This text is the transcript of my speech on MuChiangmai.
In the past six months, blockchain games have been highly sought after. Let's take a look at how other VCs and institutions view blockchain games. In the past two months, Paradigm and Coinbase have both listed their top ten promising sectors for the future, and two of them are commonly favored: on-chain games and RWA. Paradigm's list includes on-chain games and on-chain treasuries (i.e., national debt), while Coinbase's list includes on-chain games and tokenizing real-world assets. Therefore, in the next bull market, on-chain gaming is likely to become a mainstream narrative.
Since so many people are optimistic about this sector, let's first understand what blockchain games are. A simple definition is as follows:
A fully on-chain game refers to a game where all game logic and assets are on the blockchain and implemented through smart contracts. Sometimes, we also use the term "on-chain game" to refer to it. In the literature on on-chain games, we often come across terms like "Autonomous World" or equivalent "On-Chain Reality."
At other times, we may come across concepts such as Web2.5 games and GameFi games. What are the differences? You can refer to the table below:
To explain briefly, Web2.0 games do not use any blockchain technology, referring to traditional games. Web2.5 games only tokenize assets, while game logic is implemented off-chain, as mentioned earlier, these are GameFi games. True Web3.0 games have both assets and game logic on the blockchain, known as fully on-chain games.
At this point, someone may ask, why put all game logic on the blockchain when the performance of the blockchain is currently low? Previously, I tried to answer this question from the perspective of narratives (autonomous world) and technology (composability and serverless, etc.), but the effect was not good. So now I'm trying to answer it from a "historical" perspective. First, let me ask a question, why do we have DeFi? You can try to think about it yourself, and the answer is not that simple.
Let's go back to 2012-2018. During this period, we did not have concepts like "DeFi" and "Web3". The mainstream narrative of cryptocurrencies was "payments." For example, BTC was considered a P2P electronic cash system, and electronic cash is, of course, used for payments. Under this narrative, a typical feature was that whenever a major online retailer announced that they would accept BTC as a payment method, the market would soar.
During this period, blockchain had not yet introduced smart contracts, so most chains were forks of BTC. Each chain had a native coin, and most were based on proof-of-work (PoW).
In 2015, Ethereum was born as the first smart contract platform. Its appearance greatly changed the operation of Initial Coin Offerings (ICOs). The changes are shown in the following figure:
In the beginning, ICOs used BTC as the fundraising medium, and participants had to send BTC to the project's address, and the project would manually return the altcoin. Speaking of altcoins, they were referred to as "coins." After Ethereum appeared, the fundraising medium became ETH, and participants only needed to send ETH to the ICO contract address, and the contract would automatically return the corresponding altcoin. At this time, altcoins were referred to as "tokens." From an investment perspective, this can be considered a paradigm shift from "centralized investment" to "decentralized investment," abbreviated as "DeInvest."
Entering 2019-2022, the infrastructure for DeFi began to emerge. For example, the on-chain exchange "Uniswap," on-chain lending protocols "AAVE" and "Compound," and on-chain stablecoin protocol "MakerDAO." Initially, all on-chain protocols were called "Open Finance." In 2018, Brendan Forster of Dharma Labs first proposed the term DeFi, which became popular worldwide.
So, let's try to summarize DeFi. How is the financial industry combined with blockchain technology? Refer to the table below:
Looking at later DeFi projects, they all try to "write financial rules into smart contracts." So, the initial combination was only "issuing coins" or "tokenization," and later transitioned to "using smart contracts," and the narrative changed from "Open Finance" to "DeFi."
Now let's consider the combination of games and blockchain technology. Should we "tokenize" or use "smart contracts"? If it's "tokenization," should we use "fungible tokens" or "NFTs"? It should be noted that in the financial industry, currencies and securities are fungible, while game assets and characters are non-fungible. This is why NFTs are commonly seen in blockchain games but less so in DeFi.
Let's continue to review the history of blockchain games.
Going back to 2017-2020, why choose 2017 as the starting point? Because CryptoKitties was born in that year, and all cats were NFTs (they are also the inventors of NFTs), with breeding rules written into smart contracts. However, they did not issue coins. In the following years, 2020-2022, it was the heyday of GameFi, with many star projects such as Axie Infinity, Starsharks, Metamon, and StepN. These projects are characterized by the use of sophisticated multi-token systems and NFTs to represent game characters, but they do not use smart contracts. So they are still centralized games (CeGame).
Now it is 2023, still in the crypto winter, and it seems that 90% of GameFi projects have died. Is making a game just about "issuing coins"? What if we also write the game rules into smart contracts? That's when we discovered the fully on-chain game "Dark Forest." Following the DeFi approach, it might be called "DeGame."
Following the DeFi approach, we can draw a conclusion that fully on-chain games can help games achieve decentralization and protocolization. Decentralization means that game rules are written into smart contract code, and the code is usually managed by DAOs. "Protocolization" refers to the process of standardizing specific functions or operations. This standardization means that these functions or operations are no longer private or proprietary but become "public goods" or standards that can be widely adopted and used by developers or organizations. Projects in DeFi, usually based on composability, are called "DeFi protocols," and fully on-chain games can also be based on their high composability, called "game protocols." At this point, games also become a kind of "public goods."
Now we can answer the question we started with, why do we need "fully on-chain games"? The answer is actually very similar to DeFi:
- Games are eternal: There is no centralized entity or server, and they exist forever on the blockchain.
- Trustless: Code is law.
- Permissionless: Anyone can participate.
- Interoperability: Different systems, devices, or applications can communicate and interact effectively.
- Composability: Various components or systems can be combined to lay the foundation for creating larger or more complex systems.
- Promote innovation: Any developer can create new applications or services without starting from scratch. Avoid "reinventing the wheel."
So, can all types of games be made into fully on-chain versions?
No, my idea is that only games that meet the following criteria are suitable for being made into fully on-chain versions:
- Games with relatively simple rules
- Games that do not require real-time feedback
- PvP rather than PvE
- An open system
- Online games rather than single-player games
Next, let's discuss narratives.
The term "fully on-chain games" is more of a technical discussion. Currently, the more popular narrative is "Autonomous World," coined by Ludens from Lattic. In 2022, he wrote a short paper to explain his ideas. For more details, you can refer to this link: https://0xparc.org/blog/autonomous-worlds
In addition, following the DeFi approach, funblock and I also proposed the term "decentralized games (DeGame)." For more details, you can refer to this link: https://captainz.xlog.app/The-Evolution-Of-DeGame-And-The-Protocolization-Of-Gaming
That's all I wanted to talk about regarding fully on-chain games. But finally, I want to discuss a little bit about the social sector.
Similarly, following the practices of finance and games, are there two ways to combine social and blockchain? That is, issuing coins and using smart contracts. So, should we call those social projects that only issue coins without using smart contracts "SocialFi" or "Web2.5 Social," and those projects that write social rules into smart contracts "Onchain Social," "DeSocial," or "Web3.0 Social"? Or even call them "Open Social" or "Autonomous Social"? Let's classify some well-known social projects.
If you are interested in the concept of "on-chain social," you can contact me. I also have some new ideas in this area, and we can exchange thoughts. Thank you, everyone.