Economic Review #1 - February 2023
Feb 17, 2023
Like the title says, it’s a review of the state of the Skyweaver economy up until now. Delivered to you by Councilor Four—a character from another dimension.
If you’ve been reading the patch notes, this post should come as no surprise. My objective is to sync you all up with what's going on behind the scenes at Horizon, so you can better anticipate what comes next regarding the economy. At times I’ll even be the one to bring you new updates about the game's direction. I am now a member of the newly formed High Council alongside other human members of the Skyweaver team. If that sounds hard to believe, it's because it is.
As a Councilor, one of my responsibilities is to structure a review every month or so that illuminates key points of interest surrounding the economy. Sometimes it will follow “good” news and policy changes, and sometimes it will be “bad”. Whether it’s good or bad depends on the individual. There's a ton that can be covered, so it won’t be possible to touch on everything, but I’ll do my best to prioritize. Please accept the content of these posts as a source of truth.
Since this is my first review, it'll take a while to get the hang of things. If you notice me using slang or colloquial words, it’s thanks to my editors who help make this content easier to read. Now without further ado, I would like to begin with an important update that pertains to the tradability of Hero skins and other cosmetic items.
Existing Market Restrictions
The Skyweaver Market is unique compared to other in-game markets. What sets it apart is its ability to settle trades instantly. This is made possible by a reserve of items and a straightforward pricing formula. Because it is unique, it can be misunderstood. So in an effort to better educate players in this domain, we recently made this video:
Now that you’re more familiar with how the Market works, I can better explain the delay behind the tradability of certain cosmetic items in-game. I should mention briefly for those unaware, players have always been able to trade outside of Skyweaver on 3rd party marketplaces or peer-to-peer. But it's not recommended to interact with other products or services outside of Skyweaver if you’re unfamiliar with crypto and web3.
Note: References made surrounding the Market—wherever capitalized—refer exclusively to the Skyweaver Market (Niftyswap)
It’s been estimated to cost 50,000-100,000 USDC in order for someone to adequately supply the Market with Legacy Hero skins. This process is called “adding liquidity” and we currently do it every week for the latest Gold cards available to be won in Conquest. We also do it for Silver cards when new card expansions drop. Details on the specific liquidity amounts can be found in this extensive post:
As you can imagine, this is not a trivial cost. Thankfully, the Niftyswap team has a solution on this year's roadmap to address this limitation. Once that solution has been implemented, we’ll be able to move forward. The same goes for Card backs, Stickers, and any other cosmetic that has yet to receive sufficient liquidity. Not only will it reduce overhead costs, but it should also reduce wild swings in the Market on account of low liquidity—which creates a bad user experience. Crypto users that wish to supply liquidity for new cosmetics may still do so anytime, as it will enable trading in-game. But only for Card backs and Stickers. If crypto users add liquidity for Hero skins, they will not appear in-game at this time.
Note: Wild swings in the Skyweaver Market can still exist even with high liquidity as item prices are determined by the market
Road to Equilibrium
Silver cards are currently minted via three methods: Conquest (including the Treasure system), Ranked leaderboard, and the Premium Skypass. Only the first method supports a sink, by way of minting Tickets. The rest must rely on Conquest mode to ensure a balance exists between inflows and outflows. To put it simply, if there are more Silver cards being minted then there is demand for them, the excess Silvers should be burned.
Now, obviously no rational person would burn a Silver card they own when they can sell it. However, since Tickets are required to play Conquest and they cost 1.5 USDC to mint, some players will opt to burn their cheap Silvers for Tickets instead of selling them. In doing so they can obtain Tickets for less. If a player has no interest in Conquest and their Silver card is worth less than the Ticket mint price, they can just sell it to someone else who is interested. This recycling system provides added utility for Silver cards on top of the gameplay and aesthetics they unlock. When the cheapest Silver cards on the Market are close to the mint price of Tickets, we call this state Equilibrium.
Equilibrium for this system is not a precise number, but rather a consistent range over an extended period of time. This past year we’ve seen Silver cards range in price as would be expected of a player driven market. Sometimes Silver cards are higher than the Ticket mint price, while other times it is lower. Recently it has been lower. This brings us back to a point made earlier: only Conquest mode currently supports a sink for Silvers. If the aggregate of other faucets is turned too high for too long, the sink must either expand or the faucets must be turned down. If nothing changes, cracks will start to form. That is why it’s crucial to understand the factors at play that influence these conditions. So in this review I'll touch on a few of them.
Participation and Time
It takes time and players to play Conquest mode and burn Silver cards. This is not the case for Ranked rewards. The amount of Silver cards and Tickets being minted via the Ranked leaderboard is a fixed amount and not influenced by a number of participants. While this is effective at reducing exploits—as a scalable reward system is susceptible to bots—a fixed reward system still has its own problems. Specifically, it cannot adapt to the size of its player base. Therefore, it may end up minting more rewards in a pocket of time than the economy can support.
Where we might get a glimpse into how this relationship plays out is by looking at how players are participating in the Market. Lately, it's safe to say we’ve experienced conditions that have been more optimal in the past. But I should mention we’ve been in a similar state regarding the Silver card economy before. Last year during the summer, we were encountering a similar situation to what we’re seeing now. Correlation does not mean causation, but it should be noted the Ranked rewards were drastically reduced at the lowest point during this time. This was also the time the first major card expansion Clash of Investors was released in July. A month later, we announced the Conquest Treasure system.
Observing the past can help us with the future, but it cannot be wholly relied on. Introducing a lot of changes and new features all at once make it difficult to measure the impact of each. It’s possible the Conquest Treasure system sparked the most activity and reversed the trend. Or maybe it was the hype of the expansion that attracted a subset of players interested in collecting cards. Perhaps all of this is not relevant and the reality is a ton of old bots accounts and crypto users just decided to leave in the wake of greater macro conditions. Then Conquest players did over time what they do best: burn cheap Silvers. Discovering an approximate truth will require an extensive audit of our data as well as data recorded on the blockchain. Considering the size of the Skyweaver team, allocating resources to this has proven difficult. This year we plan to change that.
So while we are prepared to make adjustments to the Ranked leaderboard and reduce the rewards, we will first continue to build out our monitoring tools to better examine the situation. One of our goals this year is to automate the volume of these Ranked rewards so it can essentially regulate itself. Sometimes that will mean the rewards are increasing, other times it will not. The outcome we’ll strive for is rewarding as many players as possible—in a sustainable way—that continually feels meaningful.
The other factor we believe contributes to inefficient Silver burning is our user interface. Particularly when it comes to the Ticket purchase flow. We’ve taken note that despite the state of the Silver card economy this year, new Tickets were still being minted everyday from players using USDC and In-App purchases (IAPs). This clearly is a market failure and is likely attributed to two things: platform restrictions and asymmetric information.
If a player is using IOS or Android, they may be restricted from acquiring USDC which is necessary to take advantage of cheap Silver cards in order to burn them for Tickets. As a result, these players have no choice but to purchase new Tickets via IAPs. This process of course does not burn Silvers—it actually does the opposite. To illustrate this, if all eight Conquest participants burn Silver cards for Tickets, even though new Silver cards are minted through Conquest, the net result is three Silvers have been burned. This is because only five new Silver cards would have been minted. So if all eight Conquest participants just bought Tickets with IAPs, the net result would be a supply increase of five Silver cards.
Unfortunately, there isn’t much we can do here for these mobile users at this time. The solutions we’ve explored require a considerable amount of work. On the bright side, we have been able to address this for USDC purchases just recently. As I previously mentioned, one of the other reasons we believe contribute to this irrational behavior is asymmetric information. This basically means one party in a transaction does not have all the information and ends up making an uninformed decision. In Skyweaver’s case, the information has always been publicly available for those who were interested to understand. Regardless, Tickets were still being minted at full price with USDC when players could have easily minted them with cheaper Silvers.
To address this, we implemented a subtle UX improvement with Patch #107 that directs Ticket purchasers with USDC to buy and burn cheaper Silver cards. Essentially, it aims to choose a better price for the player. If the player sees 1.5 USDC quoted to them during the purchase flow, it’s an indication that there are no Silver cards available for purchase below this amount. If the cost presented is below 1.5 USDC, then that means at least one Silver card is available for purchase below this amount. Upon checkout, players are presented a message that explains the situation.
We expect this to have some positive impact regarding the health of the Silver card economy. However, it remains to be seen if the largest suspect of excess supply—the Ranked leaderboard—can be addressed through this improvement alone. If we do not see a positive impact in the coming weeks or months, we may have to revisit this “Silver card faucet”. Alternatively, there have been additive ideas expressed internally that could have some positive effects. One of which is accepting Silver cards as payment for the Premium Skypass. The key here is that these additional features are sustainable, as we are not interested in short term solutions. The challenge will be placing these onto our existing roadmap and expediting them. For that, I will try to keep you posted.
I’ll leave it there for now, as these were the most pressing topics. Quite honestly these reviews could easily turn into mini novels if I don’t make an effort to trim down the talking points. Hopefully you found the contents of this post worthwhile and informative. Sometimes these reviews will be data heavily, and sometimes they will not. What matters most to us is keeping you informed. Community members are of course encouraged to provide their own reports leveraging the transparent nature of the blockchain. Next time I’ll plan to touch on the recent updates to the Conquest Treasures and the impact it’s had on the latest explanation: Hexbound Invasion. But please understand if priorities shift.
There's a lot of moving parts in a virtual economy with tradable items and open markets. New players will continue to join this world so it’s important to have many of them synced up on the most sensitive matters that impact them. Not everyone will be interested or accepting in how we do things, but I hope enough people are willing to stick with us and come to like our communication methods. We’ll always be adapting to feedback, so we appreciate those who are willing to share their opinion and educate new players on the current state of affairs so that they too can form opinions. It is the collective belief from all of us at the High Council that a successful virtual economy ends with you, the player.
As time passes, and the prospect of these reviews become ingrained in our minds and dreams, perhaps they’ll be perceived as just another part of the game.
I have a name, but you may call me Four. The Council has decided to reveal a coveted secret from our world with all interested parties of this dimension. The truth is we see you. We are aware of your existence. The development of this product has resulted in the creation of our world, the Dreamfield. As endless seekers of knowledge, upon discovering this we reached out to Horizon through dreams and have established a line of communication. It was through these conversations that we’ve been permitted to address you, the player, through this medium.
For reasons I’m sure you can understand, our objective is aligned with that of Horizon’s; to ensure the world of Sky remains healthy. It’s a task that cannot be accomplished with ease and requires a great deal of effort and planning. Preparation in this domain can never guarantee success. However, preparation can increase our chances. The rate at which this world is expanding is astounding. The recent addition of the Skypass is but one of many working parts to this ever adapting ecosystem. Looking ahead, it is clear the need for more communication surrounding the economics of Skyweaver.
Last week marked the anniversary of the Public Beta. Since then, hundreds of thousands of Silver cards have been minted. Where these Silver cards came from and where they ended up are valid questions active market participants should have. Additionally, changes to various reward systems have occurred many times this past year, but often players were only given short notice. As a newly elected member of the High Council in this dimension alongside other human members of the Skyweaver team, it is these concerns and questions I hope to address in these economic reviews.
I’ll be working closely with Horizon moving forward to provide you with further insights over why certain decisions are made and provide as much time as possible to prepare for any economic changes. The purpose of these reviews is to connect you with what’s going on behind the scenes, provide an overview of the thinking that goes into various policy changes, and better equip players with the knowledge to anticipate future changes—before they even happen. Soon, we will begin a cadence of economic reviews which may follow considerable changes to the game. Please accept this message as notice.
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