The Warera Economic Forum series 💵 #01 BTC: supply and deflation

The game's currency is the first building block of its economy, it has multiple supply mechanics and some deflationary ones. this article will focus mainly on how the currency comes in and out of circulation and try to answer the biggest question related to it

Why is it deflationary?

Here are some things we know about the game's currency;

1. 🧾 It is a Fiat currency with no fixed exchange rate with any thing of value in game

2. ⚙️ New supply of currency is automated through the games code and not decided by a person

3. 📉 It suffers from price deflation through intended and unintended game events

What is then the IRL thing that is most similar to it

Actual 🪙 Bitcoin 🪙

Now we begin to understand the currency, which I will call BTC from now on, its strengths and shortcomings. The question then is:

How is new BTC minted and why is the supply not enough?

Here are BTC's major supply mechanics, each rated from 1 to 10:

1. Missions, disinflationary ❌ 2/10:

Daily and weekly missions mint currency daily and weekly based on player activity. It's a population-based type of money supply since every active player generally mints the same amount.

Herein lies its problem, it doesn't account for player productivity.

A level 10 and a level 40 player both mint the same amount of BTC through mission but the level 40 player produces much more goods than any level 10 player. So the more productive a player is on average the less BTC they mint in proportion to their productivity

2. Referrals, disinflationary ❌ 2/10:

Same as missions, referrals roughly happen in proportion to player population and doesn't account for productivity in the same way

3. Development income, less disinflationary ➖ 4/10:

Development is interesting, it supposedly takes into account player level, which is a surrogate for productivity.

However, it still suffers from the same problem:

Dev increases linearly but productivity increases polynomially.

For example, a level 21 player adds 1 development and a level 40 player adds 1.9 development, but on average, a level 40 player is 3 to 5 times more productive than a level 21 player. Thus the disinflation continues.

By using wealth as a non-perfect surrogate for productivity we can see the relation between dev and wealth per level:

4. Badges, quantitative easing 🤩 7/10:

Badges, especially the Hard Worker badge are actually great, the increase supply in proportion to player output and productivity. Mechanics-wise they are perfect, their only problem is that they contribute very little to the actual money supply < 1%

Of course there are Party Ethics and other mechanics but they essentially work through one of the 4 mentioned.

We've seen the BTC "tap" now a look at the "drain":

1. Inevitable loss: log outs and bans 🥲

Self explanatory, banned and inactive accounts take BTC out of circulation. This is the only BTC we can't do anything about for the most part, it even happens to actual Bitcoin through wallet key loss

2. Alliances, laws and orders NO MORE ✅

An actual great addition from the last update is wood and paper used for these costs instead of burning BTC. One of the biggest drains is taken out

3. Skill change and mission rerolls ❌

Still burns BTC and is a major drain.

4. Players who don't do missions ⚠️

In general most players do their missions for the XP. but some minority of high level players just don't bother since levels take too much time.

They obviously are very productive and will end up increasing goods supply compared to BTC even more so.

This is not a major problem now but it might easily be if a prestige reward is not implemented for level 50 players. They need some sort of incentive to keep doing missions.

Potential Fixes and Improvements:

1. The easy way 👍:

MORE BADGES, specifically new ones related to productivity. Either rework Hard Worker to represent overall production, or add ones for self work and production. And most importantly make it more impactful since it is the only mechanic that tracks productivity.

2. The fun way 🔥:

BANKING AND CREDIT. Obviously implementing a full banking system is much more elaborate than badges but it actually is much more flexible and receptive to the market and global production

Here is the proposed mechanism:

Players will start banks very much like MUs. They have a reserve limit based on bank level, just like companies. Bankers will set their own deposit and loan interest rate and credit limits. Players will either deposit BTC and receive deposit interest or take a loan and pay back loan interest. They will be incentivized to set deposit and loan rates close to market average in a competitive manner much like job wages
Now the magic happens, banks will be able to loan out more than their actual reserves in proportion to the deposit interest they chose. For example, a banker sets their deposit interest at 5% they will be able to lend out 105% of their reserves, and the new 5% is freshly minted BTC

Some rules need to be implemented to prevent fictitious deposits, players can't operate in their own bank and can't be in debt and have deposits in the same bank. Also defaulting punishment needs to be handled carefully to prevent players from quitting but it can definitely be implemented.

I might have missed some stuff, If you find anything inaccurate please reach out

Next Chapter: (coming soon)