In the latest episode of the Blockchain Gaming World podcast, editor-in-chief Jon Jordan talks to Pixels’ CEO Luke Barwikowski about how the Ronin social RPG has been building out its rewarded offer network both for Pixels itself, the games in its wider ecosystem, and how it also plans to open out the platform for any game developer – whether web2 or web3 – to use.
BlockchainGamerbiz: How have you found 2025 so far?
Luke Barwikowski: I think since I’ve been building, this is probably the worst market sentiment I’ve seen in the space. This is worse than the FTX crash or any other black swan event. I’m seeing builders who have been here for a long time starting to lose faith. But there’s also an optimistic side.
I think why people are feeling this way is because retail has abandoned gaming coins completely. Token performance when it comes to any gaming coin and most alts as well have not had the performance. My take is that retail has been burned too many times by these altcoins. There’s no narrative to buy them.
Meme coins really accelerated the death of these altcoins. You used to be able to buy an altcoin and hold it and it would go up for a little bit. The meme coin cycle of coins losing their value within 15, 30 minutes killed retail exposure. Retail has a very negative sentiment on crypto.
What we really need to do is go out and attract people in web2 with the really cool stuff that we’ve learned over the last four to five years as an industry. Because we have seen sparks of brilliance in this industry and things that really worked, and things that are better than their web2 counterparts. We haven’t marketed this right or at least presented them in an approachable way to these web2 users. That’s a lot of my focus moving forward.
Building blockchain games is a lot harder under these conditions.
Yes, a lot of web3 gaming was subsidized by the speculation layer and now that speculation layer has basically dried up. Without speculation, you have to build something that’s fundamentally sound and it’s very difficult to do and pull off. I think that’s why a lot more web3 gaming teams are struggling too, because the interesting part about web3 is that in theory, speculation could bootstrap a sustainable ecosystem.
That was our theory at Pixels. We knew the initial stuff was unsustainable, but we were trying to use that unsustainability to move us into sustainability. It’s taken us so long to do it. We have been grinding on this, trying to turn the economics to be sustainable, for the last two years.
Finally now we’re making good progress. It takes a ton of time. It takes a ton of experimentation and a ton of things to try out. That’s why a lot of the builders in the space are starting to feel a little discouraged too, because the technical work required to actually build something that can be sustainable, the game design, there’s so many different pieces that have to come together. It’s actually completely unrealistic to expect any team to be able to pull it off by themselves.
And while you’re building, you still need players who are prepared to spend time and money on a work-in-progress experience.
We were digging through data a year ago when we released Pixels Chapter Two. That was one of the things that made me realize that we needed to change things drastically. We started analyzing the user data, where spending was coming from. It was such a small percent of our users that were actually spending. We knew we needed to make big changes into the game.
Our game was loved in early 2024. Obviously it’s super fun to make money playing a game, but the issue is the economics weren’t dialed in where we were making any money. If you keep that up for too long, it’s just not going to work. Either the token will crash in price or the business will run out of money. The thing that people love will go away regardless. We knew we had to change.
It was actually shocking to me how misbalanced some of the economics were in those beginning stages because we had some smart systems in place. We had earning systems that were much more advanced than anything else that web3 gaming had seen at the time, such as our task board. Even segmented tasks where we were targeting different users.
We started diving into the data around monetization and we saw 1% of our users were taking 50% of the rewards. The percentage of net spenders were quite small. This churned a bunch of the active users. This was mostly intentional. When each user is losing you money, it makes sense to start churning users until you can build that base up.
That’s what we’ve done over the last year. We started tweaking the economy, making changes to the gameplay, making changes to how we give out rewards, not caring about DAU. Caring more about the macro. We’ve been talking about this metric called Return On Reward Spend. It’s a really easy metric to understand at the beginning stages, but there’s more that you need to think about afterwards.
We’re probably going to bring out a new metric although I don’t know what to call it yet. But Return On Reward Spend is basically a measurement of how many rewards your game gives out versus how much spend is inside of your game. It gets a little bit more complicated when you have to also think about blending it in with your user acquisition costs, if you’re grinding paid UA. Then Return On Reward Spend is more of a retentive mechanism than like a UA mechanism.
But the cool thing is Pixels has crossed Return On Reward Spend more than 1 over the last two weeks after content changes and some game economy changes. We have a really big update coming out called Chapter 3 that’s supposed to boost it even more. So, over the past two weeks, we’ve been consistently seeing a Return On Reward Spend of 1-1.05, so a 5% margin.
How sensitive is this to being able to correctly target users?
We’ve been building this tech solution for the past 18 months, which is essentially a rewarded offer system that can hype target the right types of rewards to the right types of people. It does a ton of automated testing. We’ll create a bunch of different offers. It’s like the TikTok algorithm where we’ll start to test specific offers, the specific types of people, and analyze the results to maximize the result that we want, which for us right now, is that higher level of Return On Reward Spend.
But there are other interesting things you can do with it too. If you see a particular set of users who you want to retain inside of the game longer, you can send them a targeted offer. If you have a group of users who we call lapsed spenders, and you want to re-engage them, it’s a great system for that. It’s a great system to convert users into first time purchasers, which really increases the LTV of the user if you can get them to spend for the first time. That system has been wildly successful. We started rolling it out two to three weeks ago and the results that we’ve seen so far have blown our expectations away.
From first principles, I think it ends up looking like a loyalty system or a web2 cashback system. It’s a way for us to distribute earnings in a more precise way where we’re not giving them to bots, we’re not giving them to people who are net negative for the game and the ecosystem. We’re actually able to reward people who help and benefit the game.
That tech stack is extremely hard to build. We have a whole data science team, a whole infrastructure team, probably half of the team resources have been spent on this infrastructure, so it’s exciting because we’re finally starting to see some of those results and see it work even better than we expected.
In the next month, we’ll probably be making an announcement that anyone who wants to use this tech can do that. This might help the industry with that crucial problem of rewarded play in the way they want to.
My end goal is I think we can use this to turn any game into a web3 game. That’s how it works. There are web2 connections. We’re experimenting with the types of rewards we give out. One thing we’ve noticed as we’re starting to run some paid UA campaigns is crypto is very off-putting for normal users. We tested certain ads where we offer a crypto reward or a gift card, Robux or V-Bucks and those web2 rewards are so much more effective at getting in new users. And the cool thing is everything that we’ve been doing is still powered by web3.
What does this mean for the PIXEL token?
A key realization we made a few months ago is we were trying to force partners to use our tokens. We thought more games using our tokens, that’s more token utility. But I realized that doesn’t really matter at the end of the day. What matters is the revenue behind any of these games, and that we’re able to lift the revenue of these games. If we’re able to build out revenue streams, we can use that to help support the token.
We have a pretty elegant staking solution right now, where you can stake tokens to certain games. You can think about the PIXEL ecosystem like a network or a protocol, where it needs data. We need data to help build out this offer system, because this offer system will help increase the ecosystem’s reach, visibility, and also drive revenue to the ecosystem. So the ecosystem is willing to pay for this data, essentially.
We pay these games or their stakers through the PIXEL ecosystem the revenue made. And the revenue can be anything. As long as stakers of the PIXEL token are receiving some net benefit, it helps us get the security and the data that the ecosystem needs to build out a solid network that can distribute rewards in an effective way. The revenue can be USD, USDT, PIXEL, we’re happy to take any of it essentially.
In the long-term, I can see the PIXEL token becoming stake-only. We probably will even phase out rewarding the token in the long run and essentially stop emissions and just have the token be stake-only.
How does the vPIXEL token fit into this?
We started rolling that out silently. We didn’t really talk about it. vPIXEL is a spend-only token so we can give it out as reward and you won’t be able to sell it on an exchange like Binance. So there’s some benefits to that for the ecosystem, right? It doesn’t add any sell pressure to the token. But if you love the Pixels ecosystem and you want to spend the token somewhere, you can. You can spend it inside the game. You can think about it like a hybrid loyalty currency. It’s semi-liquid.
I like to view in-game rewards on a scale of liquidity. If you got a soft currency inside of a game. You can’t spend it elsewhere. You can not even spend that on everything inside of a game, like if you just have coins in Pixels. If you have an in-game item, sometimes you can trade items. They’re a little bit more liquid and they’re fun because you can trade them for coins. If you get an NFT you can trade down a secondary marketplace That’s more liquid, but maybe not as liquid as a token as you still have to list it.
vPIXEL sits somewhere in this range of US dollars to in-game coins. What I was wondering is how much people would want it. So we used our offer system, and we started A/B testing, giving out vPIXEL versus PIXEL for the same types of rewards and offers. And, honestly, it’s been more effective than I thought. We didn’t want to roll out too harshly but it’s effective enough that we’re probably going to start rewarding it more. There might even be some in-game mechanics we’ll start to use pretty soon.
Do you think audiences fully understand what it is?
There are ways to skin it so that it’s not so scary to users. In our game, when we give out vPIXEL, it looks like the other token. When you go to cash it out, you can’t cash it out, basically. But you can take it onchain and you can stake it. So if you are like a more advanced user who knows this stuff, then you can do some of the onchain stuff where you withdraw it, you stake it, and then you can earn yield from staking that token, which is cool. But if you’re just a normal user, you can just spend it inside of the game like you normally would.
Can you tell us about Pixels Chapter 3?
The gameplay of Pixels Chapter 3 isn’t groundbreaking. It’s a different system that we’re trying out, with some light competitive gameplay. The Union system is a faction system. Users can join a faction for free, unlike our guilds. Our guilds were paywalled, and we didn’t see as good a participation behind the paywall as we had wanted to. So it wasn’t the right thing to use here. And there were too many guilds. You had to talk to people to join a guild.
Unions are something a free-to-play user can join instantly and not have to talk to anybody or socialize. And we can create competition amongst these factions or these unions inside of the game. It’s a small, light competitive loop where unions will compete for first, second, and third place prizes. The winning union will get paid a larger part of a prize pool, second place will get paid less, third place might get consolation items inside of the game.
And it’s ongoing. It’s not just an event. It’s going to stay in the game forever. We’re doing dynamic leaderboards. The prize pools come from a function of spending inside of the game, so it’s much easier for us to tweak the economics and make it so that it’s slightly profitable for the ecosystem. We’ll probably end up taking something like a 5 or 10% rake inside of the gameloop.
It adds light elements of skill-based gameplay, but it’s not super heavy. Pixels is still a farming game. It’s still a little grind-oriented. This is more of an experiment so that we can see if this model is fun for users. And if it is, then we’ll double down and start to build out more competitive gameplay loops that might have more depth of skill.
It’s good you’ve made something lightweight to see if it works. Game designers tend to launch features that are too complex, I often think.
Exactly. This wasn’t an issue with Pixels in the beginning stages. We were a team that basically got to where we were from brute force, where we would release things very early without so much polish. That worked really well for us.
But when we started getting a large userbase, I thought we should slow down and think about things more and try to build out perfect systems. That was a mistake so we made some changes to the team and we decided, we’re gonna go back to our roots when it comes to that philosophy. Our team’s strength lies in quick updates, experiments and speed of iteration. It’s been so much more effective. Ever since we changed those tactics, we’ve seen a lot more success getting towards our goals. It’s about figuring out the systems first, figuring out the economics first, and then we can make the gameplay better and more interesting when we know we have a model that works.
The issue with web3 gaming is not the fidelity of games, in my opinion. There are high fidelity games inside of web3 now, like Off The Grid but they haven’t really figured out the economic systems. And that’s where the experimentation really needs to happen in order for a web3 game to be sustainable, profitable, and be able to start to scale.
That’s the next phase of what we are thinking about a lot. When we have this base of sustainability, it’s with less DAU, it’s with less top line revenue, but it is better for cash flow or the ecosystem. Now we’re going to need to start to scale those numbers back up. We did $20 million revenue in 2024. This year it’s going to be less, but this year it’ll actually start to be sustainable or profitable for the ecosystem. So it’s more positive for that reason.
Our net emissions from gameplay were quite high last year. We’re going to end this year with net emissions being negative. They won’t be super negative. It might be on the order of a million tokens a month, two million tokens a month. But the idea is to start to scale that, getting new users and getting the right new users too.
We’re running paid UA experiments with this new app that we’re working on called Chubkins. It just released in early access last week. It’s geo-blocked to the US and it’s just in early access only on Android, but we’re learning so much from scaling this with paid UA; how we position the real money aspects of the game; how we position rewards to these users. Everything that we’re learning from this game we’ll also take into the core game when that’s ready to start to scale.
Why did you want to launch a new app that’s unrelated to Pixels?
This is a very casual game but it’s a game that can be very viral if we are able to execute well. On the high level it’s basically a social Tamagotchi app where you have to raise a pet with another user.
We’re not going to emphasize anything to do with crypto inside of it, but we will emphasize rewards. One of the reward types will be a crypto cash-out. It’s going to be powered by this new earning system that we’re building out. The only way to earn will be through this smart earning system that we started rolling out inside of Pixels and the rest of the ecosystem. It’s nice because we can tweak the rewards in a way that are from the very beginning, sustainable to the ecosystem.
There’ll be bonuses for referring friends and getting them to play with you, creating content. We have systems where you’ll be rewarded for hitting certain impressions of sharing content on TikTok. There also are rewards based on milestones that are helpful for monetization or for retention, like day one, day seven, day 30 rewards. There might be interesting collection mechanics that we add rewards to. But the whole point is we introduce all the concepts that we’ve learned about from Pixels into a way more digestible format.
I don’t want anybody to be put off by the fact there might be crypto elements. We want to take the best elements of play-to-earn and bring it to a normal audience. That’s my theory and thesis. I think that we have seen in web3 how crazy-effective play-to-earn can be and most normal users haven’t really been exposed to this yet. So I think when we show play-to-earn through a fun game experience to a normal audience not familiar with setting up wallets or crypto, it’s going to be very interesting to them.
It’s interesting you seem to be the only person who still talks about play-to-earn and still believes it can be a big marketing option for sustainable blockchain games.
Yes, and we’ll talk more about the reward system too. We’re also going to have a user-facing component. This whole reward system will probably launch as a standalone app. It’s going to be similar to some of the stuff you might see in web2 based on rewarded play. We’re going to have our own take on it.
