UK
Learn

Gaming on-chain: A revolution or just a short-lived hype?

23 Dec 2021
Written by: Minima

When bank employees quit their jobs to play a blockchain-based game full-time, one must wonder if they are up to something or just riding a temporary hype. To answer whether blockchain can add value to gaming and whether ‘play-to-earn’ is here to stay, we will start with challenges the industry is currently facing.

The State Of Play

Without getting into too much detail on any specific challenge, we can broadly identify four significant problems that gaming has. Some of them are on the side of gamers, and one is primarily an issue for gaming studios.

  • Cheating: In an Irdeto study with more than 9000 participants, only 12% of gamers answered that they had never experienced cheating. 77% stated that they would likely quit playing multiplayer games if they thought others were cheating. There is some evidence suggesting that the perceived anonymity when playing online might increase the likelihood of cheating.
  • Piracy: With most games now available through codes online, clever gamers have figured out how to access the software without ever buying the actual game. Often they don’t stop at that; players may also make the content available for others. While great for the individual, it’s a headache for game studios that end up trying to protect access through Digital Rights Management Systems and by pursuing violations.
  • Centralization: Centralized power is problematic on most platforms because it puts users at the mercy of the platform. One of the most significant events in gaming is tournaments. They are highly centralized. Hence organizers are free to decide who can participate, how winners are chosen, how the prize money is allocated, and even have the liberty to change the rules anytime. All items collected in-game are hosted on the studio’s server, and periodically they can disappear.

“I happily played World of Warcraft during 2007–2010, but one day Blizzard removed the damage component from my beloved warlock’s Siphon Life spell. I cried myself to sleep, and on that day, I realized what horrors centralized services could bring. I soon decided to quit.” Vitalik Buterin

  • (Lack of) Revenue Sharing: As so often in an industry where a handful of big companies hold most of the power, individual game developers often have no choice but to go through the existing centralized platforms to gain an audience — at a tremendous cost of up to 30% of their profits. Even if they don’t choose to go through such a platform, there is little protecting them from others copying what they have developed.

Blockchain for Gaming

Blockchains are decentralized, permissionless, transparent ledgers that cannot be tampered with. They facilitate digital value transfer and enable network participants to own their assets by storing the private key connected to them.

With these features in mind, it’s not hard to see which benefits the technology could bring to gaming. More specifically:

  • Transparency: If all players have their entire history out in the open, tied to their avatar, cheating players will be called out. Unlike before, if they cheat frequently, it’s stored forever. Blockchain could potentially make the gaming experience more enjoyable by discouraging cheating.
  • Ownership (Gamers): With Non-Fungible-Tokens (NFTs), gamers have the opportunity to truly own the items they purchased or earned through playing*. Even if a games server went down, they would still hold the token, taking power from the gaming studios and putting it in the hands of the players.
  • Ownership (Studios): To fight Online Piracy, Game studios could leverage the properties of blockchain to manage their digital rights. Sony, in 2018 took out a patent on a blockchain-based digital rights management system which would enable them to spot any illicit activities happening with their software.
  • Decentralization: If games were not fully managed by centralized entities such as studios, anyone could organize tournaments. Using tokens for governance, gamers could start voting on any rule changes to implement and features to be added.
  • Monetization: When creating a game, or even just in-game assets, creators can more readily monetize these when everything sits on top of a distributed ledger. NFTs enable developers to program royalties into them so that, if a creator designed a powerful armor, a share of the price would be kicked back to them every time that was sold.

Despite all these apparent benefits for the traditional gaming industry, the most considerable hype today at the intersection of blockchain and gaming is in an area called GameFi.

What is GameFi?

Source

GameFi is a combination of Game and Finance, just like DeFi. It describes a combination of DeFi and Gaming elements. GameFi covers a broad range of different business models, including rewarding players for doing tasks or enabling them to generate revenue through their assets. Play-to-earn and GameFi are often used interchangeably, with play-to-earn describing the process through which players earn income in such games.

The term can be traced back to 2019, where the founders of MixMarvel first mentioned it during a speech at the Wuhzen World Blockchain conference. However, it wasn’t until Andre Cronje, founder of Yearn, used GameFi in September 2020 to share his excitement on gamification applied to monetary policies.

(Twitter)

The term might be new, but the idea isn’t. As early as 2013 some Minecraft servers added BTC integrations. Titles like Bombermine and other p2p services enabled gamers to monetize titles using digital currency. Due to a lack of speed, and the high cost of a transaction, early GameFi projects on Bitcoin never reached a critical mass.

With Ethereum, a whole new set of opportunities for games arose, including a standard for NFTs and smart contracts. One of the early Ethereum-based games, “Crypto Kitties,” was so popular that it congested the entire Ethereum chain. A problem that hasn’t gone away in the years since. What has changed for any Ethereum-based projects is that there is now a flourishing ecosystem, which has enabled games to either use sidechains or Layer-2s to access cheap fees, and fast transactions.

Play-to-Earn

Playing a game and getting paid for it has become a reality in the sector of e-sports. This year, with Blockchain games like Decentraland, Upland, and Axie Infinity capturing more interest, some players have been able to earn more playing these games than by working.

In GameFi, players receive financial rewards for completing the game’s objective. A card-based game can battle against other players, and in games like Axie infinity, it’s often breeding and fighting with one’s monsters. As players progress through the game, they can usually increase their earnings.

In most cases, players are paid in the native token of the game — often coming directly from the treasury of the game. In practice, they might have to go through various steps to cash out what they earned into their local currency. But the reward is the main thing.

While some Blockchain games are about players fighting against each other or farming their land, there is another type of game, more gamified DeFi based on asset ownership.

Gamified DeFi

Liquidity Mining, Yield Farming, and Staking are popular activities for active DeFi enthusiasts. However, they might not be so visually appealing.

  • Liquidity Mining: describes the process of providing Liquidity to decentralized exchanges (DEX). Unlike traditional exchanges, they rely on automated market maker algorithms to facilitate trades. When depositing their funds into a DEX, traders will be rewarded for providing Liquidity in the tokens they deposited.
  • Yield Farming: Yield Farming is very similar to Liquidity Mining (some use them interchangeably). When Yield Farming, traders try to earn the highest Yield (interest/revenue) possible on their funds. Platforms will often payout rewards for Liquidity Mining and add their governance token on top of that. Yield Farmers actively change platforms to find the highest possible returns, including earning through governance tokens.
  • Staking: unique to Proof-of-Stake protocols. Anyone who locks up their tokens for a certain amount of time can earn a return on them for participating in block validation.

To make these and other DeFi activities more enjoyable and attractive, some blockchain companies have started leveraging NFTs. NFTs represent true ownership and enable anyone to check the ownership history quickly. There are already all the above ways to make more out of one’s holdings. NFTs add a visual element making DeFi more Fun. An excellent example of that is Aavegotchi — an NFT game loosely based on Tamagotchi that brings together the benefits from earning on Aave through lending and a visual in the form of a pixelated Ghost. Just holding the Ghost will generate Yield over time.

Food for thought

Blockchain, when done right, can contribute a lot to distributing the power back into the hands of gamers, and away from centralized gaming studios. It can also give gaming studios benefits in managing their digital rights.

Gaming studios implementing NFTs

Source

NFTs and blockchain are not always for the better of the end-user. When Ubisoft added NFTs to their platform, they encountered a lot of backlash, not only from their audience but even internally. Some of Ubisoft’s staff criticized the move for not solving any problem and provoking negative PR. An outspoken critic took to Twitter to explain that NFTs are not much different from the existing system: Item has a number on it; the number belongs to you until you sell it.

Even the argument that the items are recorded on-chain turns sour when considering that Ubisoft (or any other gaming studios issuing them) is still in control of the supply. What will happen to NFTs’ value if they decide to shut the game down?

Games built on Blockchain

Looking at the other side of games built directly on-chain, a vast majority of them rely on Proof-of-Stake blockchains, or Layer-2s. Among the top 5 games in user numbers, WAX (a side-chain of EOS which is notorious for its degree of centralization) is very present.

While PoS chains offer cheap fees, and fast transaction times, what players ultimately give up is control. In a blockchain controlled by big stake-holders, it’s not unthinkable that attacks will occur, and that players when delegating their stake might see it slashed.

Another risk to gaming experience with a lack of decentralization are outages. It’s quite ironic that the blockchain company that has experienced 2 DDoS attacks in 3 months is now launching a $150 million fund to invest in their gaming ecosystem.

What does the future hold?

In August 2021, Axie Infinity was the first blockchain game to surpass $1 billion in all-time sales, and interest keeps climbing. The game where players breed Axie hosted more than 1 million daily active users. While previously unthinkable due to Ethereum’s lack of scalability, an increasing Layer-2 ecosystem will mean it’s likely to see more games scale. Axie is running on its own sidechain called Ronin, and games like Illuvium rely on ImmutableX to enable nearly fee-less transfers of NTFs in-game.

GameFi makes DeFi more fun and could bring in a whole new demographic of game enthusiasts into the world of DeFi. So far, gaming has not been the Trojan horse to mass adoption as often said to be. However, we’re still early. Currently, blockchain games and GameFi rely on blockchains run by few and on servers provided by big Tech.

For game participants to truly reap the benefits of blockchain and NFTs, any single player should be able to sovereignly manage their assets — without the risk of seeing them wiped out by more powerful entities.

The only way to create a level playing field is a truly decentralized network, where there are no boundaries to access, scalability, and security. When everyone can run a complete constructing node on their phone and host apps locally on their device, then power is in the hands of every individual player.

Приєднуйтесь до розмови
Налаштування cookie

Натискаючи «Прийняти всі cookie», ви погоджуєтеся на зберігання файлів cookie на вашому пристрої для покращення навігації по сайту, аналізу використання сайту та допомоги в наших маркетингових зусиллях. Детальніше

Зберегти налаштування
Налаштування cookie

Натискаючи «Прийняти», ви погоджуєтеся на зберігання файлів cookie на вашому пристрої для покращення навігації по сайту, аналізу використання сайту та допомоги в наших маркетингових зусиллях. Детальніше

Налаштування cookie