The Delicate Balance: Tokenomics, NFTs, and In-Game Economies

Let's consider an illustrative game as an example for tokenomics models.
There are a number of external and internal factors that influence tokenomics.

The diagram presented is based on assumptions, and the predictions it makes need to be verified in practice.

We convened with the marketing team, who informed us that there are 100 players, and we needed to create a design for the demand and supply of NFTs, which players can use to earn tokens.

We proposed three NFT options, each with a price in native token, daily income, and daily expense, and specified certain in-game actions that must be reported:

A: 20 / 1 / 0
B: 100 / 3 / 1
C: 400 / 5 / 2

The marketing team later informed us that the conversion rates for purchases of A/B/C will be 90% / 50% / 20%, meaning 90 / 50 / 20 players will buy our NFTs. However, that's not all. They also told us that based on their expert evaluations, players will remain in the game for an average of 2 / 3 / 4 months.

Now, we can assess the supply and demand for tokens. For instance, in the case of B:

Supply: 50 * 3 * (3 * 30) = 13500
Demand: 50 * 100 + 50 * 1 * (3 * 30) = 9500

In the absence of other variables, we observe that the token supply will exceed demand in the first two cases, while in the third case, demand will exceed supply. Consequently, the price of the native token will likely decrease in the first two cases.

Tokenomics alone cannot create an economic system; it works in conjunction with the product, marketer, financier, and CTO. Tokenomics experts influence conversions but are not responsible for attracting users, defining the product, or choosing the blockchain. Internal factors are what tokenomics experts directly influence, such as the flow of money and the demand model.

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1. How will the relationship between supply (S) and demand (D) change each month under each scenario (external factors):
a) AS IS;
b) 100 new participants will arrive each month: acquisition(t)=const;
c) The number of new participants will change acquisition(t) = acquisition(t-1) * 1.01;
d) The "lifespan" of a participant (stakeholder lifetime) will increase by 1 month at a, b, c scenarios

2. Considering the Scenario 1.a. to 1.d. conditions, how many tokens will be minted:
a) A smart contract mints tokens at a price of P($T) = 1 TON.
b) The entire token supply is available on the market.
c) Demand is fulfilled by either the market or minting, whichever is cheaper.
d. The market price is determined by the formula P($T) = D/S.

3. How would the responses to 1.a. … 1.d., 2 change if NFTs were sold for TON rather than native tokens? How would the token price change monthly in this scenario?

4. We would like to understand the required volume of NFT issuance in the next 12 months for 1.a. … 1.d.,2,3 assuming that participants are free to trade NFTs. What questions do we need to answer?

The illustrative example presented demonstrates the intricate nature of tokenomics within game design. While tokenomics experts play a crucial role in shaping the in-game economy, their success is inextricably linked to a collaborative effort across multiple disciplines. To establish a sustainable and engaging game economy, consider these key takeaways:

• The Dynamic Ecosystem: Tokenomics is not a self-contained system. External factors such as player acquisition and retention, as well as internal factors like NFT design and pricing, significantly impact the long-term balance of token supply and demand.
• The Importance of Flexibility: A rigid tokenomics model may not withstand the test of time. Be prepared to adapt your tokenomics strategy as the game evolves, responding to player behavior and market trends.
• The Value of Collaboration: Tokenomics flourishes in an environment where game designers, marketers, developers, and financial experts work in tandem. Open communication channels and cross-disciplinary insights are essential for success.

Remember: Tokenomics is an evolving field, especially within the context of gaming. Ongoing experimentation, analysis, and collaboration are crucial to creating truly balanced and engaging token-powered game economies.