to protect their economic interests. Wars arise (PvP), clans, guilds and organizations (DAO) are formed. Employees are hired for such organizations within the games. A real economy is being built. But this is the case in ideal and successful projects. Most projects are not like that.
So why is it that only a few crypto games live more than 6 months?
- Malicious intent of developers. The task is to sell tokens, either to retail investors or to large ones, and in order to gain a large number of supporters, most of the funds are allocated for token sales (split into several sales) and NFTs are also sold from above, and allocations are mainly for the needs of the team;
- Inefficient economy. Game design problem. Lack of professionalism. Some crypto games are deprived of an effective mechanism for the operation of these 4 components of the economy: Production, Distribution, Exchange, Consumption.
Here you should ask yourself: "What makes an economic system sustainable?" If you do not go deeply into the theory of supply and demand, then this is the ability of such a system to find a balance between the elements of the economy. Capital outflow should not exceed investment. This should create a culture within the community of players so that they remain in the game even in the most difficult times. It is necessary to create an element of competition, and for this the game must be based on the player's skills and a wide variety of types for income, so that players can specialize in something that they prefer and be experts in their field.
Therefore, without an influx of new investment, such inefficient economies are quickly blown away. Although practically any new economy will deflate without the development of human capital and the inflow of new investments. And many people mistakenly call it a “pyramid”. If you think in this way, then absolutely everything in the real world economy fits this definition 🙂
And therefore, when you analyze tokenomics and how the token will be used, pay attention to whether the economy will be composed of these elements. The meaning of a real crypto game and the difference from a pyramid scheme is that the overwhelming majority of economic activity is distributed among the players, rather than paid to its developers.
Some advanced games are planning to build something like a community-driven DAO-governed government around their ecosystem. Around this crypto game, services and services from market experts can be formed. That is, the development of human capital is also necessary, which already speaks of the development of such economies. The branches of this economy are being formed. For example, around Axie Infinity a whole economy has already been formed with all its components and its own branches. But Axie Infinity also has economic flaws. The development and formation of the project was carried out back in the era of cryptogaming 1.0, when no one even thought about deflation mechanisms. Therefore, Axie Infinity cannot be cited as an ideal crypto game from an economic point of view.
AND SUCH SUSTAINABILITY OF THE ECONOMY DUE TO THE ABOVE FACTORS IS ABLE TO INCREASE THE WELFARE OF THE PARTICIPANTS OF SUCH SYSTEM AND LEADS TO POPULATION GROWTH (NEW PLAYERS). As soon as the imbalance begins, there is an outflow of capital and as a consequence of the loss of the population.
The Axie Infinity economy has survived for 3 years thanks to its resilience. That being said, we have several examples from the past. These are EOS Dynasty, which had a strong community but killed the economy through rash actions and steps that exacerbate the imbalance, creating excessive inflation, and we have many current examples. The same CryptoBlades. But one way or another, economies in decentralized worlds are much harder to kill than in traditional gaming. assets in blockchain games are always alive and at some point, developers can fix the economy, which can attract players again.
So are crypto games pyramids anyway? I hope after reading you have found the answer to this question.
And you might also ask, "Are all crypto games economically sustainable?" Of course not. The vast majority are not like that and the chance of losing money is great.
Metaverse
If we talk about the metauniverses, then there are even more prospects because owning land, you can organize an in-game business. Starting from advertising on lands, holding events, ending with the opening of your bar, beauty salon or games inside the metaverse, if the developer tools (SDK) allow it, of course.
Post-retail
The development of post-retail (goods and services purchased online remain online and are used there) has already begun and has a chance to squeeze online retail in the future (from 10 years). In addition, thanks to the development of interoperability, the economy of the metaverse can attract investment from the real economy, thanks to the presence of global brands. It is enough just to know about the statistics, according to which 3 billion are involved in the gaming industry. players whose average age is 25-34 years and who spend 20 hours of free time per week on this. After the outbreak of the pandemic, forecasts for the gaming industry's revenue have revised from positive + 20% per year (~ $ 170bn) even more as of 2020. The gaming industry earns more than the sports and film industries combined !!!
At the same time, large brands are practically not represented in the gaming industry. And this is very strange! It cannot and will not last so long. Blockchain has allowed this industry to remind of itself again and has shown a tool with which you can sell unique goods within games. In games, there are not many of the same clothes and advertising so far. If it is, then this is all about the gaming industry and is used to promote games, and not part of the economy itself.
Read on our channel about the Burberry and Blankos collaboration.
Louis Vuitton has launched its crypto game.
The metaverse and games are a kind of new gamified social media. This is the new Facebook. Concerts and various conferences are already being held there, businesses are being created, and this is even without the blockchain. And the blockchain will make the creation and ownership of digital property rights more transparent. And unsurprisingly, Facebook has taken over Oculus and is developing social media in AR / VR with gaming spaces. Your metaverse. Imagine a game world that will consume the same brands and products as in real life. Such an economy in the long run can exceed the current global economy because the game is much easier to set parameters, and purchases are made easier and delivered instantly. In addition, game mechanics have a greater impact on consumer emotions.
The starting point will be the moment when the first metaverse will exceed the economy of the first of the developing countries in terms of GDP, and earnings within it will exceed the earnings of employment in the real economy. This is already partly showing up for the early and top players.
This article is not financial, investment, or any other advice. We encourage you to conduct your own research. Thank you for taking the time to read this article.
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