How Blockchains Change Collectible Card Game Economies
Arbitrageurs and investors who flip blockchain-based CCG cards as non-fungible tokens (NFTs) can derive many benefits. In a recent blog post, Tony Sheng highlights the idea that cryptomarkets offer “more assets, markets, [and] liquidity.”
1. More Assets
NFT token standards like ERC-721 decrease the barrier of entry for people to create their own CCGs, thereby increasing the number of tradable assets. Anyone can mint an ERC-721 token in a matter of minutes by following tutorials and distribute the tokens to a wide audience via token sales or airdrops.
The design space of NFT-based CCGs is also greater than that of physical CCGs, as NFTs are programmable, which introduces new game mechanics (ex. Hearthstone’s RNG heavy dynamic) that were previously impossible. This leads to not just more CCG assets, but more types of CCG assets. With more possible mechanics, game designers can make games with more complicated rules and card types. This increase in the diversity of assets exposes card flippers to more profit opportunities.
Not to mention, CCGs only account for a small fraction of NFTs that flippers are able to profit off of. Out of the top ten NFT dapps, only two are CCGs. CCG arbitrageurs and investors can thus have diverse portfolios and hedge their risks as they can venture beyond CCGs and into other types of digitally native collectibles.
An additional benefit of NFT CCG cards compared to physical cards is that card condition is no longer a factor for asset depreciation. Unlike physical cards, NFTs cannot be bent, burned, or broken. As a result, NFT flippers do not have to worry about the conditions of their assets.
On the flip side (no pun intended), like physical cards, NFTs can still be lost or stolen if owners lose access to their wallets. Therefore, best practices for asset management (ex. distributing your NFTs across multiple wallets) and wallet security (ex. using cold wallets) are crucial for successful NFT flipping.
2. More Markets
Improved asset discovery is another major benefit of building CCGs on blockchains as flippers can easily find cards. Due to NFTs being digitally native, their marketplaces are also digital. Card flippers now have an easier time finding items to flip as they no longer have to go through massive piles of cards in people’s yard sales. Instead, NFT marketplaces are searchable on the internet and can be easily parsed. Players can also easily spin up marketplaces for new CCGs using decentralized exchange protocols like 0x to earn trading fees and contribute to their CCG’s network of marketplaces. Cryptomarkets are on 24/7, unlike your local brick and mortar card stores.
Savvy NFT flippers can even code bots that filter online marketplaces to find all available listings and automatically purchase items that they deem underpriced. Now, the arbitrageurs can facilitate trades across jurisdictions (more likely to have price differences), and investors can easily obtain diamonds in markets that were previously geographically unavailable to them. This enhances market efficiency and brings greater margins to card flippers.
However, this improved efficiency may lead to a decreased number of flippers as assets get concentrated to flippers who can build the most effective flipping bots. While it will increase the overall earnings for the best flippers as they make large numbers of trades, it also will likely increase the barrier of entry for people interested in flipping NFTs. During the CryptoKitties mania, many of the most successful kitty flippers used this exact strategy to extract large profits. Nevertheless, it is possible for new strategies to emerge that can beat out trading bots in the future.
3. More Liquidity
The greatest benefit of blockchain-based CCGs is increased card liquidity. As NFTs are digitally native, there is lower friction in asset trading. Card flippers no longer have the financial costs of shipping fees and card maintenance, and they can bypass the time costs of filtering through, valuing, and mailing the cards. They only have to pay a transaction to the marketplace and a gas fee to the network, and can use tools that automatically tells them their assets’ market prices.
The biggest winner from the increased liquidity is the CCG player. Players can now receive their new cards instantly and purchase cards at overall lower prices, thanks to a more efficient market. Other than that, they can more reliably verify the authenticity of the asset they’re purchasing by verifying its legitimacy with a blockchain explorer.
The best outcome of an efficient open trading card economy for the game developer is that the same level of fun is now achievable by a wider audience as the pay to play threshold decreases. Most CCGs with card trading economies are, by nature, pay to play. Beginners have low pay to play thresholds as they are mostly playing for fun and only need basic cards to get going. However, the pay to play threshold rises as players start to play competitively, because they now need specific strong cards to make meta decks. The pay to play threshold reaches its peak at the professional level as those players need as many meta cards as possible to keep their decks powerful and flexible.
The importance of lowering the pay to play threshold of a CCG can be demonstrated by comparing closed economy card games like Hearthstone (the only way of acquiring cards is to buy card packs from Blizzard) to open economy CCGs like Gods Unchained (players can buy packs from Immutable and trade peer to peer on marketplaces). To simplify the example, we will disregard the card forging mechanics in the two games.
In Hearthstone, in order for a new player to build a meta deck, the player must keep buying packs until he/she gets every single card that composes the deck. This leaves the player’s ability to get the necessary cards up to luck. An unlucky player may even end up with stockpiles of bad cards that he/she has no use for, creating a sunk cost. Though this provides Blizzard a lucrative revenue stream in the short term, it can push away players who do not want to invest such large sums in a game, resulting in a long term loss for the company.
In GU, new players who want to build a meta deck have two ways of doing so. The first way is to buy card packs until the total value of their cards equals the total value of their desired deck. Unlike Hearthstone players, they can trade their extra cards with other players for their desired cards. Though this method has a time cost (takes time to find trades), the monetary cost is significantly lower. The second way is to buy all the cards that make up the deck directly from a GU marketplace. This is the most efficient method as it has low monetary and time costs.
Though open trading card economies may be less profitable in the short run for the company, their lower pay to play threshold reduces the barrier of entry for players, which makes the game more attractive to gamers. This dynamic likely results in more long term growth for the game as less players drop off when the meta changes (lower cost for constructing new meta decks), more players join the ecosystem over time (lower pay to play threshold leads to more players), and more players can advance to the competitive scene which helps grow the game’s esports community. This could be one of the contributing factors of why Magic The Gathering has been the king of CCGs since 1993.
As demonstrated, the pay to play threshold influences the growth potential for games as it creates a barrier of entry for new players and limits poorer players from competing and discovering. Thus, it is important for companies to lower the pay to play threshold to maximize long term profit. Thanks to increased liquidity brought from blockchains, trading card markets can become more efficient. This helps overall pay to play threshold decrease and all players are now able to enjoy the game at a lower cost, thereby increasing aggregate fun of the game. This aggregate fun may even compound due to the inherent network effects of CCGs.
Published at Wed, 04 Dec 2019 23:27:41 +0000
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