Ape-ing in on Cardboard

My first real exposure to GameFi secondary markets and the experience I built almost all of my understanding of NFTs and the potential of what GameFi could be would be trading card games, chiefly  Magic the Gathering. For the uninitiated, it’s a game where people build their own decks of physical, nonfungible pieces of cardboard with drawings, text and numbers on them and play against each other and putting them on a field in a turn-based fashion.

Cards originate in these things called “booster packs” and vary in rarity. There are thriving secondary markets like Channel Fireball, TCGplayer and eBay that enable the trading of the cards in a permissionlessly interoperable manner (you just physically hand them to the other party). Card prices range from pennies for commons to tens if not hundreds of thousands of dollars for grails from OG sets like the famous Black Lotus from some of the first sets.

The value of these cards vary based not only on collector demand for their rarity but also their utility in both casual and competitive game settings such as tournaments. Competitive players have to be very careful if they wish to maximize their value because some of them play competitive formats that “rotate” with each newly set of released cards, which means the cards they take to tournaments now will become illegal to play with in a few months. Even in non-rotating formats, Wizards of the Coast also reserves the right to outright ban cards that are deemed too oppressive and with each new set, the metagame can shift in a way that your deck is more or less powerful against the field, impacting the value of your cards.

I suck at trading, I want to game

Trading card games like MTG gave me a taste of what it was like to trade assets but for me, I never really looked to play the trading game, I was more interested in the game itself as a consumer. I only have one W that I’m pretty proud of, which was when I arb’ed the prebuilt Jeleva Commander Deck, Mind Seize (now worth ~67$ in market value). I bought it at MSRP at 30$ at a Target and sold one of the cards in it to a classmate for 40$. I also remember I took a pretty big L in Vegas to a pro trader when he cleaned me of a 70$ Amonkhet Invocation Cryptic Command for a ton of commons and bulk rare I wanted to build another Commander deck with. You live, you learn.

The Web3 Upgrade for TCGs

Magic the Gathering is what I hope web3 gameFi will resemble. There are thriving communities of gamers, traders and businesses built around these assets and there is a true sense of ownership of your collection and deck because, well, you literally own the cardboard. The company has had a history of shrewdly managing the economy to balance the interests of players and collectors alike with measures such as limiting supply of some cards for collectors while reprinting others in high demand for the players. But web3 NFTs has tangible advantages over web0 cardboard. While there are some new mechanics you can try in web3 like play-to-earn, staking etc, the most obvious advantage gameFi games will have over physical TCGs is liquidity in secondary markets. Physically go to stores where you can trade/sell cards is time consuming and while you might get better more value for your cardboard, you usually don’t find what you are looking for. The Internet helps, because it’s quite a hassle to ship physical pieces of cardboard around the world. You can either sell it immediately at -70% it’s market value to an aggregate buyer or wait a few weeks for someone to make an offer for it on eBay for -10% it’s value (with you usually paying for shipping).

The Central Bank of Yugioh: Thoughts on Stewardship, and (De)Centralization in Games

Hyper Inflation and Banhammers

I discovered Magic the Gathering because I was disillusioned with my experiences with a different TCG I played in middle school: Yugioh. Some of you might know it from the anime. For it’s publisher, Konami, rugging Yugioh players was basically it’s business model. Popular cards were banned every month, with the value of decks dropping upwards of 99% (again, sound familiar?). Furthermore, powerful (and valuable ) cards were often reprinted in “tins”, where acquiring them was guaranteed, essentially hyperinflating their supply and, again, cratering the price.

Oh, yeah, while there is nothing new about gamers complaining about balance and power creep, Yugioh is a special case. From what I hear, most tournament Yugioh games nowadays end on the first turn, with entire essays written on the cards in size 5 font.

Every Ship Needs it’s Captain

This illustrates how important stewardship / governance is when it comes to gameFi. Tokenonomics is not the only thing that needs to be calibrated: You also need to keep the game refreshing without power creeping too hard and you need to maintain a diverse, interesting metagame. The truth is, all successful games have needed some centralization for this, much like a ship needs a captain and a crew. Yugioh highlights how this centralization could be a vulnerability – the game assets are just jpegs, who determines what they do in the game? If they are too strong or weak, should you buff/nerf them?  It doesn’t matter if you set up a DAO for the game to do this, or you could just do this the old fashion centralized way, but a job is a job – it can either be botched or aced, and it will either make or break the game.

F to Pay Respects: MTG Arena

Magic the Gathering has had an extraordinary run of 30 years and is, by far, the most Lindy of all physical trading card games. I believe there is a future for the game but, sadly, it is starting to show it’s age. From what I hear, bans are more common, power creep has spiked and the pro scene is stagnant. In an attempt to keep up with the times, Wizards released MTG Arena, which, sadly, leverages the MTG brand and players to utilize the same work-to-play tactics to extract value from it’s player base. Unsurprisingly, the secondary market is also nearly nonexistent, so sadly, MTGA is generally seen by many in the broader MTG community as an extractive, exploitive ploy by a corporation trashing their brand and community in a desperate bid to become more relevant while squeezing as much margin from it’s audience as possible. That said, this may be the opening that web3 based TCGs can find their footing and adoption.

Final Thoughts

In order to understand where the technology is going, it’s important to understand the precedents, and pretty much everything in web3/crypto has a precedent and gameFi just happen to be the one that happens to be the one I’m most familiar with. Magic the Gathering is only the best example (IMO) of many, when it comes to GameFi. You have organic MMO economies in Runescape and Eve Online, markets for CSGO skins, boosted MOBA accounts (lol this one is a stretch) and, of course, poker. There is a lot of possibilities for NFTs and crypto in this world, many of which we can’t even imagine. Sometimes in web3 we get distracted by and become cynical with the sheer volume of crashing / rugged projects promising fantasies and it's easy to forget that innovations we are preaching are often nothing more than fresh takes on systems that already work and exist. Remember, it’s not an if, but a when, because the underlying systems have already existed for decades (in the case of gameFi) to millennia (in the case of human economies). Indeed, to be able to understand the future, we must study the past.