Blockchain gaming, a symbiotic fusion of blockchain technology with the gaming industry, has, over the past couple of years, engendered hypes such as Play to Earn, GameFi, and Move to Earn. With the coming of the bear market in 2022/2023, blockchain gaming gradually fell into hibernation. Thus, one is prompted to ponder how narratives would evolve in the succeeding bull market and whether the future of blockchain gaming equates to launching AAA-grade games with tokens and NFTs. I propound a perspective in this discourse: the ensuing bull market could potentially be steered by the narrative of DeGame, thereby actualizing the protocolization and decentralization of gaming.
The fusion of blockchain and finance: The evolution of DeFi#
2012-2018:
Let's first take a retrospective view at the evolution of DeFi. If we were to consider 2018 as the inception of the previous bull market winter, we can discern a clear trajectory. In the bull market preceding 2018, the mainstream narrative of cryptocurrencies was "payment", that is, the reason to build public chains was to "issue coins", and the purpose of "issuing coins" was "payment". The first-generation POW-based public chains generally lacked smart contracts, leading to a situation where each public chain had its own coin, which became the market norm. Ethereum, which emerged in 2016, was the first to introduce the concept of smart contracts, thereby marking a watershed moment and becoming a hallmark of second-generation blockchain. However, due to market inertia, the use of smart contracts within the industry was limited to "coin issuance", or "automated ICOs", or "decentralized investment". Investment is a typical financial activity where users give their funds to a centralized entity (an organization or individual) in exchange for a corresponding return. Before the advent of Ethereum, users typically used BTC as their investment capital to acquire coins from a particular public chain. However, this centralized method was particularly susceptible to various forms of deception: the financiers could easily abscond after receiving the BTC. Ethereum changed all this, in a two-way sense, including both the project side and the investors. Project teams no longer needed to expend significant resources to create a brand new public chain to issue a coin; they simply needed to create a "coin issuance" smart contract. At this point, "coins" became "tokens". Investors no longer had to worry about not receiving coins after giving out their investment capital, because they just needed to send ETH to the "ICO contract" and they could receive "tokens" within a few minutes. I vividly recall my first participation in an "EtherDelta" public offering: I opened my wallet, sent 10 ETH to the EtherDelta ICO contract address, and received EDT a minute later, which subsequently plummeted to zero. Although scams persisted, the mode of investment underwent a significant upgrade, transitioning from "Centralized Investment" to "Decentralized Investment", or DeInvest for short.
2018-2022:
Indeed, 2018 was a watershed year as several crucial infrastructures for DeFi started to emerge. It was also the start of the previous crypto winter, marking the end of the "payment" narrative: many traditional e-commerce platforms removed Bitcoin as a payment medium, BitPay gradually faded, and while everyone knew Coinbase as a compliant exchange, they forgot that it was once a highly regarded "payment processor". This was followed by a significant drop in cryptocurrency values, with many tokens losing 90% of their value, and then another 90%. But within this winter, the seeds of DeFi were also germinating. Uniswap, Maker Protocol, and Compound were among the first explorers
The Integration of Blockchain and Gaming Industry: Dawn of GameFi#
2017-2021
One can glean insights from the developmental journey of DeFi to envisage the future of blockchain games. Assuming that the amalgamation of blockchain and gaming industries can be distilled into two aspects - tokens and smart contracts - it is imperative to acknowledge the variants of tokens. In this context, token does not merely entail fungible tokens, but also encompasses non-fungible tokens (NFTs). Therefore, one can discern three facets: smart contracts, tokens, and NFTs. The underlying logic lies in the fact that currencies and bills used in finance are fungible, whereas in-game assets and characters are non-fungible.
The initial year, 2017, is chosen due to the advent of CryptoKitties. Employing NFTs for in-game assets, CryptoKitties incorporated smart contracts for aspects like the breeding system. Although no tokens were issued, the team, now called Dapper Labs, launched their own blockchain and coin, FlOW. Concurrently, other "blockchain games" merely utilized gaming as a means to issue tokens, without incorporating NFTs or smart contracts.
2021-2022
The revamped Axie Infinity took off in 2021, effectively combining smart contracts, tokens, and NFTs. Breeding rules were embedded in smart contracts, in-game assets were converted into NFTs, and a dual-token system was established for governance and rewards. Axie Infinity introduced a battle system on top of CryptoKitties' breeding system, but the battle mechanics were not incorporated into smart contracts. Subsequent GameFi projects, such as Farmers World, Cryptomines, Starsharks, and Metamon, simply merged NFTs and tokens, without employing smart contracts, thus becoming true GameFi (a fusion of gaming and finance). In these cases, centralized entities managed and maintained game rules, in-game assets utilized NFTs, and tokens represented rewards and equity. Traditional GameFi is, therefore, fundamentally centralized gaming (Centralized Game), and if a game has weak playability and tokens are merely used for play-to-earn purposes, the project overall resembles a Ponzi scheme disguised as a game.
2022-2023
With the onset of the crypto winter in 2022, nearly all GameFi projects experienced a downturn. So, where will blockchain gaming head in the future? Many argue that the quality of current blockchain games is subpar compared to traditional games, and games lacking playability essentially become Ponzi schemes. How can playability be improved? The general consensus is to create high-quality AAA games, which entail sophisticated graphics, intricate gameplay, substantial capital investment, and prolonged development cycles. Consequently, many AAA studios have attracted significant venture capital funding. However, these centralized games remain just that - centralized and kind of GameFi. One prevailing narrative is that the adoption of NFTs fosters the privatization of in-game assets; but for existing centralized games, this assertion is patently deceptive. If game servers are shut down, NFTs are rendered worthless, making privatization futile. Before investing in GameFi projects, consider the following questions:
- Crypto enthusiasts represent a minority, with an even smaller subset interested in gaming. High-quality games need to appeal to audiences beyond the crypto community to expand the player base.
- Issuing tokens is akin to a single game raising funds through an initial public offering (IPO) but with the IPO process preposed. In many cases, developers rug-pull after the IDO/IEO.
- If tokens represent equity or dividend rights, but the project employs a play-to-earn model with no external cash flow, the business model resembles a Ponzi scheme and is unsustainable.
- From a gaming economics perspective, only open-world MMORPGs are suitable for issuing in-game tokens as a replacement for in-game currency circulation.
- Non-MMORPG games should only utilize NFTs to revolutionize in-game assets, and refrain from issuing tokens for in-game circulation.
DeGame: Protocolization and Decentralization of Gaming#
So, what is the future direction of blockchain gaming, or even the mainstream narrative of the next bull market? I posit that it is DeGame (Decentralized Game): the game rules are written into smart contracts, the game items utilize NFTs, and governance tools can use either NFTs or tokens. The token can be a single coin or multiple coins, depending on the game type. DeGame, also popularly known as Onchain Gaming, is more aptly described, in my opinion, by the former term.
Just as DeFi realizes true automation, decentralization, and privacy in finance, compared to CeFi, DeGame can realize the same in gaming compared to CeGame. It paves the way for a completely open Metaverse. Furthermore, it offers the possibility of composable game rules, not just composable game items. In traditional game development, many common game features are reusable, negating the need for individual studios to reinvent the wheel. This gave rise to "game engines". Similarly, due to the composability of smart contracts, Web3 gaming can achieve a similar "on-chain game engine". In DeFi, we see many projects named as "XX Protocol". Following the same logic, if game rules are written into smart contracts, due to their open-source and automated nature, on-chain games will become new "game protocols". Other teams can build upon these protocols for customized development, creating an open, decentralized Metaverse that is more vibrant.
Given the constraints of blockchain's inherent performance, what types of games are suitable for full on-chain implementation? My summation is:
- Games with relatively simple rules
- Games that don't require instant feedback
- Games with a social factor
- PvP not PvE
- An open system
- Online games, not single player games
Regarding genres, turn-based RPGs, puzzle ACTs, simulations, adventures, card games, sports management, sandbox, gambling, open world gaming, and board games are all suitable.
Although GameFi projects that only issue tokens (including regular tokens and NFTs) and don't use smart contracts are still so-called centralized games (CeGame), I call them Web2.5 games. They are fundamentally no different from traditional Web2 games. Only fully-on-chain games are true inheritors of blockchain's decentralized philosophy and are indeed Web3 games. However, given the current investment trends from numerous VCs, Web2.5 games will continue to be development in the future, complementing DeGame. Similar to the current relationship between CeFi and DeFi, the crypto sphere has giants like Binance, a centralized exchange (CEX), as well as Uniswap and dYdX, decentralized exchanges (DEX). Similarly, in the future, blockchain gaming will have AAA-level centralized games like "Big Time" (CeGame), and open decentralized games like "Dark Forrest" (DeGame). Of course, only DeGame will persist on-chain, and its NFTs will theoretically always have value.
Given the current near-blank slate of on-chain games, various game project parties can attempt DeGame in various genres. Based on this, they can mutually call and combine to gradually form an "on-chain game engine", laying the groundwork for creating more advanced DeGames in the future. For instance, fighting systems, gaming systems, strategic feedback systems. It's worth noting that, while Web2 game engines primarily provide rendering engines, physics engines, computer animation, scene management, etc., the functions provided by Web3 on-chain game engines should be complementary. This phenomenon has already been observed in the community development activities of the well-known on-chain game Dark Forest. Similarly, OPCraft, an on-chain game demonstrated at Bogota Devcon not long ago, also achieved community-based customization of some game features or components within a short two-week demonstration period. In future on-chain games, plugins or code contributed by players or the community may become an increasingly important component of these games, potentially even surpassing the importance of the official teams.
If DeGame can truly lead the next bull market, its narrative has sufficient uniqueness and advantages over traditional games. It can lead a broader upstream and downstream industry, such as guilds, high-performance public chains, privacy computing, VCPE, NFTs, DeFi, Metaverse, SocialFi, and create a widespread money-making effect. These are the two most indispensable elements to form a bull market.
In other words, DeGames could potentially reshape the landscape of the gaming industry. Their inherent decentralization and blockchain-based mechanics offer players more control over their gaming experience and the assets they accumulate within these digital worlds. It offers a promising and exciting future direction for both gaming and blockchain technology, and it will be fascinating to see how this space develops in the coming years.
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https://captainz.xlog.app/DeGame-de-yan-bian-he-you-xi-de-xie-yi-hua