作者：YBB Capital Researcher Ac-Core
TL;DR
● The two most mainstream design directions of GameFi are: 3A-level chain games with playability as the entry point and full-chain games (On Chain Game) with fairness and in line with the spirit of the Autonomous World as the entry point.
● The current pain points in the development of GameFi are: 1. Lack of playability and full of speculation; 2. Lack of industry supervision, and cryptocurrency traders are the main speculative players; 3. On-chain operations are complex, with high barriers to entry, making it difficult to break the circle.
● GameFi’s focus is on playability rather than speculation, and it is not a game with Earn.
● The ServerFi concept mainly includes: ServerFi — players may be allowed to combine their in-game assets and ultimately gain sovereignty over future servers; Continuously reward high-retention players — provide targeted rewards for high-retention players to maintain token vitality and a healthy gaming ecosystem.
1. Current status and pain points of GameFi
Image source: MPOST
During the last bull market in 2021-2022, since the rise of Axie Infinity, The Sandbox, and Stepn, the concepts of GameFi and P2E have quickly become popular, and similar breeding games (such as Farmer's World) have also sprung up. However, due to its failed dual-token (governance token and output token) economic model + NFT (pets, farm tools, running shoes, and other props that can continuously produce tokens) design, the pure Ponzi model was exposed, and P2E also declined immediately. The output end of the entire game will far exceed the demand end and quickly fall into a death spiral.
After several years of development, GameFi's two most mainstream design directions are: AAA blockchain games with playability as the entry point and on-chain games with fairness and in line with the spirit of the Autonomous World. If blockchain is used as the foundation of the world, the blockchain unambiguously saves the collection of all node entities in its state. In addition, they formally define the introduction rules in computer code. The world with the blockchain bottom layer allows its residents to participate in consensus. They run a computer network to reach a consensus every time a new entity is introduced.
— 《Analysis of the Core of Fully On-Chain Games: MUD Engine and World Engine》
1.1 AAA blockchain games
Image source: abmedia - illuvium
Integration of traditional games and blockchain technology: Web2.5 games represent an innovative form between traditional games (Web2.0) and games that are completely based on blockchain (Web3.0). This type of game not only retains the core gameplay and user experience of traditional games, but also introduces certain elements of blockchain technology, such as the confirmation of digital asset ownership and decentralized transactions between players.
Partially decentralized features: Decentralized elements are usually concentrated on specific functions or modules. For example, virtual items, characters or currencies in the game may be managed and traded through blockchain, which can ensure the true ownership of digital assets by players. However, the main logic, operating environment and most of the content of the game are still maintained on the centralized server. This hybrid model can ensure the smooth operation of the game.
Higher performance and wide availability: Since Web2.5 games do not completely rely on the underlying architecture of blockchain, they are generally superior to full-chain games in terms of performance and user availability. The support of traditional servers enables these games to carry a large number of players online at the same time and provide richer and more complex game content without being limited by the throughput and response speed of current blockchain technology. This design enables Web2.5 games to have both high performance and the innovative features of blockchain technology.
Balancing traditional game experience with blockchain advantages: Web2.5 games attempt to find the best balance between the immersive user experience of traditional games and the new features brought by blockchain technology. By adding decentralized asset management, transparent transaction records, and cross-platform asset circulation to the game, Web2.5 games not only retain the in-depth gameplay and storytelling of traditional games, but also provide players with a new way to obtain value and a higher sense of participation.
Combination of AAA standards and blockchain games: Traditional AAA games are usually developed by large development teams, with high budgets, high-quality graphics, complex storylines, and deep player interaction. AAA blockchain games, on this basis, further combine the advantages of blockchain technology, allowing players to enjoy top-level gaming experience while truly owning and freely trading their virtual assets in the game, creating a more realistic gaming experience for players.
Wide support for game types: Since Web2.5 games adopt the asset chain model, in theory, almost all types of games can apply this model, from traditional adventure games to strategy games, shooting games, etc. At present, the most mainstream Web2.5 game type is massively multiplayer online role-playing games (MMORPG).
1.2 Full-chain game
Based on the views of 0xPARC's collection of crypto game papers "Autonomous Worlds", full-chain games need to meet five key criteria:
1. Data comes entirely from blockchain:
Blockchain is not just a secondary storage or mirror of data, but the only source of all key data. This means that all meaningful data should be stored and accessed on the blockchain, not just limited to information such as asset ownership. In this way, games can take full advantage of the advantages of programmable blockchains, such as transparent data storage and permissionless interoperability.
2. Game logic and rules are implemented through smart contracts:
The core activities in the game, such as combat logic, are not limited to the transfer of ownership, but are completely executed on the chain through smart contracts. This ensures the transparency and credibility of the game logic.
3. Development principles of open ecology:
The game's smart contracts and client code should be fully open source, allowing third-party developers to redeploy, customize, or even fork their own versions of the game through plug-ins, third-party clients, or interoperable smart contracts. This openness promotes creative output from the entire community and enhances the scalability and innovation of the game.
4. The game is permanently stored on the blockchain:
This standard requires that the game can continue to run without relying on the core developer or its client. If the game data is stored without permission, the logic is executed without permission, and the community can interact directly with the core smart contract, then the game can continue to exist even if the developer quits. This is a key standard for testing whether a game is truly crypto-native.
5. Interoperability between games and the real world:
Blockchain provides an interface for digital assets in games to interoperate with real-world values. Virtual assets in games can interact with other important assets, thereby enhancing the depth and meaning of the game and closely linking the virtual world with the real world.
Full-chain games built under these standards can be regarded as "autonomous worlds" based on blockchain as the underlying architecture.
1.3 Hitting the pain points of blockchain games
Image source: Discover magazine
GameFi's innovation is the financialization of games, and the gameplay of financialization is Pay to Earn. Unfortunately, Pay to Earn wears a thick Ponzi coat. Looking back at the entire history of video games, it began to appear as a commercial entertainment media in the 1970s and became the foundation of an important entertainment industry in Japan, the United States and Europe in the late 1970s. Two years after the Great Recession of the U.S. gaming industry in 1983 and its subsequent rebirth, the video game industry experienced more than two decades of growth and became an industry with a market value of US$10 billion. It competed with the television and movie industry and became the world's largest industry. The most profitable visual entertainment industry. After decades of game development history, game models are constantly changing and changing. Today, moving games to the blockchain still faces some significant pain points and challenges:
1. User needs are not clear
● It is undeniable that GameFi is far inferior to traditional games in terms of playability and gaming experience at this stage, although 3A-level blockchain games are constantly making up for it. For users, GameFi's Pay to Earn model + lack of playability, when faced with the choice of having fun or making money, you always need to get the dopamine happiness of one side. If you don't have either, it will only accelerate your departure.
● The current economic models of many GameFi projects are overly dependent on the price fluctuations of tokens, and are themselves subject to the influence of the "cryptocurrency market". If the currency price plummets and the interests of players are damaged, it will greatly affect the player retention rate. Losing players will accelerate the end of the game's life cycle.
2. Lack of supervision leads to loss of game traffic
● Behind the financialization of GameFi games is the immature global regulatory framework. This uncertainty causes players to face a certain degree of legal risk, and the push of traffic that breaks the circle will also be blocked everywhere. The remaining players are still speculative users at this stage.
3. The complexity threshold of on-chain operations is difficult to break through
● For non-cryptocurrency users, GameFi has a relatively high entry barrier. Players usually need to be familiar with blockchain operations such as crypto wallets and token transactions, which is not friendly to ordinary players. This technical threshold limits GameFi's user expansion, especially its popularity among traditional game players.
2. What does the Yale University paper ServerFi concept say?
图源：ServerFi: A New Symbiotic Relationship Between Games and Players
2.1 Concise summary
Note: This section does not verify the source of the paper or the authenticity of the author, but only refines and discusses the main points of the paper. For the original text, see the extended link (1)
GameFi reshapes economic production relations, combines "games" with "finance", and realizes a new model of "earning while playing" through blockchain. This type of game creates crypto assets through NFT and homogeneous tokens, bringing decentralized ownership, transparency, and player economic incentives. However, market stability, player retention, and sustainability of token value are still facing challenges. Compared with traditional online games, blockchain games use their unique digital asset storage methods and gradually improved incentive models to build a new player-developer relationship and promote the transformation of the electronic society. However, in the context of the Web3 era, the traditional easy game experience has been placed in a secondary position.
Most games have a life cycle, and CryptoKitties is no exception. Its breeding mechanism increases the supply of "cats", gradually reducing rarity and value. As more players participate, the market quickly becomes saturated, making it difficult for token prices to be maintained. Without enough active players, the imbalance between supply and demand will further exacerbate depreciation. Players who invest a lot of resources in breeding may find diminishing returns, and the initial scarcity is replaced by excess supply, leading to a decline in player interest and engagement.
The original article discusses the development of blockchain games (the above content is condensed for the sake of brief description). The core is to identify the main defects of the token economic model through the entropy theorem. Two new models, ServerFi and Continuous Rewards for Highly Retained Players, are proposed: ServerFi and Continuous Rewards for Highly Retained Players.
The combination of entropy increase theory and token economics provides a profound perspective for understanding the flow and value fluctuation of tokens in blockchain projects. Entropy increase theory shows that the degree of disorder (entropy) in a closed system increases over time. This concept is manifested in token economics as the orderly distribution of tokens in the early stage, but as more tokens enter the market and transactions increase, the market disorder increases, leading to price fluctuations and inflation risks. If there is a lack of effective regulation mechanism, the system may enter a high entropy state, resulting in token depreciation and decreased player participation. Therefore, incentive mechanisms and regulatory measures are needed to slow down entropy increase and maintain market stability and player participation.
For example, Axie Infinity’s token economy has several major flaws: 1. The token economy is highly dependent on the continuous generation of new tokens (such as SLP), resulting in oversupply and token depreciation; 2. Speculation during the TGE causes price fluctuations and affects market stability; in the long run, after the exit of early speculators, token prices may plummet, harming the interests of ordinary players; 3. The economic model lacks continuous incentives, and player enthusiasm is difficult to maintain; 4. The high initial investment cost also poses an obstacle to new players and limits the popularity of the game.
Based on the above discussion, the original article puts forward two suggestions to improve the GameFi token economic model:
● ServerFi：
ServerFi is in line with the spirit of Web3, allowing players to synthesize in-game assets and gain sovereignty over game servers. This mechanism enables players to control servers by accumulating and merging digital assets such as NFTs, motivating deeper investment and enhancing participation and loyalty.
● Continue to reward high retention players:
Project teams can keep tokens alive and the game ecosystem healthy by monitoring player behavior and providing targeted rewards to high-retention players. This approach encourages continued participation and drives stability and growth in the token economy. For example, airdropping a portion of server revenue to top users creates a "play and earn" dynamic that incentivizes players to continue contributing.
Model Validation:
Yale University evaluated the effectiveness of these token economic models through group behavior simulation experiments, which took into account the randomness of the real world (introducing random noise from various angles, including individual behavior and population growth).
The experimental results show that in the asset synthesis privatization model (left side) as shown below, player contribution value continues to increase with the number of iterations, indicating that this model can effectively maintain player participation and promote long-term value growth. In the model that continuously rewards high-retention players (on the right), although the initial contribution value increased significantly, it then declined rapidly, showing the challenge of maintaining player participation in the long term.
The original article believes that the strategy of continuously rewarding high-retention players can increase participation in the early stage, but in the long run it will aggravate player stratification, marginalize tail players and raise the entry threshold for new players, eventually leading to a vicious cycle. In contrast, the ServerFi mechanism introduces randomness through fragment synthesis and lottery, which enhances social mobility among players. Top players need to continue to contribute, and new players also have the opportunity to share rewards, thus maintaining the activity and sustainability of the system.
图源：ServerFi: A New Symbiotic Relationship Between Games and Players
2.2 Putting aside the complex description of ServerFi, what does it essentially say?
If we separate the literal meaning of ServerFi from the original explanation, Server literally means server, and ServerFi is like a server network. In layman's terms, its main purpose is to delegate ownership of rights and interests, deepen the decentralized spirit of Web3, "break up the server", and allow players to collect assets in the game to ultimately gain future server sovereignty.
But ServerFi alone is not enough, so a mechanism of continuous reward for high-retention players is added. Simply put, the longer you play, the more "server fragments" you can collect. However, the original text does not explain in detail whether "direct long-term consumption" is required or the length of the game. If you still need to continuously purchase related tokens to continuously consume and play the game with Earn, its essence is still Play to Earn, but this innovation is still to reduce or improve the pure Play to Earn Ponzi game to reduce speculative behavior.
To sum up in one sentence: ServerFi+'s model of continuously rewarding high-retention players is essentially still the improvement and innovation of GameFi's "design parameters" in the direction of financial attributes.
3. Final Thoughts: Are GameFi and ServerFi Essentially the Same?
Are they all in the wrong direction?
Image source: Photo Network
3.1 Is the playability of the game important or Earn’s game?
Undoubtedly, the playability of the game is important. The essence of the game is to give players an addictive experience. Earn is just the icing on the cake. Earn without playability is not a game, but an electronic gambling slot machine. Maintaining a fun game experience is the key to attracting and retaining players, rather than relying on Ponzi's short-term burst traffic. If there is only Earn without playability, then GameFi can only be a false proposition.
Economic incentives can only serve as an additional value to retain players, promote player participation, and attract more people to the game. Earn's game drives the core of the in-game economy and token flow, empowering players with the economy instead of binding them. The two complement each other in GameFi. Playability provides long-term appeal and a continuous player base, while Earn's game attracts initial users and drives the economic cycle. Therefore, the only purpose for the long-term development of the game is only one: fun.
3.2 What narratives do GameFi and ServerFi tell?
GameFi tells the story of the Pay to Earn model of game chain-linking. The outbreak was concentrated during the bull market of 2021-2022. The Ponzi craze brought about the rise of Axie Infinity, The Sandbox, and Stepn. After the tide receded, only the devastation was left, leaving behind the memories of explosive traffic and awakening the innovation and attempts of game chain-linking.
ServerFi talks about the improvement of the Pay to Earn model to reduce or improve the pure Play to Earn Ponzi scheme and further decentralize the economy and system. Compared with the way of obtaining ownership by completing the game of "Ready Player One", ServerFi is a long-term loyal player with strong financial attributes who obtains ownership.
At this stage, most innovations on the blockchain are essentially the decentralized evolution of finance on the chain (or are still essentially derivatives of DeFi), and GameFi is no exception. It may not be wrong for blockchain games to give games strong financial attributes. The difficulty lies in how to make good use of the double-edged sword of blockchain with strong financial attributes. However, the narratives of GameFi and ServerFi are still at the innovation level of economic model design. If they only use the slogan of making money by playing games, facing the inevitable plunge in currency prices in the future, players can only lose money while playing games, which will eventually accelerate the irreversible death cycle of the game. Let GameFi return to the game, let the game return to fun. We need to "design fun content" instead of "design economic values". This may be the way out for GameFi.
Extended Links
（1） https://osf.io/5dq4k
