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Arianna Simpson
0/ My team (esp !) and I have been thinking a lot about gaming as a way to usher in a new wave of people to crypto. We're going to need that if this industry is to become more than the same group of people talking at one another. A thread on in-game assets:
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
1/ The gaming industry has undergone a rapid shift. The early 2000s were dominated by play-then-play gaming — i.e. pay $ to buy game, then play as much of you'd like. Call of Duty, World of Warcraft, Fifa, etc. all used this model.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
2/ But in 2009, League of Legends launched with a free-to-play (FtP) monetization model. Dota then became FtP in 2012. Fortnite's FtP game launched in 2017 — leading CS-GO and PUBG to release FtP versions in early 2019. 5 of the top 6 games are now FtP.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
3/ In the FtP model, game creators (GCs) make money by selling/issuing in-game assets. These assets don't improve performance. Skins, outfits, accessories, and other assets are purely cosmetic. Gamers use these as a form of expression — to look cool and signal expertise.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
4/ The economics here seem to make sense: People are more likely to make multiple small purchases than one large purchase. Plus, the game is free — why not spend a few bucks to make it more fun?
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
5/ When you look at the numbers, in-game assets are a BIG deal. Take Fortnite, for example: - $2.4bn in revenue, almost all from in-game assets - 70% of users buy in-game assets - Average spending per user = $85
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
6/ In the world of in-game assets, GCs are the central bank. They can mint, destroy, restrict, or alter assets at anytime. Gamers don't own assets, and assets can only exchanged if allowed by the GCs.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
7/ GCs issue in-game assets primarily in 2 ways: 1. In-game store — Users pay $ for items. Unlimited supply, but assets are only available at certain times. 2. Loot boxes — Users pay $ for random items. GCs manage probabilities that items are released (limited supply).
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
8/ Side note: the loot box model has been deemed gambling in some places. This model becomes more gambling-like when paired with an out-of-game market to trade assets for $$$. Some assets trade for many $100's, even $1000's, of dollars.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
9/ Most games prohibit markets for in-game assets, fearing that resale markets will reduce in-game spending. But even when restricted, gamers always find ways to trade for real money. P2P 'gifting' and asset swaps are common loopholes.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
10/ Some games permit asset trading. GCs capture value through trading fees on official exchanges. Steam is the most popular exchange. Gamers who trade here are charged ~15% commission per trade. Gamers can load USD to buy assets on Steam but can’t cash out to USD post trade.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
11/ Many gamers use 3rd party trading sites to reduce fees & enable cashing out to USD. When gamers use 3rd party sites, GCs are unable to profit. These sites are more risky — users often have to share account info, opening door to scams (e.g. site steals all your assets).
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
12/ From this, what can we observe about trading? First, trading is a cool feature but not a fundamental driver of gameplay. Games have disabled trading with virtually no impact on DAU. Above all, gamers just want to have fun.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
13/ Second, there is clear demand for markets around in-game assets. Many gamers have been persistent in their pursuit of this practice. They routinely work around (or outright defy) the rules to allow for suitable asset trading. It's clear that the demand is here to stay.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
14/ Third, right now, trading probably makes games less fun. The ability to trade in-game assets for $ creates a huge incentive for hackers to exploit the centralized entities controlling asset issuance and trading. Widespread cheating undermines the integrity of the game.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
15/ And 1 broad observation: Trust in gaming is not broken. GCs don’t flood the market with assets or delete user accounts. Popular 3rd party sites aren’t stealing assets or scamming people, and gamers aren’t particularly cynical of the GCs who control the gaming experience.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
16/ So what does this mean for crypto? First, users won't adopt games just because they use crypto. The average gamer doesn’t care about asset ownership or trading (and for those who do, these somewhat exist already). These people won't be trading off fun/UX for crypto.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
17/ Second, crypto shouldn't be a priority for developers. The primary concern should be building a fun game that people want to play. If crypto helps, great! If not, don't use it. In gaming, crypto is a optional feature, not the product.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
18/ And third, tokenized assets can be a tool to improve gameplay. Tokenized assets enable individual asset ownership (no trust assumptions or centralized honeypots), increased transparency (verifiable scarcity), and better cost/UX of trading, among other things.
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
19/ Looking forward...Gaming is becoming more than just a game. FtP games are free & open virtual worlds with internal entertainment, social networking, and economic systems. Hundreds of millions of users are already participating, and this is just the beginning...
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Arianna Simpson Nov 25
Replying to @JacobPPhillips
20/ Crypto won't achieve this vision on its own, but it can be a major asset to developers along the way. Thanks again to for being a thought partner on these topics –– go give him a follow! /END
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