Game Economist Cast
What does the new wave of open economies mean for monetization? Will negative externalities overcome cosmetics economies in the long run? What exactly does a game economist do?
Game Economist Cast is a roundtable discussion of the latest developments in mobile, HD, and crypto games through a bunch of people figuring it out using the economic tool kit.
Game Economist Cast
E27: The Best Game Economy of All-Time
The crew convenes to square off on....what counts as a store of value? Is Match3 the best game economy of all time? Is progression a wage rate? Will Chris buy digital Gloomhaven? Was Eric among the five people who watched Ghostbusters: Frozen Empire? Will Phil get the crew on a regular posting schedule? E27 IS HERE!
We missed the chance to make a Ghostbusters joke on Gwonbusters. Bustin' makes me feel good. Remember that song.
Speaker 3:No, why did Supercell's marketing not use this? There is one other piece of controversy we should talk about. Why is Squadbusters two words? Why does it matter? Should it be one? Thank you, eric.
Speaker 1:Do you care? I mean, I don't care. Do you know how many times I've had to?
Speaker 3:write the word motherfucking Squadbusters in text, and you would prefer it to be one.
Speaker 1:Yes, do you know what Ghostbusters is? Yes, ghostbusters is one word.
Speaker 3:Thank you.
Speaker 1:How much do you think this would raise their lifetime revenue for the game? If they made it one word, I think CPIs would probably just Squadbusters.
Speaker 3:Oh, you mean like Ghostbusters? I love Ghostbusters.
Speaker 1:I don the only people who know what Ghostbusters are like Jen.
Speaker 3:They should put like a little Luigi Ghostbuster, Luigi's Mansion Ghostbuster character in the game.
Speaker 1:Wait, but you ever listen to the Ghostbusters theme song where they go. Bustin' makes me feel good. No, it's just so unnecessarily double entendre.
Speaker 3:This is definitely going to be our cold open. By the way, Bustin' makes me feel good.
Speaker 1:Let's start with utility.
Speaker 2:I don't understand what it even means. Everybody has some kind of utils in their head that they're calibrating. There's hardly anything that hasn't been used for money In fact, there may be a fundamental problem in modeling.
Speaker 1:I wouldn't want to model.
Speaker 3:Episode 28,. We are back. The irregular, irregular posting schedule has been maintained. I am phil from game, economist consulting. I am joined today by my two other wonderful hosts, chris hello, yes, exciting times and eric hey, it's eric new, newly of second dinner.
Speaker 1:It's funny, the. So I left crypto to join second, and you guys know what fud means yeah, yes, I used it in my latest article all right.
Speaker 1:So yeah, fud. Crypto. People talk about fear, uncertainty, doubt. Anytime you criticize something, they'll be like oh, you're just spreading fud. The mascot of second dinner is it's like all food themed. It's like a little dumpling and its name is fud f-u-d, but it's like a cute way of saying food, so I literally left. I was so bearish on crypto that, like, the mascot of my new company is FUD.
Speaker 3:Oh man, these conversations are really going to change. So many viewers are gonna be so happy that it's 2v1 now. I'm sorry, chris.
Speaker 1:Do you get a bunch of anti-crypto viewers? I thought it was a bunch of web three people listening to this.
Speaker 3:So we so we sometimes get comments from spotify. Spotify lets people enter comments and I would say there are about five negative web3 tokens, not negative web3 comments. It is what it is. Look, it's too big to ignore. Say whatever you will about it and we do say whatever you will about it, but I think to ignore it is at your own risk and peril. This thing is. This thing keeps surviving.
Speaker 2:Yeah I think if you listen to our podcast and think that we're sitting here shilling stuff and being like Mr Bullish, then you're not listening to what we're saying. Like we're some of the most critical voices, I think, and I'm critical. I work at Star Atlas, like Web3, through and through Die Web3. And I think I'm pretty reasonably critical. Obviously, I think that the tech has potential and I think that it's going to do something. So, in that way, my livelihood depends on it. So I'm more bullish than somebody who hates crypto. But I think we give sober takes.
Speaker 2:At GDC, I went to a talk by oh geez, what's that guy who does GamesBeat Dean Takahashi. Yeah, Dean Takahashi did a Web3 talk and they were like how do you deal with your contemporaries and their feelings on Web3? And he was like the reality is and it was very much what you said, Phil like this is something that's happening. We'd be bad journalists if we weren't covering it. So that's what I'm going to do and I feel the same way, Like this is something that is clearly working and there's like clearly money here, clearly working, and there's like clearly money here. Obviously, not as much as maybe three years ago, four years ago, people believed there was, but there's clearly a product here, there's a technology to be used, and I think we're starting to uncover what that is, and it'd be irresponsible to completely ignore it. So yeah, Web3 is not for everybody, but we're not sitting here shilling and I think it's just a testament to the listener. If just this dimension of something gets your blood boiling so much, you need to take a look inside.
Speaker 3:I think the other crazy part is I'm starting to see more Web3 stuff get taken into Web2, which I've been shocked by. So Discord just launched Quests. I'm like, holy shit, like every Web3 platform and their mom is working on Quests right now, and I mean that in a good way. But wow, that got ripped off of that try, ripped off of web three, and Roblox is using serial numbers, and now we could say, oh yeah, a million things have had serial numbers before. Clearly, the thing that popularized this in the digital world, though, is web three.
Speaker 3:So say say what you will.
Speaker 2:Yeah, and there's stuff that I'm realizing is great about web three and I'm I'm asking myself, yeah, could this be done without web three? And the answer is starting to be no, and a lot of it is because of the ecosystem, and I'll have a lot to say about that on the topic about transaction fees later. But, yeah, totally agree with you.
Speaker 3:So, now that we've taken Eric's news about leaving Web3 into Web3 segment, we have two wonderful topics to talk about. Today. Eric and I are going to be talking about Squadbusters. Of course, I wrote a deconstruction on it last week, which I published, which I spent probably way too much time on, but Eric's been playing it. I'm finally excited to talk about it from the roguelike master himself. And Chris, what are you going to be talking about today?
Speaker 2:Just an FYI. I have played two games of Squadbusters and I plan on playing it on the plane tomorrow. How are you?
Speaker 1:going to play it on the plane. It's online. You're going to pay for the in-plane Wi-Fi.
Speaker 2:You're right, I don't. No, I think we're flying like the cheapest, shittiest plane. It's like a destination wedding thing, so it's all this inclusive thing. So I think we're flying Frontier, so we'll be lucky if the plane even touches down in Cancun. But no, that's right. That's the problem with all these new fancy games that don't have single player.
Speaker 3:So I'll just play Polytopia. Now you can do a lot of PV stuff. You can crush load in there a little royal match, you get some hyper-casual stuff.
Speaker 1:I have a lot of hyper-casual recommendations for you, dude, I can't play that and there's no ads. There's no ads on the plane.
Speaker 3:You can play in airplane mode at home.
Speaker 2:That's like a hyper-casual pro tip for the guys shooting. You're like running up this road, yeah, is there an actual game that actually has that gameplay? Because I want to play that.
Speaker 3:So this does exist in Last War 2. This is like the first so fake ads are. They're so real that they started actually putting them in the game to lower CPIs and keep the dream alive. There is a game that does this. I've been playing this the version of this game on Pipe, which is a UGC platform that I'm super into. We'll get them. Hi, Pipe, yeah Pipe. I love Pipe. It's a UGC platform. It's from a company in Finland. I talk a lot about them on DOF. They are basically building a hyper-casual UGC app platform for your phone, so you actually make the games on your phone too, and one of the games on there that's very popular is this thing exactly. And remember, you don't need to deal with ads because it's a hyper casual UGC platform.
Speaker 2:I just wanted to let you guys know that, even though I am a Web3 scum, I still participate in the Web2 hotness, or at least try to. No, I'll be talking about blockchain transaction fees. So anytime you send something on chain, anytime you do something on chain, you've got to spend a little bit of cash, a little cash money, to make that thing happen. You're whether paying somebody else to make it happen or you're paying for computational space on the, uh, the decentralized computer that is a blockchain. Um, yeah, it has a lot of interesting implications for for web three games, um, which obviously I work on.
Speaker 3:But before we do, let's talk about what we've been playing. Got a selection of good things on sale. Stranger Did I talk about Bellatro, oh we should talk about Bellatro, because I've been playing Bellatro too.
Speaker 1:Oh, I've been binging. So I had a week and a half where I basically had no job and so I just spent all day playing. Bellatro Must have clocked in 30 hours in two weeks. Bellatro is sick. You've been playing it, Phil.
Speaker 3:I love it.
Speaker 1:It really tickles the degenerate gambler in me.
Speaker 3:Oh, let me go for, like the high risk, high reward thing. Oh, this won't pay off now, but if I get this and then this, and then I get this other thing and I get a little lucky here, then oh, then my deck's gonna be super strong. It's rogue, like poker. So you start with normal poker and poker hands and then you gain abilities which can change the score of particular hands. So you can upgrade like a pair, which is a score in poker, and that will give you more points, but only that there's the points that a hand gives you, and then there's a multiplier, so you can also increase the multiplier based on various things that trigger. So you're collecting all these abilities that are going to trigger at various points.
Speaker 3:It could be with a pair of hand. It could be if you leave something in your hand, like you leave a couple aces in your hand. There's a million different ways that they have carved out design space at every fucking inch of this game for abilities. Everything that could be milked from poker as an ability is milked here. Sorry, go ahead. I just need to provide the context.
Speaker 1:That's why we talked about this last week.
Speaker 3:We did because I played it a little bit but we didn't really get into it. I think we should get into it because it will matter for Squadbusters too.
Speaker 1:I've heard anecdotally, there's a lot of more. I don't call them casual, but people who aren't like gamer gamers seem to really like this game Because as long as you're familiar with poker, you understand how the game works and you don't have to rely on those traditional gaming tropes of like monsters and dungeons and stuff. It's just yeah, get the good poker hand. I understand that. Yeah, my friend was telling me a lot of his more casual friends were playing Bellatro, which otherwise is a pretty hardcore game, right Like rich, complex mechanics and it's just more accessible to a lay person, who might not want to play a card game that has dragons on the front cover.
Speaker 2:Instead, they want to play something that looks like poker, so they're not that the idea. I think so it's always frustrating me. People need like this casual box art in order to play something like oh, it's got to be poker, golf or basketball for me to be able to touch it. Like the second, there's any fantasy element, it's nerdy and what you're describing, bill, sounds like if we were to put some different art on it, you wouldn't know it's poker in the first place.
Speaker 1:Just feels like it's just poker because you've got like the classic heart spades card deal my favorite part of the game for sure is, and my favorite part of slay the spire is the relics. Right, if you find different relics and you put them together to make certain combinations. But in slay the spire and most of these, you have very little control over what relics you get, whereas belatro is all about the relic. The relics are called jokers in that game and you have a limited slots. You only have five available at a time and so you have to think of you mix and match about which ones you want, and there's much more flexibility in choosing which ones you're going to use. And yeah, that was always my favorite part of theory crafting and yeah, bellatro definitely delivers there. How's the balance?
Speaker 2:in that game? Is it as swingy as something like slay the spire? There are some relics in slay the spire that I'll get, and I know for a fact I'll at least get to the second, the second, third level or city my guess is it's even more volatile.
Speaker 1:I mean, it is poker after all. Some of this stuff is super busted if you get it really early or get it really late.
Speaker 3:Interesting yeah but I think that's what makes this it's so fun is that they have the perfect fusion of rng. They have enough rare powerful things RNG. They have enough rare powerful things because the Jokers that you were mentioning, eric they're rated by rarity. In fact, I think pretty much everything in the game is rated by rarity. And not only do you have the abilities that can appear that you can purchase in between rounds, so they use the in-between shop, very similar to auto chess, but the other thing that can happen is also the RNG. At the point of draw. There's all these different layers of RNG, which is really exciting because you never know what's going to happen when you have a new run. It's just like a classic execution of the roguelike genre and what it's supposed to be about. They just completely nailed it. And the other thing that's really powerful is that the abilities themselves. It really feels like you're accumulating that in-round progression as you go through your runs, and so when you get deeper and deeper into these runs, stakes get higher and higher and your ability to craft novel and interesting strategies becomes more and more fun.
Speaker 3:In fact, I would actually argue this game has problems when it gets to the very end point, because you can replace cards in your deck with other cards. That's another one of the roguelike abilities. You can say, okay, I want this card to be level five now, so when I play it I get more points when I play the card. Sometimes you can use stone cards. You can actually replace suits. You don't need to have a standard 52 card deck, you can actually start to make changes to it.
Speaker 3:So the problem is, at some point you just you don't even know what's in your deck. I mean, you can look into it, you can see what's remaining in your deck. They let you peek into it, but it starts to become so foreign from poker it actually ends up becoming convoluted. I would argue. At some point there's this S curve, I would argue, in the game, which is really compelling, and they hit that midpoint like no other roguelike I've seen. But that that that beginning point is a little bit dull as you're building your strategies, as it usually is, and I would say the endpoint starts to become pretty flat too. I don't know, eric, if you've had a different view?
Speaker 1:No, it's definitely true. For example, you might get a bunch of cards that alter your deck so that by the end of the run, 60% of your cards are hearts, and so every round you're just playing flush, flush, flush, and the execution gets pretty repetitive once you've built your engine and optimized it. But the exciting part's the beginning where you're like I don't know what engine is going to come out of this run. Depending on what I get, I'm going to go for flushes or full houses or like all aces, and yeah, they do a good job of cutting it off. Once you hit anti-8, like level 8, basically you end it and you can start a new run. And yeah, there definitely is a point where it diverges so much you're at you optimize the fun away, as people say is there betting?
Speaker 3:it's a poker game ironically enough, there is not. I actually think that's one of the biggest misses.
Speaker 2:What's the? What are you fighting? Who like in? Slay the spire? You're creating a deck to deal damage. What's?
Speaker 3:you're just trying to get a high score yes, but the levels start to introduce more pve obstacles. So they might say for this round, spades are not worth anything and you have a big boss at the end, which again is not really well personified. I've never actually seen a boss, but they they're more negative effects okay yeah, the, yeah.
Speaker 1:The combat encounters, though, are just there's some target score, and you have to play poker hands. That score you points until you either reach that target score or you miss it.
Speaker 2:Could you play this game theoretically, with just a deck of cards in real life?
Speaker 1:You'd have to do a lot of math. Yeah, there's a lot of math.
Speaker 3:There's a lot of things to track. This is Gloomhaven all over again to track.
Speaker 1:This is gloomhaven all over again.
Speaker 2:Hey, played through that entire campaign in person. Oh, it was during my preliminary exams and my phd. So I would spend nine hours a day studying, and then I would spend six hours playing gloomhaven and I would go to sleep you play digital no physical.
Speaker 1:It's so much faster dude, I could not stand in person. Gloomhaven, I know I enjoyed it.
Speaker 2:So the thing is, I sat in front of a computer for nine hours straight studying.
Speaker 1:So you don't want to work.
Speaker 2:I was like I got to touch something, so then I would afterwards I would go for a run, I would eat and then I would play Gloomhaven. At the time my girlfriend now wife was like during that time she was in Poland with her parents, so it was like I was all alone in the worst time of my entire life. So Bloomhaven got me through it.
Speaker 3:Chris, what have you been playing?
Speaker 2:Oh jeez, so I've lost. I think I'm 0-13 or 14 in Overwatch, so I just undownloaded it. I had a couple of friends who Undownloaded.
Speaker 3:That's interesting. That's a very nice way to put it.
Speaker 1:Reuploaded it.
Speaker 2:Send it back to the cloud. Walker Irvine, oh, we'll get you some wins. This is going to be easy. They came in. We lost seven games in a row and I was like I can't do this. This is not fun. I can't learn how to play any of this. So I turned from that. I was playing something else. But honestly, this isn't a game. But I've really gotten hardcore into books Read, listened to 1984. And that book like really I had never read it before. I didn't read it in high school. A lot of people do it was intense. It was not what I expected, so I enjoyed it quite a bit and it has given me, I don't know, tinted my glasses a little bit looking at the world. But this is not a politics podcast.
Speaker 3:Speaking world, but this is not a politics podcast. So, speaking of skill-based matchmaking, which you don't seem to have in overwatch, or at least are you playing pubs public games. I don't know what the fuck I'm doing.
Speaker 1:It's probably using his teammates mmr to matchmaking, so he keeps getting put against bad strong players because it thinks you're a smurf. It thinks, oh, a newbie playing with good players.
Speaker 2:No, it must be a smurf interesting I would have a positive ratio, Like I would end up with a positive KD ratio, but I just couldn't. It would just get melted.
Speaker 3:Speaking of skill-based matchmaking, I've been playing a lot of X-Defiant.
Speaker 3:X-defiant is the often-hyped Ubisoft arena shooter that has been in development, I think, for around three or four years now at least public announcement for around three or four years now at least public announcement.
Speaker 3:It has been under a lot of revision, trying to get closer and closer to the Call of Duty experience, and there's no skill-based matchmaking in public games, which is something that the devs have come out and announced, and, as someone who's worked in mobile, it is absolutely batshit, crazy, insane not to have skill-based matchmaking in your game. And we know how powerful this is because one of our former colleagues, a gentleman named Christopher, gave a talk at GDC about the effect of matchmaking in an A-B test that they did on Apex Legends and they saw huge percentage point changes when having skill-based matchmaking in the game versus not having skill-based matchmaking. And do you know why? For the very obvious reason that matching people at similar skill levels is less likely to lead to churn and tons of pushback in internet communities about having skill-based matchmaking in first-person shooters. Because they tend to be high-skilled players on these internet forums who want to prey on the weak and the idea that a corporation or a large company that's trying to maximize KPIs would not have skill-based matchmaking in pubs.
Speaker 3:To adhere to this group is insane. It is insane. If you told that to a mobile person, they would laugh. They would laugh their face off because obviously that's not the retention maximizing solution. This is total audience capture.
Speaker 1:Do you think so? One is do you think they did it to appease that audience? Or maybe they were just like fuck, let's just ship it without matchmaking, we'll do it later.
Speaker 3:So they have skill-based matchmaking in the ranked, though. So that breaks the narrative and I and it's a I would say it's a controversial topic, but only amongst redditors who play first-person shooters. So I would say, like that's one interesting factoid coming at us. I think the next interesting factoid is that x defiant had a decent number of downloads in its first couple weeks. From what we've heard, I think it was around 8 million, so it's certainly below where Apex Legends was when it launched. I think it was about 15.
Speaker 3:At the same period, there is a question about what comes next after Battle Royale that no one has really solved yet. I don't know if you guys ever had a chance to play the finals. That was another attempt to figure out what comes after Battle Royale. Extraction shooters. That was another path. That doesn't seem to have been. It doesn't seem to have panned out beyond Escape from Torkov, and so you have this arena shooter model, which has largely died. So, if you remember, there was Halo Infinite. That's pretty much dead. There was Gate, if you remember that. That was the one where you could set up portals across the map and you could go into the portals. That's gone. What other arena shooters have died? There's shatterline. I don't know if you guys had a chance to play that. That's by ukrainian studio called frag labs, which is on steam right now, which is actually very close to x-nite.
Speaker 3:So there's all these kind of like arena shooters hanging around, and what all of them seem to get wrong except for call of duty, of course is that the call of duty 4 revolution and first person shooters was rpg. It was adding perks, it was adding weapon attachments, it was being able to customize your loadout, make it highly personalized towards you, and call of duty has only embraced that more, not only in the rpg elements in terms of being able to build out your loadout, but also in the fact that you are able to. You have so many different things that are pinging right. You have mastery achievements, which gets you gold skins. You have camos. They have these incredible camos. I mean hundreds of camo for every single gun, and the way the camo system work is that it's progressive. So if I get, I have to collect five of these camos. It's CompuGacha. If I collect five of these camos, then I can get the sixth camo and then, when I get six of the special camos, then I can get the gold camo and then I can get the diamond camo, and so they have every single weapon.
Speaker 3:So if you play call of duty, you're getting a ton of pings as you play this constant reinforcement about oh I completed this, I completed this, I got this mission, I got this attachment, I got this new perk, and I think people have, like just largely missed a lot of the rpg elements that made first person shooters so compelling, and we were. Destiny has just been killing it with the final shape, expansion and also over, you know, years of destiny one and two. It just it baffles me that people haven't figured out how to embrace the RPG element of the shooter more. That's been frustrating. And you were just talking about Overwatch, chris. There's literally no progression in Overwatch. There's no gameplay affecting progression at all.
Speaker 2:Yeah, x Defiant, you're saying, also lacks, this RPG element Lacks it. And it is very thin.
Speaker 3:It's a squad arena game, yep, and the whole point of all these mechanics is essentially to give you status as you continue to play the game. It's to give you payment, right, it's wage Like. Progression is wage, and if you don't have progression, your wage rate is set to zero. And I would argue like in the case of Overwatch. Their wage rate is intrinsic mastery in many regards. Yeah, rate is intrinsic mastery in many regards, yeah, that's. That's a lot to bank on. Though, to be fair, there there is progression. You can earn cosmetics. Over time you can. You have a level, you have, there's a ranked level, but there's no gameplay affecting progression. There's very little.
Speaker 2:There's very little wages, I would argue in overwatch so there's almost like two different ways you can pay your player. You can pay your play through intrinsic, like it's just fun to play, or you can pay them through progression. These like what you think of as classical gamification and monetization. That's interesting. And then Web3 pays their players literally Cash money, baby, or token money, baby.
Speaker 3:Okay, so Squadbusters is finally out. This is the quickest Supercell has ever launched a game. That little Finnish company, clash Royale, was in soft launch for two months. This one was in soft launch for far less than that only a matter of weeks, and intermediately it's been out for a week. The early returns are actually looking a little shaky. In terms of downloads. It's comping pretty well to Brawl Stars, but active users doesn't look so good, but none of that's really important. We're here to talk about the design, and the design is super interesting and super innovative and it's something that's right up our alley.
Speaker 3:It is a game in which you are building a squad over time, and so what will happen in Squadbusters is that you have a collection of characters that you can earn out of round, and when you go into a round, a random subset of those characters have the possibility of being opened in chests. So you're going to have this collection of characters. They've been trying to build a random subselection of them. It's going to come into the match. When you get into the match, you have a choice of one of three characters. When you start, you can choose one of those characters. They all have unique and interesting abilities and what you're going to do is you're going to go around and you're going to engage in generally PVE elements and when you engage in PVE elements like farming farming so you can actually one of the characters picks up carrots, another character called Greg cuts down trees, or you engage another enemy PvE enemy they drop in-game gold and when you accumulate in-game gold, you can then go to these chests and when you have enough, you can open the chest and the chest gives you another selection of three characters and they are added to your squad and over time, you're continuing to build up the squad and, of course, you're going to encounter other characters, because it's Battle Royale, because the map is shrinking.
Speaker 3:There are 10 players on this map, so this map is going to shrink over the course of four minutes and you can engage in combat with players. And when you've built up your squad generally, that's when combat starts. And to engage in combat, you simply move your squad and then you stop moving and all the characters will automatically do the things that those characters are designed to do. So if you move over a tree, your little gray guy is going to cut down the tree. You don't need to press any buttons, you just stop. If you want to engage in combat, you just move your squad over another player and you'll start to engage in combat, and so the goal of the game is actually not to survive in a battle royale.
Speaker 3:It actually has another win condition where, in addition to collecting this gold, really what determines whether or not you win is if you're able to collect gems. There's a gem mine which spawns gem, and then when you attack other real players, sometimes they spew gems, and so you're trying to, you're trying to end up in the top five, and if you end up in the top five at the end of a four minute match, then you preserve your win streak. And we can talk a little about the meta stuff a little bit later. But I think, as you can see, there's elements of MOBA and that you have a lot of these PvE elements, these in round currency.
Speaker 3:There are elements of Battle Royale we were talking about this map that shrinks over time and forces you to the center of the map and there's also elements of roguelike, which is that you are building the squad over time and, of course, by the way, when you lose a member of your squad, you can gain gold again and then you can go out and you can find them again. How are we doing, eric? Is there anything I'm missing in core gameplay? To explain it.
Speaker 1:No, I think that was a great summary. I've been playing it a whole bunch and like it's so unique, like it took me a while to figure out, like what exactly game simplest battle royale like. At its core it's a bunch of people on a map, the map's shrinking. You start by gathering power and then later you're gonna have to fight people. But there's so many other influences right, like you said you, you don't have to kill everyone to win top five. All get prizes. So you like an extraction game. You could just farm the perimeter and never fight anybody and still do fine. And the other really interesting thing is, instead of upgrading your weapons and gear, like in a battle royale, you pick up new guns or you pick up health upgrades. In this one you upgrade by opening these chests, getting troops, and it's like a merge game or like an auto chest game where you get three gunners and they formed merge to form a super gunner guy. Yeah, such an interesting blend of mechanics.
Speaker 3:The other thing I think is an important point about fusion that you were talking about, eric, is you get that auto-chess element, which is awesome, right? It's so satisfying when you make a merge in auto-chess. But the additional benefit here, beyond just having a more powerful character, is that it actually reduces the total number of units in your squad. So three becomes one, and the price of the chests depends on how many people are in your squad. So not only does your character become more powerful, but also the price of the chests decreases. So you're trying to do a lot of these merges so you can get a bunch of people into your squad and you'll be more and more powerful yeah, definitely.
Speaker 1:yeah, the power up from the merging actually isn't that strong. It's more about reduced chest cost, but from an economy perspective, one thing that's really interesting about this game is that it is, like I said, it's kind of like a roguelike or battle royale where the how do you monetize these session-based games? How do you monetize this game where you don't come in with that much power right, the as you level up your troops or whatever, it doesn't actually change the starting power of your units very much, and a lot more of the monetization is within round. I want to open more chests or I want to be able to play more. Yeah, it's an interesting problem We've talked before about, like why don't roguelikes monetize well? Or like why does no one seem to have cracked the formula on monetizing roguelikes? And yeah, I think it's an interesting approach For me personally. I'm extremely spend-averse, so I pretty much don't spend on anything and I've just been hoarding gold, um, and I'm wondering if other people are having that experience.
Speaker 2:that's hurting their monetization what is the primary month. So for all stars there's a battle pass.
Speaker 1:Basically that's like the big thing so I'll break it into three categories. One is you upgrade your troops. Like clash royale and a lot of games, you can upgrade your troops to be stronger. However, the power delta is pretty small and that's on purpose because there's a lot of in round power progression. The second is you just you get to play more you, I guess opening the chest. The other big thing is you can buy in round power-ups. So, for example, you can normally have to collect gold in the game to open a chest to get a new unit. You could just spend money to open the chest immediately and get a new unit, so you can can basically give yourself an in-round boost, but it's only for that particular game.
Speaker 2:So there's literally an option like buy 99 cents or you use the hard currency.
Speaker 3:Pretty much. You have to do it before the match starts, so it's done through keys. So each key type will open chests and, based on the key type, the contents of the chest will change. So one of the keys is called a fusion key. It's the most valuable key, and when you activate a fusion key and you go up to a chest, the gold price is removed. So it's insanely pay to win, insanely pay to win. I've never seen something this bold before. But not only that with the fusion key, you instantly get a fused character. So rather than having to get three copies to merge together, you instantly get the most powerful version.
Speaker 3:Another one just lets you open a chest without having to pay the gold price. And so what you do is you stash these keys into your battle bag before you enter the match. So if you don't have any keys before you enter the match, you can't buy it in round, you need to beforehand. And there's no, is there no battle pass? There is a battle pass. It's called a gem pass. But that, but I would consider that like a medium. That's a medium of exchange. Ultimately, what they monetize is those, those keys you nailed it.
Speaker 1:uh, yeah, there's all these other systems by which you acquire currencies, that you spend on other currencies, that you spend on other currencies, but ultimately the end product is either persistent power, which which by leveling up your troops, which is pretty mild, and then also, in round power boosts, which are only for that round, which is the problem with roguelikes and battle royales is that you're supposed to reset your power every round. Right, you start from weak and you slowly progress in power during the round, and one question is how willing are people to spend on something they know is temporary? For me personally, I love building up my stash and slowly getting stronger, so it's very not appealing to me, but I'm curious how well this game will monetize.
Speaker 3:So I actually have a different perspective on the monetization. The monetization is actually one of the strong suits for you. So I think there's the gameplay stuff we should talk about. Is this a game that's going to retain 10 years in the future? Is this a game game people remember forever? I think the answer. I mean, I still have a lot of skepticism. I think the answer is yes, because I think it's a sandbox. We were talking about the characters and how you build these squads, and all the characters are going to have different abilities. How do they interact in an interesting way, theory crafting all the roguelike stuff we've been talking about. But it's not just that forms. The sandbox has different enemies. The map has different elements, like trees. They're in round consumables, right. So there's not just the keys we were talking about, but you can have bombs. Now those are not monetized, but you can get them in crates inside of the round. You'd be like, oh, I got a bomb, I got a cannon. That's really cool. So I think that sandbox is super interesting as they add more pieces to it. Then I think there's okay is the.
Speaker 3:I went on an econ podcast when I talked at my university. Which is what is the best game economy of all time. It sounds like a dumb question, but you start to think about what is the best game economy of all time? We should have answers to this right. What makes the best game economy? And to me, the answer is Match 3. I think Match 3 is the best game economy of all time, and the answer for that is that it's survived for over 20 years is that it's survived for over 20 years.
Speaker 3:Candy Crush is still going. They don't have any deep economic problems. Every squad RPG, every RPG I've worked on, always has. Whenever you introduce vertical progression, there's a lot. Whenever you introduce that accumulation that you were talking about, eric, it's also design debt that you got to solve, right, because you got to adjust enemies to that. You got to do all these different things.
Speaker 3:If you have vertical progression in your game to still make that compelling, because ultimately, at the end of the day, if you introduce vertical progression, it's about the gap, right, it's about the gap of how powerful the enemy is and how powerful you are.
Speaker 3:And so if we're saying, eric, that you're going to get more powerful, I also need to increase the enemy power level at some point, and so there's just, there's a lot of design baggage when you have, I would argue, vertical progression.
Speaker 3:But when you have consumables, when you're in candy crush and you're selling extra moves at the end of a level or you're sending in around boosters, that can go on infinitely right, that can go on infinitely.
Speaker 3:And now all King has to do is get players to play more levels right, to go through the turn style more and the turn style is like how many opportunities do I have to spend on those extra five moves, how many opportunities do I have to spend on boosters? And so the more levels I play, the more I'm going to consume them and and that ultimately to me is it has been an economy that's sustained for 20 years and has delivered, I would argue, probably the single of any economy design that's probably delivered the single most money of any economy design, at least on mobile. I think RPG might get you somewhere, depending on. I know we could have the whole ship a theist problem of hey, there's ship, a theist, this problem of whether or not. But I think Squadbusters is very innovative in this sense. It's a PVP game, it's going to have consumables and I think those keys are going to be able to make sure there isn't a lot of design debt and keep this thing going for a very long time.
Speaker 2:That would be my argument, at least it's weird that there's nobody that's ever done this type of monetization in previous roguelikes. That are they their pve, like why didn't? Obviously hades is they have a box price, so there's a skew to buy the game so that they don't really need in-game monetization. But you look at slay the spire, like why don't they do this? There's no controversy about having to pay to get a little bit of progression or pay for power. And then you've got this pvp game that comes out and fuck that. We're gonna have pay for power in round like payments, infinite of loop. I totally agree with what you're saying, phil. I'm really curious to see how well this does and if other rogue likes will follow up.
Speaker 3:The other thing they do is they do some classic streaks, which is also pretty brilliant. I don't know how you found about this, eric, it's just lost a version of 101, right, if I'm on a streak, I get extra rewards at the end of the round of the round, and if I lose, my streak is broken but I have the opportunity to spend gold to maintain that streak. And so you see some players that have streaks that have been going on for 50 levels because obviously they haven't won 150 times, but they but they've been paying. And the other thing is that there are a lot of bots in this game, so you don't have a 50 win rate, you actually have a higher than 50 win rate. They can actually boost that number up a lot. So you you can have effective streaking, which is usually hard to do in PvP games.
Speaker 3:Pve and again, candy Crush does streaks really well. They combine the streaks with the moves, and so there's a lot of pressure at the end of a round to make sure that you win, and you win on your first time. You don't want to lose your streak and you don't want to lose all of your progress and all these different events which mandate that you place first, so they play on that really match three monetization elements into a PPP game, which I think to me is really revolutionary.
Speaker 1:Yeah, that point about sustainable economies and like how vertical progression is intrinsically not sustainable because it's a permanent level change, yeah, that's a really interesting point. I hadn't thought about that. Going back to the whole crypto thing, where people talk about sources and sinks, there's no sink for level You've leveled up. Your level doesn't sink. The only way to deal with it is inflation. The only way to deal with it is to make everything else go up too.
Speaker 3:I think it was a store of value. Your level is a store of value. Your battle pass level is a store of value. All these things are stores of value.
Speaker 1:How is it storing value if you can't un-store it?
Speaker 3:Well, it's not a medium of exchange, but it would be a store value.
Speaker 1:You can't give it If you're storing. If I got like gold bars in my closet, I'm storing them there and the point of storing them is so I can take them out and sell them at some point.
Speaker 3:But you can still have a non-transferable store value.
Speaker 1:Then what is it storing? What is the value if it's not transferable?
Speaker 3:So let's think what do we think of a really good example Non-transferred store of value. What if I had a tattoo? Isn't that consumption? So the way, the reason I call it a store of value is that it accumulates like your level can accumulate. It in some ways represents your sweat. It gets more valuable over time, it's monotonically increasing, is valuable and it stores your progression in a way.
Speaker 2:I agree. It's not transferable. I don't think store of value is the right word. I see what you're saying. I just think that store of value implies something to do with some sort of.
Speaker 1:Like no one else values it.
Speaker 3:Yeah, you're the only one who values it. I think a bunch of people value it. That can be fine, right? What's wrong with that Then? It's not storing value. Then it's not valuable Storing value for you though I have a level 60. World of Warcraft character. That's a store of value. It's not transferable.
Speaker 1:I would say that's consumption. I'd say that I've accumulated this thing that gives me utility, but it's not valuable to anyone else.
Speaker 2:You can imagine an item that you buy primary and has almost zero resale value. There's a bunch of different things like this, those things you're accumulating. Let's assume that they immediately depreciate and are worth nothing like used cars. Or it's a luxury car. The second you buy it it's worth 60% of what you bought it for. You can imagine the extreme scenario where it's 0%. You purchased it so it is valuable to you. You can use it. You can use it up, but it is I agree with Eric. I think definitionally it's consumption.
Speaker 3:So we know. So in game economies there are sinks and sources and those are things that are exchanged. If I have a wallet balance of a thousand gold, ultimately that's something that can be spent, and we can't say the same for level. We can't say the same for, like your battle pass level. So that definitely, to me, is it's something that's accumulating, accumulating XP. It's accumulating, it's accumulating. What do you think would be a better way to describe that, doesn't I? I agree it's consumption, but that feels fundamental. We I think we need a different term to describe what that is accumulating. It's a tally marker does that make sense?
Speaker 1:my analogy is every time I, if I every time I ate a hamburger, I drew like a mark on the wall. And now my hamburger battle passes at level 100.
Speaker 2:You're saying phil, like it is something that matters. And if, if I'm wandering around in RuneScape with a level 99 cape or whatever that has value, People are impressed by that. But well, that's not a great example because that you can sell. But it's more. It's like a status symbol, it's a signal.
Speaker 3:But it can be privately for you too, right, it can be non-public. Facing Squadbusters is an account level which, by the way, is super hidden. So I think we need a term for something that accumulates something. I think it's accumulating value, and when I think about something accumulating value, I naturally go and say I think that's a store of value. What is value? You're getting more powerful, right? You're using those interchangeably. I don't think so. And the reason you can derive utility from a store of value, but I think there's I don't know the right term for this there is. I do think the phenomenon we're describing here is a thing, and I think it deserves its own term.
Speaker 2:And it may not be store of value.
Speaker 3:But there is a particular mechanic. There is something that there is. You're accumulating something, maybe you're not storing it. Maybe that's not the right, maybe store isn't the right word, but it's something that's not a medium of exchange that's increasing. It's that hamburger you were just talking about. But let's say, the hamburger medium or powerful? Is that hamburger tally Like? Every time you eat a hamburger, let's say, your hair grows an inch? I don't know what would you call that.
Speaker 1:And then is the value I'm getting that from that like my pride when I see, oh, I've eaten a hundred hamburgers. Or is it like showing to other people look how many hamburgers I ate, like I'm a real?
Speaker 3:hamburger. Remove all the socials. Just assume you live on an island. Let's do island economies. Let's do where's Lucas. It's pure utility.
Speaker 2:It's just something that gives you utility, intrinsic utility, because value implies that there's been some sort of optimization procedure. There's been some sort of either a market has optimized the price and that value is derived from the price. Utility is purely intrinsic. It doesn't require any external like. There's no external agents required for you to have utility. A price is value. Utility is not necessarily value. In my opinion. That's how I look at value. So you're talking about something that can provide infinite value, like an account level.
Speaker 2:If you use Star Atlas as an example, players can, let's say we had a leveling system where they could sink, burn resources that are worth real money and level their account up. They might do that just to level their account up, just to feel good about it. Now, what is that doing for them? That's purely utility. They can never trade that back. They've burnt all that. They've consumed all that in order to consume utility. So it is utility. It's just utility that sticks around and they can look at it. It's like I said, it's a status symbol, it's a signal, it's a trophy. It's something you can look at. You can't do anything with it.
Speaker 3:It's worthless, but you had to a lot or produce a lot in order to get it.
Speaker 1:Maybe not. It's a storage utility, it's a counter of utility, then some way, isn't it? Yeah, it's almost like a signifier of oh, this is how many hamburgers. I feel good when it's higher.
Speaker 3:So one random thing I'm going to throw in here. Who I'd love to have on the game of autonomous cast is the chief design officer of supercell, who has now become the lead for this game and previously was the lead for clash of clans and has given an incredible gdc talk, by the way, on time-based economies. If you're having a chance to check it out, we'll. I'll link it out in the show notes masterclass talk. It actually talks we get them on.
Speaker 3:That'd be awesome. Yeah, his name is ano. He actually has an economics degree. He's worked with one of the sociologists economists he's the guy he wrote. He was the guy who wrote with edward castranova that that econ book, virtual design analysis the one I fucking hate. Oh, he's not actually an economist, he's a sociologist. Oh god, late inverta yeah, that guy really late inverta why do you hate that book so much again, like econ 101 exists, gee, thanks demand curve, slope downward yeah, but that's like our slope upward.
Speaker 2:You can't take that as given, though, but anyway.
Speaker 3:So anyways he did. He actually started a virtual economist consulting firm before he was at supercell. So he actually worked at ccp beforehand.
Speaker 3:And of course, he worked at digital chocolate with, like paypal mafia mobile. It would be great to have him on. He seems like an absolute brilliant human being, extremely well versed in economics, I'm absolutely sure, and, of course, versed in game design and a strong econ background. So, like another w for us, another w for the for game economists, even if they go by other titles. Yeah, he's the head of product. He said he was the chief design officer at supercell and now he's the project lead. He's the product lead on squadbusters.
Speaker 1:Nice, that'd be sick, yeah I think it would clash of clans, dude I was looking at the charts in your article, phil clash of clans still chugging along making gangbusters money. What the hell I?
Speaker 3:mean. This goes back to sustainability. What is the cornerstone of clash of clans? It's consumables, right? It's make troops, they go out, they die. You make them again. It's an infinite money pit. Clash of clans has been going strong like it had that big summer when it came out, I remember it was the summer of 2015. That shit was crazy. But yeah, clash of Clans is one of the best performing products in Supercell's portfolio. It's actually Clash Royale that's gone off a cliff and really fucked themselves. And I think, again, it's because of vertical progression, right? You just look at, they just introduced a thing called evolutions in the game. They gave away a lot of vertical progression in their battle pass early on in Clash Royale.
Speaker 1:It's hard to roll back those things Very hard, very hard, I guess. To bring things back on topic right, if you can introduce consumables in a PvP game in a way that that PvP player base will accept, I think it's huge. And I think one big question for Quadbusters is will players, will the competitive PvP-oriented community accept the idea that there is this pay-for round power?
Speaker 3:and without any argument. Usually I used to defend vertical progression, and monetization is abolished by this game because it literally is you in the moment getting an increase in win probability? There's never it. How should we say this? It's almost proto-efficient. There's never a reason not to spend keys. It is always win probability increasing to use keys. There's never a reason you should not use keys. It's always strategic to use a key and so what if you hoard it? Am I playing the game wrong? I haven't used any. Just put money aside for a second, though. Right? Assume you have infinite sum of money you should spend. You should maximize as many keys as possible during the round and remember there are cooldowns.
Speaker 3:I think that's like one per minute, I think yeah, it might be something like that, but you should all, every time you play a match, if you don't, if you really want to win, you should always spend against keys. And that's what I think is very interesting here and is also usually what you don't see in a lot of pv stuff. Usually, like, the zone of monetization stops once the in match, the in round, things happen even if, for instance, you have additional abilities you could choose from, because even in Squadbusters, you still have to unlock the character. So you can open a chest and you can have a character that you haven't unlocked and that still can appear in the chest. It's just you won't have the ability to select it, so that to me, would be more traditional monetization that could happen. That's still pretty aggressive, but this is in the fucking round, this is in the fucking round.
Speaker 2:How can?
Speaker 3:no-transcript are so dependent on so many other design elements. I think you can do the street prevention though.
Speaker 2:But yeah, but pay to win or pay within round on a marginal consumption.
Speaker 3:The only other game that I've seen come close to this is World of Tanks. They had golden bullets at one point, but that's very Eastern European has not had a lot of Western penetration. Maybe in some Eastern RPGs they might have elements somewhat closest, but it's rarely in round. I've just. I've never seen it this close in a popular Westernized game. I don't think you could pull this off anywhere else, and I'm actually I'm even surprised they pulled it off in here.
Speaker 2:Is there a cop-out? Oh, you can have a pay-to-win lobby and a non-pay-to-win lobby, a lobby where you can pay for stuff and a lobby where you can't pay for stuff. So initially.
Speaker 3:that's always my defense of pay-to-win mechanics is that when you have matchmaking systems or ELO, that at equilibrium the payers are always just going to play against one another because they're going to be clustered in higher tiers. They're going to be paired off against one another. Not true at all. You could have tons of people mixed together, so there's no guarantee of that either.
Speaker 2:Yeah.
Speaker 1:So I think part of the struggle is with this consumable paper power. Is that part of the sort of social contract you're entering when you enter a competitive game is like, hey, the real world's crazy. Some people are tall, some people are short In this game. We got the same tools, let's go, let's. This is a contest of skill. We're both playing mario kart, we're both playing by the same rules and I think some people see that consumable paper power as a violation of that.
Speaker 1:And then it breaks the magic circle. You stop thinking about the game and you start thinking about how unfair life is and how different people have more money than other people, and it ruins your immersion. But squadbusters hopefully tries to cover that up a little bit, because it's a battle royale and there is that in round progression, like people are growing and shrinking in power over the course of the round, and so this is a modifier in that you can't really tell if someone else paid for power or not. You can't look at someone else's squad and say, oh, this person's right, and by hiding that I think it makes it more palatable From what you guys said.
Speaker 2:you don't have to win to be able to progress and to earn your streak. You just have to be in the top five. Probably pretty attainable to be in the top five, even if you're in a lobby full of payers, I'd imagine.
Speaker 3:And remember they have bots. They have a lot of bots, yeah, so remember they push run rates above 50%. This is basically a PvE game, so it starts to become more PvP-based when you get into the squad leagues, which is the end of progression. Right now, I've heard things change pretty dramatically, also in terms of the bot composition.
Speaker 2:Yeah, that's how. From my experience, that's how every PvP Supercell game is. Once you start to, actually, you can tell immediately when you're versing real people, because you stop winning every single round. Ironically, that's also when I stopped playing Squad for All-Stars was when I started versing actual players.
Speaker 3:I would like to see a bunch more games do this win streak thing. I think this win streak mechanic can be transferred to anything. We saw Doolingle do it right. This is one of gaming's big win has been streak prevention. That's been one of our huge results. Thank you, thaler.
Speaker 2:I saw this on reddit. I think I logged into reddit the other day or on my phone. I opened it up. I swear it was reddit. Maybe it wasn't reddit, but it's reddit.
Speaker 3:I have be real, that gives me a little bit of streak bonus. Duolingo has this. Sometimes it's just of a notification that you have a streak, though like they they don't put like. The reason candy crush streaks work is because you get boosters if you're at a certain streak level, right. So if I've been streaking for three levels in a row, then the next level I play I get a bunch of boosters because I'm at that streak level and so if I lose that I have to rebuild it up again. So there's real material consequences to losing.
Speaker 2:It's not like a tree that like stops growing if I don't log in, although I would argue that's why I think, like some of the, some of those streaking mechanics don't work, like for reddit, unless they are going to give me a special emoticon or a special what's the guy? Uh, sped, not spes the character that you have, or whatever your avatar alien guy let's give me a different avatar or something like that.
Speaker 2:I'm not. I don't give a shit about that chesscom. I don't care if I have a streak on chesscom. You can't give me a fucking power up on chesscom. Now, what they could do is they could give you content. They could give you free content. That would get me to come back. Oh, I get an extra lesson this week. Okay, maybe I'll play. Do an extra lesson. Oh, I get some extra puzzles about their streaking. We talked about Duolingo in the past. The only thing that Duolingo gives you is, I believe, after 100 days, you get a different colored app on your home screen and then after 365 days you get an even different color.
Speaker 2:It's like gold, but it's like the weakest retention mechanic, in my opinion, for a game, for something that really needs a powerful retention mechanic, because it is pain. You're putting the person through pain, it's not fun, it's not a game, and I stand by that. Anything else we'd like to say about Squadbusters? I played two rounds and then I was like this is too complicated, I'm going to play Brawl Stars. And so then I played a game of Brawl Stars and then I put it all away.
Speaker 3:The other thing that I think is very interesting here is that I was initially critical when the game was in soft launch, because you could not buy loot boxes, so you couldn't spend. Velocity is something I've started to talk a lot about, which is just your ability to spend money, to deploy capital in a game on day zero. How much money can I spend on day zero? How is that limited? And so squad busters launched with a ability to you buy these chess tickets which lets you get a reward at the end of round. Now you can play without a chess ticket. You just won't get a reward at the end. You will. Now you can play without a chest ticket. You just won't get a reward at the end. You will progress along your missions, all these other things, but you won't get a reward at the end, and usually that's the reason that you get a lot of your progression is through playing these chest tickets, which refresh on us goes.
Speaker 3:It's an energy system that we've seen a million times before. It's actually a very old school design. Right, buy all my characters to their maximum vertical progression rating, which is, in this case, three stars. I can't take them from one star, two star to three star, because their store only lets you buy a limited amount of character copies per day and there's no loot boxes which I can just press press. So they have implemented this design, which I have begged multiple StuVs to do.
Speaker 3:I call it the inverse loot box. So what you do is you have your store and when you buy an item in the store, you can buy all of the items in the store, and then what you can do is you can hit a refresh button for a certain amount of currency, and so that refresh button essentially gives you infinite spend up because you can just keep refreshing, keep buying all the things, keep refreshing, buying all these things. So it massively increases spend velocity. And it's actually very similar to these x-ray packs which have started to poke up, pop up. So rocket league did this and fifa did this, where you open a pack and you get to choose which card you want in it beforehand. It's similar to that, but it's a very clever way to get spin velocity up.
Speaker 2:Boy, only if marvel snapped it, something like that, but and this is for those in game, this is for those like in round not for the keys, not for the consumables.
Speaker 3:This is for the vertical progression. This is for the characters getting more powerful out of round.
Speaker 2:But technically eventually you would hit, so you would have every right after an insane amount. You probably have to spend hundreds of thousands of dollars.
Speaker 3:But yes, yeah, we can also talk about the fact that there isn't a soft currency in this game, which could be interesting.
Speaker 1:No one's actually talked about that yeah, their usage of gold and gems because they're used as in-round game mechanics. They're like totally different from the standard soft, hard, current. I never got to the menu.
Speaker 2:I think I had to play two games right in a row before I was confronted with any sort of menu, so I never even saw what the monetization looked like, didn't know what the menus looked like, didn't know what the currency looked like. I was just playing the game and I was like this is tough, this is complicated.
Speaker 1:I'm going me go play brawl stars there. There's so many progression systems. There's five different. There's two different quest systems and two different like battle pass systems and then three different upgrades.
Speaker 2:It's crazy I wonder if that works. I wonder if that works for the audience that they're going.
Speaker 1:It's like phil's research pressing six times as many claim buttons is positive on retention. There's so many fucking claim buttons of this thing. So it's positive on retention, but there's so many fucking claim buttons in this thing.
Speaker 2:It's positive on retention, but was it imagined there's a big difference. But yeah, we shouldn't talk about it right In fact.
Speaker 3:This is fucking brilliant. Thank you for bringing this up, eric. This is the shit I missed when I was talking the podcast to the other two guys. It's like now you start to think about the external validity, right? So if I have a thousand gold I want to give to players, should I have them click eight buttons or six? And at some level. That's what this game is asking. It's like how many different mechanics do I want to use to source shit to players?
Speaker 2:Speaking of pay to win and inequality, let's talk about transaction fees on blockchains. Recently, I wrote an article titled Fixed Costs and Income Inequality in Blockchain Economies and basically the idea is that, operating on a blockchain, you always have to pay these fees. These are typically called gas fees if you're on Ethereum. If you're on Sol, it's called like a transaction fee or a rent fee. But the important part about these fees is that from a game economy perspective, especially a game economy design perspective, the fees don't discriminate or care whether there is an expensive asset or an asset with really high stats that might have a higher value on a marketplace than something that has really bad stats, something that might have a lower value on a marketplace. So in Star Atlas, for example and this is the reason I wrote the article was because of a problem we were having in our own game you could be flying around a ship, a spaceship that's $100,000 or a spaceship that's $15. And it's going to cost the same exact amount on the blockchain to pay for the transaction to move from one planet to the other. Now, obviously, there are gameplay mechanics that make the $100,000 ship much more expensive to move across the map. They have to pay for fuel, blah, blah blah. But on a meta level, on the actual blockchain, you're paying a transaction fee to move. Now on Solana. This has always been touted as this extremely trivially small, tiny number, and that number is 000005 Sol, which is when let me do the math real quick when Sol was $40, that was $0002. Now Sol is almost $200, and that's more like a tenth of a penny. So every single time you do something in the game, it's going to cost you a tenth of a penny. Now let's say you take your $15 ship and you are undocking from a starbase. You're moving across the map, you're landing on an asteroid, you're mining the asteroid, you're coming off the asteroid, you're doing all these different things. On the blockchain. You're doing 100% on-chain game that is going to cost you. That'll be anywhere from five to a dozen to two dozen transactions to do that. So all of a sudden, your tenth of a penny turns into a penny and when you're talking about a $15 ship, that's actually a lot In. In fact, the amount of material that you were able to extract from that asteroid is probably not worth as much as the fee that you paid to get there the blockchain fee. Now the game economy is balanced so that it's net positive for you. It's not going to cost you more to get there than the material that you pull off.
Speaker 2:So what's interesting about blockchain transaction fees and why I say income inequality and that might be a bit of a misnomer. It was more or less a flashy, interesting title. But the problem is there's a fixed cost associated with operating on a blockchain and that fixed cost almost acts like a fixed tax, linearly increasing. Let's just say it's like the line Y equals X. It's just going to be a one over one. It's going to be sloping upwards. And then there's tau, which is the tax or the blockchain fee, and that's positive. That's non-zero. So anything on that upward sloping line that's below tau. There's a gray area where players are literally Deadweight loss. I don't know if it would be a deadweight loss, would it be called a deadweight? I actually think that is a deadweight loss. So what you end up with is people underwater. Basically, now, as that fee goes down and as that earnings slope goes up or that earnings line increases, either it's just linearly increasing on the y-axis or, if the slope changes, you're going to have a smaller and smaller deadweight loss. Now, ideally, you're able to completely eliminate the fixed costs and you end up with no deadweight loss.
Speaker 2:Now, when Sol was stable at 165 and Atlas was way up and relative to USDC and the transaction fees on the Solana blockchain were low, this wasn't a problem. But all of a sudden, transaction fees skyrocketed about 100x to 1000x, depending on the day. So, all of a sudden, transaction fees skyrocketed about 100x to 1,000x, depending on the day. So all of a sudden, your tenth of a penny transaction fee turns into 10 cents or something like that, or a dollar in some cases. So all of a sudden, the everyday everyman's Visa, solana, the Visa network of the blockchain, ends up being too expensive to run a decentralized application on. So you end up in this situation where the fees were crazy high. Atlas had come down a little bit compared to its all-time high. I'd say a little bit. I think it was down like 45% down since its local high that we had, which was like 1.2 pennies. Now we're sitting around 0.4 pennies. You have this situation where the earnings came down quite a bit and the costs went way up skyrocketed. So there's a bunch of people underwater. Anyway, that's the problem.
Speaker 2:Some of the suggestions that I have to deal with this problem are. Something that's interesting to note is first of all, there's only a certain portion of your population that's under actually under this. You should understand what percentage of your players are under this. So you can basically just plot out the earnings of all players and the fee and literally just like manually plot out the distribution of players. The problem with that? There's some bias there, because the people who are in the deadweight loss zone shouldn't even be in your data, and if they are in your data it means they're just fucking up or there's some sort of asymmetry, information asymmetry. So it's a tough problem to crack because you don't actually have the data to observe. What does it look like underneath tau? Now you can see where does tau and your earnings line distribution meet, and so you can actually study. Okay, here's the number of players that are above this, but it's hard to know how many players are below this. Now, fortunately, we have historical data that allows us to pretty much know what this looks like. But if you don't have historical data, you wouldn't know what the bottom of the distribution looks like or the people below this.
Speaker 2:So one of the main ways you can do that you can't really impact the earnings. You can't arbitrarily increase the earnings of a player. I always tell people earnings is a market price. The invisible hand has determined the earnings rate of a player in a Web3 game. There's nothing you can do to change that. You can make a better game, you can make a more stable currency, you can do things to make the overall, the entire ecosystem, better and that's going to cause, hopefully, whatever that hand is, that invisible hand is going to shift that upward. So in our case, atlas, the more stable game we make, the better game we make. Hopefully, the higher Atlas goes in terms of its price and all of a sudden the earnings is going to go up, so fewer people are in that deadweight loss zone. So that's the only way you can really change earnings, which is a long-term, not short-term. There's nothing in the short-term. There's no design things you can do in the short-term to arbitrarily or immediately I should say increase earnings.
Speaker 2:So you have to focus on the cost side. How do you focus on the cost side? You could put through fewer transactions, but when you're talking about a video game that's fully on chain, that's almost not really possible. For example, we have 2 million transactions per day, about 1,500 to 2,000 daily active users. So we have thousands of transactions per user per day. So it's really hard to say okay, even if we cut it in half by 50%, that's maybe a slight improvement, but you have to have an impact. That's going to have orders of magnitude. You need to cut it in half by 99%, and that's really difficult to do, because how do you go from 100 transactions to one transaction? You just can't do it. So if you're going from 100 to 70, that's not that big of an impact. So you could try to reduce the number of transactions that are actually going through. So that's reduced transactions.
Speaker 2:Then there's a second one non-decentralized ideas. So basically, just don't have your game fully on chain. Obviously, that kind of goes against the ethos. So Star Atlas, for example, we have a side net, we have a layer or we have a subnet of the Solana blockchain called AtlasNet. We could technically put the game on AtlasNet, but what this does is it means we can't build with the other programs that are on Solana. So we have multiple programs that are building simultaneously with us. For example, a ship lending platforms that we're currently trying to implement. They're on Solana. If we weren't on Solana and we were on this side net they wouldn't be able to build with us. So there's an advantage to being on the main chain and not on some sort of side chain that has zero fees. So that's one thing you can do is just move to a decentralized approach.
Speaker 2:The third piece that I have here and I actually have more as we've been working through this problem to add you can offset or eliminate the fees. Now, this is a big topic offsetting and eliminating transaction fees. So you can do this in a number of ways. You can build the blockchain programs to be more logical or to be better. This is an engineer's solution. This is not an economist's solution. You can.
Speaker 2:In the case of Star Atlas, for example, let's say you have a DAO that has $3 million sitting in it and that DAO is making $3,000 a day on in-game activity, for example, crafting fees, from our crafting protocol. You could take that money and you could pay the transaction fees with it. So as long as everybody in the DAO, if the DAO passes a law that pays transaction fees, you can actually have the DAO income pay for those transaction fees. So the biggest players are funding that DAO. Our top 20 players are funding 90% of the wealth that's going towards the DAO, and then that 90% of that wealth is being distributed across the players relatively equally or evenly. So that's a really cool feature of being in this decentralized ecosystem. You could pay it as a company. In our case, that's exposing us to $125,000 a month of pretty much unlimited upside or downside risk. If we 10x our user growth, that number 10x, so that's not an attractive option.
Speaker 2:And then, in terms of eliminating or offsetting fees, one of the final things that I'll point out this is like super high tech is to actually run your own validator on the blockchain and with that validator, you can essentially charge nothing to the users of that validator. So you can validate blockchain transactions and have the fee be zero. And I'm not 100% sure how that works. That was a discussion I had with an engineer this week, but lots of interesting stuff. This is like such a very fresh new topic that's come up. And it's come up because the cheapest blockchain in the entire world is now too expensive to play a game on. If you're not somebody with a $1,000 portfolio Because, remember, it's a fixed cost If you have $1,000, $1 is nothing. If you have $10, $1 is 10% of your operating capital. Exciting times. Find an article, go read it, even if you don't like Web3 stuff.
Speaker 3:One of the things you made me realize as I was going through your piece earlier is because it acts like a tax right. A transaction fee is a tax. It's a token tax. It's how it sounds, though Tax in the book. Tax in the book that when you have a game and those activities are no longer worthwhile to pursue, the ones in which the benefits don't away, the cost, now that the tax is what it is, can actually have a lot of adverse consequences. So if we were to give a simple example of a crafting game and you need these base materials to craft all your way up until extremely valuable goods, there was a certain cost to gathering those core materials and the tax was high enough. You could destroy entire supply chains with this tax right. There's a lot of intricacy on how you set up your Web3 game economy and how these things interact with them.
Speaker 2:And this was something that we were told we shouldn't have to worry about. I've got a chart. I'll share with you guys, a chart that maybe we can put in the show notes. But we basically saw transaction fees like 100x between December and March, where they were at their highest, and these priority fees went from being a fraction of a penny to being, like I said, dollars in some cases. So it's all of a sudden this thing that shouldn't have been an issue that's now an issue, but it's absolutely true For somebody who's building a blockchain game, especially if you want it to be on chain, which fortunately, like nobody's doing that or I should say unfortunately, but nobody's actually building on chain games that very much but it's absolutely something you need to worry about. This is probably more important actually for decentralized applications that are that have to build the logic on chain. Like a logistics company, I'd imagine, would want to think about something like this if you're sending billions or millions of transactions every single day.
Speaker 3:Because you can execute something in the game and you can do the roll-up strategy right, which is execute it in the game engine, have it recognize it's real and then you roll it up and you send it to the chain later on. But if I'm a dApp, a DeFi, like I need shit executed, I need my cash now. Can't wait for the roll with my USDC On Solana we don't roll up.
Speaker 2:Oh no, everything goes through. We're not Ethereum, we're not Polygon, there's no roll strategy for Sol.
Speaker 3:Why not? No, that seems like the most obvious clever design I've ever seen. Layer one baby yeah.
Speaker 1:You can't roll up On the ground floor?
Speaker 3:Yeah, I guess you're just out there raw-dogging it, man, do what you got to do. Is there no Layer 2 solution for Solana?
Speaker 1:No, there hasn't been a need to. No, it's been so cheap on base Layer.
Speaker 2:Wow, I didn't know that.
Speaker 1:Wow, that was their whole shtick. They're like the L1 alternative to all these roles.
Speaker 3:I knew that, I just didn't know. Screw your L2s.
Speaker 2:I mean like I've been hinting at this, but I hope that my views are sober and people read. I want this stuff to be like anybody can read it and be like, oh my gosh, that's interesting, whether you're a blockchain person or you're not a blockchain person. But to me these problems do introduce interesting, like the whole DAO thing. All of a sudden you're like, oh, that's an interesting use for DAO. Now, if you were not on a block sheet, you wouldn't have this problem to begin with. So you take that out. I don't know. It's been an insane, an insane time over the last few months dealing with like community, but it's sparked a lot of, in my opinion, good content because I can write about really complex problems and like explain them in a technical sense. It's two web three.
Speaker 1:Talk to you guys soon. See you guys, we should teach this to our children Economics is major. Everyone has to major in economics. Number one for personal survival, economics is major
