Collective intelligence / Democratization of ownership
Collective intelligence
“Technology isn’t bad. If you know what you want in life, technology can help you get it. But if you don’t know what you want in life, it will be all too easy for technology to shape your aims for you and take control of your life.” — Yuval Noah Harari
Technology does not possess the capacity to recognize between what is beneficial or harmful. It is up to the individual to decide how to use technology, whether it be to create a code that can hack the minds/hearts of many (as some click-bait companies have done) or to develop an ethical code that is beneficial to humanity. — Ultimately, the decision of how to use technology is dependent upon the individual and their goals.
Humans are domesticated primates that harbor evident cognitive biases on numerous levels and types, which have an effect on daily decisions. We are also greedy creatures and have been attempting to manage technologies that are far more advanced than our human operating system (Human OS). Therefore, it is not unexpected that our emotional hardware is not well-aligned with our capacity to reason effectively about how we should prioritize and manage risk. — Consequently, crises such as those in 1997, 2001, and 2008, as well as shenanigans such as FTX, Luna, SVB, etc., become inevitable.
The first principle means; the fundamental concepts or assumptions on which a theory, system, or method is based. There is a reason why we use titanium and its alloys when making an airplane, why we use best conductors such as silver and copper for electrical wires and why we use glass for windows.
- Say if a de-fi protocol with a rule to take an asset at full collateral, w/o a haircut and they want %140 over-collateralization, when the asset price goes down %75, that de-fi platform is toast!
- When there is abundance of something, you have more than you need. The value of that something goes down; If you print too much money, money supply goes up / value of the money goes down. Say if a web3 game creates lots of tokens, without a buy-back plan and proper treasury / emission management, the value of the token goes down thus creating inflation!
As long as we have a reasoning from the first principle and collective intelligence, it does not matter whether it is De-Fi, Trad-Fi, Web2-gaming, or Web3-gaming; the outcome will inevitably be the same — humans repeating the greed cycle.
Web3 gaming
The value
Access; 3rd party trading for in-game assets using fiat money has existed for a long time. But games offer more than currency — they offer access. There have been limitations on the creative side from the beginning. NFTs will open the door for creative inputs, allowing artistic careers to be more accessible from different communities.
Ownership; Web3 allows people from different backgrounds combine financial resources, enable creators and distribute to true fans. Direct ownership of a community enables direct incentivisation. In gaming, people provide value for others through digital objects. NFTs will take this to another level.
Composability; is simply extending the work somebody has done. It allows devs to extend the utility of a game’s assets to an infinite amount of use cases. We’ll see the best games built on the foundation of previous builders.
Distribution; Gaming NFTs might look like a toy now, but the concept behind this new tech is that all media can be free and creators can monetize the true fans / owners. When the platform becomes the largest publisher, independent studios lose their leverage for distribution. Web3 will allow creators to capture value that is locked into the monetization strategy of distribution platforms.
It’s not a “zero sum game” anymore for players; There are essentially two ways to value something; Non-monetary value (Status, happiness, excitement, joy, etc) and Monetary value (cash flow and appreciation). The non-monetary value of Web2 games has been paramount. Now, web3 offers us a chance to combine those two; We can build real products with great gameplay and strive for matching that non-monetary value and top that building sustainable game economies and giving back some of the investments.
Numbers
The dapp (decentralized application) industry experienced a 50% increase in unique active wallets (dUAW) in 2022, rising from an average of 1.58 million dUAW in 2021 to 2.37 million dUAW in 2022 on average. (source: 2022 Dapp Industry report — DappRadar)
Web3 games in 2022 account for 49% of all dapp activity, with on average 1.15 million dUAW (60% increase 2021) numbers and 7.4 billion in transactions (40% increase 2021) count.
Projections
Most of the web3 games require wallet log-in to play the game, so I will take mUAW as MAU. This means web3 games averaged 6M MAU in 2022. Those numbers are from DappRadar, and since they do not include all web3 games, let’s take this number 8M MAU.
Web3 gaming Market size in terms of revenue was estimated to be worth USD 4.6 billion in 2022 and is anticipated to rise to USD 65.7 billion by 2027, at a CAR of 70.3%. — So we might hit 100+ million players by 2027. Those numbers are promising, but still trivial compared to the gaming industry.
Also many of the biggest game developers are already working on titles with Web3 integrations. That said, it takes years for any game to be developed, let alone a AAA game. — So the space will only heat up as these projects come to fruition.
100M+ web3 gamers — How?
Here is my “2 cents” on how we can increase the reach of web3 games and scale them to the masses;
Stop Trying To Onboard People Into Web3; Instead, we need to infuse the internet with blockchain technology in such a way that everyday users can enjoy the benefits without knowing they are doing anything differently. Reddit’s Collectible Avatars, limited-edition personal profile pictures backed by non-fungible tokens, offer the perfect case study. Since their launch in July, more than 6M of Reddit’s users have bought at least one, paying for it with their credit cards.
Build a game Everyone Wants To Play; Much of what goes by the name of “crypto” is financial applications that let users trade, borrow, lend and stake tokens. While an important part of Web3, the so-called “money crypto” engages only a narrow spectrum of mostly early adopters. For blockchains to live up to their societal paradigm-shifting potential, we will also need to build what many more people will want to use.
Build an engaging game to make people spend $ for fun. Tie your incentive mechanism more on in-game rewards not on token emission. Only having a great game with depth will create willingness to level-up and learn about the gaming experience on the blockchain.
Fair / Skill based gameplay; The business of video games assures us a game is “competitive,” then gives any player the chance to cheat through purchase pathways: powerful weapons, stronger armor, better stats. This denies us the freedom of play. It denies us the elegance of the one-time-purchase video game, the complete game experience, and the totality of the developer’s vision. It also denies us fairness of play, where winning is determined solely by a player’s skill, not their spending.
Power distribution should be fair and should be attained through playing time and sharpening skills, rather than through the purchase of an epic in-game item / NFT. — When money impacts core gameplay it can undermine the above.
Frictionless gaming experience; Although we might need on-chain onboarding solutions initially, in order to optimize the churn rate, players should be willing to take the next steps, which will require blockchain know-how. — I think the real challenge is creating a will for learning and to have a learning curve with a steep rise.
- Allowing users to login with social media accounts
- Making NFTs purchasable by using credit cards
- In-App Wallets / built-in marketplaces to make it easy for users to purchase / store NFTs and access other in-game assets directly in their in-app wallets.
- Lower the barrier to entry and expand to a F2P model. Remove web3 game mechanics of using NFT as a prerequisite and Let players jump directly to the game without having NFT or Wallet.
Create utility for your NFTs (in-game / out-game); Have other devs build games with your NFTs (composability) Build B2B businesses, give players the option to use those NFTs somewhere else (interoperability).
Think about what tried-and-true biz models you can combine w/ tokenization to create innovation while improving your chance of success. Focusing on partnerships w/ diverse brands in both real life & metaverse is a key part of making growth, think about how you can bridge real economy & Metaverse in creative ways.
NFTs as a business model (like f2p); You can build your game economy on NFTs and price in-game transactions with a major crypto asset or a stable coin. The huge benefit here is the transaction fees are in an asset that is not tied to the game performance and when you charge a transaction fees, you have that revenue immediately. Players will bridge those assets into the game, which would be stored by the treasury. The treasury could earn yield on these assets thus creating additional income for the game.
Whether you control the emission with a fungible or a non-fungible token will make much difference. — NFTs could be a great toll under treasury management.
For this model to be sustainable, stop anchoring value / ROI to in-game assets! Let players earn them / put a value on them and let those digital assets be uplifted by players themselves. Don’t be afraid to have assets that can lose economic relevance. Everything is about managing expectations / being open with the community. This is a game world and they can get lost in it for years. Expectation of a good return on those assets for many years may not be achievable.
Think about traditional Monetary / Fiscal policies; You can play around w/ interest rates / taxes to manipulate the token demand/supply, price and growth.
Lower the player ROI; A business is a process that creates profit. ROI should be negative from the players side. If they spend $100 they should be getting $10-$20 not $110.
Token emission rate should match the rate of project growth, so it doesn’t hurt NFT value but at same time doesn’t unnecessarily encourage “up only” financial speculation either.
Democratization of Ownership.
We have been fortunate to have seen Web3 gaming from more angles than most people. We were heavy players of games like Runescape, World of Warcraft, Diablo, and DOTA, which all demonstrated early experiments at what we’d now call Web3 gaming. These experiments ranged from gray markets for in-game currency in World of Warcraft, to “NFTs” of rare items in Runescape and DOTA 2, and the brief attempt at a real-money auction house in Diablo 3.
For as long as gaming has been around, third-party trading and using in-game assets as fiat currency has been a reality. In 2009, people in Venezuela were using RuneScape gold instead of their local currency due to its instability. For the past fifteen years, gamers have been trading their accounts and mining gold in the gray market. — Traditional gamers are not opposed to ownership, but they are wary of over-commercialization and financialization, which is a form of digital capitalism. They do not want Wall Street to enter their games, and they are justified in their concern.
On the other hand, the gaming industry has demonstrated a conservative attitude, being hesitant to embrace change and rarely taking the lead. This is evidenced by the negative reception mobile games and free-to-play games initially received. Mobile games had been available prior to the success of the iPhone, yet it was not until Angry Birds became a proven concept that major gaming companies began to invest in the mobile market.
When Axie Infinity was launched and demonstrated that a certain mechanic was successful, talents from traditional gaming began to enter the realm of Web3 gaming. — Ultimately, the advantages of blockchain technology will be evident enough to draw more traditional gamers.
Conclusion
Let’s imagine a web3 game, wherein players will trade NFTs not for the anticipation of a x10 increase in value, but for the utility of the game (who anticipates that the value of a game account will rise?). Furthermore, tokens should represent the genuine value/fundamentals of the game, rather than being a means to bribe the community. Let’s discuss retention rates, the complexity of the game, the quality of the artwork, the exceptional gameplay, the Price to Earnings Ratios (P/E ratio) of tokens, — and eventually move the button from web2 to web3 with the democratization of ownership.
I believe that in order to innovate within the realms of de-fi and web3-gaming, it is essential to apply the rules and principles that are applicable to traditional finance / games. — It is my opinion that those who possess a sound understanding of quantitative finance and traditional gaming will be the ones to make these innovations work and scale.
Since the advent of computing in the 1940s, there has been a major computing cycle every 10–15 years, including PCs in the ’80s, the internet in the 90s, mobile computing in the’ 00s. Blockchains will power the next major computing cycle, which we call Crypto or Web3; “The internet owned by the builders and users, orchestrated with tokens” as Chris Dixon says.
It is evident that web3 will eventually emerge from the current state of disorder. We are striving to create a permission-less world, which will require a considerable amount of time and effort. — It is safe to say that the final chapter of Web3 is not only not written, it’s not even imagined.
“The end of the hero’s journey is once you go into the darkness and find something of value, the next thing to do is to bring it back and distribute it within the community.” — Jordan Peterson
