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The Intersection of Crypto Gaming and Gambling Industries: An Exploration from GGR to NGR

23-08-11 20:00

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Original author: Crypto Vajra

"Crypto games must be playable." Crypto game teams that still hold this as their only belief will inevitably die because they cannot recognize the gambling nature of Crypto users. Before starting a new Crypto game project or investing in one, please learn Crypto Game 101 - the gambling GGR model of the gaming industry.

GGR, short for Gross Gaming Revenue, is the most commonly used performance indicator in the gambling industry. It refers to the total amount of money that players have lost during a certain period of time, which is the gross profit of the casino. It is calculated as the total amount of bets minus the total amount paid out to players (i.e. the money they have won).

There is another algorithm called NGR - Net Gaming Revenue, calculated as: total number of bets - total amount allocated - total amount of bonus allocated (extra chips given away during promotions) - total amount of gaming tax allocated.

It sounds simple?

As we all know, gambling is not a fair game even if the dealer doesn't cheat. Even for relatively fair games like blackjack, baccarat, and craps, there is still a house edge ranging from 0.5% to 20% even when playing by standard rules and theoretical values.

Leaving aside the "infinite funds bug", the banker hopes that the player:

- One has been gambling all along.

- Bet bigger (more turnover) so the casino can control the actual House Edge, especially in online gambling where there is more room for manipulation.

This result is simply because the kill rate is too low to make money, and too high to attract players. You cannot let customers lose all the time, nor can you let them win all the time. Additionally, you need to provide customers with certainty regarding the odds, and customers must also have a consensus on this certainty.

Speaking of which, we can take a look at Crypto Games and even the crypto trading market. Let's start with this interesting quote from @Mulan0x:

I agree with her statement, but here "casino" should refer to a general gambling venue rather than strictly a casino in the narrow sense.

The biggest difference between gambling and crypto gaming lies in whether players can accept variable odds.

The odds of a gambling game are framed regardless of the final kill rate, while each Uniswap token has a different odds, even for each shitcoin on @binance, the odds may vary at different times.

This explains why there is almost no difference between GambleFi products from @rollbitcom to @Stake. They are all game halls with sports betting, baccarat, fishing, and roulette. The gambling industry emphasizes mechanism consensus and odds framework. Their audience is focused on how to gain an edge within fixed rules. And this group's profile does not completely overlap with degen or trader.

Most online gambling operates on an agent system, where game suppliers and cash networks split GGR. As the number of games increases, so does the cost, which is why NGR is mostly around 3%. Secondly, there is the issue of kill rate, or how to make it controllable. Here are three approaches: gambling, contracts, and local dogs.

The fundamental difference lies in liquidity:

Gambling: Fixed odds, no liquidity, absolute control over the kill rate;

Contract: The odds are relatively fixed (for major cryptocurrencies), with some liquidity (settled at any time), and the turnover model or kill rate is relatively controllable (also known as "customer loss" logic).

Local Dog CEX/DEX: The odds are completely unstable, with absolute liquidity (except for Pixiu). The kill rate is almost uncontrollable (except for CEX cutting the project party). The more unstable the odds, the greater the liquidity of chips, and the less controllable the kill rate.

This is why almost all games, whether they are gambling or not, do not use absolute true randomness.

Due to uncontrollable kill rate, players will be lost once the kill rate is too high.

In the online poker game industry, the "sexy dealer, online dealing" method is often used because pure algorithm pseudo-randomness is easily cracked by stronger algorithms, resulting in losses for cash websites. This is a game with the theme of "balance and tug-of-war".

The kill rate directly affects the player unit's lifecycle GGR. Returning to the three types of products mentioned above, from gambling to local dog, user stickiness is decreasing, which directly affects user growth and conversion logic.

The most profitable form of gambling is the VIP room, which can account for over 80% of the total profits of a casino. The VIP room relies on intermediaries known as "dima zai" to drive growth and conversion. How does the casino share profits with these intermediaries, and how do they know how much their clients have gambled?

This is about how casinos generate codes.

There are two types of chips in the industry, cash chips and mud chips. Cash chips can be redeemed in both directions, while mud chips are only used for betting.

Does it sound familiar? The commission system of futures exchanges adopts a similar form. The contract experience fund is equivalent to mud code, and the advantage is to incentivize without spending real money.

This takeaway here is:

- NFTs have locked liquidity and directly driven betting (trading).

- Washing and rebate are essentially about forming a consistency of interests in key growth nodes, where the greater the turnover, the greater the profit (even for gamblers, it is about generating turnover to earn). In fact, this further ensures controllable kill rates and increases the unit lifecycle GGR. Here, we have discussed the three core elements of gambling:

Fixed odds framework;

Controllable kill rate;

Growth conversion;

Let's take a case study as an example: @0xMJM, which has recently announced its financing, is a blockchain-based modification of a classic mahjong game, which is worth studying.

Due to the limited experience time and incomplete functionality, the following is an incomplete analysis (please bear with us): MJU - a stablecoin equivalent to 10 cents, can be obtained by recharging U.

Equivalent to cash code, can be exchanged for GGR, kill rate and growth conversion logic in games are very interesting, worth careful consideration.

First, let's look at GGR and kill rate. There are currently three types of paid game modes in this game: ladder, spirit battle, and private room. Ladder is a PVP mode, and the game only charges up to 6% of the table fee.

Lingzhan is similar to automated card playing. Users need to place bets when they sit at the table, and the Mahjong rules have fixed odds. In theory, the project party can act as the user's opponent and control the kill rate by arranging "operations" and directly adjusting as the House role.

During this process, GGR = 6% table fee (no operation intervention) + ladder/spiritual warfare user losses (operation intervention) - user winnings (operation intervention). Interesting thing is the mahjong parlor mode, which is the gambling logic of this game:

- Users can rent Mahjong parlors NFTs to start private games, and the higher the level of the parlor, the higher the cost (rental or purchase).

- The private pool is expected to have customizable betting rules.

- Private room rake is based on the mahjong parlor level, and ranges from 30-70% of the table fee.

Unlike the previously discussed washing code,

- The owner of the mahjong hall is the hall owner, who has a pre-sinking cost.- The interests of the hall owner are aligned with those of the official, which is to increase the total turnover and the lifespan of the unit's GGR. The hall owner needs to calculate the NGR, which is the total amount of bets plus the total turnover sharing.

- Total allocation - Total mahjong parlor cost There is an obvious bug here;

- In mahjong games, the hall owner does not act as the banker and does not have a clear edge, making it impossible to control the kill rate.

From the perspective of rake, the rake taken by the platform owner is quite considerable compared to the traditional Macau commission rate. However, there are several factors to consider. Firstly, there is a sunk cost for the platform owner to set up the platform. Secondly, there is a risk of losing money that cannot be controlled. Thirdly, there is no commitment from players to stay on the platform. If I understand the game mechanism correctly, the cost-effectiveness of renting a mahjong parlor NFT is questionable. Of course, if the secondary market price of NFTs can be driven up, that is another story.

普通级：For each registered and coded account, 10% of the banker's advantage (banker wins money) will be returned to the inviter as a rebate.

Advanced Level: 100 registered and coded accounts with a total coding amount of over $100,000, with a 20% house edge rebate.

Red Stick Level: 500 registered and coded accounts with a total coding amount of $1,00,000 or more. Rebates are negotiable.

Here we can see that Rollbit actually uses the classic horizontal push and vertical code model, and promoters have no risk, no upfront costs, and no need to make opposing bets. Its competitors, such as Stake.com, also use similar strategies (with a maximum cashback advantage of 45% for the house). Therefore, as agents, the competitiveness of the @0xMJM house owner mechanism is worth discussing.

Of course, there is also an additional unpopular opinion here: all on-chain gambling or chess and card games, in essence, use growth data to create memes and quickly capitalize the casino, rather than earning revenue like the predecessors of Web2. After all, AG or iGaming may not have the same demands.

For inspiration for Crypto game teams:

- First of all, it is important to understand that crypto players are not like traditional gamers who consume without seeking returns and provide yield to your "ROI participants". Their primary motivation is not just for fun, but rather for the thrill of gambling.

- Utilize the gambling model, determine if GGR is suitable for your project, what is your profit model, and how to control and eliminate risks?

- Learn from the code slaves how to do CX. Macau has already blazed the trail, so don't feel your way across the river.