1/ How can a play-to-earn game possibly be sustainable if every single player is there only to make money from the game? The answer: it can't. Some thoughts below on sustainability in play-to-earn economies from someone who has been neck-deep in designing one🧵

2/ In crypto, we have a tendency to want to reinvent the wheel but, in doing so, we ignore decades of real-world experience we can leverage. Before play-to-earn, people asked a similar question about free-to-play games: how can they be sustainable if you can play for free?

3/ In a F2P game, you have roughly three categories of players from a monetization perspective: minnows, dolphins and whales.

4/ Minnows want to spend the least amount of money possible in achieving their objectives because they place less premium on their time and more premium on their money.

5/ Whales want to spend the least amount of time possible in achieving their objectives because they place less premium on their money and more premium on their time. Dolphins are in between.

6/ The whales and dolphins are essentially subsidizing the minnows. The typical F2P game generates over 75% of its revenue from only 20% of its players. So if you have 100,000 active players, only maybe 20,000 are driving profitability for the game:

7/ In a traditional F2P game, the value that's put in by the players (e.g., buying skins, buying gems, buying boosts, etc.) is then extracted by a combination of founders, investors, and middlemen that sit on top of the entire stack. I visualize it like this:

8/ This is because the game is the only one profiting from the transactions. If a minnow spends, or a dolphin spends, or a whale spends, whatever the case, the revenue is collected by the game to be extracted and distributed.

9/ But the only way a Web2 F2P game is successful is if it attracts enough overall users that there are enough dolphins and whales amongst them to make the whole thing profitable.

10/ In order to do that, you have to raise and spend enough money (often cutting in publishers and other middlemen) to attract and retain players. If you can't attract and retain players, all the raised money is burned through in development and marketing and the game fails.

11/ A play-to-earn game doesn't change any of the underlying principles here. It just allows users to participate in the value extraction part of the stack. And it does this as a form of marketing/advertising. Something like this:

12/ The equation doesn't change whether you're a traditional F2P game or a new-fangled P2E game. You have to have enough on the bottom to hold up the top. If you have too many value extractors and not enough value inserters, the whole thing will collapse.

13/ The bottom of the stack (the whales and the dolphins) for most P2E games right now is almost entirely driven by speculators. People who are spending within the game to (1) sell to someone later at a higher price or (2) level up their ability to extract at a later date.

14/ This may be fine for initial marketing purposes because it drives interest and attention. But eventually you have to convert the bottom of the stack into sustainable whales and dolphins. And you have to do it before your "players" start to reach max level.

15/ Because once they start to reach max level, there's nowhere left for them to spend their earnings--it's time to take profits.

16/ So what's a sustainable whale or dolphin? A player who is spending money not solely because they think they'll make more money later on but because they actually don't mind spending money to play the game.

17/ Real gamers can be though of as one of Bartle's four archetypes (Achievers, Explorers, Socializers, Killers). Each spends for different reasons. An achiever may spend to complete objectives, an explorer may spend to open up new areas, a socializer may spend to flex, etc.

18/ Without the right mix of these types of players, eventually the farmers and speculators will overburden and collapse the game economy. Note speculators and farmers don't fall into these archetypes. They spend only to make money--they're marketing expense, not revenue.

19/ And this is the fundamental challenge for all play-to-earn games. If you double-click on the "earn" part of play-to-earn to attract your initial userbase, how do you transition to a userbase focused on the "play" part to make your game sustainable?

20/ The teams that succeed in this space will focus on game first, just like companies have done for decades, and treat the "earn" part as what it is, a marketing expense that you need to carefully manage to prevent from getting out of control.

21/ These teams will be the ones who focus on traditional F2P metrics (retention, conversion rate, ARPDAU, lifetime value, etc.) while still being native enough to this space to understand how to manage open vs. closed economic systems. Looking forward to seeing this evolution.

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