Unleashing the Secrets to Gamefi's Success: A 20-Year Journey of Open Economic Gaming Mastery
Despite of its success, only a few articles have been written about it. Therefore, I have written this in the hopes of helping some of you to better understand this open economic gaming masterpiece.
The historical evolution and case studies of innovative companies have long been of critical importance, and Fantasy Westward Journey is a premier example of such in the realm of Web3 gaming. Its high playability and open economic system actively contribute to its sustained vitality -- the exchange rate between the game currency and fiat is consistently reliable, and its inflation rate sits at a mere 3.9% annually, which is lower than that of many countries' currencies.
Represented by Axie Infinity, web3 games gained widespread attention over the past two years. In 2021, Axie's annual revenue reached $1.2 billion, despite being a low-cost game created by a small team of fewer than 50 people. Since then, many Axie imitations with AXS-SLP tokenomics as their dogma has emerged. Unfortunately, none of them have replicated the Axie myth and have instead lingered on for several months since launch. However, only a few projects have focused on the underlying logic behind Axie and iterated on it. Most of them have focused on superficial improvements rather than real innovations.
When dealing with project parties in the past, I emphasized the importance of carefully designing the tokenomics of Gamefi before delving into the depth and breadth of gameplay. Otherwise, it is hard to maintain players’ activeness and value of game assets in an open economy.
Fantasy Westward Journey is a master of tokenomics design. It was first released in 2004 for PC, followed by a mobile version in 2013. Despite being on the market for 19 years, its IP still ranks in the top 10-15 worldwide in terms of total revenue. The mobile version has been online for nearly 10 years and, according to Senor Tower, its IOS revenue alone reached 500 million US dollars in 2021.
The economic system in Fantasy Westward Journey is entirely free and open, and the game resembles a single-token gamefi. The mobile version has a different economic model than the PC version but is largely based on the latter's design. Although there are few articles discussing the economic model of this game, I strongly recommend that all gamefi teams study it carefully, as the PC version is a classic of open economies. Recently, I was asked by a portfolio company to talk about the game's design, so I bought an account and returned to it after nearly 10 years. I am taking this opportunity to organize my analyses into articles, hoping to provide readers with some reference and to let more people be aware of this Chinese game's light.
TL;DR
Core Gameplay
Fantasy Westward Journey's re-enactment of the real world is not only reflected in the economic model, but also in the design of its gameplay. One needs food, clothing, housing, transportation, work, and consumption in the real world, and so does he in the game.
One of the most groundbreaking designs of Fantasy Westward Journey is level-cutting. It brings benefits like gear value preservation, payment ability stratification, and player engagement levels.
The gameplay offers a satisfying level of complexity. The vertical ‘level division’ allows players to explore horizontal content. Players perceive positive feedback in the gameplay and continue to “produce” (refers to the production of in-game assets). These assets can be utilized in various dimensions of the game.
The game uses a time card system that requires payment, which in turn drives consumption throughout the economic model. The gameplay incentivizes behaviors that increase friction costs.
Social elements are integrated throughout the gameplay. Marriage and sworn systems, dungeons, gangs, and other features all encourage players to socialize and build a strong sense of social identity and recognition.
The game's economic system is designed to be entirely free and open. Players have the ability to trade in-game assets through stalls that are displayed based on the in-game geographic locations, instead of being limited to a virtual aggregated market.
The economic system is designed to maintain a stable exchange rate between game tokens and fiat currency. The inflation rate of the game token is even lower than that of many national currencies, representing an annual inflation rate of only approximately 3.9%.
The trading system creates a closed loop. The stall system promotes the commodity economy in the game, which leads to the emergence of merchants and in-game economic prosperity.
The division of labor naturally arises. The existence of merchant groups creates external pressure on the in-game market, stimulating producers (players) to improve labor productivity, thus resulting in labor specialization.
Value Capture and Inspiration for Gamefi
The social division of labor in Fantasy Westward Journey is highly fragmented. Each production stage, from the initial accumulation of materials to the finished product, involves different actors in the division of labor. Producers, merchants, and bosses provide different materials at each stage, and each material requires different processing skills. Simply accumulating "combat power" is insufficient for players to succeed in the game's commodity economy system.
Each finished product is composed of several production materials. The higher the value of the finished product, the more complex the means of production required.
The game design is balanced by multiple inputs and outputs.
Introducing a commodity economy into gamefi can help it become more sustainable, expand its production value, and use a tax model for long-term benefits.
Merchants whose sole purpose is to make a profit will exist, but they and gamefi are symbiotic. Their pursuit of self-interest allows the market to operate effectively.
Because there is continuous "output," it is necessary to prevent overfishing. The first approach is to increase the cost of mining. The second is to set an upper limit on output. The third is to let the mining behavior create value for the ecosystem.
The prosperity of a commodity economy is based on social division of labor and the division of owners of means of production, materials, and products. Gamefi should break down the production process of game assets into smaller components and not rely on a single indicator such as "combat power" to determine the production process. This will encourage players to participate in commodity exchange actively.
To achieve a balance between output and consumption, Gamefi must achieve "effective consumption." This means that consumption should not be solely for the purpose of obtaining more output, but also for gameplay and social interaction.
Developers should capture value in a restrained manner and focus on long-term value instead of short-term gain. Profiting by exploiting the interests of players is no different from a scam. The ideal approach is to boost the game's GDP growth with players.
Core Gameplay of Fantasy Westward Journey
Basic Ideas
Fantasy Westward Journey is an MMORPG game based on the worldview of one of the Chinese Four Great Books, "Journey to the West". The main quests, NPCs, and story background inherit the grand storyline of "Journey to the West". Players can experience the game's plots from a first-person perspective. The game's PC version was released in late 2003 and began commercializing in early 2004. Players with a level lower than 10 can experience the basic plot and gameplay on the initial map for free. After reaching level 10, they must purchase time cards worth RMB 0.6/hour (the price was 0.4 yuan/hour before adjustment). The time card serves as an anchor for the economy system, providing pricing protection for users' output in a unit of time. Here are some important game elements:
Characters
In this game, characters are categorized into three races: [human], [demon], and [fairy], with 6 sects for each race, totaling to 18 sects in the game. A character can only join one sect based on their race, and some sects have gender-specific requirements. Each sect restrains the other, with each having an ultimate skill that has a greater impact on specific sects. Sects determine the quests that a character is suited for, their attribute configuration, gear/stunts, position in the team, and more. Challenging quests often require cooperation between several sects, with AD (attack damage), AP (ability power, referring to damage caused by skills), seal, and support each playing their respective roles. Players will incur high fees if they decide to switch their high-level character to another sect. As with most games, there are relatively stronger sects in each version. The game planner targets sects/characters with relatively weak pay-to-win willingness and regularly introduces significant enhancements and version iterations.
Gamefi can utilize these strategies and values to balance its game elements. The objective is to "fill the gaps" and keep players invested, which generates continuous revenue for the game. It is important to exercise caution when changing the game's economy, as it directly affects the efficiency of P2E (play to earn) and can harm existing players. Skyweaver has done an exemplary job in this regard, testing the balance of heroes and cards for 4 years and only introducing cosmetic-related economic designs. This approach has protected the core game while allowing players access to the Web3 world.
The game's initial level cap is set at 145, but can be increased to 155 and 175 through the first and second expansions by "ascending" the character. While some players strive to reach the maximum level, many opt to remain at their current level due to the gameplay of the Hero Tournament (PVP), which groups players according to their level range. The groups are as follows: Levels 50-69 are [Elite], 70-89 are [Brave], 90-109 are [Divinity], and 110-129 are [Tianke]. Levels 130-159 belong to the [Apocalypse] group, and levels 160-175 belong to the [Origion] group. To gain an advantage in the tournament, players tend to stay at the highest level of each tier: 69, 89, 109, 129, 159, and 175. As competition becomes more challenging in the later stages of the game, many players manipulate their level to maximize efficiency.
Hierarchic-level-design has several advantages:
Asset preservation: players can sell gear with minimal loss when they level up from one tier to the next, and some rare gear may even increase in value. This feature encourages players to pay more, as they can sell assets to recoup their costs if they stop playing.
Payment ability layering: generally, higher levels require greater investment. Players can choose the appropriate level segment based on their spending power. This ensures that people with similar spending power compete with each other, rather than being dominated by players who spend more. This feature optimizes the experience of players who are not willing to pay to win, and also creates a sense of competition for high-spending players.
Engagement level segmentation: Fantasy Westward Journey is a very time-consuming game, but players usually do not feel this way due to the vertical level division. This division provides players with enough space to explore horizontal content. It has also led to some unconventional level manipulation, such as players stopping at level 59 to avoid the increased complexity that came with the "magic weapon legend" expansion. After this expansion, magic weapons and pet practice were open to characters above level 60.
Characters possess five attributes: [physique], [magic power], [strength], [endurance], and [agility], which correspond to the character's [HP], [MP], [hit rate], [damage], [defense], [speed], [spell damage], and [magic resistance]. The system assigns initial attribute values, which vary by race. Upon leveling up, a character gains 10 attribute points, with 5 points evenly distributed among the attributes and the remaining 5 points freely distributed by players. Different races have varying innate attributes and effects. Characters can save multiple sets of attribute schemes, but switching between them incurs a fee.
In addition to the basic attributes, characters can also gain additional attributes through the practice system, with the practice level capped by the character's level. Practice requires learning in a gang, also known as attribute point practice. Gang contribution (gained from gang tasks) determines the practice level, but practice consumes tokens instead of gang contribution.
Skills
Skills system includes three main categories: sect skills, life skills (also known as support skills), and plot skills. Here are some details:
Sect skills are battle skills, and their skill level cap is generally based on the character level cap, plus 10.
Life skills must be learned within a sect, and learning them consumes tokens, experience, and tribute. Life skills are mainly divided into three categories:
Skills to improve attributes include the [Body Strengthening Art] that boosts HP cap or [Meditation] that improves MP cap.
Support skills that help with social work. These skills require a certain level of commercialization capabilities. For example, crafting weapons requires corresponding crafting skills and proficiency, while crafting level 3 health-regeneration items requires knowledge of Chinese traditional medicine pharmacology skills. Support skills usually burn vitality points or stamina points. Vitality points are obtained by completing regular tasks and staying online. In contrast, stamina points are obtained through online presence or by purchasing [Zinnia] and [Hippocampus] (note that only one can be used per day).
Players will receive plot points after completing the main storyline, and they can choose different skills according to their needs.
PvP players usually choose to learn the [Art of Change], which allows them to use a "transformation card" to add buffs, and [Danyuan Jihui], which enhances HP/MP regeneration effects.
Other players or businessmen may learn skills with commercialization capabilities. For example, [Gem Crafting] can improve the success rate of synthesizing gems (which can be inlaid on gear to increase attributes), and [Qimen Dunjia] can synthesize flying flags (allowing players to directly reach a certain location on the map without having to walk there).
Items and Gear
Players have six basic gear slots, including weapons and armor. Those with a level above 65 have four additional spiritual ornament slots. While both basic gear and spiritual ornaments belong to the gear systems, their growth system and production materials differ. The weapons available to each character vary, and the helmets and armor have gender restrictions. Gear has basic attributes, additional attributes, special effects, gems, runes, smelted effects, and suit effects. Meanwhile, spiritual accessories have basic attributes, additional attributes, special effects, and suit effects. Among them, two special effects, [Level Restriction Removal] (no level requirement for gear) and [simple] (level required for gear - 5) are the most attractive.
Creating each attribute/effect requires different materials and skills, and each step involves randomness and probability. Various life skills and sub-professions are necessary during the process, forming a chain of industries requiring various types of labor. Additionally, players reaching level 65 can unlock the “magic weapon” system, level 109 can unlock the “artifact” system, and level 129 can unlock the “legendary weapon” system. Although these three systems are essentially magic weapon systems, the means of acquisition, growth system, production materials needed, corresponding events, and the points system differ. Most magic weapons are used for combat because they increase attributes or skills, and only a few are used for life skills. Magic weapons are only tradable when they are level 1.
Summons (Pets/Minions)
In the game, players can enlist the help of summoned creatures or babies, which function as pets with different growth systems and production materials required. While basic pets obtained from quests are sufficient for most players, PvP players typically have multiple pets to meet specific needs such as AD, AP, movement speed, HP, and endurance. Pets have their own set of attributes, skills, talent attributes, internal alchemy, talent, and gear systems separate from the player's. The best pets, known as "all-red babies," possess high-level skills denoted in red.
The pet system in Fantasy Westward Journey is a well-designed feature that requires a delicate synthesis process to create ideal pets. This process is known as "forging a baby" and is one of the game's most important consumption systems. However, every step of the process is subject to randomness, and a top-class pet requires numerous sacrificial pets, refining materials, and pet tips (skill books) which can be obtained through player investment or purchased from others.
Quests and Events
There are various types of quests and events in the game, and players won't be able to complete them all. Each quest/event will offer different rewards, and those with richer rewards often require teamwork. The different types of quests and events include:
Main quests: These are based on the plot of "Journey to the West". They are relatively easy, but the rewards are abundant. Players can take on corresponding main quests as their level increases.
Regular quests: Also known as daily/weekly quests, these include sect quests, ghost hunts, treasure quests, chained quests, and artifact quests, among others. Different quests yield different materials, which can be sold directly or used as raw materials. Some quests also offer points that can be exchanged for advanced materials and titles.
Dungeon quests: Dungeons are available at different times, and the number of players needed for each dungeon varies. Some dungeons offer a lot of rewards for the first pass, while others offer similar rewards every week. Players can search for the dungeon they want to join in the dungeon center and apply for it.
Gang quests: After joining a gang, players can receive four gang quests: Azure Dragon, White Tiger, Vermilion Bird, and Black Tortoise. The type of quest determines the time and investment required. Completing gang quests will earn gang contribution, tokens, and experience. Gang contribution is mainly used for point practice and life skills learning. In addition, gangs have regular events, including gang mazes and competitions.
Regular events: These consist of daily and weekend events, such as twenty-eight Chinese constellations, sect missions, imperial examination, and hero tournament, among others. The hero tournament (PvP) is held on the afternoon of the fourth Sunday of each month. Participating in the competition or not will make a tremendous difference for players. Non-PvP players usually do not pursue leaderboard rank and spend time in daily gameplay. PvP players pursue the ultimate gear and match of pets, and they burn a lot of consumables during PvP, such as medicines and transformation cards. PvP creates a demand for high-end items, generating massive demand in the game ecosystem.
Limited events: These often happen during festivals or by chance. After the game has entered the mining stage where many miners operate multiple accounts simultaneously, most players pay more attention to the event output. Usually, a mining studio will share the input-output comparison of limited events with regular quests.
Leisure events: As an MMORPG game, Fantasy Westward Journey has a variety of built-in games, including cultivation, simulation, card, strategy games, and others. Players with different preferences can find pleasure in these games.
Social
The social aspects of Fantasy Westward Journey are reflected in various gameplays. Due to players' strong sense of social identity, these social elements can sometimes lead to invisible discrimination in high-end gameplays. Although players cannot directly see the attributes of other characters, they can see their weapons, mounts/auspiciousness, and skins. Consequently, players often "judge others by appearance", particularly in terms of the amount of money invested. If a player is using a normal weapon and doesn't have any skin effects, it can be difficult for them to join a PvE team.
While this appearance design initially received positive feedback for promoting social interaction, it has since caused negative side effects such as discrimination, high costs for latecomers, and long team formation times. As a result, the enthusiasm of casual players has diminished, leading many to play solo by operating multiple accounts simultaneously.
The social elements include:
Character Relationships: The game features various systems for character relationships, including the mentoring, marriage, sworn, and family systems. Among them, the marriage system leads to the offspring and housing systems, which include gameplay such as geomancy, courtyard, and pasture. The design of character relationships has greatly encouraged players to buy social assets and is a good way to keep users engaged.
Gangs: Players must join a gang based on their needs for life skills and practice. Gangs act like communities with their own management structure, including a leader, deputy leaders, branch masters, elites, and members. Usually, managers set up a gang management system to maintain the vitality and funds of the gang, and unqualified gang members will be kicked out. The core purpose of managers is to promote gang members' activeness and increase the gang's overall strength. The design of the gang system adds SLG's gameplay to "Fantasy Westward Journey" and helps maintain players' activeness and retention rate through deeper engagement.
Mounts/Auspiciousness: Mounts and auspiciousness belong to the mount system. Characters reaching level 65 can complete designated quests to obtain mounts, which can add certain attributes to them. Characters reaching level 30 can purchase auspiciousness. Most auspiciousness have mainly appearance value, while few offer life skills, such as flying, allowing players to cross the map regardless of ground structures.
Skins: There are a wide range of skin designs available in the game, including dyeing, special effects, avatar frames, dialog boxes, team logos, and brocade outfits. Skin design creates a high demand for in-game resources. Dyeing alone is available for pets, weapons, and mounts. Some limited-edition brocade outfits were even priced as high as 20,000 to 30,000 yuan. A merchant once made a profit of millions by monopolizing a brocade outfit and buying it at a price of 200 per piece.
Achievements: The achievement system has a separate leaderboard from the PvP leaderboard, mainly motivating players to explore various gameplay.
Appellation: This personalization method is also one of the bases for "judging others by appearance".
Trade
The economic system in Fantasy Westward Journey is completely open and free, allowing players to trade in-game assets using fantasy in-game tokens. Once characters reach level 30, they can set up stalls in various areas using the stall system. These stalls can display raw materials, pets, and life skills on their shelves. The system will charge a commission fee for some goods. As players need various materials for daily quests and crafting gear, as well as synthesizing gems that require certain life skills, trading becomes a necessary aspect of gameplay, leading to the emergence of merchants.
As shown in the figure below, the stalls are not displayed in an aggregated marketplace but rather are located based on their geographic locations. The distribution of stalls is similar to that of grocery stores in real life, with each area gathering stalls of the same type. The same items often have different prices, and some merchants engage in arbitrage trading.
The benefits are:
Improving gameplay experience: many players enjoy browsing stalls to pick up cheap items in their spare time.
Increasing the efficiency of transaction behavior: the time cost of selling items will decrease, and thus increase player consumption.
Introducing a commodity economy into the game's ecosystem: a widely-accepted economic model aggregating commodities' production, exchange, and sales. Compared to self-sufficient natural economies, commodity economies are characterized by a clear social division of labor, high commodity exchange frequency, and high efficiency. We will describe this topic in the following page. Here, it is important to note that introducing a commodity economy promotes the prosperity of in-game economy and expands overall production scale. As a result, Fantasy Westward Journey can gain significant profits from the time consumed due to transaction friction.
Players have the option to run stores in the game, in addition to setting up stalls, to sell various assets. Once a store is opened, players can invest and withdraw funds through daily operation. Running a store incurs daily maintenance fees and operating expenses, which are determined according to the business index of the items sold. The store system charges higher handling fees and fixed opening costs than the stall system, but provides players with a more professional and vertical trading venue. The system provides an aggregated trading market for some assets with high demand and usage frequency. As mentioned earlier, there is a lot of friction in the stall system, which may not meet the needs of some players to purchase large quantities of the same items quickly. The products listed in stores are highly consumable and relatively niche categories, such as pets, pet tips, and medicines.
Both the stall and store systems are built in the game, using fantasy tokens as currency. Additionally, there is a "treasure house" as the official over-the-counter trading platform, using fiat currency (RMB) as currency. Players can purchase in-game assets with RMB through the treasure house or sell in-game assets in exchange for RMB. The platform charges a handling fee of 3-5% under the daily limit of 9,999 RMB. Implementing the treasure house increases OTC's security, competes with third-party trading platforms like 5173, and endows game assets with RMB value, thus ensuring the preservation of assets.
The transaction system design promotes exchange rate stability between the game currency and fiat currency. The value of fantasy tokens remains relatively stable, thanks to the free circulation of the in-game economic system. Over the past 20 years, the currency only depreciated by half: at the beginning of the game, 100 yuan could be exchanged for about 6 million fantasy tokens, and now the amount is 12 million. This indicates:
The annual inflation rate of fantasy tokens is only about 3.9%, making it more stable than many fiat currencies.
The value of basic materials in the game is also stable, and the value of some rare items even appreciates considerably. Players refer to the game as "Fantasy Financial Management."
Value Capture
Customer Segments
After years of development, the gameplay in Fantasy Westward Journey offers extensive depth and breadth, making it easy to segment player engagement levels. As mentioned earlier, the vertical level division lets players explore horizontal content and enjoy a variety of gameplay that induces different kinds of positive feedback. Players continue to produce positive feedback, which can be consumed in different dimensions.
Today's XP can be used to upgrade sect skills. Tomorrow, players can save up money and go stall shopping for cost-effective pets. The day after tomorrow, players can upgrade the weapon's gem. These consumptions aim to improve the character's overall "combat power," but players focus on the process because of the difference in dimensions, process, and materials. This feeling of "not doing repetitive and unnecessary labor but getting the pleasure of growth" motivates players to be more active, promoting retention rates. This demonstrates how the game captures value from different players:
Whales: In Fantasy Westward Journey, there are a few senior players on almost every surviving server who take the lead and participate in PvP battles between different servers. Although whales only account for 10-20% of the total players, they contribute significantly to the server's consumption. Whales seek to collect the rarest gear across servers, pursue the most extreme attributes, collect the best babies, and buy the rarest brocade/special effects. To satisfy whales' desire for the ultimate and p2w willingness, the developers continue to launch more complex systems, allowing whales to pursue one marginal benefit after another, such as high-level artifacts, legendary weapons, ascension, tribulation, and [DiTing] (a powerful pet).
Bourgeois: In Fantasy Westward Journey, whether a player participates in PvP or not distinguishes bourgeois and casual players, as PvP makes the gameplay significantly different. Although bourgeois players' purchasing power is not as good as whales, most of them still have full attributes and lots of red babies. They are the backbone of the game, and their involution has deepened players' sense of social identity.
Casual players: With the impressive varieties of gameplay, many casual players have emerged. They do not pursue high ranks, but enjoy character cultivation by obtaining output from regular activities and basic transactions, then reinvesting in their characters. However, Fantasy Westward Journey is a game that was born nearly 20 years ago, and the depth of the game has expanded over time. Therefore, to ingratiate senior players, the developers have launched more and more complex gameplay, and the quests' threshold is getting higher and higher. Casual players have to rely on strong cooperation and established routines to complete tasks. Still, it is difficult for them to join a team under the culture of "judging others by appearance," so they are forced to operate multiple accounts simultaneously in pursuit of efficiency.
Merchant: "Merchant" refers to players earning in-game currency through trading (aka P2E gamers). Since every player is exposed to the trading system, everyone is a conceptual businessman. However, merchants focus solely on profit and often continue to expand production to achieve economies of scale, ultimately promoting the game's GDP. Merchants provide casual players with better liquidity, bourgeois and whales with efficiency, and developers with taxes. The commodity economy and merchants are in a symbiotic relationship, with the former leading to the formation of the latter, and the latter promoting the economic prosperity of the game ecosystem.
Economic Design
Output
Output refers to the assets that are released in the game, including materials, tokens, and XP that players receive from completing quests. Different types of quests provide players with different types of assets, which are usually semi-finished products that can be processed or sacrificed to produce finished products with higher value. The circulation of assets among players gives these outputs a new identity as "means of production" and produces value.
Some may wonder if there will be an oversupply of production materials in Fantasy Westward Journey since the game's economy system is open and prices are automatically adjusted according to supply and demand. However, the game maintains excellent asset preservation for the following core reasons:
Players have limited means of production, but their outputs are diverse. As players' attributes increase, the dev team continues to introduce new systems to the game. For example, with the popular "Being Famous Overworld" expansion, the spiritual ornament system was added. Although it belongs to the gear system, the spiritual ornament system's output methods, production materials, and supporting assets are different from those of other gear. The spiritual ornament system creates four additional gear slots, causing a surge in demand for tokens and related materials in the short term. Given the limited total means of production, the production possibility curve (PPF) of spiritual ornaments and other gear (as shown in the figure below) reveals that when only Product 1 (other gear) was on the market, the total output was at point A. After the introduction of spiritual ornaments, the increase in the output of Product 2 (spiritual ornaments) caused the output of Product 1 to decrease, and gradually we reached points B, C, and eventually D. As the marginal profit of a single product diminishes, the total output tends to return to point C, where there is a balance between supply and demand.
Finished products are unique assets, and good ones are scarce. Design elements such as character features, sects, and level restrictions add a lot of constraints on a suitable finished product in Fantasy Westward Journey. For example, suppose a level 129 player wants to buy a top-grade level 140 weapon, given that their character is [Xiaoyaosheng] and belongs to the Tang government sect (which is good at physical attacks). In that case, the finished product must meet the following conditions: a) level 140, b) a sword or fan that [Xiaoyaosheng] can equip with, c) basic attributes that are not worse than a weapon with [Simple] special effect of level 120 or 130, and d) the special effect [Level Restriction Removal]. The probability of finding a finished product that meets all these requirements at the same time is extremely low, and the [Treasure House] at this time is showing only four weapons that meet the requirements for sale.
Inferior finished products have steady consumption channels. If a finished product is undesirable, players can decompose them into tokens and production materials or consume them in tasks.
The presence of merchants in the game puts external pressure on players to compete in the market and encourages producers to improve productivity. This results in the emergence of a social division of labor that is highly fragmented, with some roles resembling those found in the real world. As previously mentioned, the gameplay of Fantasy Westward Journey is very immersive, and players may not have enough time to complete daily tasks. As a result, many players entrust other players to manage their daily character maintenance, which is a natural use case for the Guild in Gamefi. The social division of labor within the game consists of three main roles:
Boss: Typically consisting of whales and the bourgeoisie, they represent the demand side of goods and services. For teams preparing for the [hero tournament], there is usually a designated leader, or commander, who is responsible for daily character maintenance, tournament consumables management, attribute adjustments, and other tasks. Team members will pay small daily expenses according to the leader's requirements, including a certain command fee. The leader's income is mainly based on the team's ranking.
Merchants: Merchants collect and sell goods to profit from price differences, and some top-level merchants accept customized demands from the boss and collect goods from niche merchants.
Producer: Every player is a producer, creating raw materials through various channels for personal use or for sale.
This social division of labor is the cornerstone that helps the entire economic system achieve balance through multi-end output and consumption.
Consumption
Consumption is the action of using the assets produced in the game, such as upgrading characters with tokens and turning materials into gear. The consumption items in Fantasy Westward Journey are very diverse and fragmented. Besides time cards and game top-ups, there are also XP, items, and tokens, such as immortal jade, gold coins, and silver coins. Energy and skill points are also included, such as sect contribution, gang contribution, and others.
Items in the game are roughly divided into three major categories:
Consumables: food, medicine, raw materials, sacrificed materials, [monster-attracting incense], [taoist charm for flying], and pet rations.
Gear: weapon, armor and spiritual accessories.
Quest items: plot props and gang goods, which cannot be traded.
Different systems require different items and consumptions:
Attributes: Tokens, XP, and skill points are necessary to improve attributes, including basic and additional attributes. Certain life skills, such as fitness, bodybuilding, fortification, and meditation, can also enhance certain attributes.
Practice: Tokens, XP, and skill points are necessary to engage in practice, including character practice, pet practice, and eight extra meridians practice.
Skills: Tokens, XP, and skill points are necessary to learn skills, including teaching and auxiliary skills, among others.
Gear and wearables: Tokens are necessary to obtain gear, including basic gear, spiritual accessories (unlocked after reaching level 65), magic weapons (unlocked after reaching level 65), artifacts (unlocked after reaching level 109), and spiritual treasures (unlocked after reaching level 129).
Summons (Pets/Minions): Tokens are necessary to summon a pet, including quest pets, competitive pets, babies, etc.
Mounts/auspiciousness: Tokens are necessary.
Skins: Tokens are necessary to obtain skins, including special effects, avatar box, dialogue box, and team logo.
Others: Houses, entertainment, and trading, etc.
Of the above consumption systems, gear (including basic gear and wearables) and pets are the most important. Every finished product is a collection of several means of production, and the higher the value of the finished product, the more complex the required means of production.
Gear
Using basic gear as an example, Figure 1 illustrates the process of crafting finished gear, starting from the accumulation of initial production materials until completion. Each step involves the social division of labor of different interested parties, with each party providing its own driving force and positive feedback. Figure 2 details the means of production provided by different interested parties throughout the process, including producers, primary/secondary/tertiary merchants, and bosses, and how production materials circulate through the commodity economy.
It's worth noting that the production process described above is only applicable to basic gear available to characters with a level lower than 150. To craft a 160-level gear, another set of production materials such as [meteorite], [primordial body], and [battle soul] is required. Additionally, the spiritual ornaments system needs a different set of production materials, with the gear crafting book and well-refined iron being replaced by the guidebook of spiritual ornaments and the spiritual spar. Consequently, the core production materials have become the exquisite treasure map that can only be obtained by consuming dungeon points, and the artifact points that can be obtained through the artifact quests. Moreover, gems required for production have changed to [star gems], and the necessary life skills have shifted from [Blacksmithing]/[tailoring]/[alchemy] to [spirit quenching].
The above process highlights the fragmented social division of labor and its high level of complexity.
Summons (Pets/Minions)
In addition, the process of creating a summoned creature (also known as "forging a pet") requires the collaboration of multiple parties and consumes various resources. So, how does the pet system work? Firstly, pets with practical qualifications are usually monster babies, and players have the opportunity to capture these babies through unexpected events or Dark Thunder gameplay. Secondly, these babies possess unique attributes, a maximum skill number, and innate skills. However, the pets that players can capture generally only have 1-2 innate skills. Therefore, in order to obtain a fully developed pet, players must complete the following three steps:
Capture pets or use refining materials to increase the likelihood of obtaining a baby with the ideal innate aptitude and skills.
Synthesize two babies into a new baby through "pet refining". The aptitude and ability of the new pet is based on the aptitude and ability of the sacrificed pets. This process increases the likelihood of obtaining a pet with more skills.
Use [pet tips] to teach the baby the target skills.
Each of these steps involves some randomness, and it's important to note the following:
Step 2 burns a significant number of pets, which creates a deflation mechanism for pets.
The [pet tip] can grant a certain skill to the pet, but each time it's used, one of the pet's original skills will be overwritten. Although pets with less than two skills have a certain chance of not sacrificing the original skills, "pet forging" usually burns multi-skilled pets. [Pet tip] contains most of the pet skills and is divided into low-level [pet tip] and advanced [pet tip]. Low-level ones are usually obtained by discovering regular treasure maps, while advanced [pet tip] can only be obtained by collecting 5 materials to discover advanced treasure maps. In addition, some main quests and events also offer [pet tip] rewards.
Because using [pet tip] will overwrite the existing skills, step 3 will burn a lot of [pet tip]. This is the reason why a top-quality all-red finished pet will consume a lot of advanced [pet tip]. Every time a pet uses [pet tip], there's a great chance that it may just substitute the skills it has just learned, which ensures the demand for [pet tip].
Pets have an independent gear system, interior alchemy system, and talents, among other things. The related consumption also has its own social division of labor. In this industry chain, the main production materials are pets, refining materials, treasure maps, advanced treasure maps, and [pet tip]. Primary merchants act as arbitrageurs to reallocate resources, while [pet tip] merchants and pet merchants belong to this level. Secondary merchants produce embryo pets by consuming sacrificed pets, [pet tips], and refining materials. Tertiary merchants produce finished babies by consuming embryo pets and [pet tips]. Tertiary merchants and secondary merchants sometimes overlap, and the boss directly buys finished pets.
Inspirations for Gamefi
Currently, players have access to a wide variety of games, each with its unique economic model. While some general economic principles apply to all gamefis, the economic design of Fantasy Westward Journey offers valuable guidance for MMORPG gamefis. In general, a sustainable gamefi must be able to self-adjust output and consumption. Here, output refers to the assets acquired by players, such as tokens, gear, and materials. Consumption refers to the usage of these outputs, such as upgrading characters with tokens or converting materials into gear. The balance between output and consumption determines the appreciation and depreciation of in-game assets and currencies.
Before delving into tokenomics, it's essential to understand how gamefis generate revenue. Let's take "Axie Infinity" as an example. The developers earn income through:
Direct sales of game assets to players (in-game purchases), such as Axies NFT and Land NFT sales revenue.
Breeding fees for Axies
Market transaction fees, which amount to 4.5% of each transaction.
According to data from Nansen's platform, the game's total revenue since its launch is $1.35B, with the breeding fee accounting for 87%. Under this model, the project team earns income from the initial NFT sale, in-game purchases, and taxes generated by asset exchange and breeding. However, since the gameplay does not incentivize players to exchange commodities, in most cases, players consume and produce assets for their own needs, rather than for capital accumulation and expansion. Assets are only listed for exchange when there is a surplus or a need to liquidate them.
As a result, players' commodity exchange is relatively infrequent, as demonstrated by the income distribution graph. Axie's economic system resembles the ancient natural economic form, which emphasizes self-sufficiency and does not require exchange. The downside of this approach is that an individual player's productivity is limited, and the gap in initial capital accumulation is difficult to bridge, leading to a pyramidal distribution of wealth.
In contrast, Fantasy Westward Journey adopts a commodity economy. Its revenue streams include:
Revenue generated by time card purchases. Instead of selling game assets to players, the developer provides production materials to players through time payments, which essentially function as a form of taxation.
Market transaction fees, which serve as another form of tax.
Revenue from sales of social assets.
In order to increase revenue, dev's objectives are to a) increase the frequency of P2P exchanges, expand the "gross gaming product" (in-game GDP), and ultimately increase taxes; b) raise players' awareness of their social identity, thereby increasing their sunk costs. Fantasy Westward Journey has effectively achieved dev's goals through the design of its commodity economy system. The implications for gamefi include the following:
“’It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.’ ……he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”-- The Wealth of Nations
In gamefi, there should be merchants whose sole purpose is to gain profit. These merchants and gamefi are symbiotic, and this pursuit of self-interest enables the market to operate effectively. Under an open economy, players and developers share a community of interests. In the process of pursuing their interests, merchants are also producing and selling what others need.
The existence of merchants does not hurt the economy, unless all players become merchants. There are three things that should be noted about merchants:
Producers, merchants, and bosses should co-exist in a reasonable and healthy ratio.
Merchants should be motivated to create value for the system, rather than simply extracting value. In Fantasy Westward Journey, the friction of commodity exchange is increased through the design of the stall system. This allows the existence of merchants to largely improve the efficiency for the boss and provide better liquidity for the producers.
Merchants cannot get benefits at zero cost. Fantasy Westward Journey solves this problem through the use of time cards. Gamefi should focus on preventing mining at zero cost by directly increasing the cost of mining, setting an upper limit, and trying to make the action of mining work for society.
A complex system of social division of labor is necessary for a commodity economy to exist. In Fantasy Westward Journey, the social division of labor is highly fragmented. Producers, merchants, and bosses create value in different stages of production. For example, a boss consumes a variety of production materials when purchasing a finished product. Gamefi should break down the production process of game assets as much as possible and stop relying solely on "combat power" to determine output. This will allow interested parties with varying spending power to participate in the production process. Additionally, randomness should be introduced into the production process so that casual players can also create high value materials.
The gameplay of Fantasy Westward Journey is both deep and broad, with numerous categories of production materials. These materials and commodities belong to different interested parties, making self-sufficiency through quests and events impossible and commodity exchange inevitable. Gamefi should expand the output paths and production processes of its production materials, and encourage players to actively participate in commodity exchange.
The commodity economy is characterized by an expansion in production scale. To capture more value, commodity producers tend to reinvest and establish competitive advantages, enabling the scale of production to continue expanding. In the pursuit of ultimate production efficiency, merchants in Fantasy Westward Journey have continually subdivided and developed into a multi-level merchant system, ultimately shifting overall production investment upwards. Gamefi should encourage competition among merchants, as an economy can create more means of production with the same resources and expand the possible overall production frontier under specialized division of labor.
The fundamental reason why the entire economic system of Fantasy Westward Journey can continue running is that some players pay for gameplay and socialization. This part of consumption is not for more output, but rather for "effective consumption." Gamefi should attempt to cultivate players' identification with their social identities to attract them to invest more in such sunken assets.
As Fantasy Westward Journey ages, its social feature becomes less attractive. PC user and profitability data are gradually declining, and the mobile game's retention rate is not impressive. The reasons for the above phenomenon are the higher and higher entry barrier of new users, unrestrained value capture on players, and unremarkable game experience. Gamefi's means of value capture must be very restrained, focusing on long-term value, and not profiting by encroaching on players' interests but by increasing "gross gaming product" (in-game GDP) together with players..
Ending
Fantasy Westward Journey is undoubtedly a masterpiece in terms of in-game economic design. NetEase not only created a game but also constructed a sustainable ecosystem. However, lately, due to commercial pressures, many game designs have begun to deteriorate. Some actions, such as launching new systems, were too hasty, social elements were lost, and the developers started to kill the goose that laid the golden egg. Despite this, I still regard it as the best game. I remember when I was in junior high school, I memorized a lot of language test points in order to win the [imperial examination] event faster, and I sighed that the game changed education.
The emergence of Web3 offers a natural tool for opening the game economic system, accelerating user growth, amplifying the potential of game innovation, and rationalizing the relationships among contributors (producers), service providers (developers), and speculators (merchants). Although current Web3 games are not ideal, the potential of Gamefi has already been shown.
I look forward to seeing a truly evergreen Gamefi one day. Furthermore, I hope that, whether on Web2 or Web3, players not only pursue gameplay and economic feedback but also seek educational and social value. If you are interested in Web3, I strongly suggest reading the white papers of Bitcoin and Ethereum. If you are interested in the design of the Gamefi economic system, you should read Microeconomics.
Happy to discuss any interesting ideas with you. Feel free to reach me at twitter@frost_lam
Interesting article, thank you for sharing.
Would be happy to talk about GameFi and tokenomics.
I'm not familiar with this particular game, and it doesn't seem to be available in my region (or not available anymore), but the economics seem very interesting.