Hope everybody had a great Holiday break. I certainly did. I spent time with loved ones, read books, took a break from working, moved to a new apartment, and developed a crippling addiction to a game called Path of Exile (PoE)–an action-RPG released in 2012 that is experiencing huge new-player growth1.
As I grinded my way through quests, I paid attention to the in-game economy and its relationship to my motivation to play the game. In terms of real-world value, the economy is broken. If one values real money, one should do pretty much anything else with one’s time than play PoE2. Any achievements in the game are worthless (in terms of dollars).
Here’s how the game works:
- You kill monsters that sometimes drop items
- Among those items are crafting materials that you can spend on modifying another item
- Instead of money like gold, players use crafting materials to barter with other players
The number of items in the economy increases over time. Everything inflates. At equillibrium, items should be worth nothing. Yet, I continued to invest my fungible time into the game, earning more in-game items that were largely worthless to others but worth something (my time at least) to me.
Even if I couldn’t sell the items for dollars, they improved my experience playing the game. They were fun to earn and use3.
- Kill monsters to earn stuff
- Use stuff to improve character to kill better monsters and earn better stuff
This is the ARPG core loop4. The success of the game relies on how fun the loop is to run over and over again.
But wouldn’t it be more fun if players could trade their items for real-world money?
It depends on whether the trading impacts gameplay.
Take Diablo 3: they added a real-money auction house where players could buy and sell in-game items for USD. It was universally loathed by players and quickly removed from the game. Adora Goh covered it well in this post.
Why did it fail? It detracted from the joy of the gameplay. A streamer said, “I didn’t purchase an auction house simulator, I purchased a hack and slash dungeon crawler.
From Goh’s post:
You go from:
- Kill enemies
- Earn loot drops
- Find the weapons and armor that you need in these drops Repeat
- Kill enemies
- Get loot drops
- Sell items in loot drop on the Auction Houses (real money or gold)
- Accumulate gold to buy items that you need from the Auction Houses
- Repeat, OR…
- Find ways to arbitrage in the Auction Houses and earn more gold/money this way
The salience of the real-money implication of decisions in-game detracts from the fun flow-state players experience when simply playing the game. It also disrupts the balance of the game, creating uneven playing fields for those with money to throw at it (pay-to-win).
When real-money trading impacts the core game loop, players have less fun.
On the other hand, when the items are purely cosmetic, real-money trading seem fine. The largest real-money market for cosmetics is probably CSGO, with items selling for thousands of dollars on Steam’s community market. In the crypto space, companies like OPSkins/WAX are trying to tap into that existing market to get users to trade tokenized cosmetics.
Real-money markets for in-game cosmetics seem desirable for players5, but as I’ve written before, they’re not business model optimal for the game developers. And markets for cosmetics are only meaningful if the game already has a captive audience (by definition, cosmetics are peripheral–not the primary focus of the players).
An economist might look at PoE’s economy and say that’s broken . A crypto-anarchist might look at PoE’s centralization and say that’s broken . But a player just sees the fun6.
If you’re thinking about using crypto in your game, don’t do it at the expense of the fun. And if you’re discovering some new models that create fun, please reach out. I’d love to learn more about it.
- PoE’s recent success is partially due to Blizzard’s choice to make the new Diablo game mobile only
- While trading items for fiat is banned, people still do it. Even if you never got your account banned, it still wouldn’t be worth it to farm items for cash.
- One big problem with this genre is that over time, the inflationary economy can become demotivating for all players. New players feel like it’s “too late” to play the game (because the existing player base has so much stuff compared to their nothing); old players feel frustrated that the items they worked hard for are worth less today than they were before due to increasing supply of those items and more importantly, power creep in the game: new items that are more powerful than prior items. Path of Exile uses a hybrid “league” and “standard” server model to find a balance that seems to work well. Every few months, a new leagues starts. Everybody that plays in that league starts from scratch (so the economy is completely reset). Once that league ends, all characters and items merge into the standard league (with its much more mature economy). This lets new players start on equal footing at the beginning of each league while maintaining a sense of “keeping your progress.”
- For a breakdown of core loops check out this post on Clash of Clans
- I have benefited from this myself. Some lucky Dota2 drops have filled up my Steam credits.
- For why the users don’t think things are broken, see my post on why emergent properties are invisible to end-users.