IMAGINE!! You get invited to a crypto party at NFT NYC. The party has the best production quality, live performance, and venue. Everything is great but you experience something unusual. Crypto events/parties are usually known for having a lack of women. Well, all because of the lack of women in the industry.

Back tour imagination! Just assume that the party had a well-balanced female:male ratio. Infact, women attending the party seemed overly attractive and well-dressed compared to the average female crypto event attendant.

Now, certain questions would pop up that need to be answered.

Who were they? Why were they there? And most importantly, how would their existence impact the behaviour of an average crypto event participant? Let us discuss it all in detail as below:

F2P Game Economics

With the mass adoption of smartphones, the rise of the mobile free-to-play gaming industry was inevitable. These games offered both free and premium content. Mobile phones enabled game developers to collect, analyse and test user behaviour to understand and optimise what % of content should be free vs paid in addition to what the pricing should be per premium content and per type of user.

F2P game has 4 key actors:

  • The game developer creates the content
  • Players play some content for free, watch ads and/or pay to play some of the premium content
  • Whales spend huge sums of money to access the premium content
  • Advertisers pay the game developer to show ads to players. 

The game developer and advertisers have financial motivations. On the other hand, players and whales have physiological motivations.

Let us understand their economics with an example. 

In some F2P games, +50% of revenue comes from 0.15% of the players and +95% of revenue comes from 2%. These figures are proof of how crucial whales’ retention and spending behaviour is for the financial viability of a game. 

Simply put, whales subsidise the game for the remaining 98% who don’t spend at all or spend relatively less. Advertising revenue is usually insufficient to cover the development and marketing costs.

NightClub Economics

According to Vader Research, Non-VIP nightclubs and bars have simple economics. Each drink has a price and each client pays a fixed entry price and the same price for any given item on the menu regardless of the age or status.

The 2 main actors of the non-VIP nightclubs are:

  • Club operator who provides a venue with drinks, food and music with financial motivations 
  • Participants pay for the entry and drinks/food to finance the club operator’s operations with physiological motivations

The club operator doesn’t directly create content but provides a platform for participants to create their own user-generated content aka every social interaction that results in the increase of certain emotions and physiological chemicals in one or multiple participants.

Content can be – the glance of one participant to another, the dress one wears, and the way one dances or drinks and have an impact on other participants’ experiences. It determines whether the participants have positive or negative emotions in regards to the club which will then affect their engagement, retention and monetization.

VIP NightClub Economics

On the contrary, VIP night clubs have a slightly different business model. VIP clubs allow those who want to pay more to access premium services to get the physiological desires they seek. 

The 3 main actors of a VIP night club are:

  • Club operator with financial motivations
  • Participant and VIPs with physiological motivations

The club owner provides a venue with drinks, food, music and a rule set of premium and non-premium services. Irrespective of how interesting the venue’s design, music, drinks are, the venue’s own content can scarcely impact the participants’ experience. But the user-generated content created as a result of the rules set by the club operator (such as VIP table prices, bottle service prices, dress requirements, etc.) can have a large impact.

The VIP nightclub economics is akin to a F2P game except there is no advertising. Yet, some F2P games also don’t have ads and some VIP night clubs do have sponsored drinks and billboard ads.

Whales & VIPs

VIPs are similar to F2P whales as they spend huge money to access premium content. In similarity to F2P whales, VIPs are also human and have emotional needs. Venues, methods and tools might change from physical to digital but the fundamental needs don’t.

According to Vader Research, F2P whales spend because they want to acquire a desired emotional end-state — even though the game developers can not really completely understand the emotions they want. By conducting A/B tests throughout the game design process, game developers are able to engineer player behaviour to maximize retention and monetization.

It is almost impossible to access the spending distribution curve of VIP nightclubs. So, let’s assume that an average whale spends $10k per night while the average participant spends $100. Assuming the club has a capacity of 2 VIP tables and 198 non-whale participants; the 2 whale tables that represent 1% of the attendance bring in +50% of the revenue.

Paid Participants

It’s to wear your imagination hats again!

Imagine a case where the VIP club isn’t doing well in terms of traction — VIP tables are seldomly booked, neither VIPs nor non-VIP participants don’t spend as much as at other VIP clubs. The management is planning to rework on existing options to boost revenue; spend more on influencer marketing, offer discounted drinks/entries, etc.

But there is another way…

Club management can pay some potential participants to attend the party with the aim that their existence can attract more VIP spend (thus, higher revenue). If the VIPs are typically male, in this case, the potential participants that could increase VIP spend would be young female fashion models.

Club management would need to find and more importantly convince the models to participate. Club operators offer direct rewards such as money, luxury gifts, expensive dinners and/or indirect rewards such as the promise of social status through access to celebrity VIPs to convince models. But, as the top VIPs become regular participants, it is likely that indirect rewards might be insufficient to attract the models without any direct monetary incentives.So now we have a new category of participants – paid participants.

The existence of paid participants could potentially increase

  • VIP spenders
  • Non-VIP to VIP conversion ratio
  • Average $ spent per VIP per night
  • VIP retention ratio

As long as the incremental monetary benefits (LTV) of having paid participants are higher than the cost paid to attract/retain paid participants (CAC), then that is an ROI-positive investment for the club operator.

It must be noted that the paid participants are more of an ongoing expense as paid participants can churn if they are not constantly getting financially incentivized and VIPs can churn if there aren’t enough paid participants around.

This entire paid players economics proves that if the women are invited to the crypto event mentioned at the beginning of this article, they are most likely financially incentivized to participate with the hopes that their existence could increase the experience and retention of the average crypto participant.

Web3 Game Economics

Web3 games enable game developers to reward players with tradable assets (tokens/NFTs) that they can sell for real money on permissionless on-chain exchanges and marketplaces. Thus, the game developer incentivize certain player behavior with direct financial incentives.

As per the Vader Research, the 5 main actors of a sustainable Web3 game are:

  • Game developer creates the content
  • Players play some content for free, watch ads and/or pay to play some of the premium content
  • Whales spend huge money to get access to the full content
  • Advertisers pay to show ads to players
  • Paid players are a new breed of players

The game developer is able to cherry-pick the players that will be rewarded based on the desired behaviour. The idea is that in the long-term benefits from financially incentivizing paid players will outweigh the cost. This could be through either paid players being converted into players/whales due to the ownership or loyalty aspects (and end up spending more than what they had previously earned from the game) or the existence of paid players positively impacting the LTV of other players/whales.

Problems with Play-to-Earn & Play-and-Earn

Arguments around play-to-earn have been around players deserving to get paid for their time and effort.

A player who spends months levelling up his RPG character to level 1000 should be allowed to sell that character/item/gold when he wants to stop playing and monetize that time and effort.

The argument here is that the game developer makes fat margins and doesn’t share any of that with players who spend hours playing the game.

Here are some questions that must be answered before taking the big leap.

  • Why does the player deserve to get paid? 
  • What value does that player add by spending 4 hours a day playing the game for 2 years and by levelling up a character to level 1000? 
  • If everyone is getting paid to play, where does that money come from?

To answer these better, let’s imagine a situation where an OG who levelled up a character to level 1000 has decided to stop playing the game and wants to sell the character to monetize. 

A newbie who is keen to play the game for months to level up a character, wants to play with that level 1000 character immediately.

If a newbie pays $300 to the grinder to buy the level 1000 character, how would it affect the newbie’s experience and LTV?

Chances are more that the newbie’s progression from level 1 to 1000 is when the compulsion loop kicks in repeatedly to form a strong bond with the player and the core game loop as the player associates the core game loop of killing monsters to gain XP/items to level up with positive desirable emotions.

Thus, odds are higher that the newbie will churn after a few weeks because of boredom. On the other hand, if the newbie went through the full progression curve towards level 1000, maybe he would still be playing.

Let’s understand it better by comparing the economics of each scenario:

A: The newbie pays $300 to the OG, plays 2–3 weeks, then churns to another game. During this time, he/she doesn’t make any microtransaction purchases and brings in $1 worth of ad revenue. The game developer charges 5% from the secondary sale and earns a total of $11 from the newbie while the OG pockets $190 from the transaction.

B: The newbie starts from the beginning and goes through the full progression curve towards level 1000 and makes some microtransaction purchases along the way and plays the game for 2 years. The game developer is able to fetch $500+ from microtransaction purchases and ad revenue while the OG doesn’t get any financial value.

In F2P games, the microtransaction items that will let a newbie skip the progress and level up to 1000 immediately are priced in a way that it exceeds the cumulative revenue that the newbie would have brought throughout his lifetime as a player (ad revenue + microtransaction purchases + extended lifetime).

In the first scenario, the OG doesn’t add any value to the ecosystem. The game becomes less fun for the newbie who churns and the game developer who is responsible for reinvesting back into game development has less money to spend. Scenario A poses a significant loss to the game developer on a unit economics basis.

Which Players Should Get Paid?

There will likely be different paid roles in the future of gaming. Content creator streamers/influencers, game developers/mod creators and esports players have already been paid in the traditional gaming industry but web3 gaming might enable them to get paid more and in a more transparent way.

The new breed of paid participants itself can be divided into 2 main categories; 

Blue-collar players – they grind to level up a character or earn items — e.g. Axie scholars.

White-collar paid players – potentially add value to a game and can validate the hypothesis that paying players will result in larger and more sustainable franchise value created for games. Their main role is to provide necessary (and natural-feeling) social interactions to make other players spend more time and money within the game.A16z-backed EPal is a great example representing the future of gaming white-collar players. EPal provides a platform where players can pay other players to play games together — EPal calls it teammates on demand!

Through the VIP night club example, our main aim was not to recommend games to target male players by using female players as baits. The idea behind this comparison with nightclub economics is to optimize the allocation of financial incentives in the hands of the right players to maximize game franchise value.

4X strategy games is a genre where the average whale spend is substantial — players mostly spend because they want to feel powerful, dominant and socially connected. 

The whales might share a guild with non-whale players where non-whale players are dependent and acknowledging of the whale. It is because of this social dependency of existing guild members and rivalry between multiple guilds that make the whale spend more. 

If there were more of those social interaction resources, would there be more whales, or higher average whale spend? Let’s dive intosome examples.

  • Metacast podcast host Nico Vereecke mentioned how he got satisfied when he heard the scream of a player he virtually killed while playing a shooter game. If more of the virtually killed players screamed, would Nico spend more time and money within the game?

In a nutshell, those who should be getting paid either should be the ones that add value to the ecosystem by increasing other players’ retention/monetization so they can numerically justify what they are getting paid or they should be the ones that will end up spending more than they got paid.


Not all Web3 games will have an emphasis on social and in some cases, rewarding competitive players might have a higher ROI impact than rewarding social players. There is no one size fits all approach. 

It is very imperative for game developers to understand how to allocate their limited incentives/resources in a blockchain-fueled open economy ecosystem. And Web3 games might as well use some deets from the nightclub economics to slay and stay in the long run. When it comes to Web3 games, Rising Capital has been in the forefront in backing unique Web3 gaming ideas and ventures that have the potential to trigger the industry with their out-of-the-box offerings.

Disclaimer: Sourced from Vader Research

Leave a Reply