A Blockchain Gaming (Infrastructure) Retrospective
Christian Niedermueller shares his thoughts on the intersection of gaming, blockchain, gamification, and GameFi. Christian is Co-Founder and part-time GP of SMAPE Capital, CEO of Blocktrade, a gamified exchange, and Co-Founder of DAIC, a blockchain infrastructure company.
Playing Games
Playing games is something that has been done for thousands of years. Gaming has also been one of the main reasons why many people got their first PC in the 1990’s and with that, was one of the first tested applications for decentralised ecosystems based on blockchain solutions.
Let’s explore this just a little bit more and infer why we think, that the infrastructure for blockchain gaming is very interesting from an investment point of view — think of Nvidia and AWS, for example, but pretend its 20 years ago and try to imagine what the next “Nvidias”, “AWSs” might look like in a very compelling part of the future of gaming — on-chain gaming.
We will take a look back into the origins of gaming before transitioning into the new era of blockchain gaming and its distinctive characteristics. We will then touch upon the next innovative evolution of games into GameFi and conclude with an outlook over the next few years.
Retrospective on gaming and how this all makes sense in regard to blockchain gaming elements
It is interesting to compare the first main use cases for computers then to the first main use cases in the blockchain industry now: Computational power was first used for highly complex simulations in defence and space explorations, but shortly afterwards the finance and accounting industry (e.g., for databases and calculations) found it extremely useful as computers could be programmed to automate either monotonous or otherwise challenging tasks.
As soon as there was colour and a little more pixels involved computational power shifted towards recreational programs and graphical interfaces — computer gaming was born, shortly followed by online gaming. It was all just a matter of infrastructure in the end; first screens (UI/UX), then the internet (communities).
With players increasingly identifying with in-game characters, game worlds, and ecosystems, the logical next step was to take ownership in and of the games: games allowed for developing in-game assets, using in-game assets as collateral, and combining games with financial applications. All those innovations were pushed and governed by those who are most passionate about further developing the games and the ecosystem.
And here we are now: Passionate players game in communities on-chain with smooth UI/UX experiences. It took around 7–10 years for the first gaming applications to truly thrive in its very first versions. During the first widely witnessed crypto bull market in 2017 also the first hyped blockchain gaming projects were born and tested. Although gaming was not the first application for traditional computing, it was also not the first application on blockchain infrastructure. However, blockchain gaming is here to stay and will definitely revolutionise how gaming is perceived and enriched once again.
How blockchain gaming started and how it is going
The 1st blockchain gaming cycle was driven by P2E (play2earn) games, where players could earn for just playing the game. The first blockchain games were pretty rusty in terms of UI/UX, non-mobile, and lacked a lot of fluid gameplay due to permanent involvement of non-custodial wallet infrastructure. Tokenomics were skewed, lowering the motivation for playing/interacting with the game, thus the first hype cycle quickly came to an end.
In the current, 2nd blockchain gaming cycle, new games are now building on a P2O (play2own) model combined with other GameFi elements. Games are more and more mobile-focussed and the UI/UX elements (especially around the wallet integrations) are becoming much smoother. This attracts more gamers who don’t want to or shy away from interacting with underlying (web3) technology.
Distinctions between gaming until now and gaming based on blockchain technology
Let’s take one step back and check in on what blockchain gaming is and how it could revolutionise the gaming experience going forward.
The main differences between traditional online gaming and games being built on and or next to/with blockchains are:
- Players themselves control data and in-game assets through ownership/development
- In-game economies benefit not only players, but also developers
- Games (and blockchains) are now interoperable
- Game ownership and governance is decentralised
Those blockchain elements can be implemented all together or only selectively in games — from a very light touch with just some blockchain elements to having the entire game on-chain.
Connection of blockchain gaming with GameFi
The main intentions and benefits of the next iterations of blockchain gaming are decentralisation, value accrual and sharing. This will be achieved by building open-ended economies, which seamlessly connect individuals into communities and enable them to think of digital ownership and gaming asset development in a completely new way:
- Games will not only have their own in-game marketplaces (blockchain agnostic), where players are exchanging / trading in-game assets on a decentralised exchange but these marketplaces will be connected seamlessly, thus fostering trade and monetisation of gaming assets across games.
- GameFi will be the driving force for in-game asset usage in the whole web3 ecosystem, e.g. as collateral or via renting / lending out assets.
- DeFi will get enriched with gamification / gaming elements and vice versa.
- Blockchain games having some kinds of DeFi elements in their core gameplay will become the standard. Players will be incentivised to do something with their in-game assets, e.g. staking them or participating in playful liquidity pools (opening up the game for fully decentralised gaming economy development).
In addition, the integration of games into a metaverse, AI-powered decentralised game development, or augmented / virtual reality integrations could inaugurate a whole new gaming ecosystem.
Market size and blockchain gaming ecosystem cycle stage
Also from a market size perspective, the still very young market of blockchain gaming seems to be very attractive to enable the builders. While traditional gaming currently generates approx. EUR 180Bn global annual revenues (projected approx. EUR 300 — 500Bn by 2030) blockchain-based gaming and its elements could make up 10% — 15% of the entire gaming market by 2030. That would be a growth of approx. 10 — 15x compared to its current market size of EUR3–5Bn.
Sources on market data: https://crypto.com/research/blockchain-gaming-trends-opportunities, https://www.chainalysis.com/blog/blockchain-gaming/
We think that this growth might be a bit too positive, as development cycles in gaming require a lot of money, time, and infrastructure. We see the blockchain gaming ecosystem in its 2nd development cycle, where important blockchain infrastructure is being built out — and potentially leading to a steeper market share grab in the 3rd and 4th development cycle.
Conclusion
The seamless interoperability, control of data, in-game asset ownership / development, and governance elements are some of the most important topics for blockchain gaming. However, if and how they are integrated and working together depends a lot on the infrastructure that enables this new era of the gaming industry.
All of the elements mentioned in this article make us think very positively about the future of blockchain gaming — for both the companies that build the rails for this new element of the gaming ecosystem, as well as for the players and communities that stay connected and thrive through their ability to monetise their passion
Sources (used for inspiration or data points):
What Is Blockchain Gaming? | Ledger, Blockchain Game Development: The Ultimate Guide (2023) (thirdweb.com), An Introduction To Blockchain Gaming Infrastructure — and How You Can Use It Today (naavik.co), What Is Blockchain Gaming? (chainalysis.com), Exploring the Future of Blockchain Gaming: Trends and Opportunities (crypto.com), What Is GameFi and How Does It Work? (coindesk.com)
