I’m not economist, just sharing random thoughts :=)
As of today, web3 economies in metaverses and virtual worlds all have the same problem: their native in-game currency, which is used as a unit of exchange to facilitate the buying and selling of goods and services, is volatile:
When a currency is volatile and devalued, it creates catastrophic problems in the real world, as has happened with the currency of Argentina or Venezuela. In an increasingly digital world, where the virtual money of users and creators has real value thanks to blockchain technology, it is necessary to understand why these models have failed in order to propose better solutions.
Problem
The tokenomics of web3 virtual worlds are poorly designed from scratch. Tokenomics is the study of the economy of a crypto token —from its qualities, distribution, production, and much more—.
Specifically, tokenomics models with limited supply (such as $BTC, $MANA, or $SAND) are volatile by nature. Limiting something creates scarcity and disincentivizes its consumption. Scarcity generates demand and speculation in favor of future economic returns.
From a user-creator perspective, if they receive game rewards and profits in a volatile currency, they have to worry about the risk of its value fluctuating. That is, the creator has the additional concern that their capital may be worth $10 one day and $1 the next.
How do we solve this problem? Spoiler: the solution lies in understanding how currencies work in web2 games and adding the web3 component.
Web2 gaming currencies
Web2 video game currencies are similar to stablecoin models: the user pays a fixed amount for coins and that price usually does not change (unless the company raises the price punctually). For example, as a Clash Royale player, I bought 100 gems for €5 using my credit card.
The problem with web2 gaming economies is that they are closed: once the money enters the company, it cannot return to the player. In fact, it is usually prohibited by terms and conditions to buy or sell digital assets for real money with the penalty of expulsion and loss of all your digital assets.
Blockchain technology brings a cultural and technological paradigm shift where the digital economy is open. Web3 games have open economies formed by digital items (NFTs) and currencies (tokens) that can be easily converted to real money.
This means that web2 players (and creators) cannot see any economic return for the hours invested in games, while web3 games are more accessible and offer the community a monetary part of the pie.
The creator's currency is decentralized and stable
To recap, the problems of web2 and web3 gaming economies are:
Centralization: In web2 models, centralized platforms do not allow the sale of virtual objects or coins in exchange for real money and barely redistribute profits to creators. Users are not the true owners of their virtual assets and have no way to recover the money and effort invested in these games.
Volatility: In web3 models, decentralization allows the community to participate in the digital economy of the projects. Users can monetize any activity or content thanks to blockchain technology. The current problem is that most web3 platforms have based their monetization and marketing strategy on the scarcity of their virtual assets and tokens. This has led to rampant speculation and concentration of power in these platforms, increasing entry barriers and limiting creators' ability to monetize content properly.
The solution is a decentralized and stable currency:
Decentralized:
Technology: The digital economy is real and liquid.
Culture: Users are part of the digital economy of the game.
Stable: A healthy and sustainable currency
The new models that will emerge will be sustainable, accessible and prioritize create&earn mechanisms, which would allow creators to generate value with their work through a stable and decentralized currency within the game.