Are Gaming Tokens doomed to fail?

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Welcome back to another week of Gaming Crypto! I’m Kostas and this week we examine if the thesis of gaming tokens based on in-game demand is viable.

Have Gaming Tokens failed?

A big conversation sparked this week around whether gaming tokens can ever succeed and how. 

As fellow writer and researcher Web3_Memento wrote in his tweet,

No matter the launch mechanism, the initial float, the listings, the ecosystem – the end result is still the same. 

An argument by Chris Heatherly, the founder of Invite to Mystery and a long-time Disney executive, was that the long-term horizon of games doesn’t fit the short-term hype focused mindset of crypto, and that is why the audience needs to radically change.

Loopify, the founder of Treeverse, argued that genuine demand for a quality product is all a successful token needs. That is where the example of InfiniGods was used, the studio behind King of Destiny, which at the time of its token launch seemingly had a large enough user base and in-game spending to support their token’s price, like Loopify suggested.

Infinigods’ own CMO [Brydisanto] gave his own take in the conversation. He argued that they were close, but ultimately, the in-game demand couldn’t maintain the narrative. That is the reason he thinks the thesis of sustaining a token’s price from in-app purchases (IAP) isn’t properly tested.

He argues that the 3 pillars of the thesis, 

• users at scale. 

• pathways to convert IAP to token buying. 

• alternative revenue supporting the token at least partly. 

All require maturity of the game. The reasoning is that early stages will require unpredictable tinkering that can disrupt a token economy.

Does this Thesis Work at Scale?

Most people in web3 gaming have started to believe(or always believed) that gaming tokens cannot be sustained on the game’s demand, or that it would need such great numbers that it is incredibly difficult to achieve.

But is this accurate?

According to AppMagic, there are 586 developer accounts of mobile gaming studios and publishers that made more than $500,000 in cumulative revenue in the month of June. Additionally, there are 783 that had more than 1,000,000 downloads.

The 2 issues here is that, firstly, we are taking revenue, not profit numbers, so theoretically, a large portion of that token demand will also result in token sales. And secondly, we are examining IAP + in-app advertising revenue (IAA). IAA will not directly translate to token demand, although it's in the studio's ability to convert to token buying.

On the other hand, these numbers refer only to mobile games and studios, and even then, only from the App and Google Store, not alternative stores, such as the Amazon Store.

Moreover, AppMagic, like any other analytics tool, undershoots the actual revenue. After the first few hundred games, the revenue numbers aren’t properly represented, with much of it missing. The number of studios that are over the $500,000 milestone is much, much higher.

What about Specific games?

We examined studio revenue, but not game-specific revenue. Let’s now look at specific games.

648 games made more than $1m in the month of June, with the limitations we already mentioned. The true number would probably be over a thousand games. On top of that, 1000+ games had 1m+ Downloads.

Is this scale enough to sustain a token?

You would think so.