I am pessimistic about crypto games
If there is one What venture capitalists have taught me is that concerted incentives can kick your ass.
This is the phrase you will hear a lot when you spend time with professional private investors. But when I bring my years of study together, the sentence is actually just the economic principle that individuals react to incentives, formulated a little more specifically.
In the land of venture capital, the idea works like this: individuals respond to incentives so you want to make sure that everyone in a company, for example, has incentives.
For this reason, startups often offer their employees a small portion of equity, which gives them a small share of the overall project. This aligns the employee incentives with the overall success of the company, which employers want, as they pay the employees as little as possible while at the same time reaching the benchmarks for the quality of human capital and not too many employees churn.
There are less blatant capitalist readings as to why venture capitalists allow startups to sell equity to employees through options at below market prices. I am not buying them. Investors like returns, and they optimize for it thanks to their own incentive structure.
VCs make a good appearance. They take money from existing pools of capital, invest it in work that others are doing, and then receive a portion of the deal profits while tying in a few hundred bips per year of their entire investment vehicle. Here, too, we see coordinated incentives, with venture capitalists benefiting when their financiers benefit. Cooperation.
I’m pulling you through all of this to explain that the concept of targeted incentives is deeply rooted in the startup and venture capital world, something that can sometimes blind people to other ways of doing business.
Games for example. Crypto games in particular.
You see, the crypto community and their myriad of supporters are pretty hot about crypto games. It seems like a place here where incentives can be geared in a new, exciting way to translate gambling into related economic activity. Full of fun, but with coordinated economic incentives! What could go wrong
Play to Earn?
Through the lens of coordinated incentives, the concept of play-to-earn games on a blockchain inspires venture capitalists. The users will play the game and will generate both fun and economic activity. The user gets some of the value and the company gets the rest. Everyone is happy and the game can keep making money forever, right?
