Player-Owned Open Web3 Gaming Economies

Sam Peurifoy
8 min readMar 15, 2023


Open player economies driven entirely by player action are the de facto holy grail of MMORPG game design, and overwhelmingly fit hand-in-glove with blockchain technologies. But is adding blockchain to your game, and the potential for financialization that historically has accompanied it, really in the players’ best interest?

Source: Midjourney

Gaming’s virtuous cycle

The idea of absolute player-owned economies has always been something of a holy grail in game development, even well before “web3.” Bob chops a tree and sells it to Alice, who fletches a bow and sells it to Charlie. Charlie fights the great dragon Elvarg, dies, and loses the bow. The process repeats — a self-contained gaming terrarium.

Traditionally, models like these have lent themselves well to the highly popular MMORPG genre (e.g. Runescape, World of Warcraft). Famously, Ultima Online, one of the seminal precursors of modern MMORPG standards, leaned so far into “player-driven” economic models that players actually managed to obliterate its flora & fauna ecosystem within days of launch by indiscriminately killing every living animal, regardless of the fact that only dangerous animals yielded substantial economic rewards.

Economic rewards in the context of web3 take on a substantially different shape than they did back in the Ultima Online years, where time can now really mean money. When digital assets are “real” and can be owned, traded, or otherwise collateralized by players on-chain, human behavior (and dedication) towards games will undergo a seismic shift, for better or worse.

Two ideological battles sit at the fore of this discussion:

  1. Economic moralism around: providing substantial labor opportunities for disparate geographies with traditionally lower capital availability, versus the notion that “employing” overseas players to perform rote online tasks amounts to a digital sweatshop; and
  2. The inverse relationship between fun and extrinsic incentives (i.e. getting paid to play makes something unfun), versus the claim that real digital ownership of in-game goods provides enhanced player affinity for gameplay and higher monetization ROI.

As usual, the truth lies somewhere in the middle.

Does web3 help or hinder an open player economy?

Consider Albion Online. Released in 2017 and lauded as the spiritual successor to Runescape or Ultima, Albion uniquely promises two components that I fully expect to see leveraged in open web3 gaming economies:

  1. All in-game items are player-made; materials come from in-game monsters (“mobs”) or natural resources, and equipment items dropped from mobs are actually those that have been sold by players to the neutral automated marketplace.
  2. The automated marketplace itself functions as a form of opaque automated market maker (AMM), with pricing for individual items determined explicitly by supply and demand; when too little of a popular equipment item has been crafted and sold to the neutral marketplace, the price increases until someone is inclined to collect the resources to create that equipment piece.

Taken together, these comprise a complete player-driven economy with concepts that are very easy to map 1:1 into web3 features. Certain games already are driving in this direction, with in-game decentralized exchange (DEX) AMMs and harvestable resources via time-based staking or active gameplay participation that generate some subset of usable game items.

This type of economic experimentation was popular even before such player-generated in-game assets were extractable or “owned” in any capacity. The ability of blockchain to augment this extremely unique feature in these game ecosystems is likely to cause a Cambrian explosion of economic simulators and MMORPG-lite ventures aiming to capture exactly those two game mechanics listed above.

Is blockchain in the players’ best interest?

New classes of players emerged in late 2020 with Axie Infinity’s serendipitous discovery of the “scholarship” program, in which a capital-rich player type (the “manager” or “guild”) loans digital assets with real cost to a time-rich player type (the “scholar” or “player”). Entire business models took root and saw participation even from institutional firms looking to lever up non-fungible token (NFT) positions to capture higher near-term yield from in-game asset generation. These game loops were primitive, premature, and unengaging for the player, but at ranges of $2-$20/day in earnings per player, they were sufficient to drive this entirely new sector of the digital economy.

Pundits on both “sides of the aisle” argued that this type of ecosystem either takes advantage of players in “digital sweatshops,” or, conversely, that this type of ecosystem was immensely empowering and the “future of labor.”

But the more important argument remains: is this an effective player acquisition and retention strategy that results in compelling gameplay and strong player ownership affinity towards the game?

Psychological studies point us in one direction here, and it’s unfortunately contrary to the prevailing web3 narrative. Termed the “overjustification effect,” participants in a myriad of activities overwhelmingly enjoy them less after they receive some form of extrinsic incentive for their performance, in contrast to the motivation they originally felt from “harmless” intrinsic motivating forces, i.e. “this feels fun” is a stronger motivator than cash. There’s a ton of studies that highlight this exceptionally well, which I’ll banish to the footnotes below to save space.¹

The net is that it’s likely that tying real-world incentives to a post-work activity (i.e. gaming) may end up having the inverse effect on players, inasmuch that burnout will increase and retention will decrease. Ultimately, the risk of exploring down this path is that the world does become one big Axie Infinity scholarship operation,² except Blackrock owns all the land (again!) and we all farm berries and Smooth Love Potions till we die.

But wait! There’s more

Ultimately, while the existence of a potential “moral hazard” associated with permitting certain players to hire other players and exploit geographic arbitrage is unlikely to persuade or dissuade players or developers from pursuing a particular game feature (see: lootboxes, everywhere), the absence of an improvement in either revenue or retention certainly will cause developers to flee from an idea. So, with respect to blockchain in gaming, where’s the beef?

The punchline here isn’t quite so clear, but trading card games (TCGs) may be our best proxy for evaluating the way that players (and ultimately, developers) are likely to approach real player ownership of digital assets in games over the next few years. Arguably, TCGs (e.g. Pokémon, Yu-Gi-Oh!) achieved success because of the perceived monetary value behind the collectible cards.

Now, anyone who grew up in that era will immediately bristle and say “Certainly not! We played for fun.” And they’d be telling you at least half the truth, because they probably didn’t explicitly recognize that certain cards were worth marginally more percentage points than other cards, at least at the ages they were when they first engaged with those games.

But the idea of value was baked into the games themselves. A shiny foil card was certainly more valuable than a not shiny foil card, even if the average schoolyard duelist couldn’t tell you exactly why or by how much. And, similarly, a Charizard was obviously worth more than a Blastoise, even though Blastoise beats Charizard in-game (because dragons are cooler than turtles, obviously).

This idea of value is deeply ingrained in gamer psyche, and is even responsible for certain modern MMORPG monetization techniques today.

The outstanding question, however, is: what happens when instead of working at McDonald’s after school to earn enough cash to buy a box of the newest Pokémon cards, I can just play Pokémon to earn more Pokémon cards and sell them to my friends?

Back to the future

In this brave new world of an open web3 economy and the incoming ubiquity of digital collectibles (aka NFTs) this open question will be tested by prominent studios and indie devs alike, and billions of dollars will be thrown at various hypotheses. And, while some may decry the potential for gaming to morph from a hobby into a job, the reality of “doing something you love for work” is complex and generally evokes a wide mix of emotions in the people that experience it.

I find myself optimistic that the future of gaming looks a lot more like a resurgence of the original core motifs that saw Pokémon rise to the apex of culture in the 90s and early 00’s, and less so like a dystopian digital sweatshop where thankless work begets thankless pay.

And I’m willing to bet on that. Not out of blind optimism, but because the former of those two generates real emotional experiences for billions of players, which implies developers will have billions of new emotional experiences to target with new monetization experiments. Major studios are certainly paying attention.

Ultimately, for better or worse, when in doubt, follow the money. 💰

¹Four studies, rapid-fire here: Self-Determination Theory (Deci & Ryan, 1985) suggests that when people believe they are only performing an activity for an external reward, they feel their autonomy has been threatened, and exhibit a decrease in motivation; Deci, E.L. (1971) found that people paid to solve puzzles were less likely to keep solving them in their free time than those who were unpaid; The Gift Relationship (Titmuss, 1970) explores how introducing cash incentives for blood donations actually decreased the total number of donors in the US, which implies they experienced a reduction in intrinsic motivation; and finally, my favorite (as we just had a son) is Gneezy, U., & Rustichini, A. (2000), in which researchers found that when a fine was instituted at a daycare for parents who picked up their children late, the late pickups actually increased, because parents were able to price their misbehavior, and that price exceeded their internal motivation to be on time.

²I should know a thing or two about this, Bloomberg even did a feature on me for it. Matt Levine kindly knighted some of my scholars with the resume denomination “Piloted blobby monster non-fungible token around virtual world,” which captures the spirit well.

Sam is the CEO of Playground Labs, a web3 protocol dev organization, and Partner & Head of Interactive at Hivemind Capital, a crypto-focused multi-strategy fund. Follow him on Twitter.

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Sam Peurifoy

Investing in & building new worlds. Views mine, not advice. Gaming VC @HivemindCap, chief tinkerer @xPlaygroundLabs.