I decided to sell my ships and exit my POLIS position. Yesterday I had about 10k USD invested, now I am down to three Pearce X5 ships (about 300 USD). I do think exiting was the right choice, but I can’t say I am 100 percent certain of my thesis. In fact I would be pretty happy if someone in the comments man-splained how I was wrong.
The Short Version
I don't think Star Atlas has found a way out of the zero sum trap. If it succeeds, it will be a game where you can pit your skills against others and possibly win more Atlas than you put in. It will be akin to high-skill gambling, but it will not be an economy, and it will not provide funds beyond the zero-sum amount that players put in (minus fees/tax to Automata).
If the game is very good and fun, you could expect it to look and play a lot like other MMORPG properties. Which is fine, and I hope it works, but I don't think there's an economy emergent from that system.
Yes, I read the white paper.
The Long Version
Right now the Star Atlas ecosystem is in its infancy. Player interest and investment are encouraged by the standard crypto startup tools -- Uber Economics and Ponzi Economics.
Uber Economics
Uber had a fairly straightforward method to gin up users and growth -- it took VC money and paid subsidy for each taxi ride, so that the rides appeared to be cheap. Then the market-spinners told the public that their discount was due to Tech Future Awsum, or something something something, based on the inherent excellence of the Uber Brand. Eventually, all the taxi competition was supposed to die out. It didn't quite do that, but the VC money ran dry, and then Uber started increasing fees. Although Ubers still plays local games with pricing, they now are much closer to charging a full price.
The Star Atlas version of this is the subsidy of staked assets. I guess I would add that their version also includes a deflationary plan for tokenomics — token buyback. Their subsidy scheme is similar to many crypto defi plays -- yer basic bankrolling rewards for participants. So they took VC money and the money collected from selling ships. They dribble it out in Atlas rewards to everybody who stakes their ships. The overall narrative is that these stakers are investing in a new economy. Eventually the money will run out, and then *waves hands* there will be an economic engine to take over.
Ponzi Economics
As long as new players are entering the game, they will feed in new money. So if I buy a ship today, I expect or at least hope that it will raise in value, because of the flood of new peeps who also need ships. All that we need for this future to happen is Continual User Base Growth.
It's probably too extreme to qualify the positive price pressure from newly arrived players as "Ponzi." All positive moves in price, in any stock market, are driven by people wanting to get in (or increase their position). That's not Ponzi, it's normal price behavior. But I'll stick to the "Ponzi" name for now, as I want to highlight that the ONLY reason (that I can see) for ship prices to rise is a continual influx of new players.
Eventually the Star Atlas model will involve players making ships (and other stuff). At that point, prices will maintain if and only if asset destruction (You Sank My Battleship!) equals or exceeds production. This dynamic - build+destroy to maintain a balance -- I will call "Steady State Economics." We are not anywhere near a Steady State. We are in the Uber + Ponzi phase.
Uber + Ponzi = ??
In the case of Star Atlas, I don't think there's anything necessarily wrong with employing Uber Economics or Ponzi Economics. It is risky. It relies on healthy growth of the user base. It relies on there being a New Economic Engine(tm) when the pot of Staking gold runs out. What does that Economic Engine look like?
Steady State Economics
At some point in the future, let us imagine a state where the artificial inputs (startup money) have subsided, and we are relying on player behavior to run the Engine. I will posit some numbers for discussion, and they might be wildly wrong, but it doesn't exactly matter -- feel free to insert the "correct" numbers if you know them.
Total Players: 1 million
Average Ship Buy-in: 100 USD
Monthly Average Earn/Spend: +- 20 USD
Total Players
I think the first number is simple. In this thought experiment, there are a million active-ish players, and every month some new players arrive, and some players leave, and essentially the exiting players sell their assets to the new players. Since I am trying to describe a "Steady State" I am going to say for the sake of argument that arrivals equal exits.
There are hand-wavy assumptions in this model. It is not necessary that new-player asset buys will equal game-quitter asset sales. Some percent of exiters will just keep their ships and mining rigs, thinking that the stuff might appreciate, or that the exiter might want to return and play more later. I will call this phemenon Passive Investment Price Pressure, or PIPP. I am saying, for the sake of keeping this model simple, that new-players === exiters -minus- PIPP.
For comparison, here are active daily players in other MMORPGs, (estimates, as these companies don't share numbers)
FFXIV -- 3 million players
WOW -- 1.2 million players
Eve Online -- 230 thousand players
There are likely more subscriptions on the books than active players. But I think active players is the right metric to worry about. Among the many big difference between Star Atlas and a regular subscription-based MMORPG -- the Star Atlas economy gets a very small benefit from dormant and infrequent players (basically the PIPP), while a regular MMORPG makes bank on those infrequently used accounts.
Average ship buy-in
I assume buy-in includes a ship, maybe a mining rig, a skin for your avatar, decals, some fuel and ammo, etc. So the average cost to get started is 100 USD. Is that reasonable? Dunno. But it's an easy figure to think about.
Monthly Average Earn / Spend
Some players are L337 and some players are n00bz, so there is a spread on how much money a player wins/loses in a given month. I am positing that at 1 standard deviation, that amount equals 20 USD. Mostly because this number makes it easy to compare to exisitng MMORPGS, where the standard monthly subscription hovers around 15 USD.
I expect that early Star Atlas enthusiasts want to be on the L337 end of the spectrum. And some of them believe they will be god-tier, so these calculations about standard deviation mean nothing. Totes. Cool. But it still bears analysis I think.
While the M3GA-L337 players are doing their outsize WINNING, it's still necessary that the overall game, like, continues to function. At any rate, in my working definition of "steady-state economy," the available money-to-be-made in a given month comes from the half of the player population below the break-even line.
Let's refine that equation by one small step. Automata (the Star Atlas game company) needs to make some money. At the very least, they need to keep the servers running. What if they take a 10% "tax" on all transactions? Now we have:
NORM - monthly average loss: - 22 USD
L337 - monthly average gain: + 18 USD
In this adjustment, Automata farms/taxes 2 USD per player. I know that the white paper is full of all kinds of mechanics for money flow, but I think for the purpose of addressing “how much doe Automata take?” you can boil it down to some percentage of player spend that “disappears” from the game. I suggest for the moment that it’s 10%, or about 2 dollars per user, per month. Note that this pales in comparison to the 15 USD per player that subscription-based MMORPGs enjoy. So to compete, the Star Atlas game needs to be about 10 times "better" at efficiency, or marketing, user-retention, or... something.
It is possible that the fundamental attraction of owning your own stuff -- ship/mine/planet etc -- is the magic sauce that makes a 10x out-performance achievable.
I think you could argue that Automata needs a lot MORE than 2 dollars/user-month, but any increase in their share just pushes the story further into the territory of no-income-for-the-players.
SIGNIFICANT QUESTION
If the money in a given month is not coming from players below the break-even mark, where is it coming from?
For the player who is not L337, but still likes the Star Atlas universe, still wants to have fun -- we could suppose that this player is okay with spending about USD 22 per month to "keep up." They want insurance. They want ship repairs, fuel, ammo, food, new decals, new weapons, new modules, etc. All of that costs.
For any player, win and loss will fluctuate from month to month. But I think it's useful to describe this baseline number, "Average Loss Tolerance." For the sake of modeling, I am saying that this ALT equals 22 USD per month. That's kindof optimistic compared to the usual MMORPG spend of 15 per month. But I imagine it's in the right ballpark.
In the standard MMORPG there is only one financial transaction: the monthly subscription. In the Star Atlas model, the cost is diced up into many smaller transactions. Conceivably, paying for fuel is a fun, rewarding part of the game. At the least, conducting all of these micro-transactions needs to be... tolerable.
On the other hand, winning Atlas is way cooler than winning Interstellar Kredits, because Atlas is cash money. This magic of winning Real Cash Money could push higher the metric of Average Loss Tolerance. Wherever the ALT lands, we can say that the available winnings in a given month are [one half of player-count times ALT].
Count Koinz, not People
Each player has a choice of how bigly to invest. So there is no "normal" income/loss profile, even though we can use basic math to arrive at an "average" income/loss window of -22 to + 18. The important thing to note is that wherever you land on the spectrum, investing $100K on a giant ship, or $10 on a little bike, your income prospects are bound by a zero sum game. You must be consistently better than average to reliably make money.
Is it Really Zero Sum?
I guess the Steady State Economy does not have to be zero sum. For a net income, all you have to do is find outside actors to pour money into the game system on a perpetual basis.
Oooooh! Here's an idea! We can open up the virtual reality to in-game advertisements! And we can track behavior and enable targeted ads so the merchandisers spend more on ads! Awsum! Problem solved, amiright? Call Zuckerberg, that guy is great with ad-tech.
But I am L337
I know that there are professional e-sport players. I know that there are professional gamblers. But for the 99.9 % of the population not in that group -- the rest of us? Even if we are L337, we are probably only 1 or 2 standard deviations above the norm. In this case, we can expect to capture an average of 1 or 2 ALT units. So if we are "very good" at the game (2 standard deviations above norm), we can expect to rake in 36 dollars per month.
If we invest tons of capital -- buy some huge ships -- we can then expect our volatility to be enormous. Staggering wins or losses in a given month. But when they average out over time... there's that [2X ALT == 36 USD] metric staring us in the face.
Grinding
The game is supposed to be more than a space-themed casino. It is expected to be a full fledged economy (plus a casino). I take this to mean that you ought to be able to trade grinding for risk. Axie Infinity has taught us that it's easy to find poor people who will grind for 18 USD per month. If we end up with an Axie style of in-game job prospects (grind-for-Atlas), then you would expect the grinders to soak up a great deal of the available income.
In this case, you would then see a much different weighting of win/loss populations. There would be a cluster of boring grinder day-job workers, concentrated in an income bracket around (I am guessing) the positive index of the ALT. And then you would have the "normal" players — down for the skill-gamble, down for regular pew-pew fun. That group would skew quite heavily towards the pay-to-play end of the spectrum.
That's not bad, exactly. It would be pretty cool to see that my monthly spend is routed to otherwise impoverished grinders in the Philippines and Venezuela. Activision/Blizzard (Microsoft) does not need my money. The Automata VC backers don't need my money. The poor grinders do.
Why Not Invest?
Right now the APR for ship staking is around 40%. If I were completely confident in the game's eventual arrival and success, then an APR of 40% would be awesome. Why not buy some expensive ships, and have them pay for themselves by the time the game arrives?
Video games fail all the time. Crypto projects collapse. We all know that. Will things fail before 2.5 years elapse? Before I can earn the price of my ships?
That’s a legit question, and I don’t know the answer. The problem is, even when I answer, “yes, they will survive”, I cannot see what "success" looks like for Star Atlas, unless it looks like a very cool game that costs about 22 USD per month to play. If it’s a cool game, sign me up. I want to play it. But it’s not something I see as a compelling investment.
Clouded Judgment
Owning space ships is fun. A space ship that makes you money is much, much cooler than the equal value of coins staked to some defi liquidity pool. I guess just about any NFT can carry that mojo — where it is more fun to hold the image than to hold an equivalent value of coins. I think Star Atlas has achieved a notch beyond baseline in this respect.
Resupplying your staked ships is not particularly glamorous, but it sustains a mental space touchpoint — you have to resupply every few days. And in my head, the space ships carry a kind of sky's-the-limit imaginary potential. Some day there will be a game, and then these ships will DO STUFF. How cool is that?
Answer: zero cool. Doesn’t exist yet. But someday it MIGHT BE cool, and we can just wonder about it. So the point is, for me, the ships are attractive for reasons quite separate from their current yield-generating function.
This is bad. Or at least, for me, it was a source of confusion — a witch's brew of hopium and "some day" speculation. There is a six-year-old boy in my heart who wants, apparently, to be a space industry mogul. Or at least, when I'm refueling my ships, I find it easy to obsess about some version of mogul-hood.
In real life, I think that's silly. When I step back just a bit and look at my... analytical performance, my clarity of thought, on the subject of imaginary space ships — O boy. It seems really dumb. As much as I want Star Atlas to be, like, The Future Of Gaming, I don't think that future involves me getting Space Mogul Rich(tm). So for now, I am going to look for degen investments elsewhere.
Yup. Anyway. I’d love to hear other people’s take on all this.