From Speculation to Utility: Unlocking the True Potential of Gaming Tokens

@jaredpolites

Marketer and writer focused on Web3, Tech, and Entrepreneurship. Partner @ Raresto...

What gives cryptocurrencies value? Clearly, there are numerous factors, from utility and scarcity to perceived store of value and supply and demand. This is also true for the native tokens that power the new generation of blockchain-based games, including metaverses.

The two should not be conflated, of course. While many cryptocurrencies – particularly meme coins and yet-to-launch protocol tokens – are essentially speculative assets, their price governed by market sentiment, effective metaverse tokens have concrete use cases within a game world: they can be used to buy virtual goods, access premium content, or unlock exclusive features. They can be wielded for governance purposes or used for other game activities. In short, their value is derived from utility and the appreciable benefits they bring to players.

This is a point that was lost in recent chatter about the prospect of pumping Metaverse

tokens.

Gaming Tokens: Built for All Markets

Ahead of one of the big metaverse stories of 2023 – Apple’s release of a VR headset – prominent Bitcoin developer Udi Wertheimer tweeted that Crypto Twitter (CT) was “completely oblivious to the fact that Apple is about to launch a mixed reality headset in 3 weeks,” adding that “metaverse shitcoins are going to pump so hard it’s not even funny.”

While this predicted pump didn’t end up materializing, Udi’s attitude is not uncommon on CT, where everyone is seemingly hell-bent on catching the next wave and riding it into the sunset, where a frozen margarita awaits them on a desert island after they’ve dumped their bags on unsuspecting retail investors. Although some might argue that CT is a different world from, say, Metaverse Twitter or Gaming Twitter, these communities generally get lumped together under the same Web3 umbrella.

Udi’s speculation does blockchain games and metaverses a disservice because, by and large, game developers are seeking to build the best games and offer players memorable experiences. The native tokens of such projects are a part of that, but the ultimate goal is to furnish players with utility rather than create tools for opportunistic speculation. We cannot financialize away the fun.

By shifting the focus from speculation to utility, gaming tokens can provide value to both players and the ecosystem as a whole, irrespective of market conditions. Whether we’re in a bull market or a bear, the token’s utility does not change.

The same can be said for well-built games which focus on creating enjoyable experiences and a collaborative, community-oriented environment: their success does not depend on the market being frothy. Gamers aren’t drawn in by the promise of a token likely to moon. Rather, they are compelled to play the game, explore, meet friends and form communities, and have a say in a project’s direction. The native token? It’s just part and parcel of the game.

Rampant Speculation and Gaming Might Be Incompatible

The emergence of gaming tokens and NFTs may have compelled some studios and investors to envision a kind of gold rush, but those likely to last the distance are the developers whose digital items provide tangible benefits.

Those who purchase native gaming tokens and/or NFTs with the sole purpose of dumping them on retail alter the dynamics of a game, taking the focus away from enjoyment, camaraderie, and adventure. The value must flow bidirectionally. If you, as a community member/player, enrich a game for other players, rewards are inevitable – but you must earn it.

While Udi’s comments were probably tongue in cheek, they expose the ruthless profiteering mindset that often characterizes a lot of this industry. Thankfully, gamers are an altogether more altruistic bunch.

Instead of being viewed as investment vehicles, the purpose of gaming tokens should be to enhance the playing experience and provide meaningful benefits to users. This is something that developers and token issuers increasingly seem to acknowledge, as assets with specific functionalities and utilities are becoming more common.

We cannot discuss gaming tokens without mentioning gamer equity. The truth is, the vast majority of players are locked into games because they’ve labored for months or years to hone their skills and increase their knowledge: walking away isn’t an option. The web3 gaming vision is that players who have spent six months and $200 on a game can access that equity by transitioning it into another skill tree path within that same game (i.e., barbarian to rogue).

Alternatively, they can decamp to a completely new game, levying considerable pressure on developers to maintain quality. If they don’t, users will jump ship – and take their hard-won spoils (tokens) with them.

Of course, some gaming tokens and NFTs are prohibitively expensive, creating a barrier for traditional players and potentially deterring them from fully engaging with and exploring the games themselves.

By integrating tokens seamlessly into the mechanics of a game and incentivizing active participation, skill development, and community contributions, developers can create a thriving ecosystem. One whose token value directly derives from practical applications rather than clever market maneuvers.

Shifting the focus from speculation to utility might enable gaming tokens to avoid the worst of the volatility of market cycles and provide sustainable value for all. Developers, gamers, and token issuers must work together to promote a vibrant, inclusive community that lives up to its potential.

By properly aligning incentives, we can unlock the true potential of gaming tokens, enrich the playing experience, and create a more robust and engaging future for metaverses as a whole.