Do games really need blockchain?

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

What is something that can only be accomplished with blockchain and cannot be achieved without blockchain?

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

These are the problems that our industry is still struggling to solve, and there is still no clear model that can coordinate game design, business model, and player motivation well. This is why this field makes us excited, but also feels difficult.

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

I strongly recommend that you think deeply about this question yourself. A firm belief in blockchain is very important, otherwise you might be better off making a free-to-play or console game without digital assets.

Opportunities and challenges brought by Web3

A. Opportunities for Players

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

1. Ownership increases player motivation

In traditional gaming models, players often spend a lot of money to buy in-game items but cannot actually own them. However, blockchain allows them to own, trade, resell, and even transfer items between different games.

I often hear questions like:

Imagine there were two identical games: one that let players resell their skins, and one that didn't. Which one would players prefer?

The following are examples:

(1) In paper card games like Magic the Gathering or Pokemon, players already enjoy the fun of trading and collecting. Blockchain card games like Gods Unchained and Skyweaver bring the same experience online, but with less friction and the authenticity of the cards can be proven.

(2) As seen in massively multiplayer online games like Albion Online and Runescape, players have experienced the joy of accumulating in-game wealth and fame through strategic gameplay. Web3 allows players to gain more rewards in terms of accumulating fame and wealth, and games like Embersword and Mirandus are building this experience.

(3) Players already form strong emotional attachments to characters, especially in RPGs like Genshin Impact or Fate Grand Order. True ownership and customization can further deepen this emotional attachment, which is what games like Guild of Guardians and Stella Fantasy promote.

(4) Players are keen on “game records” and now they can “own” part of them, such as owning the gun or deck of cards that won the world championship.

(5) Players enjoy achieving achievements in the game, such as winning medals or top rewards. Make these achievements permanent collections so that they can leave their records even if the game database is closed.

2. Decentralization promotes the emergence of game content and gameplay

Decentralization allows creators and players to build content on top of games without worrying about being shut down. Not worrying about being shut down is important because it greatly reduces the risk of investing in the ecosystem. Less risk means more experimentation in the game's ecosystem to create value, leading to a better experience for players.

The following are examples:

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

(2) Games like The Sandbox are based entirely on user-generated content (“UGC”) and hope to replicate the experience of a Fortnite creator or a Warcraft III map editor and provide rewards to both creators and players. The core idea is to provide a better gaming experience for players by giving creators more rewards through better incentives.

(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 better player experiences.

B. Opportunities for Developers

Now, let’s look at the main advantages for developers.

1. New business model

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

The following are examples:

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

(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, with the number of users exceeding 2 million and a 30-day retention rate of 70%. Although this economic model is not sustainable and eventually led to a death spiral, it is a good trial case that shows how to use Web3 to increase advantages for game distribution and retention.

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

(4) Among the advantages brought by decentralization, the most interesting is the "Web3 Guild". A guild is a business formed around playing Web3 games, often connecting investors with a lot of money and players with a lot of time. Organizations like Yield Guild Games have raised a total of $500 million in funding, demonstrating significant interest in building decentralized businesses around Web3 games.

2. Composability and open source

The open-source nature of blockchain allows game developers to go beyond traditional models and grow their games. This encourages a participatory culture where users have enough confidence to build businesses around games, knowing that they won’t be shut down at will.

The following are examples:

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

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

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

3. Promote the community

So far, Web3 has demonstrated its ability to cultivate evangelists in the community. This is because Web3 projects usually start building communities early and grow with the community. In addition, community members usually own NFTs, which gives them a sense of ownership and pride in their favorite games and a willingness to support them.

The following are examples:

(1) Bored Ape Yacht Club has built a large community, making them one of the most well-known NFT projects. Community members have developed various activities such as offline gatherings, snack bars, yacht parties, music videos, etc., all inspired by the brand. (

(2) Other games, such as Illuvium, Guild of Guardians, and Axie Infinity, have built a core group of loyal supporters who are emotionally and financially invested in the game in order to see the project succeed. This group actively voices their opinions on what the game should do on social media and eventually becomes advocates for the game.

Despite the advantages mentioned above, there are still criticisms about the use of blockchain in gaming. These challenges are not trivial, and it is not certain that all of them can be solved.

C. Challenges faced by players

1. It doesn’t solve any real problems for players

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 are meaningless if games can still be shut down, which means interoperability has no value.

2. Real money will destroy players’ enthusiasm

Making in-game items tradable is the equivalent of giving them real-world value, which can introduce unnecessary stress into an activity that is meant to relax. Extrinsic rewards for assets can even reduce player satisfaction. Furthermore, allowing players to buy anything can undermine the gameplay experience, as the elements of discovery and grinding can be very important in some games. A common example is the auction house in Diablo 3, which allows players to "skip" grinding, which undermines the core gameplay experience.

3. Poor usability and scams

Blockchain can be slow and complex to use, requiring more clicks than players are used to. This can put many players off. And for some games, real money rewards can attract bots and scammers, which can create a negative experience for players.

D. Challenges faced by developers

1. Higher development costs

Integrating blockchain technology into games is expensive. This is partly because blockchain is a new technology (expected to become less expensive over time), but also partly because it adds additional costs on top of developing a good game. This means that Web3 games are likely to cost more to develop than Web2 games.

2. Negative views (environmental issues, fraud)

Some blockchains consume a lot of energy, which has caused players to worry about environmental protection. In addition, many players have a negative attitude towards NFT and cryptocurrencies. They think these are scams and prefer to keep their distance.

3. Self-competition in the secondary market

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

in conclusion

Although blockchain has the ability to have a significant impact on the gaming industry, there are still many obstacles that need to be overcome.

There is currently no consensus on what a viable "model" in the gaming industry looks like, or whether a viable model even exists.

My personal view is that blockchain has huge potential in the gaming sector because it can bring real-world "tradability" to digital entertainment. However, to achieve this, thoughtful innovation and a strategic focus on creating unique gaming experiences rather than simply replicating existing game designs are required. Doing so is necessary so that the additional friction for investors, publishers, studios, and players becomes valuable. #达摩院 #web3.0