The Metacast by Naavik: Crypto Corner #15 - Crypto Gaming 101

[Music] gm their listener and welcome to the 15th episode um on the metacast crypto corners brought to you by navic i'm your host nick lavreek or nico for shorts and today we're doing a little crypto gaming 101 episode i'm joined by some of our collaborators we have devin enzo becker we have maria maria gillis who you will know if you listen to our roundtable episodes and then we have ethan levy was that the good pronunciation you got it nice hello friends practicing um and so with with this crew we are you know just going back to basics um you know talking to people and and seeing what what the conversations are on linkedin and on some slack channels um there's a lot of confusion about certain terms and the problem is and i do this myself you know once something clicks you keep using that words just because

it it just makes sense in your head and then you don't acknowledge that others might not understand so we're you know we're going back to basics here and we're hopefully um i mean and so what's gonna happen is maria is gonna take over she's a fantastic host um which you will know if you listen to our roundtable episodes and so she from now on is gonna take the lead she's gonna ask questions and we're gonna try and answer and she is gonna you know make sure that we don't skip over any certain like words or jargon and um yeah it's gonna be good so you know with this maria you officially are hosting this and um oh wow the power what what to do with this hour the power i feel that i'm coming into your house you know as a guest because it's your usual episode and so i should leave my shoes at the door and whatnot um yeah should i just jump in with the first i'm pretending to not be knowledgeable of course i'm extremely knowledgeable on everything we're free

yeah all right so as we all are everyone understands every concept right i expect to be stumped at le just don't ask me what a zk roll up is i have no clue no um yeah so when i i have these conversations about web3 uh with with friends no one really knows what to call it is web3 the correct name or should i be saying blockchain gaming or should i be saying crypto gaming are these different or can i just use them um as synonyms right i'll i'll take this and and i'll give my thoughts because there's probably not really a consensus around this but for me web 3 is the next iteration of the internet and it's going to include games but it's also going to include decentralized finance it's going to include decentralized social media it's basically the next layer of the internet powered by blockchain and so basically old internet did not have a native value layer right

if i sent you an email with a picture in it i have that picture and you have that picture and so there's no way to enforce scarcity so there's no native way to ensure value um and that is solved through blockchain with web3 um and so for me webpre is just the next iteration of the internet and that will include games but it will be way bigger than only games um and for me crypto and blockchain gaming are the same and are just you know gaming you know the web the so you have what three you have the gaming part and so that for me is then crypto or blockchain gaming i agree on the second part and i tend to use crypto gaming just because it's fewer characters like that's that's honestly why i make that choice is fewer characters in twitter or you know in a blog post um that's an interesting way to think about i've actually never tried to define web3 game web 3 in general um something i think about it a lot is ecosystems

right like what would be the difference nico and devon tell me if you agree with this like what would be the difference between a web 2 game platform and a web 3 game platform well a web 2 game platform would probably be owned and operated entirely by one company so you could say like aws is a lot of services that provide a web 2 platform for games and other services and there's uh aws and there's azure and and there's a google cloud and they all provide different cloud services that can power your game and they're mostly adding services that you pay the central company for whereas i would look at polygon as a real ecosystem right they provide the polygon layer 2 solution on top of ethereum and then there are other services that people can build without polygons permission that add

value to anyone using the ecosystem right so if i as a game developer want to launch a web 3 game pre-sale i might use prement.xyz i'm not even sure who makes it i might support use metamask and other wallets and not build my own wallet i'm going to use openc and not build my own marketplace like there are all these different services that people build for these ecosystems and even though there's an originator of the ecosystem they don't own it and they actively want other people to add on to it is that does that resonate with you guys devin and nico i mean i think uh i would like to think everything stays decentralized but i think eventually there ends up being a certain amount of centrality that kind of like so it's like halfway between um like i mean even most big blockchain games right now have like a server that's not a

decentralized server that's like the game server um and so you've got this kind of blend whereas i think you know things like wallets and some of the crypto elements that are maybe a little decentralized stay but then we end up with like a little bit of you know hosted servers maybe some walled gardens to some extent that just interface with a wallet or some other blockchain identity but i remember when html5 was like a new thing and i was getting the development of that similar kind of thing to web3 where like everyone lumps everything under one term like html5 was was a specific thing but everyone was considering css3 and a bunch of the javascript stuff as part of html5 even though it technically wasn't it was just kind of a uh sort of like a zeitgeist right that we're kind of doing with web three as well right where we're saying this is web3 going forward even if it's not like a specific technology but i think obviously the blockchain stuff underpins a lot of what we're doing whether it be decentralized centralized whether to be crypto heavily involved or just crypto partially involved i think

at this point it's like i say blockchain gaming just because it's easier for people to know what i'm talking about and i get what you mean ethan about saying crypto to be a lot shorter uh but i feel like when i say the word crypto it's like a slur at this point so i say blockchain because for some reason people are slightly more neutral about the word blockchain i'm trying i'm trying to take crypto back right exactly i'm not looking to trigger people as often as you are so it's i try and pick up trick you know you've picked up that i i troll for fun a little bit just a little bit just a little that's what you do for a living ethan um yeah actually maria i can can i just like take look i don't want to take over can i make a suggestion about when you just when i say or when someone says the word a crypto game i think there is like a wide range of what that could mean and i think it's relevant to quickly touch upon different levels of you know crypto games yeah definitely go ahead thank you um look at me like asking permission to the

host i'm proud anyway training wheels you'll get there nico you'll be a guest eventually yeah um and so basically um different levels of crypto integration um just like on one end um you have games that you know they sell themselves as you know players don't need to understand anything about crypto in order to play our game right they can start free they can play the game and at some points they will be able to add their own choice export certain assets and these could be nfts or or tokens like governance tokens and we can go into what these are maybe um they can export these assets onto the blockchain and so at that point that company would call that game a crypto game although 99.999 what percent of whatever like everything around the games actually would so almost everything around the game actually happens off the blockchain and there's just like one little connection where you can actually export assets of the game onto

the blockchain and then that would name it also a crypto game and then on the other extreme you have fully unchained games so one example of a fully unchained game um that i recently played um is the game by david aymore so he's his company is called playmate and they made the crypt and it's a game within the loot verse basically you have a bunch of dungeons and you have loot bags and if you're an owner of loot back you can use that bag to to raid a dungeon and that's raid is actually a transaction on the blockchain and essentially everything that you do within the game happens on the blockchain and so the blockchain is essentially the back end of the game and so ethan before this you would you were describing uh you know aws as something that hosts the back end of your game the servers in this game you don't need an aws the only thing that you need is the blockchain and that's where everything happens and so calling both blockchain games or crypto games is almost unfair to the hardcore

on-chain games that's you know essentially you know everything around that game is revolving around blockchain and the tech and then on the other hand you have this other game which just tangentially touches upon this this technology right the thing that ties them together is player ownership of assets and those assets being in the form of nfts or tokens would you agree with that that's kind of um yes and no because i can imagine a unchained game where there's no there's no necessarily there's no um player ownage of anything um i don't think that will happen soon and i think it's it's it's an advantage um but for me player ownership is an advantage of crypto and there's many more and i think i feel like these are less explored the other ones are less explored and we can again go into like everything that the gate like blockchain technology can do i think the term on chain or fully on chain helps clarify you know regardless like if if you know it's fully on chain and you say

that like that makes a very clear distinction so there's no like ambiguity whereas like you said playing blockchain a crypto game obviously doesn't really specify and i think where we have mostly a blend these days anyways there's not a ton of fully on chain games just because that's expensive and hard to do sometimes is is ethereum to the blockchain ethereum theorem ethereum is i believe the biggest one by users and probably transaction volume but it's not the only right it is what's called a well okay guys correct me if i'm wrong here because i i as with many of these concepts i could easily be get this yeah um ethereum is a layer one solution which means like it is a foundation it is a blockchain and applications can be developed on top of it and tokens and nfts can exist on top of it

their entire platforms that exist above it like polygon is a layer two solution that exists on top of ethereum there's solana solana is its own layer one solution which means it's a full competitor to ethereum these two things don't interact in any ways they're they're separate blockchains and you could choose to be on ethereum or on solana or you could start on one and then build a a bridge where your assets can exist on the other but i think the poi just like um aws isn't the cloud it's one implementation of the cloud ethereum is a blockchain um but there are many different kind of uh uh uh embodiments of blockchain so is bitcoin another type of blockchain oh it's one of those bitcoin contract heavy

though yeah so essentially the history is as follows in 2008 satoshi nakamoto produced a white paper called bitcoin a peer-to-peer payment system or cash digital cash system something like that anyway and it described this concept of a blockchain and a blockchain is a network and a network is a bunch of nodes who are processing transactions essentially and so bitcoin was the first blockchain in i think 2014 uh vitalik buterin um he's like a russian canadian genius he's like younger than me and he's that guy's insanely brilliant anyway so he proposed um so he wanted to make bitcoin programmable that was his goal so bitcoin essentially is a payment system right i can send you some bitcoin and you can send me some bitcoin back there's actually not much more that you can do with bitcoin and he was like you know we can use this technology to make like some super crazy cool stuff uh but he couldn't do it with

bitcoin and so he wrote a white paper about ethereum and he called it the world computer and so the idea of ethereum is it's also a blockchain but it's it's like a computer so people can write software for the computer and publish it to this world computer and so these the software that's what we call smart contracts and these are the building blocks of everything that we see happening today so nfts are based on smart contracts on this world computer on ethereum and so there's a few design principles um that ethereum has taken that's for example a blockchain like solana is is you know taking a different stance on and essentially um yeah we're likely going towards a world where you know you have different blockchains for different use cases um and you know yeah and then we come into layers but i'll i'll keep it at that and um let you ask any questions or comments from devon or ethan i have a follow-up question

can i go cool so if if the blockchain is being described as the server cloud service like aws um do you have something that's like a game engine in in a crypto game you have an unreal or unity that you have to use you do that's pretty much already i mean they're already you have every game engine it's it's just a back just think of it as a back end service um that you can call so i know there's unreal powered blockchain games there's uni i'm building a uni-powered blockchain game uh people are using uh different web only engines um to do web games i think do you guys remember in the crypto raiders what their current engine is i think they used phaser to begin with yeah so every every any game engine a member of the audience would be using they can utilize to build a blockchain

game but ethan these game engines are used for the clients is that correct yeah these are these are engines for the game client um yeah for the visual representation of the data yeah and so what i think um what i'm actually so as an investor i there are companies coming to me and saying look we're building the unreal engine of the blockchain where they provide a service that actually you know where you can very like through very simple user interfaces you know design games design the back end of a game on the blockchain which for now is reserved for smart contract programmers that are you know super smart and you know it's it's it's very slow but that's what a lot of teams are working on so to to bring a similar um you know easy user interface um and and services to for things to be built on top of the blockchain itself not necessarily only on the cloud that's

where that composability stuff uh helps and just to be clear what composability is since we're going back to basics um the idea is when you have all these smart contracts on on this these blockchains they all have inner communication to some extent like there's the ability to to talk to these functions these pieces of code on on the blockchain and get things back most of the time depending on how they're built right and so there's this idea that you build these contracts that these little chunks these little pieces that could be reusable like the way you would make functions in code and so by by doing that and by allowing these to be open and kind of trustless permissionless as long as you follow the protocols it allows you to then reuse these pieces that other other people are using and a lot of d5 stuff is built on top of that but game stuff is still kind of trying to figure out how doable that is i think to some extent like some games uh are using some of that but most games are still kind of building their own stuff via a little copy and paste to the standards mixed with their own thing but this idea of composability does doesn't mean you can have the engine entirely on

chain if you're building an entirely unchained game uh if that's what you're trying to do but that that's more of a of a goal rather than most often it's my opinion that um as we move from a early adopter and kind of fanatic stage of crypto gaming to widening out the audience over the next couple years and even where we are today you know i i it's i think there is some users for whom being fully on chain is like a marketing point and it attracts them to the game and then there's a lot of people who don't care and there are so many things um that there are cheap easy to access database solutions for that you don't need that like um if i have gold and in-game currency and you're earning gold and spending gold all the time and this amount is

going up and down and i don't want you to be able to trade it with other people um putting it on a blockchain transaction just makes it a slower and more energy expensive transaction versus keeping it in a traditional database so i for my game we're opting to keep a lot in a traditional database structure because that provides the best user experience and it's best for the environment and best for the cost like it's all there so um unless you believe that you will attract um your target audience more efficiently by being fully on chain which for some types of experiences you will i kind of um it you know on-chain transactions have drawbacks basically um so there's a lot of places where i you know and and i'm not actually the developer but as we talk you know i'm pretty decently technical technically proficient and there's a lot of place where we're like okay let's i mean the

goal is basically to keep the right things on chain right right and it's it's i think it's essential to understand that you don't use the blockchain just for fun right there's definitely a trade-off there and you have to make sure that with your design decisions using the blockchain is actually worth it and so for example for an unchained game which by definition is going to be a lot slower and more expensive than what you would have with ethan's game where a lot of stuff is actually happening on a like a traditional server if you build an on-chain game you better make sure that you're fully using all of the advantages that blockchain potentially gives you like composability what what devin you know mentioned like if you're not using composability or interoperability and we can go into that as well um then it's probably not worth doing stuff on the block just very very quickly uh before we move on to tokens and and nfts what does a layer two mean do i need to have a layer one and a two

well so um so basically ethereum is today like the main layer one and and layer two usually happens on top of ethereum and essentially what it means is that um when you build a blockchain there is what is called the blockchain trilemma and the blockchain trilemma is basically a trade-off between security decentralization and transaction speed and so every blockchain makes a choice and chooses to basically maximize two and make a like and make a trade-off with one other one and so for example bitcoin bitcoin is very decentralized very secure but for that it has to pay in transaction speed and so that's why the bitcoin blockchain is so slow similarly ethereum is very secure very decentralized but also pretty slow and

what layer two is try to do is they build another blockchain on top of the blockchain and it works in a way where it inherits certain characteristics of that original blockchain and so a layer two on ethereum inherits the security of the of the ethereum blockchain but it gives more flexibility when it comes to transaction speeds and so for example polygon polygon is a layer 2 on top of ethereum it inherits security but it can play around with transaction speeds and and transaction fees and processing speeds and that is why polygon is so much you know faster than ethereum without necessarily being that much less secure because it it's if i want to go home and do a crypto game right now i have to select my layout one first and then see which one of those three is missing and then select a layer two that compensates for it i think you're pretty much just getting off the have to go with layer two that's like either the cheapest if you're if

you're doing lots and lots of transactions or more often whichever one's faster ends up being the differentiator because like if it's not fast and your players are having to wait between transactions you're already kind of losing out like in it because some are going to be great for defy where it doesn't matter as much if it's fast for example versus like a real-time interface i mean obviously as ethan's pointing out you separate stuff that needs to be on the blockchain from stuff that doesn't but but generally like there's certain user experience things of a game they're gonna be pretty bad on certain blockchain layer twos versus others if i'm understand you're not if i understand correctly you're not running on ethereum and polygon no you're just running it's not like you say i'm running on ethereum and now let me choose my layer two oh i choose polygon you're just kind of choosing polygon or you're choosing polka dot or you're choosing wax or avalanche right yeah you know there's there's a

lot of options cardano whatever so um it's it's not um it's not an if then i didn't say at the start that i'm an expert and i think yeah no i mean these are very good questions and it's i think also something interesting there is that we'll probably see like the the blockchain or the layer two or maybe eventually layer three or four or five and then who knows what's gonna happen in this space like the one you end up going for is probably gonna also be decided with the type of game that you're building um for example if you have a game where your movement actually needs to get tracked on the blockchain you're gonna have a lot of you know a lot of transactions like a high number of transactions but with like little data right if i move from you know x to you know x point x plus one that's not a lot of data that has to be written on top of the blockchain um and so there's gonna be blockchains who are specifically designed for like a large number of transactions

and then you might have another game where it's it might be a city management game where you know uh every day you need to like submit all of the new tasks for your villagers within the city right where you're saying okay i'm gonna dedicate to two of my new villagers to farming woodcutting whatever where you actually instead of having you know a lot of transactions you have one transaction that actually changes a lot within the blockchain and so certain other blockchains are gonna be more efficient in that and so what we'll see is we're gonna have like a wide range of blockchains um and blockchain technologies and they're going to be specifically targeted at solving like certain types of problems interesting so i have to do my at least paper high-level game design before just making this tech decision i would say both and i guess when it's just because like there's an influencer right like you can't you can't make your you're not gonna make your own blockchain most of the time uh and like unless you're already like scaling like crazy like something like axey so you're gonna have to like pick in like a general like okay i want to use this kind of one because it's still going to influence your game design like you're still going to have to make

decisions off that and i i think there's probably also a marketing component to it too right like what is the addressable audience on avalanche versus polygon versus a theory sometimes it's the network that will give you money to develop on them too yeah that yes so there's there's marketing and then there's grants funding um ecosystem it's um there's no clear winners right now and and a company um let's say you're in a position where you need a three million dollar grant to keep the lights on you may go with one company whereas let's say you want to get one blockchain because you're able to do a biz dev deal with them uh or if you're uh totally fine on funding and you want to deliver the most eco-friendly blockchain you may go with a different one right like there's there's all sorts of strategic reasons um to choose one technology solution over the other

okay and i guess to add on that story to you maria i think your interoperability is also relevant um because you know what's interesting is you can the concept of a vampire attack for example so let's say that you're building a trading card game and you're like this what i'm building is the best trading guard game out there um but i just don't have any players yet and i need players for that game to be successful so what you could theoretically do is you know look at a blockchain where another you know trading card game is living so you know i'm going to talk about immutable but that might be like a bad example maybe splinter lands is a better example is that is that wax or it's wax oh yeah it's like the only i have i think there's a second a hive okay so it's it's hive so there's a like you could there's a reason why or at least a valid strategy could be to build your game onto the hive blockchain and just tell all players that have splinter lens

cards you know come to my game and for each splinter line cards you have you get you have i give you one of my cards of my game and so that way you know you already have the audience that like trading card games you give them assets to get going um and that might be like a a like a vampire attack or a way for for you to get like cell phone companies a vampire attack means using the publicly available data to try and steal customers away from another project is that right yes and i guess what i described is like more targeted like more more narrowly scoped to vampiric yeah right it would be something you can't do in the aws world is say hey candy crush players sign into my game with your candy crush account and for every dollar you've ever spent in candy crush i'll give you a hundred dollars that's something you can't do in web 2 private databases but you can do in web

3. you've seen some of the d5 platforms do that specifically to steal people over to their dexes and things like that scaring me a little bit it's cool and i can't even picture it you you just have to be the first one maria so you're in a good spot you're learning exactly i don't know if i want to be a vampire i thought we all wanted to be don't we all want to be beautiful and live forever and fly the fly and there you go that put it over the top yeah yeah i'm convinced now sold um so in the round the last round table podcast i started a phrase saying nfts and then i ended it saying tokens are they the same thing or did i did i make a mistake yeah i i feel like you can take this it's kind of funny because all of them are just kind of weird abstractions to begin with and what we call like nfts for example is like an abstract term but we have certain standards

everyone uses so in general like the idea is a token is essentially just a number that represents something right so like if i have you know uh the five nicos that's just a a way of labeling a number uh essentially that is associated with my wallet address or something to say like i have five nico and you have six nico and whatever right it's it's just an abstraction but there's a certain standard around it um we're usually referred to as like the ec20 standards that are like just a way of uh building smart contracts around it so everyone knows how to interact with that token and that forms like a token standard and so that's we've kind of built on that and then the nfts we just like added some extra things to it like we said okay here's a unique id to this so that it's quote unquote unique it doesn't really have to be unique in any other way than anyone else's but it's unique in the sense that it has its own id number uh and then it can have metadata which is it could be whatever you want metadata could like point to an image it could be a bunch of data about

the thing but usually it's expensive to store stuff on the blockchain so it's usually more just pointing towards something else uh where it's stored somewhere else and and so the idea is uh they're both just things that in theory act like they're being handed around when in reality you're just changing marking who owns it differently it's like it's like the money essentially stays in the bank you just change whose account it belongs to and both tokens and nfts kind of work on that same principle just with extra data in terms of use case in a game i think the main difference is whether whether you set something up as a token or an nft is whether one is going to be different from the other so if we're both playing um uh an rpg game i farm gold you farm gold every piece of gold is the same you can't level gold you can't name gold you can't do anything to gold so you just make gold a token because every piece of

gold is interchangeable with every other piece of gold but let's say we have gear and gear we have swords and swords level up so you and i both have so if we had let's say we had this the sword of ultimate cleverness if if i is the game designer didn't want didn't want the sword of ultimate cleverness to ever change uh i can make it a token i can have a token called the sword of ultimate cleverness and i can own one and you can own one and they're the exact same thing but if i want to attach a level progression to the sword of ultimate cleverness and for that level progression to be in the public database so my sort of ultimate cleverness can can uh level up to level 20 or it can have a special property like plus 5 wittiness and yours has minus three curses like now we're using nfts because we want one

to be different from the other um so that's kind of the the high level use case of it it's like do you want something to be a currency or do you want it to be a trading card is kind of how i think about it so if i get the base sort of cleverness and then i put an upgrade into it it transforms into a different nfc you can you can write that into them well that's i mean you can do that you can there's no there's no one way to do it but generally what i was describing was um your sort of cleverness has data written into it on chain and therefore it got stronger um than mine or it got different than mine right but i would i would push back on that ethan for me and if the use case for nft is not necessarily that it could potentially change in the future for me so basically nfds and other tokens um and these are fungible

tokens so nft stands for non-fungible token and you have fungible tokens essentially for me the difference is um if devin and both devin and maria send me two tokens each for a fungible token i'm gonna have four tokens and if i'm gonna send one token to ethan i'm not gonna know if that token actually originally came from devon or from maria it goes together in one pot and they're all the same and so there's no history that one token has they're just all the same and i'll send one to ether if for nft so non-fundable token if devin and maria if you both send me two tokens i have four tokens and i have to pick which one i sent to ethan and i know oh this one came from devon and this other one came from maria and this one came from devon and the other one from maria and so there there's a difference between these things and so toke that's why i was saying like uh currencies versus trading cards because like if you think about a trading card i might have a michael jordan rookie tops 90 whatever i i don't even know the

year and devon might have the exact same one but it has one difference and that difference is the serial number minus serial number one here's a serial number two therefore it's more valuable that's like the most one of the more common expressions of it is just like multiple versions of the same object with the serial number but um when thinking about game database primitives um like the choice between whether you make something a token or a non-fungible token is whether you want exactly as nico was saying whether you want one to be the same as another or one to be different from another and that difference can express itself in a lot of ways yeah because one use case for having non-fungible tokens could be what ethan said where you can level up one item right where it upgrades as an nft um and then the other another you get use case could just be historical um no provenance right if

if i own a you know league of legends zed skin and like i could potentially own the skin that faker used when he um did his crazy you know faker what was that play i don't know if you're league of legends esports fans i am i love that stuff anyway so you know i i could potentially like own that specific skin right and this is another potential uh interesting use case for that's why i started with the technical side because like there's so many different ways you could use it like the actual technical implementation doesn't really dictate a lot about what you do it's like you got to give it a unique number and there's a couple other fields and really you can extend that kind of however you want uh and maybe you're not following that standard quote-unquote anymore maybe it's some understanding there are some other standards that do expand upon it and that's the nice thing about the way everyone's kind of agreeing as we go very similar to like the way a lot of web protocols developed it's where people just kind of started doing stuff and then you went you know that's a good idea i'll do that too and then we got a standard and it's like you know ethan might be using nfts one way nico using them a totally different way but as long

as they're all following the specific standard they all know how to talk to each other it doesn't really matter right like it's how you want to use the information just like a database right a database is just a bunch of tables of data and like what it means is up to how you make it interpret it and do things with it yeah and so the expressions might differ but you know i i could make enough t's a certain way ethan could make them another way and then devon you could build a marketplace that would you know natively make you know my i might work with both my nfts and ethan nfts because we all agree on the same standard and it's just you know small expressions that actually changed within the code right so i could have a an nft that is a series with a 100 that were minted for that series and if i level up my gear well the sword is still part of that 100 it just changes the stats like the data in the nft wow that's really cool

the history is going to be interesting like someday there's going to be an auction this bay area yacht club uh ape was once owned by jimmy fallon famous in the in the early aughts right like uh and that becomes part of the story embedded in the object that gives it perceived value right does it actually matter that the human being named jimmy fallon once owned this database pointer to a jpeg like it does if you care about it and it doesn't if you don't care about it right it's you know good way to put it it's but the the history thing is is very interesting and like um i don't know things are valuable when an individual decides they're valuable that's it yeah and then in terms of the tokens i hear games talking about being downs and then other games talking about how instead of just having cosmetic tokens they want to have utility tokens

how would you differentiate all of these token types how long do we i've got an nfl all day pack dropping i can't stick around for about 18 hours five minutes the way i describe this maria is very broadly speaking um there are two types of tokens and when i say tokens that doesn't include nft so and if these are also tokens but i don't include them here usually when we say tokens we mean fungible tokens and so there's governance tokens and there's utility tokens um and and this is broadly speaking and you'll have combinations of both and so governance tokens i think the easiest way you could think about those would be like shares of a company in a way where it they give you some kind of ownership or a kind of voting rights with like for the the community that's actually issued these types of governance tokens they give you know they give you governance right and so the more tokens you own the more you have to say and so the more your votes

weigh i guess um and so this the way you could think about this is this would be the axs um tokens within the axi infinity game and then you the utility tokens so these are tokens that have utility within the game um as as the name would describe so they usually have you know their sinks their faucets uh quite often they don't have like a max supply so governance tokens are usually supplied like have a max supply so for example i think for x infinity shards it's like 300 million or something so you know there will never be more than that for slp you don't know and so there's a potential to have hyperinflation which we've seen and so utility tokens are tokens um like you know slp as a in in axionfinity that have utility within the game um yeah and so that's for me that the broad difference although ethan you want to some things that are really interesting there like one a lot of governance tokens also have utility for instance you use axs to breed along with slp so they're both utility tokens

the second is is that there is no standard for what a governance token means uh right now it is as much marketing as anything so i own you guys did an episode on crypto raiders the other day and as i was listening to it i'm like discord messaging nico like why didn't you ask what the governance tokens are for right like in in a in a because i own raider and i've never placed a vote and i don't actually think anything's gone up it's for making money isn't it and like right for making more money and isn't it right to stake things and get something in return at the end of the day yeah i mean there are a lot of um there are a lot of tokens that exist that have like well we'll figure this part of it out and there's no there's really no standard for what governance means so like i could start a treasure a dow and a treasury and issue a governance token and i could make the rules of it that um

the governance token is used to vote on the name of the treasury and once a month there's a vote on the name of the treasury and if you own 10 of the governance token you can propose a name and then everybody can vote on it because that's the way little kids run governance right what feels like the way little kids run a club yeah i mean like so there's you're the president i i i think that there's more um because of a corporation and stock has a lot more legal precedent like there's kind of there there's more um concrete details on what it means to be a shareholder in a corporation whereas governance token is a very nebulous um concept right now i have a series of questions about staking um i'll i'll ask them one by one instead of making this huge question with multiple questions within it what is staking do does my little character walk

up to a little bank in the game and i say can i want to put 100 tokens into this bank can i take this one um i think there's a lot of misconceptions and around staking essentially there's actually two ways very distinct ways in which staking works that is different like important to make distinctions in so the original staking is actually what happens within a proof of stake network so proof of stake is supposedly what ethereum is going to be but there are other blockchains that are using a proof-of-stake method and essentially they are um as so basically if you say like i want to be a staker you are validating transactions and you're putting some of your tokens up as a stake and so you're validating transactions and if you lie if you validate the transaction that was actually not supposed to be validated that was like a faulty transaction then you run the risk of having your stake slashed which means you lose your stake

or part of your stake so essentially staking is literally like i take part in the you know the maintenance sort of of this network and you know i put a stake up and um essentially like i put that stake up i validate transactions and i'm a part of the network and you know on every block so because that's how most blockchain blockchain works a new um a new like a number of tokens are created out of nowhere so you have that with the bug like with bitcoin every bitcoin block that gets created every 10 minutes i think 6.25 new bitcoins get created and they go to the miners and so in a proof of stake you know with ethereum each block there is a you know number of new ether that gets created and those go towards the stakers and so that's the original definition of staking but that is completely unrelated to a game saying oh you can stake your tokens because that has hasn't gotten anything to do with what i just described so that is game staking and so gamestaking um or like staking that you

usually see about oh you can stake your nfts or maybe your tokens the way that works is it is essentially just a way to push up the price of the token or the nft on the short term um because what happens is you have a let's say for axe infinity right we just described they have 300 axs tokens at 300 million access tokens and a part of that coinbase would be a lot happier if they're only 300 i own two of them be pretty sick yeah um but and so basically if you look at their tokenomics there is a certain amount so in certain number of tokens of these 300 million let's say let's say 20 million are reserved as staking rewards and so staking rewards is just so basically what they say is okay we have a contract and you stake your access tokens in there and then we're going to promise not to sell them first well you're actually looking at this

you're locking them up exactly and and so with most staking you can just take him out at any point in time and go sell him if you want um but what basically happens is you basically get every every minute you get like um so these 20 million that were reserved as taking rewards let's say that these taking rewards gets spread out over you know let's say 20 months to make math easy every month 100 million tokens sorry 1 million tokens gets given out to the stakers so essentially if you're staking the only thing you're doing is you're hedging yourself against the in the natural inflation of the token and so people that are not staking they're actually losing out if that makes sense because there's actually more tokens and so they own a smaller amount of the circulating supply and if you're staking you're capturing the actual inflation yourself generally what that'll mean is like encryptor raters as an example i um went to an exchange and i said who has

raider to trade me i've got eth and i gave someone ethan they gave me raider back and then i took my raider and i put it in a vault for six months and every day it's in that vault uh the crypto raiders team gives me a little bit of another token called aurum is a reward and so what they're doing is they are artificially reducing the supply of raider token which helps maintain or prop up the price uh by rewarding me uh for promising not to trade it or sell it or use it it's funny because it's the opposite of what a bank is kind of doing when they when they hold your money for you and give you interest they're doing it to use that money whereas in a sense these games are doing it to lock up that money and keep it from being used for a while they're doing it to artificially constrain supply and increase the price um you know even as i say these things out loud these are

the type of things that i wouldn't be surprised if they got regulated out of existence over time because it seems i don't think so you don't think so i i i i don't see anything wrong with it especially and and so this is what i would recommend anyone who's thinking about doing something similar if you find a way to integrate this organically within your game i think this is something that could be positive yeah um also i think just make sure your tokens have in-game utility i think that's the that's the key to keeping it kosher right yeah i feel like this this might be a discussion for another podcast but um the thinking around early launches early token distribution and like n like having the need to prop up the token price so like you don't discourage your community from supporting you um like it's it's basically a trade-off that you make like the earlier you launch a token and an nft the more you have to think about them i need that

price to be like high enough so people just don't give up and consider my game dead so i don't lose all my community members um and i feel like staking is a solution for this and so you know if you made a mistake of launching too early and and don't have anything to show for it i think staking might be like a viable option to keep a token price in the short term and especially if you can gamify it in some way won't people stay around if they're there for fun and not just the thing is that there's a lot of nfts and tokens that are launched before there is even a game right so staking essentially is not that complex right writing is taking contract you could probably do in a day um and so it could be like a short-term solution for you know just propping up the price and keeping people involved and engaged an example of how you could gamify it to make it fun um i think a lot of people played fallout shelter and in fallout shelter you send your hero out into the woods and then at some point you press a button and then it takes them back and they arrive back with some gear and other stuff for you

so um crypto raters again to use this as an example that was just on the podcast they introduced questing and questing is a narrative layer on top of staking so by you send your hero on a quest for some period of time and they come back with some experience and some eye of newt right so they level up their herbalism and they get some eye of newt and so what you've actually done in those hours where your hero is questing is you've committed that you will not trade that hero to another person on openc and so they've gamified the staking they're saying you're promising for the next 12 hours or 24 hours you're not going to sell this character and in return you'll get your herbalism skill leveled up and you'll get a token called eye of newt and you'll be able to burn that token called eye of newt in order to create a new token called health potions so like that's a really good game utility version of

what in another game might be um commit your uh nft doggo monster in for 12 months and we'll give you ogre horns every day you know like that's staking or that's actually even more narrative um a lot of them will just say stake your thing and you'll get one thousand percent apy right that's where it gets you know where i think like somebody who takes a look at it might go defying games just constantly merging now it sounds it sounds like the free-to-play expeditions type mode where you lock away something and then gets you rewards so can you stake both utility and governance tokens you could yeah exactly it and it's a game does it the game designer who make this and actually if you have a sufficiently unchained game other people could actually make a staking contract for

your items from you talk about a vampire attack so exactly and and so like you know i don't like that game i want like i'm gonna give people free money obviously like and and then because the thing is like what are you giving in return for this taking uh that's also with a question right and if you can build enough narrative around this and that stuff actually has some value then you can you can do a lot of cool stuff so you could say um uh i'm gonna uh uh i i'm going to target the users of pegasi and i'm going to tell i actually don't know technically if you could do this or not based on their setup but you could i as a total outsider could say hey put your pegaxi stones into this hole and every day your stones are in this hole which means you're not using them to play peg axi i'll give you 10 vampire blood or 10 blood vials and you can use the blood vials in my game to open up the blood vault gotcha and get your free legendary tier vampire nft heroes every

day so just stop playing pickaxy and i'll give you a bunch of stuff to play my game part of what makes that doable is the visibility into their database in a way right like that sort of even if you don't have access to like code the fact like everything's on the blockchain for the most part is like what allows you to do interesting things like that like you said about not being able to peer into other people's aws databases the fact that it's all in the blockchain just means you can like go if i see you spend it i'm taking it away in my in our game but if you don't touch it over there that's enough to say like it doesn't get touched on our side too and stuff like that is just it's kind of funky because i think we are going to have to have privacy-based ones too right where not everything is on the blockchain right so you're gonna have like this mix of when people start doing those vampire attacks then people start being like overly paranoid and you have like this mix of like well we'll expose some things for trust reasons or whatever but then other stuff we're gonna keep hidden for competitive moat reasons right like i think people are going to start getting kind of defensive like the way

that everyone had apis right for for the web 2 stuff apis everywhere as far as the eye could see and then also they were just locked down to death and no apis for anything no sorry you got to be part of our ecosystem now to use anything and so i mean i hope we don't go that direction but i think there's going to be some inevitability of some of that and we do have like stuff with like some of the zk roll ups and other stuff that do like start to allow some levels of privacy but i think more technology will probably be built that direction as well yeah i think that's what my when i said i'm scared when i hear these things is my gut is telling me oh this is this sounds dangerous if i invest a lot of time and then someone can just come and incentivize people to not play my game it just seems like you know smearing marketing a little bit which is kind of frowned upon so yeah i i think these these scenarios are not very likely to be honest yeah um yeah and but in the end i think um it will and it will force people to really focus

on fun games because if you're you know if you built a game and you know people are just not playing it because it's not fun then someone else could potentially swoop in and just say like okay you don't get a lot of tokens but if you just you know take your nft from that boring game and you just lock it up here you know i'll give you some and you can start playing and so i think we might see these types of things so last question on staking before we we move on um for a game to be a crypto game or a play and earn game does it have to have staking no no no it's easy it's representative if you look at axi for example actually doesn't have staking but it's it's playing it originally i know it's been around a while did it early in its history does anybody know i mean the access token didn't did exactly so probably not yeah i don't remember yeah but it doesn't do now so i i guess the short answer is no um there's there's no rules in the end about being a play to earn game or not or like even a crypto game

or not right we've already discussed in the beginning you can tangentially use you know allow your assets to be to be exported onto the blockchain and that would make you a crypto game and then if at that point if people can sell what they like did within the game it's also playing an earned game right because they just you know actually captured value or made some money by by you know playing your game okay that's quite helpful thank you and uh next next up is to i've been thinking well i've been reading these articles about how to evaluate um games that are crypto and they have some terms that i have no idea what they mean and then i try to pretend to know what they do like floating caps off something so um so quickly so this is about the often the the governance token of a game right when you hear people saying that axi infinity is worth like as a game is worth you know a couple of billion what they essentially do is they take the

value of one access token today which is i don't know like 50 bucks or something and they multiply it by the fdv no sorry by the total token supply that will ever exist so the local token supply that will ever exist is 300 million and so if you multiply 300 million by 50 bucks per token you get to 15 billion value of x infinity the game and so that is the fully diluted value because that means that the you take into account all of the tokens that that are you know ever going to exist that said a different there's a difference between circulating supply and like like total supply so remember earlier where we discussed about staking where a certain amount of tokens are locked up for staking and so tokens that haven't been given as taking rewards yet are actually not in supply it and so there's a difference in in most cases there's a difference between the currently circulating supply and the

total supply um and this is important to know and this is also why you know comparing blockchains with their fully diluted value is so hard because you could have one game that has one percent of its total total token supply in circulation and another game that has 99 percent of their token supply in circulation and when you have such a huge supply the chances are that the value is going to be slightly lower um well if you only have one one percent like the total valuation might be huge because there's high demand and just like a smaller supply of these tokens if that makes sense does doesn't that assume that a game is going to limit how many tokens will ever yes it's not guaranteed yes well i mean it could be like most of cases like axs for example there is a token contract that is the origination contract of the axs token and there it is literally defined um that there's never going to be more than 300 million tokens so you can you can be sure that there's

never going to be more than 300 million tokens because that would mean that it would be another contract and so that wouldn't wouldn't work so you're sure that the um that there's going to be a limit that said you have some other tokens like slp and slp does not have a hard cap so there could be an infinite number of slp and that is what they call a floating gap so if there's no defined cap on the token supply then you have a floating gap just as a game an economy designer i am generally more in favor of define uh fixed cap tokens than fl floating cap or unbounded supply tokens i think those unbounded supply tokens as we've seen in axing other create really challenging inflationary problems that are more likely to implode your economy like putting putting these sorts of things in

create like natural trigger points at which your economy falls over and so that's why i'm like kind of scared of them or yeah it's just funny though coming from free to play where i'm sure you you never capped any of the things that you put in right each in any of your games exactly but each player's horde is constrained to their account it's like a trade ability right that basically makes that doable when when each when players are not able to trade with each other for real money i can sell or reward each player with as many heroes as i want and like one hero one player's supply of heroes doesn't really affect other players but once there's trading between players then like if i really want something to have an infinite supply then i probably don't want people to trade it between each other right i think i mean generally i think a lot

of people are just copying axey infinity system because it was the first one and it's leading to a lot of predictable unstable economies yeah sorry niko i cut you off um no i was going to say i think there's use cases for both i think um because in the end floating supply can balance out through you know you can balance out the value through supply and demand right i think it gives more flexibility um i don't know i don't know how you know for example actually how slp would work if it was capped um i don't know how the dynamics would turn out because you can i mean i don't i need to reduce the emission at some point and then yeah i i would uh i i think there's kind of a sustainable version of axi that doesn't have breeding and doesn't have unbounded slp supply as well yeah it's it's these inflationary things that i think lead to the collapse triggers yeah essentially my conclusion is that we're gonna need a lot of very smart economists to be able to model out the

repercussions of all of these you know variables all these things that you can choose and so i mean i think you know i i've always said there's three jobs within web3 gaming that are going to be you know super important one of them is a you know smart contract developer so just like a programmer the other one is community builder and the third one is economist um if you're one of those three then um you'll be you'll be fine no worries you'll be taken care of and you'll be able to take care of others as well yeah i feel like i need to go back to a university and do an economy course to stay up to date for the next 20 years so much of it's just theory like so much of it like i think we'll have to really see it play out yeah because i think you know economists work off models and models make a lot of assumptions and like especially in the financial world where people are incentivized sometimes to be bad actors or to do weird things and then you mix in people's emotions and just everyone acts so irrationally that like you could say this model is totally

sound and just people do the dumbest thing and just mess it all up and i think like it's gonna be more off of a mix of like here's some theoretical stuff that should work and then there's parts of it that do work parts that don't and we'll like evolve a few different models that like be like oh we'll use that model or we'll use that model and i think free to play is pretty much settled on a couple basic models right like we go like you've got the dual currency model you've got like the soft and the premium and like everyone's kind of like somewhat settled on by looking at what worked and then trying some things and then keeping the things from that that worked and it's like iterative design and as much as i would love economists to come and be like oh all you have to do is this uh realistically they can't do that in the real world either so like i don't think economists have a great track record overall but it was really interesting to see uh the greek economist who uh had worked for valve temporarily like speak out a bit about uh his views and what he learned from inside valve because steve marketplace has been a great predecessor to this stuff

i think he looks very handsome in a scarf if i'm thinking of the same person you are um i mean i think what's interesting is um because exactly as you because nobody has any answers right now like a 16 year old girl in vietnam who's never designed a game and has never taken an economics course is just as likely to find the the answer as like a team at zynga with 20 phd level economists on it right nobody knows anything and if you're an amateur don't be scared by experts is my guide because you're just as likely to figure it out as they are that's what i find quite exciting about blockchain games is that i think in free to play there's a lot of concepts and pillars that are quite well known and you know to follow them and how to find the right answers at times there's never a perfect answer but there's a lot of leads to find the a great answer and i

think that's what's exciting in the blockchain world is that no one has really figured it out yet so it's a it's a bit more of a playground even if you're not an expert just try to do something and see how it works 100 it's a new frontier yeah and with that i feel like we're we're gonna have to do a follow-up episode a crypto 101 part two um so with that i want to thank devin uh ethan and maria i think uh three of you were perfect for doing this um listener i hope you enjoyed this as well i hope you learned something um we didn't ramble too much and we kept it simple and i'm sure we we made mistakes because we're all learning here um so um yeah if you liked it feel free to subscribe also we're on youtube now so go check us out on youtube and if you're watching this on youtube give us a thumbs up i've never thought i would ever say that give us a thumbs up like and subscribe and smash that subscribe like smash that like button exactly and share it does help youtube recommend our show to others exactly it really helps out uh

and supports what we're doing here um so with that you know thank you all for being here this was the metacast by navik and yeah we look forward to speaking to you in the next episode [Music] you