I had the pleasure of experiencing the last Community Token Talk live on air the other day. Didn't even realize that was an option until @samostically told me he listens in. Took me ten minute before I could even join the channel because of the filters on the 3Speak Discord, but I'm not complaining. Just never experienced that before.
Speaking of experience...
I asked a few questions about Ragnarok towards the end.
The one I remember most was about about EXP tokens.
Will the NFT market's unit-of-account be XP tokens?
Followed by a resounding "no".
- XP tokens will only be used for XP.
- The secondary market for NFTs will use Hive/HBD.
Interesting.
The tone of the answer was an interesting one.
I could only describe it as "pure".
Trust me, I get it.
We game-theory the hell out of these things...
At a certain point it must be tested in the real world.
It makes sense to essentially use Occam's Razor logic.
Scientific experiment.
In science we use a control group. The purpose of the control group is to account for chaotic variables like Placebo Effect. Without the control group the results of the actual test can't be compared to anything. This can cause wrongful conclusions to be accepted as fact. We must eliminate as many stray variables as possible for scientific experiments to be accurate. It is this focus firing of a single variable that Occam's Razor is all about.
The simplest answer is likely the most accurate.
Purist
So when I hear that XP will only be used for XP and XP is for XP and that's what XP does... hm, yeah, I get it, that makes sense. But I can't help but think this is a mistake in the long run. After all, XP is Ragnarok's only fungible currency (AFAIK) within a framework that it controls.
Example:
Some kind of weird bug happens and we, as the Ragnarok network, want to reverse it. Unfortunately we can not reverse it because the transfer was done with Hive, and Hive transfers can not be rolled back like that. Only the NFT side could be rolled back.
However, if you use a currency that the network controls these things can be fixed during the testnet phase when everything is chaotic. Honestly, this is not the best example and there are a lot of vectors in which it can be debunked, but that's not really important. There are dozens of scenarios where it makes sense for Rangnarok to use its own fungible currency as an actual currency.
It was weird hearing it phrased like that...
The secondary market will use Hive/HBD.
Doesn't the language itself imply a primary market priced in XP tokens?
I mean if it was me developing this game I'd probably do the same thing.
I don't want to be dicking around creating a market before launch.
Just want to get the thing launched so it can be tested for a year.
Still...
Advantages of a primary NFT/XP market.
Again, everything remains in the bounds of the Ragnarok network itself. We don't need oracles from the outside telling us that a Hive transaction is valid; we know the transaction is valid because it's priced in XP and the network intrinsically knows how much XP each player has. All the smart-contract logic is contained within an environment that is controlled directly by the protocol.
Am I out of my element here?
Am I just speculating on stuff I don't know anything about? Probably... I know that Dan has talked about an Oracle solution with the 3SPEAK network, and there are a bunch of open-source modular pieces of code that 3SPEAK is going to launch that Ragnarok is going to use... so I really have no idea how that all works. Perhaps I need more information.
But here's something I do know:
If an internal market is priced in XP tokens, that intrinsically gives XP tokens more utility, and thus more value. So the question becomes: Do we want to give Hive a little bit more value, or Ragnarok XP tokens a lot of value? I'd say jam that utility into the singular fungible token of the network.
It's weird that XP is buyable.
Another thing we have to address is the unorthodox nature of XP tokens. Think about it. XP is experience... you can't buy experience, that's kind of the idea. People get experience by doing. The entire point of an RPG game is to go kill stuff and level up; you can't just buy levels and skills, that's what weapons and armor are for.
That being said I think XP being the currency is super interesting and I'm ready to test out the viability of it within a strategy game. Just because it would never work for an RPG doesn't mean it won't work with a CCG. Also, XP tokens are basically going to fund the entire system and make it work. It's hard to imagine the game being sustainable without them considering yearly tournaments are the only other way to get rewarded.
Pay to Play
The fact that XP can be bought is a huge red-flag that this game may turn into a pay-to-play nightmare. We've already seen how crazy this can get with crypto. The combination of pay-to-play on top of expecting a financial return for HODLing means that players are often willing to risk thousands if not tens of thousands of dollars buying into the system, all under the guise that this is an "investment". Whether that is justified or not is yet to be seen.
I personally believe that this is the first pay-to-play setup I've ever seen in my entire life that's going to be sustainable, which is truly quite impressive coming from me (you can take my word for it).
What makes XP is sustainable?
Well, in every other pay to play game you have a centralized greedy-goblin that controls everything siphoning that value directly into their own pocket. On Ragnarok all that value gets kicked back to the community in a sustainable way (unlike something like DRUGWARS that dumped all the value right from the beginning).
We can think of XP as a community subsidy.
Even in the worst case of rampant pay-to-play necessity, the top players are spending like tens of thousands if not hundreds of thousands of dollars in order to compete. Where does that money go? Directly into the pockets of players farming and selling XP. Again, don't be surprised if someone figures out a good way to farm XP that ends up being super profitable (Gimmy them gold cards, fam).
We can think of XP as a proof-of-burn token.
It costs HBD to mint XP tokens, therefore XP is simultaneously hyperinflationary and hyperdeflationary. Burning HBD is clearly deflationary and creates a cutoff in profitability at a certain point. However, the fact that any player will mint XP after every win makes it hyperinflationary. We must also consider that players will simply take the HBD loss in order to play the game for fun, adding a very weird mechanic to the ecosystem.
Ironically enough, more players joining the game (inflation) is deflationary on XP tokens because more XP tokens will have to be powered up to accommodate them. Only once old players have everything they want will they start dumping all the XP tokens they earn, once again flipping the mechanic to hyperinflationary. Many of these mechanics will balance out over time.
Paragon levels
It was also mentioned that cards can be leveled up past the maximum level 9, further adding deflationary pressure to XP tokens. Leveling past the max level will be expensive and only provide a small bonus, but you can be damn sure certain people are going to spend quite a bit to get that extra edge.
Unstaking XP
Removing XP from a leveled up card is going to come with a penalty (assume something like 5%-10%). Again, this adds more deflation to XP and balances out the inflation. These are all great resource sink mechanics that lead me to believe that the ecosystem will be sustainable for quite some time.
Deflation makes it difficult to enter late.
Here's where things get even weirder. The hyperinflationary nature of XP tokens somewhat counteracts the hyper-deflation of NFTs. Say the game is four years old and someone wants to join in on the action for the tournament's fifth year. How much money would they have to spend in order to stay competitive? Probably not so much on the XP side. XP will be very abundant and much cheaper than it was during the first year or two. However, the NFT Gods themselves will be quite expensive.
This creates a super weird tug-o-war where NFTs are cheap as hell in the beginning, but XP is expensive, while later on XP is cheap and NFTs are expensive. Very few players are going to take this game seriously on a relative scale, and many will dump their generous airdrop. However, there will be ZERO XP tokens available on launch day... which means XP is going to be very expensive to start, while NFTs will be dumped.
Then on the flip side when the game has been out for a while, XP tokens will be cheap and the NFTs will be absurdly priced (think Ethereum NFTs... but even more expensive because they can actually win players money in the tournament).
Imagine how big the prize pools will be in five years...
As a deflationary game, there are only a few thousand super serious competitive players, and then there are the casual players farming XP for the hardcore players. With a prize pool that only pays out to the top 100, imagine how much HBD the SIP has inside it... lol that's so much yield.
SIP Speculation
Again, I need to do more research on 3SPEAK tech, but I have an idea for how this should work, which is why I think it is obvious that an INTERNAL market paired to XP tokens is the obvious path forward.
HBD/XP AMM pairing.
It becomes clear to me that a legacy order book where players post bids/asks for HBD/XP is ridiculous. This is the future boys. If we want people to take Ragnarok seriously we obviously need an AMM pool with infinity liquidity. In my mind this is really the only option now that Uniswap has shown us the way.
So how does an HBD/EXP LP work?
Whelp... the SIP is already sucking in HBD into a savings account. Problem with that is this money is locked for three days; not great for instant gratification like most users will demand. Also the entire point of that money is that it's not coming back out again, so while tempting to add such a massive pool to liquidity... it's really out of the question.
This is pretty unfortunate now that I think about it. While the delay for HBD >> XP would be zero, the delay for XP >> HBD would take 3 days. Woof. There are potential work-arounds for this delay but they aren't super pretty... also I'm just overthinking this so let me just go ahead and delete these 5 paragraphs I just wrote...
Yield vs Volatility is the Crux of AMM.
It's obvious to me that the Ragnarok network should print some amount of EXP tokens as yield for providing liquidity to the HBD/EXP AMM. Unfortunately, it is also obvious to me that, judging by Dan's "purist" answer in regard to XP tokens... that he's not going to agree with diluting XP tokens like this.
Personally I think the value generated by printing this inflation pays for itself ten times over, but I am curious to see what kind of solutions have been built around these problems. Clearly, liquidity must be provided so that players have the option to buy/sell XP tokens. I just hope that "solution" isn't a bid/ask orderbook... because that is a very basic bitch answer now that DEFI AMM is rampaging crypto. Again, totally out of my element here... these are just the things I'm worried about given my limited knowledge of the situation. I should probably STFU until I do a deep dive on 3SPEAK... NAH that's no fun!
Non-savings-account buffer.
The SIP is going to trap HBD in the savings account to generate yield for the prize pools at the end of the year. However, as stated, this value is locked and can't exit easily should players with XP want to cash out. This implies that the SIP must also have liquid HBD that isn't locked to act as a buffer for players to exit instantly.
Should we penalize players for not waiting 3 days to cash out? Should we set up some kind of subsidized buffer fund? Should we give a bonus for users willing to wait the 3 days? Should we just make the buffer first come first serve, and if it runs out players will have to wait for the next unlock? Should we give a bonus to players who provide this much needed HBD liquidity in times of need? I have no idea... these are just questions we should be contemplating when trying to solve this 3 day lock liquidity problem.
Just to reiterate...
The way I see it, Ragnarok has 3 liquidity pools.
- HBD in the savings account generating 12%-whatever yields.
Locked forever, yield used for yearly prize-pool. - Liquid HBD used for instant exit liquidity.
Available now, calculated using virtual AMM HBD/EXP. - Greed savings account.
HBD that should be liquid but isn't because we locked it in the savings account to get even more yield. Why keep the HBD liquid if the network doesn't need it 99% of the time? 3 days max isn't a long time to wait to become solvent again.
Then again...
Probably more than a 50% chance that this isn't even how the system works or will work even after I pitched the idea (because it's not really that great of an idea to be honest). This is only a problem if exit liquidity is tied to HBD in the savings account (which doesn't actually sound like something Dan would do). Trapped in a game-theory box of my own making. Figures.
I only mention it because if we can find a way to fairly balance this situation we can get the best of both worlds. For example, why provide 1,000,000 worth of HBD exit liquidity when we would just as easily lock 75% of that up in the savings account, earn 12% yield on it, and still have 250,000 liquid HBD left for XP holders that wanted to cash out? Even if that 250,000 gets reduced to zero it only takes 3 days or less to refill the exit pool. Something to think about.
Why not HIVE/EXP?
Because the game isn't charging Hive. Hive is a terrible unit of account for many reasons. HBD is much better. No reason to dilute the liquidity pools across multiple LPs. HIVE/EXP is way too risky anyway, anyone in this kind of LP is betting on the price of Hive going up.
A market like this needs more stability than that and shouldn't cater to maniacal degens like Yours Truly. Also, HBD is in dire need of more liquidity just in general across the board, and it's cool that we've discovered ways we can outsource Hive's debt to further subsidize the main-chain itself.
Idea for how XP should be allocated per game.
Again, this is something I should just wait and see how it's done before commenting on it... but I guess I just can't help myself. I think it's pretty clear that when you win you should get more XP points if your opponent is higher ranked.
For example, if we were using chess ELO rankings the average rating would be either 1500 or 1000, let's just use 1000 for unit-bias simplicity. So you're rating is 1000 and you lose, your rating goes down to 980, then you beat your opponent who's rating is 970, pushing your rating back up to 998. How much XP coins did you earn?
I think the rating itself should be used as the basis for the reward.
So you beat a rating 970. In my opinion the most XP coins you could possibly get would be something like 970 (the rating of your opponent). Of course if your opponent quit instantly and you did zero damage to them, this would add an x0 multiplier to your score and you'd get 0 XP tokens. I don't know how it works but I assume something like this is how it should work. That way if you are ranked highly you can farm more XP tokens than someone that just started playing (or god forbid a bot with a 500 rating).
What happens when a whale ragequits?
Again, back to the concept of liquidity, I feel like an orderbook is just not good enough. This is the kind of game that will get players raging hard. Have you ever seen Hearthstone or CounterStrike players rage? Christ almighty: the tears. Imagine adding massive cash prizes to those emotions of competitive frustration. That's going to make it exponentially worse.
Ragnarok must have the liquidity to sustain huge buyers/sellers at a moments notice, and that all points to an AMM farm with EXP yield being paid out to the HBD/EXP LP (in addition to any HBD we can get from the savings account).
Governance
Wow I've written this much and only now have gotten to governance? Yikes. I talk too much. In any case, governance on Ragnarok is super unique because we are going to vote with our NFTs. The NFTs are chess-based, so does that mean higher ranked cards have a bigger vote? I must assume that this is the case.
Using a chess voting-point system.
- Pawns would have a 1 point vote.
- Knights/Bishops would have a 3 point vote.
- Rooks would have a 5 point vote.
- Queen would have a 9 point vote.
- Kings don't have points in chess but I'd say 10 points for Ragnarok.
So if you had 5 kings, 7 queens, 12 knights, 11 bishops, and 50 pawns, your governance vote would be 232 under this point system.
What can you do with your governance vote?
That's really up to the protocol to decide. At this point we know that the testnet will not end until we vote for the main-net to begin.
In the context of the topics I've been discussing in this post, there'd be votes/ballots that determine how much HBD is locked in the savings account generating yield for LPs/(whatever-else), and how much would be stored as instant-exit liquidity.
In this same vein, governance votes would control how much EXP gets printed out of thin air to incentivize the HBD/EXP LP pool. A lot of EXP being printed means exponentially deep liquidity, but at the same time adds more dilution to the token value over time.
Very little yield applied is the opposite: thin liquidity with hardly any inflation. Considering the game will begin with zero EXP tokens, it makes sense that inflation would be high and liquidity deep in the beginning, but that's just me. Or we could do bid/ask order-books and cut the inflation to zero... which... I hate... but also somewhat expect.
I've described the ways I would do this kind of governance voting in a previous post titled...
Hive Governance: Tug-of-War Sliding-Scale Voting
Where every so often the community would be able to vote on whether they wanted to increase or decrease a certain number in a certain direction by a certain amount. I don't actually expect these things to be implemented in Ragnarok but I am getting flashbacks to some of the stuff I've blogged about in years past. Just sayin.
The fact that governance is based on the God NFTs is super interesting. It definitely gives the cards a lot more utility and value that they wouldn't of had otherwise. It's honestly crazy to think that NFTs could have governance powers. Should be interesting, especially on top of future airdrops TBA.
Conclusion
EXP is Ragnarok's only fungible currency. As such, it would make sense that we actually used it as a currency rather than keeping it quarantined to its original function. Considering EXP tokens are already in a position to be bought and sold it makes sense that we'd use it for NFT sales as well (and perhaps even certain in-game functions unrelated to leveling up cards).
Gonna kill it here; this post is ridiculous. Behold: The Wild Speculation of someone who knows nothing about what they are talking about! Feels like reading a post I wrote 4 years ago and thinking: wow you're dumb. The ADHD theory-crafting continues. Let's see where we end up. With a year testnet, there really is no rush here.
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I understand what you are saying about the HBD/EXP LP and deep liquidity. That makes sense, especially if deep pockets will get involved.
On your argument about the primary NFT/EXP market, I believe Dan funded this game especially to add value to Hive (in this case HBD). A market that goes through HBD both for NFTs and for EXP greatly improves the usability of HBD, if the game becomes successful. A direct primary market between NFT and EXP excludes HBD and that's what I believe Dan is focusing on in the game's economy.
Right, but if you increase yield on the HBD/EXP LP farm that alone is enough to give HBD exponentially more value. See how this works? You can add value to EXP tokens and then transfer that value to HBD with the LP pool.
In my opinion it makes way more sense for Ragnarok to use a currency it controls, if only for security purposes. By keeping the game fully contained you only have to worry about a single offramp: the LP pool. But again I need to see exactly how it works before I comment on this further. Just spitballing here.
Dan might have plans for something like that in the future. The way earning of interest will be handled initially, via the HBD savings, he called version 1. Which makes me believe he already has in mind a version 2.
These are different things, but still I'm mentioning it because he mind have plans to improve the economy.
Indeed he calls it the SIP Version 1.
A SIP Version 2 would apply to all the projects (3SPEAK and any code clones/forks)
The paying for XP is a little weird but you know what's awesome. This is suppose to be open source which means a new version could be relatively easy to launch and not have that as an option including other things to see how it pans out. One could learn a lot from the first few weeks of Ragnarok launch and play system and could be adapted into a new game.
This is very true.
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Jesus christ.. my mind is blown, and once again I am overwhelmed by hive related development haha!
Great write up man!!
it is kinda a substitute of selling your character after you leveled it up :) but you still have you character and can grind more
I already had this feeling immediately i read the game design, the game seems too complex to be just played alone. I think that's a path for investors to buy XP and make money.
It is really not so ridiculous, I mean your write up. I understood every of your point and I kind of agree with you on this. I feel the game would sustain for a long time but might just be too expensive to play.
I can only imagine playing someone who has bought a huge amount of XP! Lol😀
The Testnet would probably produce more answers.
I enjoyed reading this,it is interesting to know how much you love this game even before it is launched!
!PIZZA
But it is one for sure. I am more concerned about all that "HBD sinks" which mean you need a lot of HBD to heal and level up. This is putting me off, if it turns out to be the case. The beauty of Splinterlands is, that you just pay the spellbook and can start winning battles. I hope there won´t be such economic hurdles.
At the same time the economic hurdles are exciting because they totally eliminate bots for at least a couple years and make the XP tokens way more valuable. This is what people need to realize about the HBD sinks... you are trading the HBD to XP, probably at a very healthy profit especially early game.
Are you really going to complain if you play 10 games and that costs you 10 HBD, but the XP you earned was worth 20 HBD? Just sell off half your XP to pay the cost of playing and you still made money.
In that case of course no complain, but lets see if it will be like that! Someone has to pay, right? That value from XP has to come from someone. Also good marketing will be needed to attract outsiders. We are not that known as ETH, nor do we have a marketing budget like others.
wait for alpha to test. everything else is thin air. As far you know, a game will never be the same as its announced :)
But I know, you are already deep in it :P
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Withdrawals from the hbd in savings could be staggered on say 4 hour withdrawals.
That way new hbd goes in, and a daily average comes out to cover withdrawals.
If there was a large withdrawal it would need wait only hours and not days, depending on how big it was.
Banks get by on 10%, I don't see why the same wouldn't apply here.
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So what happens if someone sells a bunch of XP on the market? Will the game system have a way to convert XP into HBD regardless of liquidity (some type of peg similar to what we have for HBD/HIVE conversions) and an internal market for fast liquidation?
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