Token Guide

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What is a Token?

A token is a digital asset that is verified, tracked, and housed on a blockchain platform. As a collection of code, these are comparable to files on one’s computer or mobile device. The advantage of creating a blockchain token is that it is nigh impossible to copy. Imagine a family photo as a token, that exact photo cannot be replicated and the ownership is tied to the user through a digital wallet. That photo could be sold on a marketplace or traded to another individual but it couldn’t be replicated. That photo could also be used across multiple services or media that support that token, so in this same scenario someone could take that family photo and display it in a video game house.

Let’s frame tokens in another hypothetical situation. A young gamer streams their gameplay online and they’ve amassed a lot of viewers. One day they find a rare sword that is a blockchain token after a particularly challenging level. The player names the sword “Red Lighting” and carries it through multiple games, spending years using it as their audience cheers. Years later, that player decides to quit playing games and instead focus on cancer research. They could sell Red Lighting, alongside a digital record of all the monsters and adventures it has seen, which could be enough to help the player move to a new city because of the value it has. Some tokens even allow for royalties, so Red Lighting could continue making that player money over time from future sales. We haven’t really seen this sort of scenario yet using a blockchain token but it is possible and the technology seems perfect for these sorts of situations.

There is a ton of potential for tokens in a digitally connected world, especially in games and particularly in Play-to-Earn games. This guide will cover the common types of tokens that currently exist and what to expect when acquiring and using them. Our guides are primarily geared to gamers looking to get into Play-to-Earn titles but a lot of this information applies to crypto and tokens as a whole.

What is a Blockchain?

A blockchain is a specific framework that a project was built upon or a platform where a piece of media exists. For games that utilize blockchain technology, these platforms are comparable to a console or system such as a PlayStation or Xbox. Blockchains are how tokens are created, tracked, and processed. Usually games are housed on specific blockchains (such as Ethereum, Polygon, etc) and have proprietary tokens that are used to buy in-game items. Expect to exchange a typical currency such as USD for a blockchain’s currency like ETH (a currency used on Ethereum blockchain products) and then again for a specific game’s currency like the AXS of Axie Infinity, a popular Play-to-Earn blockchain browser game. Exact exchanges will vary from game to game but this scenario is typical. Tokens can also be exchanged back into a traditional currency like USD and many physical stores accept cryptocurrencies like BitCoin. 

For further elaboration, in regards to gaming, tokens are similar to the various coins and gems players have been using in mobile games for more than a decade. These tokens come in two forms primarily, fungible and non-fungible.

Types of Token

Fungible Tokens are usually used to create a game’s premium currency. Think of fungible tokens like Super Mario’s coins, Donkey Kong’s bananas, or the Gil used in many Final Fantasy games. 

Non-fungible tokens or NFTs are utilized mostly for digital assets such as a collectible or item with unique, identifiable properties. The Red Lighting sword we imagined previously in this guide would be a non-fungible token. 

Like most parts of blockchain technology, tokens have a market value that can fluctuate which is where the word Tokenomics comes into play.

How are Tokens used in games?

Games benefit from three core areas when using blockchain tokens, service, governance, and staking. 

Service in blockchain refers to things like a developer selling in-game weapons or providing players a new level or a function such as adding cooperative play. Additional content for games, colloquially known as DLC, would fall under a service. 

Governance involves giving players a way to request changes or enhancements through trackable metrics. For example, a development studio could poll their players to change a card’s power in a trading card game. If a majority of their players call for a buff, it could be a meaningful way to interact with that audience and potentially create a self-governing system of game mechanics. In this instance, players have a unique identifier, probably an NFT, tied to themselves so the vote is true data.

Staking is the holding of a token in the eventual hope for financial gain. If a player gets a wealth of tokens of a game before it becomes popular and then it gets a huge boost in the amount of players enjoying the game, the tokens said player has gathered could be worth more than what they were purchased for which could lead to a profit. Staking is why we’re already seeing people and companies buying virtual land; they hope that those games will have enough players that they can potentially advertise to them or sell the land later when its value has increased. 

What is Tokenomics?

Tokenomics is basically the economics of tokens. It’s the study or discussion of market trends, perceived value, and the philosophies and ethics that go into blockchain systems. The ever-expanding scope of decentralized finance (aka DeFi) is powered by how these various systems work in tandem with one another. 

One might refer to tokenomics in gaming in relation to the value of in-game items/tokens or the complexity of the currency systems. For example, saying a game has good tokenomics might mean that the game’s systems are easy to understand or that its tokens can be considered valuable. In theory, a Play-to-Earn game that has multiple token breakdowns might make it needlessly confusing for the player, much like how many mobile games create labyrinths of gems and tickets. Currently, many games have a primary token that is used for most in-game purchases.

What is a In-game Token?

In blockchain games, in-game token is often the main currency that is used to buy in-game items or content. For example, Axie Infinity is a game on the Ethereum blockchain so to buy items one must first buy ether (ETH) that all things on the Ethereum blockchain utilizes. Ether is then exchanged for the primary token, AXS which can be used to buy things that can help players breed stronger monsters.

In summary, playing most blockchain games requires that platform’s specific currency first. Usually that token is exchanged for a primary game-specific token and that token can be broken down further into other types of tokens including additional currency or NFTs.

Common Fungible Tokens

These are some of the common currencies and acronyms one might run into in blockchain media and services. 

ETH, short for ether used on the Ethereum Blockchain

MATIC, matic is utilized by the Polygon Blockchain

KLAY, short for Klaytn used on the Klaytn Blockchain

BNB, short for Binance Coin used on the BNB chain

SOL, short for Solana used on the Solana Blockchain

Here’s a list of common games and their currencies as well.

Splinterlands, using Splintershards (SPS) token as in-game currency built on HIVE blockchain

Axie Infinity, using Axie Infinity Shards (AXS) & Smooth Love Potions (SLP) token as in-game currency built on Ethereum Blockchain

Pegaxy, using Pegaxy Stones (PGX) & Vigorus (VIS) token as in-game currency built on Polygon Blockchain.

FAQ

What is ERC?

ERC is an acronym for Ethereum Request for Comments. It’s like technical documents that define the methods, behaviors, innovation, and research applicable to a group of developers and users who want to utilize the Ethereum ecosystem.

ERC-20 (fungible token), ERC-721 (non-fungible token), and ERC-1155 (fungible & non-fungible token) appear as the three popular ERC token standards or protocols that have their applications across major industries. The Ethereum community fully approves these token standards, and they differ in terms of specific features and functionalities.