Merit Circle on the web3 gaming revolution: The game-changing power of interoperability
When talk turns to what blockchain can bring to the gaming industry, one word keeps popping up: interoperability
A blockchain is, of course, a digital ledger that incorruptibly records everything that happens on it. Back in 2009, there was just one blockchain, which launched with its associated cryptocurrency, Bitcoin. Now there are thousands. If we think of all these blockchains as musical instruments in an orchestra, the conductor that can get them playing the same tune is interoperability.
Cross-blockchain interoperability is the promised land of web3. If its full potential is realized, it has the potential to revolutionize global supply chains and much else besides. Happily, we’re already moving in that direction, with the likes of ‘rollups’ and ‘data oracles’ nudging us further and further along the path.
At the Merit Circle DAO, it’s interoperability’s relevance to gaming that we’re most interested in. In that context, we find it helpful to distinguish between visual interoperability and economic interoperability.
The sweet deal of economic interoperability
First, economic interoperability. The gaming industry is a siloed space, made up of individual games that individual development teams have created, with each game its own little world and law unto itself. Traditionally, what happens in a game stays in that game — and that includes all the money you throw at it. Back in the day, that’d be the cash you spent on the cartridge; more recently, it’s all the money you splash on skins or convert irreversibly into in-game currency. Gamers, historically, have never got any of it back. Game economies are closed ecosystems.
Correction: maybe you got a few bucks back by selling your Street Fighter II SNES cartridge or in more recent times — as we discuss in our article on true digital ownership — ventured warily into the Wild West of flogging your profile or in-game items on the black market.
But for the most part, all we expect to get in return for our gaming money is fun — and gaming gives us so much of that. That’s how the big developers have gotten away with it for so long — by blinding us with that sweet, delirious fun.
Blockchain tech means, however, that game companies now have the key to open economies at their fingertips. Before, they could claim that it was all too messy and risky to turn their closed economy into a more open one. “By adopting blockchain in games, studios can offer their players an ecosystem where they can freely buy, sell and move any in-game assets out of the box, by utilizing existing marketplaces and decentralized exchanges,” says the Merit Circle DAO’s own Martin Kainzbauer. “Players aren’t at the mercy of a game dev studio to be able to exchange their in-game assets, or wait for (often dodgy) aftermarkets to develop.”
With blockchain, the raw, impossible-to-ignore invitation to engage with open economies is now staring the gaming industry in the face. Which of the major web2 game developers blinks first and gives it a go is going to be fascinating to see. After all, the status quo is working pretty well for them. “Take Roblox’s walled garden,” says Martin. “You can buy Robux with cash (only) from the developer, or earn them by creating in-game content. However, Roblox keeps a significant cut of the amount other players pay for user-generated content, and when trying to ‘cash out’ earned Robux, creators are faced with a much less favorable conversion rate and will receive up to 70% less (!) compared to the price Roblox charges when you buy from them.”
With blockchain integration, game studios can embrace an open and free ecosystem, where supply and demand control the price of any given in-game asset. Royalties make the transition economically feasible for studios, too, since they can earn — over the whole lifetime of a game — a portion of each aftermarket sale in a way that wouldn’t be possible with current third-party markets.
In web3-first games, you could argue that economic interoperability is already happening. If someone makes a little crypto dough from, say, Axie Infinity, then turns it into dollars and uses those dollars to buy items in another game — that’s already economic interoperability right there, some would say.
But there are a few conversion hurdles in that example. It’s all going to get much smoother. When economic interoperability is in full swing, you’ll be able to move an asset you earned or created within game A into the ecosystem of game B, where you can then trade or sell it. You might think of it as going into a store that sells both its own-brand products and products from different brands, like Harrods or Whole Foods do. If you have a winning streak in one game, you can splash your earnings or trade your new items for stuff from a different game.
And there’s a lot of tradable stuff in gaming. “Anything that can be tokenized will be tokenized” — Bobby Ong of CoinGecko told us in our interview with him — and in-game assets lend themselves so ridiculously well to tokenization that we just know economic interoperability is the future. In fact, there’ll come a point when gamers won’t even have to engage with the logistics of crypto if they don’t want to — you’ll be able simply to hook up your regular bank account and all the conversion will be done behind the scenes.
Pioneers of economic interoperability
The team at web3 game publisher BoomLand is already playing around with the possibilities of economic interoperability. Their debut title is Hunters On-Chain, a tokenized version of the enormously popular Hunt Royale mobile game. CEO of BoomLand Hannibal Soares explains the interoperable “cross-pollination system” that the team is creating between soon-to-launch Hunters On-Chain and subsequent title Car Driving School. “In Hunters On-Chain, you ‘summon’ a hunter using a kind of recipe. Now, if you bring certain items from Car Driving School and add them to the recipe in Hunters On-Chain, you’ll get a particular sort of hunter.”
Hannibal also talks about progression from Hunters On-Chain translating across to Car Driving School. “Let’s say you have a legendary hunter in Hunters On-Chain and you’re going to play Car Driving School — we will recognize what you come in with, giving you something like a Level 10 ‘legendary’ car. Of course, there’s lots of very complex design behind all of that, so it can’t be gamed in a negative way.”
BoomLand is also making economic interoperability a reality with its tokens, with both the soft (BGEM) and the hard (BOOM) currencies interoperable across all games. “This means you can earn in Game A and bring those rewards into Game B and keep on playing,” explains Hannibal.
Now for the economic interoperability’s more romantic counterpart: visual interoperability.
The seductive possibilities of visual interoperability
In gaming, visual interoperability refers to assets from one game showing up not just in the marketplaces of other games, but actually in those other games, so that they impact gameplay in some way. Now it’s easy to get carried away here: Mario dodging bullets in Call of Duty, anyone? It sounds fun, in a weird, quirky, one-off way — like Winnie-The-Pooh And Piglet on South Park (it happened) — but that’s not what we’re talking about.
“If it doesn’t make sense for asset ‘a’ to show up in game ‘b’, then we just won’t do it,” explains Colin Foran, CCO of Shrapnel, a web3 first-person shooter that many industry observers have high hopes for. “The interoperability police aren’t going to force Remedy to add Mario Kart vehicles to Alan Wake 2.” Instead he talks about a near-future world in which “you can bring ‘a version’ of your favorite weapon into Shrapnel, so you don’t feel like you’re starting from zero — that sounds pretty cool.”
Colin goes on: “I’m more interested to see what devs do to honor the spirit of an asset, rather than bending over backwards to present it in a pixel-accurate way. So say I’ve got a stylized, cell-shaded sword from another title that would look sort of silly or immersion-breaking in our realistic environment, instead we can represent it as an in-fiction Shrapnel item, or maybe it’s a buff on an existing weapon, or whatever. There are a number of ways this could go, and ultimately it’ll be informed by users getting their hands on the system and telling us what they want to see.”
The current state of play
Don’t get us wrong — we’d love visual interoperability to go wild. You want to bust through those ancient gates in this game and access the secret level? Then find the warlock in that game and trick them into giving you the magic words. Alakazam, baby!
But first things first — and some of the first things are avatars. Alex Paley is co-founder of Faraway, one of the gaming studios already experimenting with interoperability. He believes that, for visual interoperability to take off, there’ll need to be “some level of asset standardization. The good thing is that for certain asset types, such as avatars, there have been a few well-adopted standards that have emerged: Ready Player Me and Mixamo are two examples. If you make an avatar using the Ready Player Me skeleton, for example, it will be interoperable in our games since all our animations, rigs, etc, will work with that skeleton.”
One of Faraway’s titles is Mini Royale: Nations, an open-economy game that combines first-person shooter and social strategy elements. “Our Mini Royale avatars are automatically playable in games that use the Ready Player Me skeleton and avatars from those games are playable in ours,” explains Alex. Check out this video for a flavor of Faraway’s experimentation with visual interoperability.
There are undoubtedly many hurdles to overcome before visual interoperability is as fun as it sounds. The challenge presented by the enormous diversity of art styles across the gaming universe cannot be dismissed, though Colin Foran of Shrapnel alludes to some workarounds. The industry will also have to account for interoperability at scale, as the number of blockchains increases, with their divergent smart contract languages and consensus mechanisms. Security is also an issue, since one blockchain’s vulnerability can be contagious.
What the gamer wants, the gamer gets?
The game developers also need to want to do it. Yet gaming has shown time and again that, if a capability is available and users want it, they eventually get it. What seems unlikely today becomes the norm tomorrow. Even true digital ownership — so inimical to the interests of the gaming powers that be — will, as far as we are concerned, become just the way things are before very much longer.
As our own Marco van den Heuvel says, “Interoperability isn’t only about connecting games; it’s about giving players real control over what they own in the digital world. With blockchain technology, gamers can go beyond the old rules and make their virtual stuff truly valuable. It’s a whole new world where what you own in games matters. For gamers, this means they can feel even more connected to games and their online profile than before.”
Colin Foran of Shrapnel points to the example of crossplay. “Until recently, it was absolutely inconceivable,” he says. “It was never going to happen. Could never happen. Until it did, because consumers tried it, liked it, and insisted it become standard behavior. The second there’s market proof that interoperability increases the longevity of game studios’ titles and assets, you’ll see it take off and we’ll wonder how we lived with items that ‘you could only use in one place’.”
You could say something similar about the rise of free-to-play and microtransactions — just look at what one little bit of horse armor has led to. Back in 2006, Bethesda offered players of The Elder Scrolls IV: Oblivion the opportunity to buy some horse armor for $2.50. It was the first time that a game company tried selling DLC (downloadable content) in a major title. It’s fair to say it caught on — Immutable co-founder Robbie Ferguson claims that US $150 billion is now spent every year on in-game items.
For now, projecting into the next 5–10 years, we’re confident that a few things will happen. One, and for all the reasons we’ve described, secure economic interoperability will be the norm — bring it on.
Two, from this year’s version of a franchise to the next, your achievements and purchases — once recorded indelibly on the blockchain, as we believe they’re soon going to be — will amount to something. Game companies will no longer be able to look at the fact that you’ve played every release of FIFA/Madden for the past decade, amassing achievements and building up a rich relationship with the game’s intricacies — and then ignore it all, making you start from scratch. Franchises without some degree of interoperability from one year’s release to the next will look incredibly ungenerous.
Three — and this is related to number two — competition between game studios to keep gamers interested is going to be fierce, to the benefit of gamers. How will this work? Well, if game A gets complacent and lets things stagnate, game B can tempt game A’s players away by promising that assets and achievements will carry over to game B instead.
What about 15–20 years? Well, if everything plays out the way we think it’s going to, there’s one thing we can be sure of: interoperability will be so ubiquitous, so normal, that we won’t even talk about it — which means not having to stumble over its pronunciation or spelling ever again!
This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, financial or tax advice. You should consult your own advisers as to those matters. References to any digital assets and the use of finance-related terminology are for illustrative purposes only, and do not constitute any recommendation for any action or an offer to provide investment, financial or other advisory services. This content may not under any circumstances be relied upon when making a decision to purchase any digital asset referenced herein. There can be no assurance that the investments mentioned herein will be profitable. The digital assets referenced in this report currently face an uncertain regulatory landscape in several jurisdictions. The legal and regulatory risks inherent in referenced digital assets are not the subject of this content. The content speaks only as of the date indicated. Any reference to investments made herein are made by Merit Circle Ventures, held on trust for a purpose to accelerate and further the growth of the Merit Circle ecosystem. The assets held by Merit Circle Ventures are not controlled by the DAO or held on behalf of it. The DAO can however exert certain limited checks and balances on it and signal non-binding wishes to it via governance. Merit Circle Venture’s mission and purpose is aligned with the DAO’s.
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