The phenomenon of human tribalism is a greatly interesting one. Since our caveman days, the evolution of humanity has been marked by powerful competition amongst groups and alliances. From the rise and fall of empires to the formation of labour unions, it is clear that our propensity for alliances has shaped the landscape of our world tremendously. This much is already evident within the Web3 space.
Given the absurdly vast amount of information and knowledge required to navigate this space, communities are arguably the cornerstone on which Web3 is built.
People share hot new information and trading strategies, or simply build relationships across platforms like Discord or Twitter.
Ultimately, people band together to increase their success in any given universe. In the days of medieval Europe, craftsmen and merchants joined guilds in order to ply their trade. In exchange for obeying guild rules, benefits were offered that would help one excel in their craft. For example, while The Hatters Guilds of London provided training and wages for apprentices, they also set standards on the quality of hats sold and protected their industry. However, economic history professors noted that “overall, the actions guilds took mainly had the effect of protecting and enriching their members at the expense of consumers and nonmembers.”
In the modern-day context, guilds are well-established within the video-gaming sphere. These are groups that boast membership up to the tens of thousands, and they work fiercely under strong leadership towards achieving mutual goals. Guilds evolve with the times and have understandably made their way into crypto gaming too. While they add an amazing social dimension to games, there is a potential danger that may repeat itself, with reference to its burgeoning dominance reminiscent of historical guilds.
What are guilds?
In its purest and earliest form, game alliances were borne out of friendship and passion for the game. In MMORPGs, players would band together to explore vast dungeons, seek great treasure or defeat dragons in epic battles. Soon, some of these squads or clans experienced explosive growth, transitioning to become organized and structured guilds (some to an almost-militant extent).
For games, guild systems are an amazing way of increasing a player’s sense of community. Gamers have long enjoyed being part of guilds — the memory of exploring new frontiers with a band of loyal friends behind them is dearly fond to most MMORPG players. “Guild” is often interchangeable with “clan”, or “alliances”.
Over the past few years, the crypto gaming economy, particularly P2E, has exploded. 40% of these players were from third-world countries like the Philippines. It is not hard to understand such rapid adoption when monthly earnings were $200 for players from households making less than $400 a month.
The starting cost of buying crypto-assets required to play the game can be incredibly hefty. Many players cannot afford this, and instead, choose to rent them from guilds. These players are “scholars” — players who work under managers hired by guilds.
The guilds purchase crypto-assets required to play these games and rent them out to scholars in exchange for a portion of the returns. The guilds may take from 10% to 30% of the player’s yield. With this income, the guild can purchase more crypto-assets and thus scale their earnings model. This is known as the flywheel effect.
In 2021, Yield Guild Games announced that their scholars had collectively generated over USD $13.6 million in-game tokens. YGG is a mega-guild, an overarching alliance of over 8 guilds with more than 100,000 members. This is a testament to the ability of guilds to move markets and grow in-game economies. CoinYuppie describes such powerful guides as “Kingmakers”, referring to their ability to pour money into the ecosystem and bring new players into their game.
Video-game giants are certainly not blind to this either. In an interview, the VP of Ubisoft’s Strategic Innovation Lab Nicholas Pouard (at the helm of Ubisoft’s NFT venture Digits) asserted the strength of guilds as a “new tool for user acquisition”, commenting that “if you build a good play-to-earn experience, those guilds will come to your game, and they will boost up your ecosystem.” Guilds are already a proven recipe for success. The original clans and guilds in games like World of Warcraft and Call of Duty helped those titles to achieve legendary status in the video game industry. It is clear that Ubisoft sees an opportunity here — attracting top guilds brings huge amounts of players to a game, and is a more cost-effective way of doing so compared to marketing efforts. It is inevitable that other AAA game studios are taking notes and following suit.
Do guilds present a threat to such gaming concepts?
To open the debate about the threat of guilds to a gaming ecosystem, there is a strong argument that scholars are more likely to suck liquidity out of the game, rather than re-invest in it. For the stability of the game tokens, it is important that players use or burn the tokens as much as they cash out. To scholars, the game is a job. They are likely to cash out frequently and do not have a long-term vision in terms of investment in the game. When the previous statement describes a large percentage of the player base, it is inevitable that tokens will be volatile. Such a situation will happen when guilds aggressively recruit scholars and swell into the tens of thousands.
Another criticism is that the effect of strong and powerful guilds is a centralisation of power and decision making. For example, we have seen that guild’s models work through large ownership of crypto-assets like tokens and NFTs. This effectively allows them to control the market — hoarding tokens would decrease the total circulating supply and cause spikes in value, while mass-selling them would cause a massive dump in prices. Further, hoarding NFTs would allow them to set high floor prices, ensuring new users with limited financial resources are effectively priced out from buying the NFTs, leaving them no choice but to join the guild as a scholar. If the goal is to force users to join scholarship programs, rich guilds would be able to do that.
Centralized power is especially relevant in a game model where governance tokens allow users to have a larger say in the direction of the game. STEPN is a good example of such. By staking their GMT, users are then able to vote on the profit distribution between donating to carbon-offset initiatives and dividends to players. If large guilds hold an immense amount of GMT, the sway they have on these decisions is undeniable. This is but one example of how powerful groups may affect decisions that may not align with the team’s long term vision of sustainability for the game.
To analogize gaming guilds with the trade or craft guilds of yesteryear — we note that the formation was done with the aim of prosperity as a collective. As these guilds grew, they amassed significant political and market influence. “Power corrupts, and absolute power corrupts absolutely”. This grim warning from Lord Acton rang true back then and rings true today. Those who controlled the guilds infiltrated the richer classes and sought to maintain their position by setting higher membership fees and restricting competition from outsiders, effectively establishing a monopoly on the business. It is for good reason that today we have in place antitrust laws that promote competition, collusion and price-fixing.
The term “decentralized” is not merely a buzzword in crypto — it is the ethos on which Web3 is built.
The idea of tokens is to give users property rights and a greater say in the ecosystem that they are invested in. Thus, it is clear that it is the responsibility of builders in Web3 to protect the ideal of a fair ownership stake. This includes the developers of apps like STEPN.
Guilds within STEPN?
Guilds are not necessarily bad actors, despite the harm asserted in the previous segment of this article. The scholarship model allows players who would not normally be able to front the starting costs to earn from the game. This is particularly helpful for players from third-world countries, where such games do extremely well.
With STEPN, this model is already built into the app. We wish to effectively cut the middlemen out and allow every player to benefit. This means that the power of groups to control NFT prices is strongly diluted.
Communities around STEPN have been growing — within our Discord servers and outside. Other DAOs have dedicated STEPN chats, where they share information and discuss strategy. This is healthy for the game. It serves a dual purpose: allowing greater guidance for newbies and allowing STEPN to fulfil its vision of bridging players and the greater Web3 world.
Further, STEPN’s model is extremely friendly to the onboarding of new players. Instead of pure gamers, the people who can enjoy STEPN are simply those who can walk and have a phone. Our users often share STEPN with their friends and family — often forming smaller groups centred around STEPN. These can be seen as mini-clans of sorts. In the future, we may see the rise of various STEPN alliances. Combined with Social-Fi systems such as leaderboards, the potential here is exciting.
We respect the power of alliances. After all, humans are social creatures and thrive on teamwork. However, while fostering a strong community, we must also preserve the balance of power within organizations.
Some game economies, in particular, enjoy market caps in the billions, more than even some established companies. As such, both the developers (and the player-base to a certain extent) hold the responsibility of safeguarding its tokenomics. Essentially, guilds have the power (even if they don’t intend on doing so) to manipulate markets and control the player base of a game.
In real life, laws are designed to ensure a balance of power and prevent collusion within groups. For those beneath or outside, social systems are in place to help them out. These laws are developed over a thousand years of free-market movement — humankind has deemed it necessary for the overall economical growth of society. Given that game developers are responsible for the growth of a healthy economy, they should heed this collective and curated wisdom in order to curb the excessive power of any one group.