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Crypto Games: Blockchain Selection

Since the success of Axie Infinity, gaming has become one of the most invested verticals in the crypto industry. Many argue that blockchain games have the greatest potential to bring crypto into the mainstream, given the sector’s low barriers to entry and the widespread appeal of gaming. Amber has invested in several crypto games, and when speaking with teams in the early stages of development, we are often asked, “which chain should I build my game on?” Chain selection is a crucial decision for most game projects, and should be carefully considered. In this report, we will go through the history of several crypto games and analyze the pros and cons of different blockchain ecosystems. We hope this report can help current and future game developers with their decision on chain selection.

Axie Infinity: from Ethereum to Ronin

On Feb 18, 2018, Axie Infinity opened for presale, where people could adopt Axies by paying for them in ETH. The team planned to develop mini-games, quests, activities, and events for Axie owners to spend time with their Axies.

The axie showcased in the Axie presale post

The game was initially built on Ethereum, and its three key economic elements, Axies, AXS, and SLP, were all represented as tokens on Ethereum. Axies were ERC-721 tokens (NFTs), while AXS and SLP were standard ERC-20 tokens. Axie Infinity finally captured mainstream attention in the summer of 2021, as shown in the chart below.

Source: Axie World

Facing more pressure from the community regarding rising Ethereum gas fees, the Axie team announced Ronin, an EVM-compatible Ethereum sidechain built solely for Axie Infinity and future games built by Sky Mavis. It aimed to create a faster, cheaper, and easier user experience. In addition, the sidechain would accrue value from transaction fee payments, instead of players paying gas to Ethereum miners.

However, Ronin was hacked for $600M worth of assets in March 2022. Worse yet, this notorious breach was rooted in a vulnerability specific to Ronin’s security design. The chain was secured by 9 validators, among which hackers were able to take control of 5. The Ronin hack highlighted the important question of whether the benefits of building a sidechain outweigh the potential costs. Building and operating a sidechain requires expertise and careful planning, which may not be achievable for many game studios, even those which are highly crypto-native.

Stepn: from Solana to BNB Chain

Stepn was one of the brightest stars of this year. Not only did its token value increase by ~380x at its peak from the public sale price on Binance Launchpad, it also brought a short-term bull run to SOL as people flooded into Solana to play Stepn.

Source: stepn.com

Stepn is part of the “move-to-earn” subgenre of gamefi that allows users to earn rewards by running or walking. Players need to first buy a pair of shoes in its marketplace before playing. When players walk or run with their shoes, they are rewarded with GST, which can be sold in the open market or used in the game. Players are encouraged to upgrade their shoes with GST so that they can earn GST at a faster rate. Each upgrade is priced higher than the previous one, up until the maximum level of 30. For some higher-level upgrades or shoe mints, users need to use GMT, the governance token, as well. This complex and interesting in-game economic model attracts many players to design their own optimal strategy to maximize yields.

Stepn’s decision to launch on Solana was likely driven by Solana’s significantly lower transaction costs compared to those of Ethereum and other blockchains. Stepn was ranked 4th in the Solana Ignition Hackathon Gaming Track. However, the Solana network has recently struggled with occasional network downtimes and performance degradations, often for many hours at a time. This resulted in asset transfer delays as the Stepn team was not able to communicate with Solana nodes properly. Understandably, most users who didn’t understand Solana’s mechanisms blamed Stepn for the outage. These issues were not caused by Stepn, as they attempted to explain to their users, but it still negatively impacted player experiences.

In order to minimize the risk of running on a single chain, the team made the decision to expand to BNB Chain. Transaction costs on BNB Chain, while not as low as those on Solana, are still relatively cheap when compared with other layer 1 blockchains . Additionally, BNB Chain has a strong community with 970,218 daily active addresses at the time of writing, increasing Stepn’s user base. In April 2022, Binance Labs made an strategic investment in Stepn, further strengthening the partnership between Stepn and BNB Chain.

Source: CoinMarketCap

Although Stepn is technically “multichain”, the game is relatively siloed between the two networks. At the time of writing, there is a material price difference between GST on Solana ($0.14) versus GST on BNB Chain ($0.32) due to the lack of bridge infrastructure of the GST token between the two chains.

In traditional games, it is normal that multiple servers exist and the in-game economies remain separate between one another. However, the openness of blockchain creates new challenges for crypto game developers as they look to balance the interests of existing and new players and manage potential exploit risks inherent to cross-chain asset transfers.

DeFi Kingdoms: from Harmony to Avalanche Subnets

DeFi Kingdoms is an RPG mythical game which originally launched on Harmony. It “gamifies” DeFi by wrapping DeFi aspects into a fun gaming experience (hence the name). Users earn Defi Kingdom’s native token, JEWEL, by completing quests and selling in-game items. Users can also stake JEWEL inside a virtual bank, similar to single asset staking in DeFi.

Notably, DeFi Kingdoms announced plans to build a new realm called Crystalvale using Avalanche Subnets in Dec 2021. The core of DeFi Kingdoms remained the same in Crystavale, but a new token, CRYSTAL, was introducedto power the new realm. Users can bridge their JEWEL tokens from Harmony to the DFK Subnet on Avalanche and stake them to earn CRYSTAL tokens. JEWEL tokens are used for paying gas fees on the subnet, while CRYSTAL acts as the primary in-game currency. The dual token design most likely stems from a compromise between different stakeholders — new players want exposure to the new realm without the baggage of the old, while existing JEWEL holders were concerned about value dilution from the creation of a new token.

The team chose to partner with Synapse as the official bridge to send tokens between Harmony and Avalanche. However, the existence of JEWEL, a unified currency across two chains, brings up potential issues with arbitrage, liquidity, and bridge exploits (see our previous blog post for more details on the risks of bridges).

DeFi Kingdoms

Although DeFi Kingdoms had found market fit on Harmony, the team’s decision to move to Avalanche was likely motivated by better scalability, security, and community reach. If DeFi Kingdoms were the only game on a given subnet, its users would be able to take full advantage of its TPS of 4,500. At the same time, security and decentralization are not compromised as subnets are validated by Avalanche nodes. In addition to Avalanche’s technical capabilities, Avalanche Foundation launched Multiverse, “an up to $290M incentive program to accelerate growth of a new internet of subnets.” DeFi Kingdoms became the first subnet project to receive a grant from the program, worth $15M.

Illuvium: Immutable X

Illuvium is an NFT collecting combat game, where players can hunt, capture, and play with over one hundred different “Illuvials”, each represented by an NFT. Combining multiple Illuvials allows players to evolve them to improve their stats. It also has plots of land which can be purchased. With the exception of the land-purchasing mechanic, Illuvium is similar to Pokemon-style games, with added features including duels between players and the ability to make bets on the outcome of matches. Kieran Warwick, Illuvium’s co-founder, recently announced in Illuvium’s Discord server that the launch date is August 30, 2022.

The game initially planned to launch on Ethereum’s layer 1, but later decided to move to Immutable X. IMX’s layer 2 platform is entirely designed for and marketed towards play-to-earn games, with zero gas fees for NFT minting. Immutable X also allows for NFTs to be listed automatically via various marketplaces, giving sellers more exposure to potential buyers. By using Immutable X, Illuvium is effectively built into the Ethereum ecosystem while not having to deal with the high gas fees normally associated with it. As a result, Illuvium does not have a high barrier to entry for new users, as most existing NFT users are already on Ethereum or layer 2s of Ethereum. Additionally, by using rollups, Illuvium is able to minimize security risks, especially those related to bridging assets.

Sandbox: from Ethereum layer 1 to Polygon layer 2

Sandbox aims to build a metaverse where users can purchase LANDs, digital pieces of in-game real estate, to build, own, and monetize their in-game experiences using NFTs and Sandbox’s utility token, SAND. However, due to high gas costs being a barrier to entry on Ethereum, Sandbox announced that users could migrate their funds onto Polygon PoS Chain to help relieve high transaction fees.

Polygon PoS chain is the main public chain of the Polygon network. However, Polygon is releasing multiple other scaling solutions, including Edge, which allows developers to build and run their own customizable blockchain. Developers can customize gas costs and define their validator sets, much like they can with Avalanche Subnets.

To enable easy connection to the wallets of their users, game developers can tap into Polygon ID, which helps verify on-chain credentials while preserving user’s privacy. Games can then grant access rights to players based on the assets they hold.

Polygon ID

The native Polygon bridge (a.k.a. the Matic bridge) is the main tool used by developers to incorporate pre-existing NFT or ERC20 assets from Ethereum layer 1 to Polygon layer 2. This is what made it so easy for Sandbox to deploy to Polygon. Because the Matic bridge is one of the most battle-tested and general-purpose bridges, it presents less of a security concern than most game-specific bridges. Other games are also adopting Polygon’s architecture, such as Coolcats with their Coolpets game.

Closing Thoughts

Taking lessons from the examples mentioned above, we have summarized the key features of several major chains from the perspective of scalability, transaction fees, chain reliability, user base, and game highlights.

Many games have successfully launched on multiple chains. Some executed a complete migration to a new chain (e.g. Axie Infinity), while others built a new realm with a different economy (e.g. DeFi Kingdoms, Stepn). The expansion to new blockchains comes with risks from bridges and interchain economic stability. As the whole crypto space moves towards a multichain future, games with a thoughtful plan on chain selection and expansion will offer a more seamless experience to their players and stand out from the competition.

Disclaimer

The information contained in this post (the “Information”) has been prepared solely for informational purposes, is in summary form, and does not purport to be complete. The Information is not, and is not intended to be, an offer to sell, or a solicitation of an offer to purchase, any securities. The Information does not provide and should not be treated as giving investment advice. The Information does not take into account specific investment objectives, financial situation or the particular needs of any prospective investor. No representation or warranty is made, expressed or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of the Information. We do not undertake to update the Information. It should not be regarded by prospective investors as a substitute for the exercise of their own judgment or research. Prospective investors should consult with their own legal, regulatory, tax, business, investment, financial and accounting advisers to the extent that they deem it necessary, and make any investment decisions based upon their own judgment and advice from such advisers as they deem necessary and not upon any view expressed herein.

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Amber Group

Amber Group

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