Building Proper Web3 Games
Currently there has been an explosion of Web3 or Blockchain-based Games being funded, being released and many of them also sadly falling apart shortly later. Underlying these Games has been a whole catalog of models, ranging from play-to-earn over play-and-earn to GameFi, PlayFi and so forth. Many of these models have proven exceptionally successful in user acquisition but also exceptionally poor in user retention.
My core take here is to cover what will allow the next generation of Web3 Games to actually retain users and how we can create really interesting Game concepts without corrupting many of the established principles of designing great games. Spoiler alert, it’s gonna be centered around building a well-rounded game first and only then adding Web3 elements, instead of trying to build a fun game around the idea of just trading on the blockchain. This will also help you understand why I am so optimistic on Web3 games, just when many are writing off the space after a failed first wave. Because now we have actual gaming veterans entering the space and we can expect awesome games to be created that won’t simply depend on trading, but instead will give the option to play, have fun and collect items from a game you already love.
Nonetheless, this is just a fraction of the complexity behind building a game, so I am not suggesting that this is a blueprint to making a great Web3 game. It is just a collection of thoughts and experiences on the dos and don’ts of Web3 games that I have seen so far.
If you are interested, I would be happy to make an overview of a few examples that currently stand out to me in the Web3 gaming space. Just let me know down below in the comments!
Core game loop free of monetization — Just an ownership layer
To me, anyone who is building a successful game should think about this. It is fundamentally about intrinsic vs. extrinsic motivation for your users and what incentives you set them. In any setting your incentives will probably dictate the long term outcome of your project, no matter the effort you put into the game. That’s why I think having a core game concept that is sustainable and built to outlast others is key to the future of web3 games.
So what is it about? First things first, why do we play games? We play them because we want to immerse ourselves in a world, we want to enjoy it, we want to be distracted from whatever has been going on in our lives, we want to have FUN. The concept of fun has so many facets that I am not going to go into it (and everyone defines fun differently), but what is detrimental to immersion and fun is including the very things most people are trying to escape from when they immerse themselves in a game world.
It should not be the point to bring someone back to their real life problems by introducing financial decision making. We should also not reach a point where the ultimate aspiration is to make a bunch of money. This is because these extrinsic factors (speculation, profit-making etc.) will ultimately end up corrupting the intrinsic motivation of your players to have fun, that’s just the power money has. But this will leave us with a self-selection in our user base, slowly driving out the players that were here for fun and leaving the mercenaries that are trying to exploit the last bits of profit before they jump onto the next project. This is how Web3 games started and where they failed already, now it is time to apply those learnings.
This doesn’t mean that using NFTs in games has failed, it just means that the core principles of the first wave of games were fundamentally flawed and we gotta build a more sustainable model. This is where Web3 elements have to be excluded from the core game loop. What this means is that we need a game that is independent of all these assets, so it can prioritize fun for everyone (what we are gonna talk about later). Now this is not at all a new concept, we have seen the exact same backlashes at studios in the Web2 space, when games were “pay-to-win” etc.. Those were the same examples where the ownership of assets interfered with the core game loop itself.
Nonetheless, I strongly believe that there is a huge potential for all these assets to be built in layers around a sound core game, just like we see with flourishing skin economies with some popular titles (CS:GO, League of Legends etc.). So we should just take the learnings from Web2 and explore the new concepts that Web3 now offers for these models. We can have token-gated access to certain events, we can have an economy of unique limited edition collectibles, we might be able to create highly exclusive merchandise. Ultimately, it is about creating things people care about, that they can own, trade, collect and show off.
Additional engagement layers around the game
If we manage to keep our core game loop free of over-commercialisation and extrinsic incentives, we have the great opportunity to add a bunch of all those mechanics we weren’t allowed to add to the core loop as a metagame or engagement layer around the game. Why? Because having the option to engage beyond the core game and outside of the game is a booster for your most loyal players. The only difference is that these mechanics can only boost a great game to an awesome level, but they can’t boost an average game to a great game. If gamers don’t care about your core game, they will care even less about your additional metagame layers around it.
This can happen in multiple layers around your game with different levels of abstraction away from the core gameplay. We can add broadcasting as another layer for competitive titles, we could add betting, tournaments or other hosted events and we can obviously start selling exclusive merchandise around the core brand we created with our game.
All these options can help to make the game even stickier, as people integrate themselves into the community and all the options around it.
Now, how does that relate to Web3? Web3 can drastically facilitate many of these aspects via automation and trust minimized interactions. Anyone who ever tried to participate in some lower-level tournament or bet on a popular competitive title knows how administratively intense this might sometimes be in a Web2 world. Having automated contracts reward winners without third party involvement can make things a lot easier. It also fosters a more flexible and closely tied community, as many Web3 projects have proven with their astonishing engagements for real-life meetups for NFT holders. I truly believe that Web3 will open up a variety of options to engage players outside of games and it will be an incredibly valuable marketing tool to those trying to keep a strong community. Because even if your core game is out of hype at some point, many might stick around for the community side of it and that is what will forge the new games as sustainable-long term platforms instead of hyped up release cycles with drastic declines shortly after.
Fun over commercialisation — people only want to hold what they have emotions for (Psychological over Legal Ownership)
Now that we have understood where to place our additional engagement layers to not interfere with our core gamer motivations, let’s talk about the optimization of the game from a studio perspective, as this is where Web3 really can shine over existing F2P games.
In most existing free-to-play games, about 98% of the user base are just casually playing the game and paying for additional services not more than a few times with minor transaction amounts. The remaining 2% are what many call “whales” making up almost all of the revenue the game generates for the studio and paying enormous amounts of money to be in the top tier of the game at all times. Now this creates another incentive problem, as the studio will obviously try to optimize the game around the 2%, who are making their game actually economically profitable. However, this usually goes against the 98% of the players who are mostly serving as “content” for the whales to consume in terms of bashing up these players as they stand no chance against the fully leveled up whales.
Now the way this works is that usually there is a pretty consistent base of whales and a fluctuating base of “casual” users that need to be continuously acquired again as they get tired of the game after some time. This leads to naturally high costs of acquiring new players to keep content flowing towards the whales. This is now where Web3 really has the potential to shine, as we now have two options to solve this existing dilemma: First, we can use additional incentives such as play-and-earn to also keep our casual user base more loyal to the game, so they get rewarded for serving as content to the whales, making the whole game a little more of a stable economy. But secondly, we can also monetize the long tail of players more effectively with a trading economy in the game to open up the potential of optimizing the game more for the 98% of players that pay a little instead of 2% that pay a lot.
However, I really want to highlight again that we are talking about play-and-earn where earning can be a side part (or additional layer as we called it before) to the game, not the core game mechanic itself as we have seen in play-to-earn titles. To me, the actual model behind earning doesn’t matter as much, as long as it stays outside of the core game loop. This is where the rule of fun over commercialisation still applies at all times, as players will only care about items if they care about the game and that is the only way to create a sustainable game economy as we will discuss below.
As a side note, this is also where we should contrast legal from psychological ownership, as this has been confused a lot by many of the early pioneers of Web3 games. Guaranteeing legal ownership of assets earned through hard work is noble, but in itself doesn’t actually create value for the majority of players. Players need to feel psychological ownership and they can do that even if there is no legal ownership associated. Just think about how much people care about their carefully crafted Spotify playlist or their in-game created profiles. This is what we need to look at to align psychological feelings of ownership with the legal framework so players have the option to own their dearest digital items. But without it, there is no magic associated with ownership for the average player. Emotions matter and that is what ultimately drives value.
Stable economics — Sustainable value creation
Having a stable game economy sounds simple, yet it is actually incredibly hard to balance, as every single option for your player could tilt it back into unsustainable territory. Therefore, it is no wonder that the previous play-to-earn games were exceptionally good at attracting users but never managed to actually retain value within their ecosystem.
For a sustainable economy to function properly, value inflow from players must outweigh value outflow. This is especially true in Web3 where the liquidity of value is usually higher, so players will continuously withdraw value and you have to make sure that others counteract that with meaningful contributions. This also means being incredibly careful not to commoditize your goods, meaning their valuation only being based on financial metrics as we discussed above. Why? Because, if your goods get commoditized, you will quickly attract users from everywhere around the world, which is great. But as users start to compare their input with the output, you will see a shift in your user base. As lower-wage players enter, asset prices decrease continuously, ultimately leaving your first audience very frustrated and serving only a niche subset of players from low-wage countries. This is exactly what happened to Axie infinity, where a lot of Filipino players made a decent living off the game, but ultimately also inflating the supply to an extent that prices just kept falling like a rock.
You want to reward players for meaningful actions with meaningful assets. That is the power of web3. Bundling up emotions into assets that can be verified is a promise that can increase engagement drastically. However, offering commodities as a reward without a limited supply will drive prices down forever.
Because after all, we want to create magical experiences for games that they don’t want to leave anymore, not another side-hustle, where the game is not even core to the experience and people just measure their fun with the profits they make. Azra Games is one of the studios being built by industry veterans, where I see a sustainable game economy being built that combines the best of Web3 with traditional Gaming in a smart way and I am already seeing a pipeline of similar projects emerging. Exciting times ahead!
Conclusions
I hope you enjoyed some of the thoughts and I would love to hear your thoughts down below.
If you are interested in the possibilities of Gaming due to new powerful technologies such as AI, please find my first article “Why Games will be the platform for most of your entertainment by 2030” here on Medium. This will help to understand where the industry is heading and what powerful impact this ecosystem of technologies creates for the space.
If you would like to have even deeper insights into some of the research around web3 games, I can highly recommend checking out this report by Delphi Digital, which dives much deeper into some of the topics mentioned above.
