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The Importance of Innovative Token Designs in the Blockchain Space

The Importance of Innovative Token Designs in the Blockchain Space

Some Context: What’s token design? 


Token design refers to the rules of how tokens act within an ecosystem. This can include whether there’s a single versus a dual token model. The type of token distribution used in a game determines who receives tokens. If staking is an included feature of that protocol, if there’s a tax on buying and selling NFTs, and where that revenue is directed toward, etc. In short, token design looks at the rules of how tokens circulate within an ecosystem. This will help us better understand where value is being captured and where value is being created.


Key topics this article will cover:

  1. Case Studies
  2. Foreseeing the Next Five Years
  3. Ineffective Token Designs
  4. Potential Issues Encountered with Monetising One’s Time Spent in a Game
  5. Market Demand for Play-to-Earn Gaming
  6. The Future of Token Designs

Case Studies


We shortlisted some games that have unique or innovative token designs that 1. either have been released or 2. are currently in development. We highlighted qualities that make them innovative and make them stand out.

1. Edenbrawl


They sport a model that is a mix of Web2 and Web3 aspects, a token that’s getting the Web3 component rather than doing a two-token model. This brings in traditional fiat currency as the other more active gameplay-focused token in their ecosystem.

2. Block Lords, and 3. Ascenders 


We highlighted these two games for having asymmetric gameplay, or varying roles within the economy. In doing so, various participants are engaged in different types of activities and in doing so are contributing to the economy. Participants will create resources or services that are then beneficial to people in a broader role. Therefore, an interactive economy that emphasizes the need for trade between these different types of participants is created.


Block Lords is a medieval strategy game. There are different roles such as farmers producing food, defending or attacking, and higher-level characters such as kings and lords. On Ascenders, there are split Paths of Fighters, Explorers and Builders. They are all doing different things but still need to interact with each other.

4. Axie infinity


A popularized game but one which pivoted in a way that they are introducing off-chain currencies as well as their on-chain ones. These off-chain currencies are seasonal which is an interesting aspect for us and a pleasant change for them. We have seen big-time games focusing more on NFTs as their main earning mechanic which is dropped from gameplay. 

5. Thetan Arena


The game generates periodic revenue through its utility token. 

6. Forge Arena


This game has various tokens that players may acquire through various activities within the game, all of which are inputs to their NFT generator. 

7. Undead Blocks


The game sports a basic and off-chain stablecoin pegged at 10 cents per golden Z box.

These are all interesting takes on how to balance their economies. However, because these are different games with different genres of games,  it really boils down to how such game designs are implemented in their specific genre. 

Foreseeing the Next Five Years


Our thoughts on what’s over the horizon for GameFi


We expect to see a lot of up-and-coming creativity in the space. This does not necessarily mean that one particular model ends up being widely adopted. There are likely to be several different variations that apply to each project. This is because not all games are the same, and not all game economies are the same. Therefore, it is critical to have something that fits that particular version and underlying goals. 

Ineffective Token Designs


We list two types of token designs in previous blockchain games that are ineffective and the implications of those failed designs

1. SLP Distributions


One of the biggest examples would be Axie. That’s what’s received the most attention. The utility token was based on participation rather than skill, in the earlier iterations of the game. That doesn’t create the most engaging experience, and it is not the most sustainable one either. 


In this scenario, developers end up with a heavy focus on financial motivation for participating in this activity. When there is an overly financial motivation for continued participation in this particular game, it would result in a user base that’s very reactive to any reduction in financial incentives. 


If end users are playing to earn tokens for the sake of earning tokens, it becomes a job. Games that use tokens as their main earning mechanism are easily exploitable. This is because community members can figure out how to game the system and earn as many tokens as possible.


Protocols that followed this similar model faced a similar headache. When mass adoption took place, it crashed their economy. The game wasn’t prepared for mass adoption to occur. With mass adoption, massive extraction also happened on the distribution side as well.


It’s also about looking at how inflation is controlled. Another model that has been explored a great deal is the early Axie model, which is a step in understanding how inflation is regulated. They were generally constrained at the level of each player, such that each player had a certain amount of energy or capability to mine tokens. Nevertheless, developers were not controlling it at the overall economic level, so it doesn’t translate to a very granular control over the inflation rate of specific assets. It was at the player level. 


Game developers have to keep in mind that once they adjust a certain aspect of their game, the economy will react. And something that happened within the Axie ecosystem was when they tightened the SLP faucet – those who were benefiting from that system reacted negatively. This was reflected in price SOPs, as well as in trust in the protocol and the developers. 


Essentially, if a game developer tweaked something midway, they should almost always expect a reaction from the economy. It is essential for developers to understand who are the key players in the economy, and what their motivations are. This is to check if it lines up with the target audience that the team is trying to cater to. In a sense, it was a useful way “to remove weeds” and to make sure that those that stayed in the economy were the ones to be targeted. 

2. Botting


One of the issues we’ve seen in the blockchain gaming space is botting. A recent study has shown that approximately 40 per cent of participants in games and these blockchain games are bots. That makes sense from an economic perspective. If we look at the incentives of these blockchain games and when they only prioritize earning, developers are liable to have consequences in the long term.


This ties back to the idea of distributing these financial rewards based on participation versus skill. There will be varying levels of commitment that botters put into having these bots perform well in the game depending on the game itself, but the more skill-based the game is, the more challenging it gets for botters to build up this large portion of the user base and try to extract in that way. As much as possible, we also recommend setting up incentives. This will make it less attractive for bots to extract value.


Ultimately, there will always be some presence of botters when these kinds of financial aspects are present. But in certain scenarios, it would just simply be the developer’s goal to make their game less attractive to bots than some of their competitors.


As the industry is just in its infancy, everything is a bit muddled at the moment. We’re still trying to figure out the best practices for the industry, and of course, there will be some people who would take advantage of it. Once everything settles down, and more games try to create mechanisms that are not easily portable and more skill-based, it will be more difficult for these botters to create codes that mimic real players. Eventually, we expect to see that number go down.

What else did you miss?

  1. Potential Issues Encountered with Monetising One’s Time Spent in a Game

  2. Market Demand for Play-to-Earn Gaming

  3. The Future of Token Designs

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Tags: #GameFi

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