The Future of Web3 Gaming: Do Games Really Need a Blockchain?

Author: DEREK LAU Compiler: Leia

**Do games really need a blockchain? **

Blockchain technology brings about a paradigm shift for game developers and players. Is it really?

What is something that can only be done with the blockchain and cannot be achieved without it?

Do the benefits of blockchain really outweigh its inconveniences, such as poor user experience and slow transaction speeds?

These are problems that our industry is still struggling to solve. So far, there is no clear model that can well coordinate game design, business models, and player motivation. That's why this field is both exciting and difficult for us.

Next, this article will share why blockchain can help games, as well as some rebuttals on this issue, and finally attach personal views.

It is strongly recommended that you think deeply about this issue yourself. A strong belief in the blockchain is very important, otherwise you are probably better off making a free to play or console game with no digital assets.

Opportunities and challenges brought by Web3

A. Player Opportunities

The benefits that Web3 brings to players and game developers are different, and it is necessary to distinguish between the two. First let's look at the main advantages for players:

1. Ownership increases player motivation

In the traditional game mode, players often spend a lot of money to buy in-game items, but they cannot actually own these items. Blockchain, however, gives them the right to own, trade, resell, and even transfer items between games.

Questions like this are often heard:

Imagine having two identical games: one that lets players resell their skins, and one that doesn't. Which one will players prefer?

Examples are as follows:

1. Paper card games like Magic the Gathering or Pokemon, where players already enjoy trading and collecting. And blockchain card games like Gods Unchained and Skyweaver bring the same experience online, but with less resistance to transactions and the authenticity of the cards can be proven.

2. As seen in massively multiplayer online games such as Albion Online and Runescape, players have experienced the joy of building in-game wealth and fame through strategic play. Web3, on the other hand, gives players more rewards in terms of accumulating fame and fortune, and games like Embersword and Mirandus are building that experience.

3. The player has developed a strong emotional attachment to the character, especially in an RPG like Genshin Impact or Fate Grand Order. And true ownership and customization can take that emotional dependency even further, which is what games like Guild of Guardians and Stella Fantasy advance.

4. Players love "game records", and now they can "own" some of them. Like owning that gun or deck of cards that won the world championship.

5. Players enjoy achieving in-game achievements, such as winning medals or top prizes. Turning these achievements into permanent collectibles allows them to keep their records even if the game closes the database.

2. Decentralization promotes the emergence of game content and gameplay

Decentralization allows creators and players to build content on top of games without fear of being shut down. Not having to worry about being shut down is important because it greatly reduces the risk of investing in the ecosystem. The lower the risk, the more attempts can be made in the game ecosystem to create value, thereby bringing a better experience to players.

Examples are as follows:

(1) Both Tokentrove and Aqua are markets built by third-party developers. It can be said that they are better than the original developer's Immutable X Marketplace in terms of user experience. This also allows them to provide a better experience for traders when running their business.

(2) Games like Sandbox are based entirely on user-generated content (“UGC”) and hope to replicate the experience of Fortnite creators or Warcraft III map editors and reward creators and players alike. Its core idea is to provide players with a better gaming experience by providing better incentive mechanisms to give creators more rewards.

(3) On-chain gaming teams like Playmint and Proof of Play are trying to build autonomous worlds where developers can contribute to how the game works, which will create new gameplay and a better player experience.

B. Opportunities for Developers

Now, let's see what are the main advantages for developers.

1. New business model

Blockchain allows game developers to experiment with new business models, such as selling NFTs or issuing in-game tokens, thereby providing a competitive advantage.

Examples are as follows:

(1) Web3 allows developers to use a Kickstarter-like model to raise funds for the initial development phase while providing exclusive assets to early supporters. We took this approach with Guild of Guardians and raised $20 million by selling NFTs before the game launched.

(2) Axie Infinity tried the concept of "play-to-earn" in the game, using token incentives to quickly attract a large number of new players, the number of users exceeded 2 million, and the 30-day retention rate reached 70% . While this economic model was not sustainable and eventually led to a death spiral, it was a good example of how Web3 can be used to add advantages to game distribution and retention.

(3) Gods Unchained, an operating game, currently has a current market value of its token (GODS) of $85 million (as of June 6, 2023). This equates to a multi-million dollar marketing budget for the game, and the team has gone through multiple iterations to quantify the impact of rewards on player behavior.

(4) Among the advantages brought about by decentralization, the most interesting one is the "Web3 Guild". A guild is a business that forms around playing Web3 games, usually linking investors with a lot of money with players who have a lot of time. Organizations like Yield Guild Games have raised a total of $500 million in funding, showing significant interest in building decentralized businesses around Web3 games.

2. Composability and Open Source

The open-source nature of blockchain allows game developers to grow their games beyond traditional models. This encourages a culture of engagement where users feel confident enough to build a business around the game knowing they won't be shut down at will.

Examples are as follows:

(1) Analysis service providers like Helika combine off-chain and on-chain data to analyze player behavior and help publishers better understand, retain, and generate revenue from players.

(2) GUDecks This website builds meta-deck lists and provides analysis for Gods Unchained. Takes a 10% commission on all sales, generating a six-figure income for this third-party developer.

(3) Guild of Guardians has a similar referral reward mechanism (10% of the recommended person's consumption is used as the referrer's reward). In this case, the referral mechanism is on-chain, so anyone in the world can use it. Some have earned around $500,000 through the referral mechanism.

3. Promote the community

So far, Web3 has shown its ability to develop evangelists in the community. This is because Web3 projects typically start building communities early on and grow with them. Additionally, community members often own NFTs, giving them a sense of ownership, a sense of pride, and a willingness to support the games they love.

Examples are as follows:

(1) Bored Ape Yacht Club has built a huge community, which makes them one of the most well-known NFT projects. Community members have developed various events like offline meetups, fast food restaurants, yacht parties, music videos, etc., all inspired by the brand.

(2) Other games like Illuvium, Guild of Guardians, Axie Infinity have built a core base of loyal supporters who are emotionally and financially invested in the game in anticipation of seeing the project succeed. This group is actively vocal on social media, voicing their views on what games should do, and eventually becoming advocates for the game.

Despite the advantages mentioned above, people still criticize the application of blockchain in games. These challenges are not trivial, and it is not certain that all of them can be solved.

Challenges for Player C

1. Didn't solve any real problem of the player

Critics will argue that blockchain doesn't solve any real player problems. They argue that players generally don't care about owning digital assets and trust developers to manage the in-game item economy. Furthermore, they argue that ownership and portability mean little if the game can still be closed, which means interoperability has no value.

2. Real money will destroy player motivation

Making in-game items tradable gives them real-world value and can introduce unnecessary stress into activities meant to be relaxing. The extrinsic rewards of assets may even lower player satisfaction. Also, giving players the ability to buy anything can ruin the gaming experience, as the element of discovery and grinding can be very important in some games. A common example is the Diablo 3 auction house, through which players can "skip" grinds, which ruins the core gameplay experience.

3. Poor usability and scams

Blockchains can be slow and complex to use, requiring a lot more point and click than players are used to. This can put off many players. And for some games, the rewards of real money will attract many bots and scammers, which is likely to bring a negative experience for players.

Challenges for D developers

1. Higher development costs

Integrating blockchain technology into games is costly. This is partly because blockchain is still a new technology (expect to reduce the cost of the technology over time), but partly because it will add additional costs on top of developing a good game. This means that Web3 games may be more expensive to develop than Web2 games.

2. Negative views (environmental issues, scams)

Some blockchains consume a lot of energy, causing players to worry about environmental protection. In addition, many players have a negative attitude towards NFT and cryptocurrencies, they believe that these are scams and prefer to keep their distance.

3. Self-competition in the secondary market

**The essence of Web3 is that assets can be traded between players. **This leads to self-competition - meaning players and game developers compete for revenue. Competing against itself is a challenge, as it's unclear what "mix" of revenue a studio should choose, which may vary by audience or game design, and it's also uncertain whether Web3 games are actually more profitable than Web2 games.

in conclusion

Despite blockchain's ability to have a significant impact on the gaming industry, there are still many hurdles to overcome.

There is currently no consensus on what exactly a viable "model" in the games industry looks like, or whether there is one.

My personal opinion is that blockchain has great potential in gaming as it can bring real-world "tradability" into the realm of digital entertainment. Achieving these, however, requires thoughtful innovation and a strategic focus on creating unique gaming experiences rather than simply replicating existing game designs. This is necessary to make the extra friction for investors, publishers, studios, and players worthwhile.