Today, I was browsing through some gaming software that better supports ETH payments for skins and other in game accessories. It’s an emerging market that I think is going to be bigger than the internet eventually, so it’s pretty exciting for me.
I was left with a few questions….
Why would we build special purpose tokens if ETH works just fine?
Could better ETH integration potentially kill gaming specific tokens?
Couldn’t we just implement better ETH (or more widely adopted coins) integration into gaming platforms?
I’ve heard these questions a lot. I haven't actually seen anybody explain elegantly why one is better than the other. My hypothesis is most people are dumb assholes.
I haven’t made up my mind on any decision here, although I’m biased toward the world needing Chuck E Tokens AND Quarters. Some people are super opposed to tokens, think they are shit, and then there are people who are totally opposite. I think we should keep an open mind.
This overarching problem, I call The Chuck E Cheese vs George Washington Problem (Chuck E Cheese Token vs Quarters). For short, let’s just call it Chuck E vs George.
The real question is: Is it better to use a custom token or a token that already exists when building your platform?
Reasons To Use ETH
There could be a lot of short term and long term benefits to just using ETH. Here are a few:
- Up and running faster (Lean, baby)
- People already have ETH
- People already understand ETH
- People are building a shit ton of tools that help you take people’s ETH
- In the future, it could be a simple add-on which would require no engineering (think MetaMask simplicity)
- Using ETH could potentially remove a lot of steps for the user (getting cash in and cash out)
- ETH could remove legal liabilities since it’s already minted (you won’t have to mint your own security, scary!)
- ETH fungibility is higher (don’t underestimate this)
- ETH is on more exchanges
- ETH is likely to be more secure than any token (dev power, hardening)
- More general tools in ETH like wallets, creating ubiquity
(If EOS blows ETH out of the water, just replace “ETH” with “EOS”)
Reasons For Your Own Token
There are a lot of reason why you’d want to mint your own token and blockchain. Here are some reasons I can think of:
- People will buy the tokens which can be a nice (or shady) way to raise more capital
- Remove or reduce network congestion (remember what happened to Crypto Kitties?)
- Control over token distribution mechanics
- including exchanges, how many,
- whether it is inflationary or deflationary
- total supply
- allocation
- wallets
- sdk compatibility
- Token Velocity Control
- levers, tap, sink
- Token Feature Control (innovations)
- Token Branding
- Token Legal Structure
- ETH (or popular coins) could totally crash or undergo major changes, you’d be shielded (somewhat) from this.
- Other opinions
- People are more likely to spend a token that is abstracted from something that feels like “real money”. If you’re bowling at Chuck E Cheese, the last thing you want yourself or your kid to think about is how you’re burning through cash. So this abstracted proxy token removes that concern, which acts as a kind of transactional lubricant.
- Once the money is in, it’s more likely to stay in and move around in the system, since it feels locked there (too much work to move it out). So we keep their money (seems dishonest).
If we keep our analogy of Chuck E Token vs Quarters, it’s pretty illustrative of some of the pros and cons that exist between custom tokens or tried and true ETH. Check this out.
Chuck E Cheese Tokens
Pros
- Has sweet Chuck E Branding
- Chuck E Corporation controls the supply which allows them a lot of freedom
Cons
- Low fungibility: Can’t easily spend them outside Chuck E Cheese
- Not really clear how much they are worth
- Limited to the creativity and intelligence of the company
Quarters
Pros
- Don’t have to mint them
- High fungibility: Can spend in more places than Chuck E
- Lower volatility (potentially)
Cons
- Susceptible to a larger system (inflation, laws)
- No branding
- Less control over utility, supply
Sustainability
We should consider what is going to be the most sustainable choice over time. Maybe tokens are better in the short term but more fungibility wins in the long term. This should be super important when making the choice. Maybe we start with ETH to kickstart and merge into a custom token when there is more traction and brand loyalty?
Finding Answers
We need some kind of compass or a representative example of how this might pan out. Where could we find the answer? Where is the historical precedent for a system like this?
My guess is we can find some hints in researching the data behind Token Arcade vs Quarter Arcade, and that’s what I set out to do in my next article coming up: Token Arcade vs Quarter Arcade.
