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LOK Official Blog

WHY A STRATEGY GAME?

Our thoughts on decentralized gaming.

2019 was a bleak year for the blockchain gaming industry. Despite the hypes of 2018, the industry ended with flat growth and lukewarm traction. But we saw much hope as we learn more through servicing one of the best blockchain games of the year. Our lessons only reaffirmed our stronghold belief that the future of gaming can only be in the form of decentralized ecosystems.

This post will:

  • Explore the history of gaming and discuss its transformation
  • Define 3 constraints of the current games and draw solutions.
  • Explain why MMO Strategy is a great fit for decentralized gaming.
  • Introduce our new game, ‘League of Kingdoms’.

Chronicle of gaming

Since the invention of the first gaming console in the 1970s, the gaming industry has come a long way: Gaming started off as a mere extension of physical ball games and evolved to a platform where thousands of gamers interact in real-time and even going further into an arena for massively popular e-sports phenomenon.

Along with the evolution, the role of game companies changed dramatically.

“So what are the main drivers of the evolution? “

To answer that, we take note of the process of Decentralization: expanding latitude for gamers, empowering many over a few, following suit with the deinstitutionalization that is taking hold across various industries.

To put it into perspective, think about how much latitude we have today, compared to the old console games. Back then, a console was a physical object with only a couple of buttons. Today, gamers can enjoy across multiple devices and socialize with thousands of peers on well-established social media like Discord, Twitch, etc.

Evolution of gaming

Centralized Gaming

Borrowing words from Simon Kim, the CEO of a world-leading crypto-fund and our investor, Hashed.

“the first type of game comes in hard copy. The very first game software was distributed through floppy disks, game packs, CDs, and DVDs. Gamers will play the game until the end after they’ve purchased the hard copy.”

In retrospect, we were only able to play games in arcades and/or at their homes with the bulky game consoles. Games were like commodities sold and retailed, as avid gamers formed a long line in front of Toys“R”Us or GameStop in order to get the latest Nintendo titles on hand.

In that vein, the business models were also not much different from other commodities or services. Arcades sold gameplay as haircuts and game companies sold cartridges/CDs as commodities. Therefore, we want to define games in this era as “game-as-a-product”.

This structure, reinforced by strong intellectual property protection, left the gaming industry in the hands of large gaming “institutions”, like Nintendo.

Nintendo’s walled garden

For example, Nintendo capitalized it to be a dominant player, shipping most of the video games consumed in the early days of console gaming. (75% of handheld consoles by 2007) They could achieve this by completely locking up the entire value chain in their favor: Nintendo has succeeded in building a “walled garden”, keeping its added value high and everyone else’s low.

Below are some of the characteristics of Nintendo’s “walled garden”

Upstream:

  • Closed game development: Nintendo maintained closed-loop by exclusively developing and licensing only a limited number of titles annually.
  • Game-theoretic approach: By deliberately using outdated generic parts for their consoles, Nintendo limited the bargaining power of its suppliers.

Downstream:

  • Market supply control: Nintendo didn’t fill all the retailers’ orders intentionally to control the demand.
  • Anti-competitive pricing: Shortages helped Nintendo to hold a higher bargaining position in the pricing with retailers.
  • Opaque feedback loop: due to the physical nature of the cartridge and its convoluted supply chain, user feedbacks could not be heard in the game development.

As seen from above, the game industry maintained this centralized nature, up until mid-2000 when the platforms have emerged.

Platform Gaming

Internet technology was first born as a military communication technology in the 1960s by the Advanced Research Projects Agency (ARPA) and grew out of the public sector to proliferate in the private sphere. By 2005, internet penetration in developed countries reached 50%+.

https://en.wikipedia.org/wiki/Global_Internet_usage

Internet penetration has changed just about everything we do: work, enjoy, study, socialize, and others. With the hyper-connected population, game platforms like ‘STEAM’ and social media platforms like ‘FACEBOOK’, to name a few, have emerged, bootstrapping millions of users. The internet revolution has given rise to mobile adoption of 80%+ in most developed countries by 2016.

The widespread usage of mobile handsets meant game consoles in the hands of millions. Massive platforms, including but not limited to Google Play, Apple Appstore, Kakao games, etc are created and thousands of game developers migrated to take advantage of the massive platforms.

Nowadays, there are 2.7 billion gamers globally and the industry boasts a whopping $152 billion by 2019 in revenue, grown from only a few billion in 2012. This amount is much larger than the revenue of the box office and music industry combined. According to VentureLab, it seems nowhere near the end of the bull cycle, as the mobile gaming market is expected to grow strongly in the coming years with a CAGR of 14% for the forecast period, 2020–2025.

The rise of the internet displaced intermediaries in, say Nintendo’s dominance or its walled garden, and decentralized the dominance to multiple platform players. This is keeping abreast of global and gradual deinstitutionalization.

Thanks to the simplified value chain, these platforms could cater to users with enhanced transparencies and more games, attracting even more users to the world of gaming. Users no longer have to stick in the queue only to come back empty-handed. Instead, users can delight in an almost inexhaustive library of games and unlimited pipelines of game content updates — Games are no longer products but a ‘gaming-as-a-service’.

“Why this transition was so successful and what values have this new wave of innovation brought to the gamer experience?”

  • Massive Multiplayer gaming experiences provided new communal experiences where a large number of gamers socialize and transact simultaneously (which is fun!!)
  • Platform (i.e. Google Playstore) did away with middlemen (retail shops) and connected users directly with game publishers. Gamers got access to a massive content library at their fingertip.
  • Downloadable content (DLCs) created an ecosystem where gamers can continuously enjoy cool new content from game developers.
  • Different business models like Subscription or Freemium diversified users’ choices.

Among others, we focus on the “multiplayer” aspect of online/mobile games. The new social feature of games massively grew the pie as gamers found new delight competing and trading with other individuals.

Furthermore, this social rapport gave birth to two new industries: e-sports and virtual asset markets (ItemBay, OpSkins, etc). To illustrate the rise of the industries, e-sports viewership (443M in 2019) surpassed that of MLB and rapidly closing down on both the NFL and NBA. Also, the industry has raked in more than a billion last year ($1.1BN in 2019). The virtual item market is estimated to be $50 Billion and growing rapidly while mostly under the radar.

E-sports competition & virtual asset market, OpSkins

The multiplayer feature enriched the user experience and explains much of the industry’s breakout growth. Nevertheless, there are some pain points that the platform game missing out on: ownership, transparency, and accountability.

Next section, we will walk through the 3 missing pieces in detail.

3 Missing pieces

Despite all the good things, platform gaming did not solve all the problems of Ownership, Transparency, and Accountability.

1.Ownership

Given the massive user base, virtual items became a popular method of monetization. But most of the game assets are stored in the developers’ servers which made the transfers of the assets cumbersome. Transfer required special infrastructures and permission to move the items, which few developers are eager to implement for the cost. This severely inhibited trading and cornered gamers to peripheral markets ran by external parties (ItemBay, etc), where people end up having to trade sketchily written game credentials with a stranger. To make matters worse, these external platforms are insecure where billions are being lost annually due to transaction fraud. This lack of control is inhibiting the active development of game economies, as users invest their time and money half-heartedly.

2.Transparency

Gamers spending ever more time and money in the virtual world made data transparency an essential element of games. But since most games run the data on their private servers, the management of data is opaque and vulnerable to breaches. And as long as the data lives on the developers’ server, gamers will cast doubt on its credibility. Users will increasingly seek more trustable data as esports and stakes in games get bigger. Without a proper system to keep transparent provenance, earning a full faith and activating the full engagement of gamers would be a far and distant goal.

3.Accountability

As discussed, the evolution of games rested on the pursuit of decentralization. But today’s Platform gaming falls short of the value. Still, most game developments are decided inside a silo within a game company. Gamers as mere consumers of games have no way to have their voices effectively heard. Thus, development tends to skew toward the interest of developers. In this system, developers may tweak the policy to maximize their profits without consulting gamers and taking responsibility for any harm done to the game ecosystem. Many gamers lost faith in the developer’s ‘pay-to-win’ contents and left the game. This lack of accountability will continue to bar sustainable user retention.

Decentralized Gaming

We think, to address these pain points requires Blockchain technology.

Blockchain technology baked inside of the game unlocks massive opportunities: full asset ownership, permissionless transfers (Non-Fungible Token), data transparency (Distributed Ledger Technology) and make democratic governance possible. (Smart contract).

1.Non Fungible Tokens(NFT) for full ownership

NFT ensures full and verifiable ownership of game assets by users. Gamers can acquire an NFT asset from a developer or another gamer without the help of intermediating platforms. Because the proof of ownership is fully verifiable on blockchain, you no longer have to worry about fraud. Players can find a secure way to transact permissionless, buy and sell assets in cryptocurrencies. By configuring smart contracts, game developers can also effortlessly take a cut of every transaction that happens (automated trust)

2. Distributed Ledger (DLT) to ensure transparency

On the blockchain distributed ledger, all transaction is transparently traced. As these ledgers are immutable and tamperproof, gamers can have full trust in their game stats. Games can set clear and open rules where users can compete and be rewarded based on their merits. This transparency will invite higher engagement and exciting competition, eventually accelerating the transformation to the ‘Ready Player One’ like ecosystem.

3. Blockchain can be major empowerment for gamer accountability

Blockchain can address the platform gamers’ lack of accountability. Coupled w/tokenization and transparency, blockchain can lay the foundation for bold democratic initiatives, such as universal basic income. Also, blockchain games can be developed via democratic processes involving all stakeholders. Gamers can be key stakeholders to co-create and improve the game ecosystem, sharing incentives as well as accountability to advance the ecosystem as mutually beneficial and self-sustainable way as possible. For example, gamers can vote for new update ideas via blockchain voting.

So far, we laid out how Blockchain technology offers solutions to current problems in the industry. Aside from the technical solutions, decentralized gaming opens up promising new opportunities at the intersection with the blockchain technology.

“Ok. we get that blockchain solves the problems, but how does it necessarily make the decentralized games more intriguing?”

Our experiences taught us that the ‘community’ and ‘economy’ are two cornerstones that make decentralized games more sticky and captivating than traditional games. In a world where gamers already live and die for their rankings and spend hours and thousands of dollars to win competitions, games that allow gamers to earn money, vote and opine on policymaking cannot be more fascinating.

4. Economics: Property trading, Investing, dividend, etc

With the help of blockchain, games can host more sophisticated commercial activities between users. With lands, items, and skins as NFTs, gamers can freely trade, rent, and do just about any economic activities humans do in the main streets. For example, gamers can rent their game assets for proceeds or dividends.

5. Governance: Voting, Lawmaking, Fiscal policies, etc

Blockchain’s verifiable decentralized Identification, data transparency, trustless voting will be the key enablers for the self-sovereign governance. Gamers can create an actual footprint on game operation through democratic processes on the smart contracts (election, polls, etc). For example, gamers can conduct a poll to decide the reward rate for an in-game contest.

Users’ extensible latitude will make decentralized games more intriguing: This degree of freedom to transact, vote and govern will usher in the next generation of a self-sovereign game platform that is constantly evolving and expanding. Also, this accountability and extensibility will create a sense of ownership among gamers which will lead to further engagement, stickier retention and higher switching cost (thus, a network effect).

In sum, game companies will no longer build a game but an ecosystem where gamers and developers co-own incentives to develop it — Paradigm shift to ‘game-as-an-ecosystem’.

MMO Strategy game

While there are many game genres, few could integrate the key value propositions of the decentralized gaming at the core of their design. We believe the most effective is MMO strategy games, as it is centered around building and governing a civilization.

As aforementioned and based on our understanding of blockchain games, we derived that below 5 value propositions are the backbone of decentralized games: Ownership, Transparency, Accountability, Economy, and Governance. And in light of these values, we compared 5 mainstream game genres as categorized in AppAnnie’s annual report: Strategy, Action, RPG, Casual, and Casino.

*Please note some games may be hybrid or outliers. We based our classification on representative samples

Firstly, ownership is a vital feature as long as a game has items or skins, thus should Strategy (eg. land), Action (eg. skins), and RPG(eg. gears) games qualify.

Secondly, transparency is especially important when gamers invest their time and energy in achieving certain game stats(metagame), thus Casual(ranking), Strategy(war stats, etc) and RPG(Character, PvP stat, etc) games qualify.

Thirdly, accountability is crucial for games where continuity and feedback loop has value. Strategy and RPG are definite considerations because gamers consume sophisticated core game contents that are more extensible where there are multiple levers that gamers can shape. Actions, casinos, and Casual games may qualify but not always.

Fourthly, the economy became key ever since multiplayer gaming was born. Whether it be in-game currency or cryptocurrencies, gamers are used to earning rewards for achieving in-game missions. So all genres more or less have this proposition.

Lastly, governance is a relatively unique concept that exists only in a few, mostly strategy games. Rise of Kingdoms, for example, has a primitive voting system in place for its alliance decisions. In other genres, governance is hard to come by or nonexistential like in strategy games.

After all, we found that MMO Strategy is a genre that can maximize all 5 key value propositions of decentralized gaming.

League of Kingdoms

The next-generation MMO strategy game is coming! In the first half of 2020, we will release a new MMO strategy game League of Kingdoms.

The multi-blockchain game will be a medieval fantasy-themed game that takes place on a continent threatened by monsters. Gamers will own, build, cultivate, compete, and govern the continent.

The game will usher in a next-generation gaming economy by integrating and collaborating with leading Defi projects like Kyber Network, MakerDAO. We envision a future where users can monetize and make living in the virtual world, owning, playing, and trading virtual assets!

To enable it, the game will fully leverage the Ethereum blockchain on all fronts of its economy (NFT, investing, trading) and governance (voting, policymaking, crowd-sourcing, etc…). All gamers will claim a stake in the ecosystem where thousands of game players will thrive and compete.

Many thanks to Ethan Kim, Edward Hong, Sebastien Borget, Aleksander Larsen for their feedback on this piece.

JOIN LOK COMMUNITY CHANNELS!

🏰 Website: https://www.leagueofkingdoms.com
⛳️ LAND Portal:
http://land.leagueofkingdoms.com
👾 Discord:
https://discord.gg/t22KuEB
👥 Telegram:
https://t.me/LoK_global
🐦 Twitter:
https://twitter.com/LeagueKingdoms
🎮 Play Game:
App Store | Google Play | Web

©️NPLUS Entertainment Pte.

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League of Kingdoms

League of Kingdoms

The world’s first and fastest growing blockchain MMORTS game. (https://leagueofkingdoms.com)