New generation blockchain games: beyond the hype of NFTs and play-to-earn.
How to move forwards toward true decentralization.
Why build games with blockchain and crypto? Blockchain games stand at a confusing place that fails to attract game developer veterans and gamers around the world. Many see blockchain as a complicated solution to problems they never had or a technological setback that disturbs their business models. In this article, we stab at the intriguing intersection of blockchain and games, identify key technological problems and present a promising path forward through true decentralization.
This week, at Paris NFT day, I had the pleasure to address a few burning topics surrounding blockchain games, sharing my belief about why full decentralization matters for games. Today, we will dive deeper into the subject.
If you are a game developer, you would ask yourself why to bother building games with blockchain and crypto, especially being part of a wealthy industry where VC capital flows in abundance and growth doesn’t see a ceiling.
Then, if you still wanted to pursue the idea, you would have to cut through discouraging real-world examples, like 2021’s unfortunate episode where Ubisoft announced its new game NFT platform, Quartz.
In a torrent of negative feedback on YouTube, critics denounced Ubisoft’s initiative in various ways. Many said NFTs harm the planet due to outrageously high electricity consumption (which is actually false). Others have pointed out that there are not so many players who wish to trade cosmetics, weapons, or other game assets that Ubisoft just decided its audience is looking for. Finally, people talked about blockchains’ high fees and the actual value of the NFTs representing in-game assets, especially regarding what happens when companies go out of business or shut down their games.
It is necessary to distinguish the signal from the noise. This is not an easy task when we enter crypto, an industry that evolves fast with a complex mix of projects and startups, ranging from blunt scams all the way up to groundbreaking innovation in computer science. Game developers willing to embrace blockchain have to spend considerable time educating themselves and drawing their own conclusions. But education and thinking alone don’t bring them much closer to success, as blockchain tech is not free from challenging technical problems, such as bad user experience, pricey transaction fees, and computational restrictions, to name a few.
In any case, to the extent that we can overcome these technical shortcomings, blockchain and Web3 point to a disruptive opportunity beyond the current hype of NFT games and play-to-earn initiatives, which are now only scratching the surface of what the emerging tech will do to games and the so-called metaverse.
We will start this discussion by going through three well-known value propositions for blockchain games. We will see that they usually fall short of their promise precisely because they fail to honor the essential principles of decentralization. After discussing the failures, we can understand the path to reclaim and use such decentralization principles, which lay the groundwork for a powerful new class of blockchain games.
True in-game asset ownership
The value proposition of true in-game asset ownership is probably the most desired and well-known. Before blockchain, players never really owned anything in the game. Assets only existed inside the game world and were assigned to respective players only when logged in or playing. With NFTs, in-game assets can be somehow transferred to gamer’s crypto wallets, leaving the walled garden of game platforms. Then, the owner can keep, transfer, or sell their NFTs in secondary markets outside the game company’s reach or censorship.
The deeper problem here is that even with the wizardry that NFTs introduced, there is an almost-delusional disconnect between what people think they own and what they do in reality. The problem is that NFTs representing in-game assets are just reference keys or hashes stored in the blockchain. No content or behavior is to be found on the blockchain, and a company-owned server remains the sole controlling entity, signifying the reference key and giving it life in the game. The actual NFT’s value is found nowhere in the blockchain but only in the server’s centralized state or database.
Imagine a player today owning a supposedly rare magical statue that holds a good market price on OpenSea, granted by its digital scarcity. What if the game company decides to generate hundreds of these magical statues in a few years, debasing the value of the player’s original? Or what if the game company decides to censor the player, rendering their NFT useless arbitrarily? Or what happens if the company shuts down its doors and servers forever?
Only by decentralizing the game logic itself and its state, can you develop games that provide actual value and ownership to your players. Decentralization is fundamental to achieving real ownership and only with it can we tap into the immense potential value that virtual worlds can capture.
Bitcoin can help us understand this claim when we look at it as the simplest collaborative, decentralized game out there. The rules are as simple as they can be: I offer hash power to secure the network in exchange for a chance to be rewarded in the network’s native coin; if I send you X coins, I have Y-X coins, and you have Z+X coins; if X > Y, my transaction is reverted; if you try to steal my funds, your signature is rejected by the network.
Bitcoin only passed the 1 trillion USD market cap spot because of the total elimination of central authorities. The world would never consider Bitcoin a true neutral, censorship-resistant, and flawless store of value if Google, the US government, or any government for that matter controlled it.
The comparison with Bitcoin is to be taken with a grain of salt. Bitcoin wasn’t created for entertainment, yet it gives us good food for thought on how decentralization will bring immense value to games, virtual worlds, and a truly collectively owned metaverse.
Truly sustainable, inclusive, and reliable in-game economies
The value proposition of truly sustainable, inclusive, and reliable in-game economies is another exciting one. After all, monopolies concentrate too much economic power. Web2’s old model is driven toward maximizing the profit of companies at users’ cost, no matter if they pay with money or with attention. Web3 starts from more benevolent incentive principles, with innovators creating platforms that aim to empower people, distributing decision-making power and wealth.
Game publisher empires amass billions of dollars every year for themselves. If we were to rethink the old business model from Web3’s prism, we should start by letting go of most of the financial upside, leaving it within the game and its community.
This idea can sound counterintuitive until you consider the new horizon available. You can create all sorts of games and virtual worlds where real economic systems can flourish. Some players will only play for fun; other players and artists will make a living by contributing with their skills, attention, and time to the game.
Play-and-earn games could have virtual worlds running real economies with in-game land, artifacts, and services. Even if you let go of 90% of your revenue as a developer, your due fraction would be more than enough for you to have a hefty revenue stream. All while creating new opportunities for thousands or millions of people to have fun and make real bucks.
An easily overlooked problem here is that in most so-called blockchain games, the game company retains the monopoly over the source code and state of the game. Therefore, they hold the unilateral power to change the economic rules at any moment they want.
However, programming your virtual world physics and economy with a conventional centralized Web2 paradigm isn’t good enough. When we think about sustainable virtual worlds that include an economic system, we don’t want a single company like Meta with absolute power. That simply doesn’t align with the interests of most people in the long run.
True collective construction
The value proposition of true collective construction. Gaming DAOs (Decentralized Autonomous Organizations) are already a reality: gaming guilds, incubators, accelerators, and development communities have garnered thousands of participants and fundraised millions.
Decentralizing development may be the most ambitious and forward-thinking application of DAOs for games. For many industry veterans, however, the sheer idea of opening development decisions to the community can be hair-raising. Aside from the fear of the crowd not knowing the best successful route for the game, allowing anonymous developers to take part in coding impose serious risks. Upgrading decentralized applications that hold real money is a non-trivial security problem that requires a strict methodology and thorough software auditing.
Yet, we can already see concrete examples of such DAOs, like AavegotchiDAO, Dope Wars, and Star Atlas. The idea of letting the community participate in the product roadmap and allowing community developers to own the codebase through open-source licenses aligns with games and economies that will belong to a collective and transcend the original creators and project founders.
A decentralized future
Decentralization of code through open-source licenses and decentralization of state with smart contracts are the core principles of thriving Web3 creatures like Bitcoin and DeFi products. Only if we apply the same principles to games can we realize the value propositions we discussed above.
With the decentralization of code and state, we can build the fundamental pillars for true community ownership. First, community developers own the codebase and its evolution through open-source licenses; Second, un-permissioned node runners own the game state through decentralized storage and processing. With the decentralization of the state, players can finally really possess their in-game assets through NFTs. Also, it becomes possible to create sustainable in-game economies that are free from the tyranny of monopolies.
We cover all the value propositions elaborated previously with collective construction, inclusive economies, and true ownership.
Imagine virtual worlds, strategy games, or RPGs where instead of you being a game studio with god-like powers, you embrace the sharing of code, database, and economy. You encourage your community to progressively take control of the code and the game state while retaining most of the financial upside in a win-win economy for all parties involved, including yourself. As a founder and architect of such worlds, you keep a reasonable share of tokens, NFTs, or revenue from the system you seeded.
There have been a few pioneering teams designing and implementing decentralized games. Today, we can see titles like Dark Forest, Nine Chronicles, and Soccer Manager Elite, to name a few. But we see an incomparably larger production of centralized play-to-earn and NFT games that don’t deliver real ownership to people.
A common explanation for that is that gamers don’t care for decentralization, an argument that will likely not age well. The early-stage lack of interest in disruptive innovation is not a reliable basis for future projections. Remember that only a few geeks (and no investors) were interested in Bitcoin in 2009 and that gamers were fully satisfied with PC and console back in 1997 when Nokia implemented Snake for the first time on a phone.
Audiences and needs just emerge naturally from meaningful new business models and platforms. In our case here, when we think about games that truly belong to players and the community, decentralization is a basic need, not a luxury. Yet, current games are only scratching the surface of blockchain’s potential, and it is a matter of time for the industry to be more dedicated to absolute distributed ownership.
The actual reason for poor decentralization in current blockchain or NFT games is that 13 years after Bitcoin went live, it is still technically tough for people to decentralize game logic. Unless you want to create minimalistic games, not much more sophisticated than tic-tac-toe or CryptoKitties, this is the state of affairs in 2022.
Although Ethereum proposed a decentralized world computer and other blockchain projects try to deliver more scalable systems (which necessarily comes with compromises to security or decentralization), the reality remains that existing smart contract platforms have not been designed to deal with the computational loads of our everyday life. They offer only good enough computing resources for simple DeFi protocols or uncomplicated DAOs.
If you want to develop truly decentralized games, you will suffer to pull off a back-end logic using plain Solidity smart contract programming. Aside from this indisputable inconvenience, if you implemented an indie tower defense game, no one would be able to play it. A simple gameplay would engender billions of EVM machine steps, an obscene number of blocks, and a prohibitive price that no one would like to pay.
Smart contracts are not a good fit for the complexity and computational needs of decentralized games. That is the reason why blockchain games aren’t decentralized yet. A fundamental missing element is an infrastructure that provides decentralized servers supporting software stacks game developers use. By the time such servers preserve the strong security guarantees of an underlying public chain like Ethereum, we can finally have non-trivial decentralized games with economies that are as reliable as Uniswap.
Here comes the practical contribution my colleagues at Cartesi and I are giving to this matter. The Blockchain OS is all about such decentralized servers. In 2020, we designed and implemented Creepts, a fully decentralized tower defense game, to prove how it would be possible to run its game logic entirely off-chain while retaining the strong security guarantees of Ethereum. Another unique feat was that no game logic was implemented in Solidity. Instead, we used TypeScript and mainstream software libraries. Cartesi has evolved a lot since then, and we expanded upon these efforts, developing a fully decentralized heads-up poker game with C++ and mental poker. Cartesi’s tech is now finally approaching the production stage.
Wrapping up
The main goal of this article was to present a case for truly decentralized games. We discussed three key strong value propositions for games to embrace crypto and blockchain technology. They basically point to a reality where games become a collective construction and are owned by the community.
To the extent that blockchain games fail to realize these three basic propositions, they cannot tap into the revolutionary potential Web3 holds for games, virtual worlds, and the metaverse. One of the clear consequences of this failure is that in-game assets are less valuable than what the current NFT game developers would wish us to believe.
Also contrary to popular opinion, the reason for these shortcomings is not due to the lack of opportunity or interest in true decentralization, but actually, because the proper technology and infrastructure have not yet been available for game developers. While smart contracts are enough to support simple DeFi and trivial games, they are not what game developers need when it comes to decentralizing generic game logic. Instead, they would need decentralized servers that support mainstream software stacks and retain the strong security guarantees of robust public blockchains. That’s the only way they can achieve state decentralization and, as a consequence, get to reliable, sustainable, and transparent in-game economies. That’s also the necessary ground for true in-game asset ownership through NFTs.
Finally, I briefly introduced what the Cartesi team has been developing as a fundamental piece that can change the current limiting reality of Web3’s infrastructure.
I am glad to hear your thoughts on this discussion (you can find me on Twitter or LinkedIn). You may also want to know more about Cartesi’s research and development. Join us in our Discord community and engage with our tech team! It will be great to hear from you.
About Cartesi
The Blockchain OS is a decentralized layer-2 infrastructure that supports Linux and mainstream software components. For the first time, developers can code scalable smart contracts with rich software tools, libraries, and the services they’re used to, bridging the gap between mainstream software and blockchain.
Cartesi is enabling millions of new startups and their developers to use The Blockchain OS and bring Linux applications on board. With a groundbreaking virtual machine, optimistic rollups, and side-chains, Cartesi paves the way for developers of all kinds, to build the next generation of blockchain apps.
Welcome to The Blockchain OS, home to what’s next.
Follow Cartesi across official channels:
Telegram Announcements | Telegram | Discord (Development Community)| Reddit | Twitter | Facebook | Instagram | Youtube | Github | Cartesi Improvement Proposal (CIP) | Website
