Types of Web3 game tokens

In a web3 game, what separates it from Web2 / traditional games is the use of tokens in the blockchain. We can generally split the tokens into 3 types which are:

1. Fungible Token
2. Non-Fungible Token
3. Soul bound Token

Even though web3 games use these tokens, it doesn’t mean that a game should need to use all 3 types to be successful. Let’s look at how these tokens differentiate between each other and what use cases they might have.

Fungible Token

The most basic token is the fungible token which is non-unique, divisible, and tradable. These tokens can be created in any blockchain like Ethereum, Solana, Avalanche, etc.

There are many uses for these tokens like utility, payment, or security tokens. For gaming, it would usually be used as a utility token to make in-game purchases.

In traditional games, this would be something like gold or wood. In Clash of Clans, it would be used to upgrade buildings and buy troops.

In Web3 games, the most famous example is $SLP tokens from Axie Infinity. The only use for the token is to breed Axies to reproduce more Axies. As most of these tokens do not have a supply cap, they can be ‘mined’ by playing the game. The tokens being able to be bought on any exchange may cause an unbalanced game like a pay-to-win game. Even worse, games may be developed to focus on token prices rather than gameplay itself.

Thus for a specific genre of games, the use of fungible tokens may be suitable. Yet, game devs should always focus on gameplay rather than token prices. Games should never be just “DeFi but with extra steps”

Non-Fungible Token

Non-fungible tokens or NFTs are tokens that are unique, non-divisible, and tradable.

NFTs are essentially what makes a Web3 game. It is the idea that unique digital items used in-game can be freely traded on the open market.

These digital assets are already common in most multiplayer games in traditional games. The most common items are usually ‘skins’ that players could use in-game. Counter-Strike: Global Offensive (CSGO) has in-game weapon skins that you can buy/sell on the Steam Community Market.

Players will need to use their Steam wallets to make purchases on Steam. We can add funds to our wallets through Paypal or credit card. But since the wallet is one-way only, We can't remove funds from it and transfer them elsewhere. This essentially means that you are locked in the Steam ecosystem.

So in the Web3 space, they take it one step further; using blockchain we won't be locked into any Company’s ecosystem anymore. Once your asset is on the public blockchain, you can sell it on any secondary market. This means that you can cash out your profits to Fiat cash as you would normally for cryptocurrencies.

NFTs would most probably be an essential feature in a Web3 game as a game won’t probably be classified as such without any NFTs.

Soul bound Token

Soul-bound tokens or SBTs are tokens that are unique, non-divisible, and not tradable. There has not been a lot seen on SBTs by projects that have already been made public.

The best use case would most probably be for in-game achievements to keep a record of the player’s achievements.

In traditional games, this could be compared to Steam’s achievement progress tracking feature.

Having digital items locked to an account means that players might try to sell them by selling the account instead. You can already find people selling their game accounts like Valorant or Fortnite on marketplaces like eBay.

Coming to the Web3 world, the idea for Soul bound tokens is so that players would not be able to trade these items. Yet, if the item is in high demand,  the same situation will happen. Players will sell accounts instead. In Web3, people will be selling seed phrases for wallets instead.