The release of the first ERC 721 token-based games on the Ethereum blockchain offers a promising new avenue for digital collectibles and gaming. ERC 721 tokens are unique, tradeable peer-to-peer, and issued on the Ethereum blockchain via a governing smart contract. The first ERC 721 token-based game, CryptoKittles, was wildly successful upon release, even congesting the Ethereum network for lengths of time.
The game is played by breeding crypto kitties, individual ERC 721 tokens containing a unique genome determining attributes. The economic incentives of CryptoKitties involve spending ETH in an attempt to breed crypto kitties with unique mutations and attributes in hopes to sell them on the open market. This creates somewhat of a lottery / slot machine incentive structure. With each instance of breeding, a crypto kitty’s breeding attributes degrade, and therefore the kitty becomes less valuable. I see the fact that crypto kitties decrease in value as the game is played as a fundamental flaw in the core game economy. It’s just recently that dapps such as KittyRace have begun to allow crypto kitty owners to create income without their tokens losing value. The appearance of compatible dapps in the CryptoKitty ecosystem is a good sign for continued growth of adoption.
In contrast, Ether Quest provides a gaming economy in which the native ERC 721 tokens can be used to produce ETH income via game play. In addition, the tokens increase in value the more the game is played. Each ERC 721 token represents a warrior who can be either entered into individual arena battle or 5-vs-5 tournament combat. To enter these contests, one must wager ETH, and is paid out ETH in rewards for victory.
In a tournament, one must pay 1% of the current tournament pot to enter and own five warriors over level 5. In an arena battle, a player must pay .01 ETH * the warriors level to enter. When a battle is won, the warrior receives a proportional ETH reward, 100 rating points and levels up (100 experience points). If the battle is lost, the warrior receives ½ a level up (50 experience points) and loses 30 rating points. This means a level up has a minimum cost of .01 ETH * the warriors level (if all battles are won) and maximum cost of .02 ETH * the warriors level (if all battles are lost).
A warrior becomes more valuable with additional play, even if all battles are lost, due to level ups. The higher a warrior’s level, the higher the chance of victory. Due to this structure, the minimum cost of warriors at different levels can be calculated as follows.
By having an easily-supportable minimum warrior cost at different levels, it will be apparent when warriors are trading at a premium or a discount on the peer-to-peer market vs their minimum ETH value per above. It will also allow investors to calculate their ETH returns from tournaments and arena battles, better informing sale decisions. These factors are sure to drive long term value in the Ether Quest ecosystem.