Watch a blockchain game long enough and you start seeing DeFi. Same incentive problems, same math, sometimes the same collapse. Most on-chain games run two tokens, and once you understand why, a lot of DeFi token design stops looking novel.
Why games run two tokens
The first token is the governance or equity token, like AXS for Axie Infinity. Fixed supply, represents ownership or a vote in where the game goes. The second is the in-game currency, like SLP, uncapped supply, earned by playing. You need both because one token cannot be a stable currency and an investable asset at the same time. If the currency appreciates, the game gets expensive for new players. If it drops, the people grinding for income stop showing up.
DeFi landed in the same place. A governance token that behaves like the equity token, plus various yield-bearing or utility tokens that behave like the in-game currency. And the hard part is identical in both: keeping investors who hold the governance token, users who touch the utility token, and the protocol itself all pulling in a direction that doesn't starve one group to feed another.
The emission and sink problem
Players earn tokens by playing, and those emissions become selling pressure fast, especially in developing countries where play-to-earn actually mattered as income. People sell to turn earnings into fiat. So the game needs sinks, meaning reasons to spend or burn tokens back out of circulation, or the supply just inflates toward zero.
SLP is the case study everyone points to. Its emission was tied to active players and battles, and at the peak millions were being minted a day. The main sink was breeding new Axies, and it came nowhere close to soaking up the flood. SLP went from around $0.36 in July 2021 to under half a cent by mid-2022, better than a 98% wipeout. The game had real users and real economic activity. The token still failed, because emissions ran way ahead of sinks.
DeFi lives the same dynamic. Liquidity mining is the gameplay reward, and it creates the same one-way selling. Protocol fee revenue is the sink, and it has to absorb that selling for the token to hold value. The protocols that make it are the ones where sinks grow at least as fast as emissions, same as the games that survive are the ones where spending mechanics pull enough tokens out to stop the hyperinflation.
Producers, consumers, and mercenaries
Play-to-earn produced a whole class of players whose only reason to log in was extraction. They didn't want the game, they wanted the token, and they sold it the second they had it. That drains an ecosystem, because those sellers take out more than they put in. DeFi's version is mercenary yield farming: capital shows up to harvest emissions, dumps immediately, contributes nothing that outlasts the incentive.
Both worlds keep circling the same question, which is how you build an economy where participants add more value than they pull out. Games that sell cosmetics and virtual goods to people who actually enjoy playing can hold a token price, because some players are net buyers. DeFi protocols that charge real fees to users who genuinely need the service, borrowing, trading, insurance, can hold a token price for the same reason. Fee revenue is net buying.
It comes down to a balance between producers who earn tokens and consumers who buy and spend them. When everyone is a producer and nobody is a consumer, the whole thing caves under one-directional selling.
NFTs and position tokens rhyme
Games put the idea of player-owned assets on-chain through NFTs. Characters, weapons, land, all minted as things the player owns, trades, and carries around. That maps cleanly onto DeFi position tokens: Uniswap v3 LP positions are NFTs, so are a lot of lending positions and vault receipts.
They get valued the same way too. An in-game NFT is worth some mix of its yield potential, its utility, and a speculative premium on future upside, and so is a DeFi position token. When the yield behind either one dries up, the value follows it down.
The secondary markets rhyme as well. Liquidity is thin, price discovery is loose, and market makers matter more than they should. A rare item might be listed at $5,000 and actually clear at $3,000 because the book is too shallow for the sticker to mean anything. Illiquid DeFi position NFTs behave the same way, wide spreads that make the marked value look more solid than it is. At Blockcircle we treat those marked values as a starting guess, not a number to trust.
What actually carries over
A few habits from gaming tokenomics port straight into how I read DeFi tokens:
- Track the emission-to-sink ratio. Whether it's a game handing out SLP or a protocol handing out governance tokens, the question is whether sinks are growing to match. If they aren't, the token is in a structural bleed that no narrative or marketing budget reverses.
- Separate intrinsic demand from extractive demand. People who show up because they value the product create demand that sticks. People who show up only to sell rewards or farm airdrops create activity that vanishes the moment incentives change. Higher intrinsic-to-extractive ratio, more durable economics.
- Respect reflexivity. Rising prices pull in participants, which lifts activity, which supports higher prices. The downside runs the same loop in reverse. So both gaming and DeFi tokens look healthier than they are on the way up and sicker than they are on the way down, well past what fundamentals alone would say.
Gaming ran through this whole cycle fast, blowups included, which makes it a compressed version of problems DeFi is still working through. If you're sizing up a token in either world, start with the emissions and the sinks and who's actually a net buyer, and you'll skip a lot of the mistakes both sectors already made.