CHR
What is CHR
CHR serves as the in-game currency for Space Nation Online, acting as the medium of exchange between players, and between players and the game environment. As the Space Nation Online game continues to grow, the supply and demand for CHR fluctuates. In order to maintain price stability, it is not possible to use a fixed issuance plan or a fixed number of tokens. Instead, the total and circulating amount of CHR is dynamically adjusted based on scientific measurements and management techniques, using multiple mechanisms that address both the supply and demand sides of the market.
CHR will be designed to follow on-chain logic but will remain off-chain for the first several months after the launch of Space Nation Online. Once the in-game ecosystem has matured and become stable, we will decide whether it is feasible to bring CHR on-chain.
Three-Layer Dynamic Stability Structure Design
CHR, as the in-game currency, needs to have a stable value. Both excessive drops and rises in CHR will have a negative impact on the economic growth within the game. The effect of a drop is easy to understand. It will affect the income of service/resource/commodity providers. Reduced enthusiasm from providers will lead to insufficient supply of game commodities. Some people might think that a rise in CHR price is a good thing. However, in reality, this would reduce the purchasing power of service/resource/commodity demanders, meaning game consumers can't afford goods to grow in the game.
Therefore, stabilizing the value of CHR is the starting point of our game economic system design. After much deliberation, we developed a three-layer dynamic stability structure to ensure that CHR operates within a reasonable price range.
- Layer 1: Value Baseline
- Layer 2: Reservoir
- Layer 3: Active Adjustment
Layer 1: Value Baseline
Space Nation introduces fuel to define the value baseline of CHR. Fuel is priced in Stable Coin and can only be obtained through purchase (except for a small amount of event giveaways). Spaceships need to consume fuel when traveling in space. This means that all resource outputs in the game are related to fuel, meaning they all have a cost. A rational P2E player will be active in the game when the value of the resources sold is higher than the cost; and will quit when it's lower than the cost. So, the breakeven point is when the value equals the cost. Of course, there's no need to worry about how to cope when the value is lower than the cost, as the exit of some P2E players will reduce the supply of resources, and the value will rise again.
CHR, as the in-game currency, is fully active in the exchange of various goods, pricing the goods. So, from Stable Coin to Fuel, to commodities, and finally to CHR, we will draw a baseline for CHR's value against Stable Coin. In most cases, the value of CHR will operate above this baseline.
Layer 2: Reservoir
When supply or demand changes dramatically, CHR prices may experience wide fluctuations in the short term. To reduce the amplitude of these fluctuations, Space Nation designs a reservoir system. As the name implies, the reservoir absorbs the excess supply when CHR supply rises. Some advanced gameplay items will become the reservoir of Space Nation. These items are essential for advanced gameplay, and their production is limited. So, no matter when, their demand is always strong, and their value is always stable. When the supply of CHR rises and faces depreciation expectations, the Item/CHR will rise, absorbing more CHR. This is how the supply of CHR is passively/automatically regulated through the reservoir mechanism.
Layer 3: Active Adjustment
Unlike the passive regulation of the reservoir, in Layer 3, Space Nation will regulate the output and consumption of CHR through a series of regulatory tools. These tools include Marketplace rate adjustments, production rate adjustments, CHR drop rate adjustments, limited-time dungeons, black markets, and world-class resource collection, etc.
This kind of regulation requires a clear evaluation of the macro economy, rather than relying on experience or intuition. Therefore, good tools for observing and evaluating the macro economy are a prerequisite for implementing active adjustment.
Macroeconomic Targets
Tool 1 - Time-series Model
Time-series analysis can be used to model the behavior of game players, including activity, retention, game duration, and participation patterns. By examining the relationship between behavior and the production, circulation, and consumption of CHR, a CHR supply-demand model can be established. This model serves as a benchmark for identifying trends in supply and demand, and production, consumption, and circulation can be adjusted accordingly.
However, this method has limitations. The model is influenced by variables such as players, games, and external environments, and studying and making assumptions about these variables requires time and manpower. Additionally, adjusting production, consumption, and circulation is not a frequent operation. Therefore, this tool is best suited for identifying long-term trends in supply and demand. How to identify short-term economic fluctuations remains an open question.
Tool 2 – The Fisher Equation
The Fisher equation is also known as the trading equation. Irving Fisher, for whom the equation was named and a professor of economics at Yale University, in the book The Purchasing Power of Money in 1911, formulated and posed the first systematic exposition of the relationship between the price level and the amount of money.
This equation is an identifier, in which the value of P depends on the interaction of M, V and T. M is the average amount of currency in circulation in a given period of time; V is the velocity of money circulation; P is the price level or weighted average of various commodity prices; T is the transactional volume of various commodities. When we discuss this equation on the premise of monetary equilibrium, we can view it as the demand for money, similarly, the supply of money.
The real-world financial system has become very complicated due to the participation of banks and governments. Although Fisher’s identifier is concise and powerful (it ideally describes the identity relationship between money circulation and commodity circulation), its applicability is not strong because it makes strict assumptions and ignores other decisive factors of participants. Fortunately, the virtual world Space Nation Online is a microcosm of the abstract real world. There are no banks, no currency multipliers, no complicated relations between the resident departments, the enterprise departments, and the government departments, and so on. Thus, the Fisher equation can be skillfully applied in Space Nation Online to guide CHR supply.
As mentioned above, the objective of maintaining a reasonable CHR supply is to ensure that the flow of money can meet the needs of commodity trading and value storage, so as to maintain a stable price. Stable prices are both the ultimate goal and the premise for players to have consistent expectations in terms of currency value. With the Fisher equation, namely:
V in the game can be represented by the total trading volume of the trading market divided by the average trading price, that is, the trading volume. T can be represented by the total amount of commodities that can be traded. Finally, M represents the money supply. In this way, we can calculate the amount of money needed in each period. Space Nation Online takes biweekly statistical data as a cycle, formulates a reasonable money supply, and then produces guidance for short-term supply targets.
Circulation
