Fungible *Economics*

Tegro Team
May 5, 2022

Introduction

This case study is one of a series on the implementations of Tegronomics. Each of these studies focuses on a different aspect of economies in Web3 games.

At Tegro, we are committed to building sustainable and scalable economies that give value to all its participants.

NFTs vs FTs

Non-fungible tokens

Non-fungible tokens, or NFTs are a unique unit of data that cannot be exchanged for another, and is stored in the blockchain. Each NFT is therefore uniquely identifiable. Since NFTs provide proof of ownership, their primary use-case is in the storing and trading of digital assets on the blockchain.

Fungible tokens

Fungible tokens are NOT unique. Each unit of a fungible token is identical to all other units of the same token. Fungible tokens also provide proof of ownership, but are not stored separately for each unit on the blockchain.

The issue with NFTs

Because NFTs are unique, they are meant to be used to store limited collections of digital assets, for example, a piece of digital art. They are not meant to store large quantities of the same asset, for instance, cows in a farming simulator. 

Imagine having 30 cows on a players’ farm, all stored as NFTs. Developers will now need to store the ID of each individual NFT to map to the player. 

Further, this makes it hard to enable high frequency trading on the asset, since each cow would have to be individually listed on a marketplace. Players or traders wishing to purchase cows would have to make individual purchases. 

These are some of the problems fungible tokens solve.

How do FTs help?

Since all units of a fungible token are the same, the only metric that requires it to be measured is the count of the token per owner. 

Taking the above example of cows in a market, a player can quickly list some or all of their 30 cows in a single listing, while users looking to purchase cows no longer have to buy them individually.

This approach does solve the larger challenges of an NFT game, but does have some fundamental changes that require it to be incorporated into your game.

The Changes

The cow example in the above sections is from a live crypto game called “CropBytes”, which has been in operation for 4 years now. To know more about CropBytes, please visit https://www.cropbytes.com 

When CropBytes was making their cows a fungible asset, they had some challenges. Each cow had a health bar, which decreased if the cow was not fed. This system works well in an NFT world, where each cow is unique. However, this was not just cumbersome for trading, but also confusing for users, who had to track the health of each individual cow.

However, when cows became fungible, tracking individual health became impossible. The makers of CropBytes were able to think differently and they moved to the COLLECTIVE health, rather than the individual health of the cows. This streamlined the process of the upkeep of cows in CropBytes. 

This “think different” approach is one of the core tenets of building a sustainable economy in a Web3 game, and one we strive to help all our developers partners with here at Tegro.

Finding Balance

NFTs are not completely unusable in a Web3 game, however. The key is to find balance between fungible and non-fungible assets for a successful game.

NFTs provide ways for players to be emotionally invested in a game. For example, an NFT can be used as a record of the players’ achievements, or giving them ways to show off their work.

We recommend that each game should have more fungible than non-fungible tokens at any particular time. 

This can be a complicated decision, but we’re here to help. Reach out to us at games@tegro.com for a consultation with our specialists to help you understand which assets in your game could be made fungible.