The Bitcoin Pizza Problem
If your token appreciates, nobody spends it - design for dynamism before you launch
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 6
- Confidence
- 84%
Lasky and Robbins named this after the famous pizza bought with a handful of early Bitcoin, now worth a fortune - the buyer feels like a fool for having spent the currency. Applied to game economies, the effect is fatal in two directions. First, appreciation kills circulation: an economy needs transactions and turnover, and holders who expect the asset to rise simply refuse to spend. Second, appreciation invites speculators, who buy the assets without ever playing, drive prices up, price out ordinary users and make the game less fun. Because both failures share a trigger, a design that solves one can solve both. Lasky uses this as an explicit deal screen for web3 gaming: incentivising a user not to feel like an idiot for using the token is a key factor, and what got him over the hump on a new EVE-derived game was that the founder had a genuinely interesting solution.
Origin
Named by Mitch Lasky and Blake Robbins in their web3 gaming diligence conversations, after the widely told story of Bitcoin spent on a pizza in the currency's earliest days.
Core principles
- 01The goal of any economy is dynamism - transactions and turnover, not price.
- 02An appreciating currency stops circulating because spending it feels like a mistake.
- 03Speculation attracts participants who never use the product and price out the ones who do.
- 04Both problems have the same trigger, so one solution can address both.
- 05Very few teams have credible answers here, which makes it a high-signal screen.
How to run it
- 1
State the economy's purpose as dynamism
Define success as volume of transactions and turnover rather than the price of the asset. Price appreciation is a symptom, not a goal.
Watch out Teams that celebrate token price are usually already losing circulation.
- 2
Stress-test the hoarding case
Assume the asset rises sharply and ask what a rational holder does. If the answer is hold, your economy has stopped.
Pro tip Ask a current player directly whether they would spend at ten times today's price.
- 3
Stress-test the speculation case
Model buyers who never use the product. In Counter-Strike terms, someone convinced the game will grow simply buys every skin on the open market and lifts the price.
Watch out This is exactly what happened in the first wave of gaming NFTs: owners who never played, and priced-out ordinary users.
- 4
Design the spend incentive
Build a mechanism that makes using the asset feel rewarding rather than wasteful - utility unlocked only by spending, decay on hoarding, or two-currency separation.
Pro tip A separate in-game currency alongside the store-of-value token keeps everyday transactions moving.
- 5
Check that one solution covers both failures
A design that only fixes hoarding, or only fixes speculation, has solved half the problem. The double solve is the mark of a serious answer.
- 6
Use it as a deal screen
Treat a credible answer as the qualifying criterion for investing in token-enabled products. Lasky has seen precious few good solutions.
Watch out Most designs in this category are, in Lasky's assessment, absolute crap.
In the wild
Valve's Counter-Strike skins are purely cosmetic but trade for real money on a Steam-hosted market, with knife skins reaching hundreds of dollars. Robbins points out the latent risk: anyone who believes the game will grow can simply buy skins in the open market as a speculation, lifting prices for players who just want the item.
→ A genuinely liquid virtual economy that also demonstrates the speculator dynamic in miniature.
Early web3 game assets were bought largely by people who never played the underlying game. Prices rose on speculation alone, ordinary players were priced out of participation, and the games themselves were mostly thin wrappers around a marketplace.
→ The category collapsed in credibility, which is why Lasky insists on the double solve before investing.
Common mistakes
Optimising for token price
Appreciation is the trigger for both failure modes. A rising price looks like traction and is often the beginning of a frozen economy.
Ignoring non-playing owners
When holders have no interest in the product, the economy stops reflecting player demand and the experience degrades for everyone who does play.
Bolting the economy on after launch
Incentives to spend have to be designed into the loop; retrofitting them onto a hoarded asset rarely restores circulation.
Is it for you?
Best for
Investors screening web3 or virtual-economy deals, and designers building in-game currencies and tradable items.
Not ideal for
Closed economies with a fixed-price shop and no secondary market, where neither hoarding nor speculation applies.
From the transcript
“the person who spent three Bitcoin back in the early days on a pizza and that those three Bitcoins are in today's dollars worth 75…”
“there's the second problem of speculation when things go up a lot in value it encourages a lot of people to speculate brings in the…”
“the people who are owning these nfts were never even playing the game and you just priced out your average user”
From the episode
Benchmark’s Mitch Lasky and Blake Robbins on The Art of Business in Gaming
Mitch Lasky