This is a transcript of a speech by @hicaptainz at MuChiangmai.
In the past six months, on-chain gaming has been the talk of the town. Let's first examine how other VCs and institutions perceive on-chain gaming. Two months ago, both Paradigm and Coinbase released their predictions for the top 10 sectors in the future. Two of these sectors were commonly anticipated by both: on-chain gaming and RWA. In Paradigm's list, they were described as on-chain games and on-chain treasuries, while in Coinbase's list, they were detailed as on-chain games and Tokenizing Real World Assets. Hence, in the next bullish market cycle, on-chain gaming could very likely become a mainstream narrative.
Given that so many are optimistic about this sector, let's delve into what on-chain gaming actually is. A simple definition goes:
A fully on-chain game refers to a game where all its logic, states (assets and others) exist on the blockchain, implemented via smart contracts. At times, we also use the term "on-chain game" interchangeably. In the literature of on-chain games, we frequently encounter terms like "Autonomous World" or its equivalent, "On-Chain Reality."
At other times, we may come across concepts such as Web2.5 games or GameFi games. What are the differences between them? You can refer to the following table:
To provide a bit more clarity:
- Web2.0 games do not employ any blockchain technology. They are what we typically think of as traditional games.
- Web2.5 games only tokenize the assets on the blockchain, while the game logic is implemented off-chain. These are the GameFi games we talked about earlier.
- True Web3.0 games have both the assets and game logic on the blockchain, and they are termed as fully on-chain games.
At this point, some might question, given the current limitations in the performance of the blockchain, why put all game logic on-chain? I previously tried to answer this from both a narrative perspective (Autonomous World) and a technical one (such as composability and serverless architecture). However, the response didn't resonate well. Hence, I'm now attempting to answer this from a "historical" perspective. But first, let me pose a question: Why the need for DeFi? Think about it for a moment; the answer isn't straightforward.
Let's go back to the period between 2012 and 2018. During this time, concepts like "DeFi" and "Web3" hadn't been popularized yet. The prevailing narrative around cryptocurrencies was "payment." For instance, BTC was perceived as a P2P electronic cash system. And being electronic cash, its primary purpose, of course, was for payment. In this narrative context, a typical hallmark event would be when an online retail giant would announce they're accepting BTC as a payment method, leading to significant market surges.
During this period, the blockchain had not yet incorporated smart contracts, so most of the chains were forks of BTC. Each chain would have its own Native Coin, and most were based on the "Proof of Work" consensus mechanism.
In 2015, Ethereum emerged, becoming the first smart contract platform. Its introduction significantly altered the way ICOs (Initial Coin Offerings) operated. The changes can be seen in the following diagram:
In the early days of ICOs, project teams used BTC as the financing medium. To participate in an ICO, users would send BTC to the project team's address, and then the team would manually send back the "altcoins." At that time, when referring to these altcoins, the term used was "coin." After the advent of Ethereum, the financing medium became ETH. When users participated in an ICO, all they needed to do was sending ETH to the ICO's smart contract address. In return, the contract would automatically issue the respective "altcoins." By this time, when referring to these altcoins, the term shifted to "token." From an investment perspective, this could be seen as a paradigm shift. We moved from "Centralized Investment" to "Decentralized Investment," commonly abbreviated as "DeInvest."
Fast forward to the period between 2019 and 2022, and the foundational infrastructure for DeFi began to emerge. On-chain exchanges like "Uniswap," on-chain lending protocols such as "AAVE" and "Compound," and on-chain stablecoin protocols like "MakerDAO" came into being. Initially, all these on-chain protocols were termed "Open Finance." However, in 2018, Brendan Forster of Dharma Labs introduced the term DeFi for the first time, and it quickly became a global sensation.
So, let's try to summarize DeFi (Decentralized Finance). How has the financial industry integrated with blockchain technology? Refer to the table below:
When we examine the subsequent DeFi projects, they all attempt to "encode financial rules into smart contracts." Initially, the integration was merely about "token issuance" or "tokenization." Later on, it transitioned to the use of "smart contracts," and the narrative shifted from "open finance" to "DeFi."
Similarly, when considering the integration of games with blockchain technology, do we go for "tokenization" or leverage "smart contracts"? If we opt for "tokenization," do we use "fungible tokens" or "NFTs"? It's worth noting that in finance, both money and securities are fungible. However, game assets and characters are non-fungible. This is the underlying reason why we frequently see NFTs in blockchain games but rarely in DeFi.
Let's continue to revisit the history of blockchain games.
Going back to 2017-2020, why choose 2017 as a starting point? That's because CryptoKitties was born in this year. All the kitties were NFTs, and their breeding rules were written into smart contracts. Yet, they didn't issue any tokens. The subsequent period from 2020-2022 was the golden era for GameFi. Several star projects emerged, such as Axie Infinity, Starsharks, Metamon, and StepN. The hallmark of these projects was the use of intricate multi-token systems and NFTs representing game characters. However, they didn't employ smart contracts, rendering them still centralized games (CeGames).
Now in 2023, amidst a crypto winter, it seems 90% of GameFi projects have perished. Is the sole purpose of creating a game just to "issue tokens"? What if the game rules are also encoded into smart contracts? This led us to discover the fully onchain game "Dark Forest." Drawing a parallel with DeFi, perhaps it should be termed "DeGame."
Mirroring the DeFi narrative, we can conclude that fully onchain games can aid in the decentralization and protocolization of games. Decentralization means that the game rules are encoded into smart contract codes, which are typically governed by a DAO. "Protocolization" refers to the process of standardizing specific functions or operational methods. Such standardization implies that the function or method is no longer proprietary but becomes a "public good" or standard that can be widely adopted and used by developers or organizations. Projects in DeFi, given their composability, are often termed "DeFi protocols." Similarly, fully onchain games, due to their high composability, can be termed "game protocols." At this point, the game becomes a kind of "public good.""
Now, let's address the initial question: Why the need for "fully onchain game"? The answer closely mirrors that of DeFi:
- Eternal: No centralized entities or servers
- Trustless: Code is law
- Permissionless: Any people can participate
- Interoperability: Different systems, devices, or applications can communicate and interact effectively.
- Composability: Various components or systems can be combined, laying the foundation for larger or more complex systems.
- Fostering Innovation: Any developers can create new applications or services without having to start from scratch. Avoiding "Reinventing the Wheel".
So, can all types of games be adapted to a fully on-chain version?
Not quite. In my perspective, only those games with the following features are well-suited:
- Games with relatively simple rules
- Games that don't require instant feedback
- PvP not PvE
- An open system
- Online games, not single player games
The term "fully onchain game" is mainly discussed from a technical perspective. Currently, a more popular narrative term is "Autonomous World," which comes from Lattic's Ludens. He wrote a short paper in 2022 to elaborate on his thoughts. You can refer to the specifics here: https://0xparc.org/blog/autonomous-worlds
Moreover, inspired by DeFi, funblock and I also proposed the term "Decentralized Game (DeGame)." More details can be found at this link: https://captainz.xlog.app/The-Evolution-Of-DeGame-And-The-Protocolization-Of-Gaming
That's what I wanted to talk about regarding fully onchain game. However, lastly, I'd like to discuss a bit about the social sector.
Similarly, following the patterns in finance and gaming, when combining social and blockchain, are there two methods? Namely, issuing tokens and using smart contracts. Shouldn't we call social projects that only issue tokens without using smart contracts "SocialFi" or "Web2.5 Social", and those that write social rules into smart contracts "Onchain Social", "DeSocial" or "Web3.0 Social"? Or even "Open Social" or "Autonomous Social"? Let's categorize some of the well-known Social projects.
If anyone is interested in the above concept of "on-chain social", you can dm me. I have some new ideas in this area, and we can exchange thoughts. Thank you, everyone.