In the context of blockchain gaming, token faucets refer to mechanics within a game that result in an increase in token emissions (how many new tokens are generated by the player). They can take the form of in-game prize pools, passive token yields, among others. Token faucets have existed in games for decades, however, it was their use in blockchain gaming that gave rise to the term “play-to-earn”.
Having in-game tokens stored on-chain allowed players to easily extract these assets and exchange them for real-world currency. However, when there is more value extraction than value injection (withdrawals are higher than deposits), supply-side pressure can result in rapid token inflation, and ultimately, a crash of the in-game economy.
A general rule of thumb of game design is for token faucets to be balanced against token sinks, or in other words, for there to be ample ways for players to spend their in-game token rewards instead of selling them on the open market.
