Video games have evolved in conjunction with the emergence of new technology. In the early days, people had to pay to play arcade games; next, we had console games, where players had to pay a one-time price for a single title. Then we had mobile games and free-to-play titles, which developers generated revenue through in-game purchases.
With the advent of new consoles and devices with a higher capacity to support more potent engines, video game publishers and companies started developing new systems to create deeper in-game economies and engage players in their ecosystem.
The gaming industry is now worth north of $300 billion. However, like any industry, it has its share of problems.
Entering Blockchain Gaming
When we think about blockchain gaming, Axie Infinity usually comes to mind —undoubtedly the most successful play-to-earn title from the GameFI industry, the combination of gaming and finance using blockchain.
In fact, blockchain gaming in 2022 has grown 2000% from Q1 2021, and game DApps make up 52% of all blockchain activity. This increase clearly outlines investors and VCs’ interest in blockchain games and metaverse despite the poor performance of the current cryptocurrency market.
The amount of capital poured into blockchain games surpassed $2.5 billion in 2022, according to a report from DappRadar.
The Problem With Monetizing Games
The monetization of games can be a delicate subject for gamers, both in the blockchain and traditional gaming sphere. One example is when major game publishers tried integrating NFTs into their games.
Players didn’t respond quite well to NFTs being implemented in some of their beloved titles, like Ubisoft’s Tom Clancy’s Ghost Recon and GSC’s S.T.A.L.K.E.R., which received severe backlash as they believed it was just a money-making scheme without actual utility for in-game activities.
The problem, we could say, is not monetization as such but over-monetization —without providing any useful utility to in-game assets, such as NFTs, and without appealing gameplay mechanics and narratives for users.
On the other hand, gamers don’t really own their in-game assets and items —and sometimes not even the games themselves but the access to play them. It’s a heavily centralised system where the user has little control over the revenues they can generate by selling these assets.
What’s Next for On-Chain Gaming?
Since blockchain provides an infrastructure that’s transparent, decentralised, and immutable, it can overhaul and improve the gaming industry by bringing it on-chain. Several arguments support this statement, and we’ll look at them below. We’ll also review new mechanisms that aim to improve blockchain gaming.
Improving User Generated Content (UGC) Through NFTs
UGC is a popular revenue stream for games like Roblox and Minecraft. The idea is that independent studios can create games and outsource the servers to community managers. This can be analogous to a rollup, a layer-2 solution sitting on top of a layer-1 like Ethereum.
On the on-chain side, a metaverse game can bring developers the freedom to build their own games within the platform, and outsource the hosting and development to community members, creating a private or public server with its own in-game assets, mechanics and narratives.
And what’s the difference? Unlike centralised platforms, NFTs provide users with more control and full ownership of their items, and can sell it for real-world money on markets, and also offers the possibility of trading these assets with other games on other blockchains, creating a cross-chain economy.
Decentralisation & Community Governance Through DAOs
Community governance means every member has a voice in the development proposals of games, which are carried out by their respective Decentralised Autonomous Organisations (DAOs) or councils.
DAOs are usually linked to DeFi protocols, but they can serve a tremendous purpose in blockchain gaming. For example, developers can make governance a core mechanism of their games by allowing them to spend community tokens to adjust on-chain gaming mechanisms within smart contracts or maybe unlock community governance tokens through gameplay.
Asset Ownership and Player Identity
NFTs provide ownership of in-game assets, making them the perfect match for gamers who want to own —not the developers— the items they earn throughout the game. It also allows them to verify their provenance and authenticity and sell them on secondary markets.
User identity is also an essential aspect of gaming communities. Platforms like Steam and Roblox allow users to personalise their profiles and avatars to present themselves in the way they want to other players in the ecosystems. That concept also applies to NFT gaming, and on-chain metrics can help players keep a record of their reputation, success and experience based on their in-game activities.
Free-to-Own (F20) – The New Mechanism for Blockchain Games
On August 30, a gaming startup called Limit Break raised $200 million in venture capital funding for a massively multiplayer online (MMO) game. The round was led by Coinbase Ventures, FTX, and Positive Sum.
Gabe Leydon, founder of Limit Break, proposes a new model for blockchain games: Free-to-Own (F20), in which players receive free NFTs at the beginning and slowly build their way up, unlike traditional pre-sell NFTs in play-to-earn games, without whitelisting users nor receiving upfront revenue.
The rationale here is that users acquire and fully own NFTs that can generate new NFTs for gameplay, creating a broader sense of user agency and loyal fans that co-own the game alongside developers.
Developers are giving away a vast portion of the assets in exchange for “distribution” carried out by a motivated user base. Later on, developers can generate revenue through NFT trading royalties. In other words, developers will make money depending on how deep and solid their economic infrastructure is and how they can propose a fun game(s) that either use NFTs as a core component of them (providing in-game utility) or revolve around them.
Metaverse and Cross-Chain Ecosystems
The metaverse is a 60-billion dollar market with the potential to bring a new era of decentralised Web3 gaming. Blockchain interoperability also opens up the possibility of cross-chain multiverses where players from one game can interact, fight, expand and trade with other players from other ecosystems, laying the pathway for a massive cross-chain economical infrastructure.
The metaverse is not just for gaming and NFTs. Some famous examples of successful metaverse games are Sandbox and Decentraland. Both ecosystems have seen a large influx of capital from real estate investors looking to buy plots of land to build their businesses. Institutions, companies, fashion brands, and even countries have shifted from Web2 to Web3.
On September 28, the Dubai Future Foundation announced the organisation of the Dubai Metaverse Assembly. This event seeks to explore the digital economy and discover how governments, businesses, and communities can leverage the potential of this technology.
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