On Market Making for Player Crafted Items

On Market Making for Player Crafted Items

We recently announced that every building in Million on Mars is player-craftable, which is another step on the road to building the biggest MMO on web3.

Leading the Charge as the First True Play&Own MMO

We are passionate about how web3 tooling supports Play and Own. We use that term with intention — you need to have a great game and the players need to own their stuff. We believe that 3–5 years in the future the majority of massively multiplayer games will feature ownership of player’s assets on a blockchain.

Most web3 games have a strategy of selling their NFTs upfront with a hard scarcity model, and living off that primary income, and then maintaining the service with their royalties from the secondary market sales. This, clearly, has not been a winning strategy to date, and the nascent web3 gaming market is littered with bodies. We’re doing something different.

Coming from experience in online games, our team jumped on the opportunity to have players realize their land plots and building blueprints as NFTs, but we disagreed with the Buy | Rent | Breed style of gaming that — in our view — creates a grotesque exaggeration of wealth inequality, and brings it into the world of games. Our view is that the assets that a player owns should have stable value or growing value, but they should not create an entry barrier of many thousands of dollars to even play the game.

We explicitly budget the quantity of tokens and NFTs that we are willing to “pay” for a player to try the game and spread the game through word of mouth. This is very similar to any MMO or web2 game that gives players perks for word of mouth invites — going back to the original Amazon associates program.

Unpacking the Play and Own ethos further: Million on Mars is an unabashedly geeky city-building game set on Mars of the 2070s, with a rich lore set out by the novel by Keri Waters, our CEO. We have an organic and romantic use-case for NFTs — own your slice of the Red Planet! We have tessellated the planet into 250 meter per side hexagons, which neatly turns out to be 40 acres. Think 40 acres and a Rover! Every single plot of land on Mars is an NFT, so you get as close to real ownership as possible without actually getting on a rocket.

Learning That We Need to Get Even More Decentralized

Once you have a plot of land on Mars, you will naturally want to start building on that plot of land. Buildings require blueprints! We have been live as an MMO for a year now, and over that year — every week — we have sold these blueprints to our players as NFTs. These weekly and recurring sales are extremely rare for a web3 game. We are proud that we saw early on the potential of web3, and really proud that we innovated and created a recurring revenue model to fund our game development. That being said, this past Spring we decided that we would stop selling building blueprints to our players. Yep, that is right — we would kill our own business model. (I always loved the phrase “Kill your own business model before someone else does!”)

What? Why?

When we create the blueprint NFTs, and we set the price of the NFTs, and we set the supply of the NFTs, that is pretty much a centrally-planned economy. We spent the greater part of the 20th century running a thorough experiment to verify that decentralized economies are more vibrant and lead to greater growth and prosperity than centrally-planned ones.

Yet, even with the centrally-planned economy for the blueprints, we do have a vibrant in-game marketplace for commodities used in the hundreds of crafting recipes in the game. We also have secondary market trades on both the Solana and Waxblockchains. These player to player markets are running at an annualized rate of about $10 million of trade between our citizens on Mars! That is exciting, but we think we can do even better — we believe that by moving to a model where the players craft ALL of the blueprints and they determine the supply and the pricing that the economy will be even more dynamic and vibrant. We believe that this is almost an axiomatic obligation on our part to realize the potential of web3 and Play and Own.

So starting this summer we released the third generation of our building blueprints (Gen3), these blueprints would be crafted by the players and traded with other players. We would still deliver on the fundamental game design role and create the building and the recipes and all of the game mechanics. But instead of selling completed blueprints, we would instead sell “Minting Tokens” for Solana and Wax for income. With these Minting tokens players would then be able to craft the new Gen3 buildings and then sell them to each other.

In the last few weeks we have enabled the minting of these player crafted buildings to NFTs and then the player is able to sell these NFTs to another player on the exchange, or they may sell these buildings in-game as a virtual (web2) item in our Marketplace.

Solving “The Crafter’s Dilemma” by Market Making

Naturally, the ability to craft a new Solar Panel Pack, or to craft an Engineering Bay Pack or Mining Rig Pack and sell these pack NFTs to another player is an elder player facing feature. To craft these items besides the Minting Tokens there are crunchy crafting chains that leverage the players’ skill in the various professions and the gathering of resources and the crafting of intermediate products in order to create these building NFTs.

This leads to a problem we did not initially appreciate: “The Crafters’ Dilemma.” That is:

• Which building NFTs [pack] should I craft?
• What will people buy?
• What should I charge?

These questions cause problems for the buyer as well — what can I buy and what should I pay?

These are difficult questions for the player. Our Marketplace works excellently for commodities — we show the 24 hour average price and we show the relative buy and sell interest. We chose intentionally to not have a visible order book with the explicit sales offered or buy orders offered as that pattern lends itself to collusion and market manipulation. This is known. With our blind marketplace the commodities sell well, and as either a buyer or a seller you know the answers to those three questions above — what do people want? What should I sell it for? And from that I can plan my gameplay with confidence.

Planning on mining some Opals at the bottom of Valles Marineris? Need a new Mining Rig? Or perhaps you want an Engineering Bay and want to craft some Metis shield so you can tent and expand your settlement? These decisions are about selecting and buying a new building. This is a lower frequency event and in our marketplace we are strict with a 24H price history. If a given commodity has not traded in 24H, then there will be no price, and then both buyers and sellers have no guidance. Also, with the lower liquidity of the these lower frequency purchases, buy interest is not available to the seller. This is especially impactful for the high rarity buildings such as Legendary and Mythic buildings where we will never have so many flowing that there is a 24H average price established. So we get a classic chicken and egg problem of getting these Gen3 building prints to start flowing.

We needed to innovate and create the pattern for market making for player crafted buildings:

There are four actors in the system:

• Buyers of crafted items
• Sellers of crafted items
• Crafters
• Development Team

The Buyers just want to buy a building — or at the very least see a menu of buildings and make a purchase. This suggests a requirement to make the Gen3 buildings for sale in the in-game shop — ready for anyone to come along and impulse-buy them!

Sellers as separate from the Crafters comes from a nice piece of design by my colleague, Mitch Zamara. He saw that the act of crafting an NFT pack and the act of selling these NFT packs are distinct bits of gameplay. They might appeal to the same person, or it might be different people focusing on what they like best. The Seller just wants to sell items with a reasonable expectation of making some sort of profit on the trade.

The Crafters want to craft. They would also like to be paid off for their time, skills and investment in raw resources and production, and they would like the product purchased immediately upon successful crafting so that they can get on with crafting more items!

The Development Team’s goal is to provide entertainment and to make revenue for providing that entertainment.

The shape of the solution started to come together. We are running an experiment with the new Gen3 Land Deed packs where we started with a supply of 100 Gen3 Land Deed Packs, and offered these in supply both as 100 to Buy for 9,000 Dusk and 100 to Sell for 9,000 Dusk. We have tuned the price in Dusk up and down between 8,000–8,500 — and 9,000 Dusk.

What we are effectively doing is creating a virtual consignment shop, where we supply temporal liquidity to the system in terms of advancing 100 units to be either bought or sold. This is very much similar to how a mortgage market works. The bank provides 30-year mortgage liquidity for home buyers and sellers, so they can use time as a flexible device. The buying and the selling is still between the people, even though the bank provided the capital to get the transaction rolling.

Enter the New Gen 3 Building Shop!

Today we’re introducing a new Gen3 Focused Building shop, supplied with an initial liquidity that is similar to the Gen3 Land Pack Experiment, only these building packs are funded from the Treasury, and paid for (in Dusk) over time to the players that exchange crafted packs for a matching Transportation Claim.

For new and existing players looking to buy, they can still go to the shop, and there they can browse among Silver, Gold and Obsidian packs of most of our building expansions to date — the newly named Core Six (Solar Panel, Water Filter, C.A.D. Greenhouse, Grind & Brew, & Polar Workshop), the five factory buildings (Smelter, Machine Shop, Sabatier Reactor, Chem Lab and 3D Printer), the advanced manufacturing facilities of the Mining Rig, Roverworks and Engineering Bays. They can buy these packs like all other shop items.

To supply these packs from the players, we have added new functionality to the Cantina where a player will be able to sell back one of these crafted packs and get a Wrapped Blueprint Pack. These Wrapped Blueprint Packs then are able to be sold to the shop alongside the packs for the buyers. This allows all players to see the supplies of packs being both bought and sold (from player crafters!).  These wrapped Blueprint Packs come in the various flavors corresponding to the Silver, Gold and Obsidian and type of building the player has crafted. After exchanging the vouchers in the shop the player is given a “Cargo Claim” to take these to a desperate dock worker [NPC] at the Cantina in Duskworks Landing that needs to replace some inventory!

These Cargo Claims are turned-in to that desperate dock worker at the Cantina work as staking rewards that vary in size from 1,200–12,000 Dusk, and have a strong bonus amount of Dusk, over the cost to craft the pack. They also require use of that Cantina for 30–90 days, which we expect to not be a problem when you factor the Dusk per day or hour you could make.

We made a few innovations here — we used our position as the game developer to provide the temporal liquidity to allow buyers and crafters (sellers) to exchange building NFTs asynchronously, AND reward the crafters and sellers with additional Dusk for a time unlock in order to prime the pump of supply for these building NFTs. Additionally we, the development team, can spend more time innovating new content and features, and less time trying to keep the economy balanced. The supply and demand for these player-crafted items, if easily discoverable for purchase, should fall into a natural equilibrium determined by the population of players.

In the long term we hope to streamline and automate this approach in a way that self balances the prices and liquidity to maintain a better degree of stability across items with lower trade frequency.

Originally published on Medium.