It’s the buzzword on everyone’s lips: blockchain games. Melissa Zeloof, VP Marketing at ironSource, kicks off the first episode in a new mini-series all about blockchain gaming, along with Anton Backman and Kenrick Drijkoningen from Play Ventures - a games VC with promising blockchain games in their portfolio.
Together, they review clear and concise definitions of key blockchain gaming terms, top companies to watch in the space, trends and predictions for the future, as well as the practicalities of producing a blockchain game.
Tune in here or keep reading for the edited highlights.
What are blockchain games?
Anton: “I would categorize them as games that use the blockchain or blockchain components to a varying extent. You might have a completely off-chain game that runs on the game studio’s own servers and infrastructures but then the game’s economy might be on the blockchain. Or, on the other hand, you might find more experimental games running fully on-chain where all the logic and in-game actions of the players are being run on-chain. Dark Forest would be an example of this kind of game, where everything the players do requires on-chain transactions, which of course brings its own challenges in actually interacting with the game, whereas games that just have their economies on-chain resemble more of the mass market games we see currently.”
Why is blockchain having its moment now?
Kenrick: “It’s a new concept for a technological point of view, how you interact with it and use it, and the mental framework of what it is and how it works. That just takes time to propagate through the marketing. Second, the technical readiness of a lot of this is not really there. So it took a while for those two factors to catch up and we’re starting to see them maturing”
Anton: “We had some technical hurdles still up until last year. I think it was in 2018, when Theorem got plugged up by CryptoKitties - even though the only kind of gameplay was the breeding component, it still managed to clog up the network. I think that was the catalyst in the discussion in game developer circles of what do you want to keep on-chain and off-chain? I think we’ve found a better sweet spot there … If you then look at these play-to-earn games, like Infinity in this past year, I think it really came down to them nailing down the token economics for that product. They found an audience that really resonated with and managed to get into this economic flywheel with a surge of new users.”
The educational challenge for users
Kenrick: “To reach mass adoption, you need to obfuscate almost all that technology - but the concept still remains that you can actually own those digital assets in the game and potentially use them for something else outside the game. That as a concept will take time to educate people on. How we make that possible is up to us and developers. As with any new technology, I think you’ve seen it with the vicious reaction of other gamers or even Discord members, who are up in arms with any company that wants to do anything with NFTs. It’s a very natural reaction to any new disruptive technology. We saw this with the internet itself. I’m old enough to remember the 1990s when people were up in arms about the internet and how it was going to destroy our planet. So if we show the benefit for the players, then people will appreciate it.”
Anton: “Also on the note of increasing the market and the type of user with the early play-to-earn games, there’s a big incentive for players for earning within those games and having it as a strong motive to play in order to reach more mass adoption - especially in more Western markets and in the East Asian markets that have a bit more of a core gamer mentality. The game also needs to be fun on its own - but on another note, I don’t think there’s a point in looking at a game ‘is it fun in a vacuum?’ because the economic components will also be a part of the game. I wouldn’t see free-to-play players play this for the economic component but rather because they’re fun and then the economic component is an addition.”
DAOs, decentralized publishing, and how they impact games
Kenrick: “What are DAOs? It’s like a corporation, organization, or group of people with a bank account. The bank account in this case is just a smart contract typically on Ethereum … If you want an interesting case study on this, it’s the constitution DAO - a group of internet trolls wanted to buy one of the original US constitutions. They were eventually outbid by a US hedge fund manager but it’s a very interesting story of how quickly people can organize themselves in a DAO and raise money.”
Anton: “I just want to underline Kenrick’s comment there and the importance of these DAOs not being mythic structures or somehow very new in that sense. If we look at a traditional corporation, it’s a set of contracts - employment agreements with employees, shareholders agreement between shareholders, partnership agreements with other companies … Similarly you have smart contracts in place about how to organize within the DAO and how to reward input in the DAO. The Finnish Trade Registry wouldn’t recognize DAOs as a legal entity. But if Ethereum is a jurisdiction then they are recognizing companies in the Ethereum jurisdiction.”
Kenrick: “I think eventually yes [they will be legally recognized]. I think there's in Wyoming if I’m not wrong in the US, but I would assume this would take another decade.”
Anton: “In terms of decentralized publishing, if we look at it from a dollar perspective … it could be a blockchain protocol with a set of smart contracts that have been designed around how a publishing marketplace would be operated - with the participants in the DAO voting what that cut between the developers and the DAO slash publishing platform would be. But then again that would reminisce a lot of what Steam, Epic Games, or the mobile app stores would look like today. But then instead of that one company deciding on the parameters of publishing, they’d be decided on a more market-based principle.”
Kenrick: “I think they will converge, where the onboarding of the first gameplay experience will mostly still be free to play. The monetization later might come in the form of NFTs. So it will be a combination of the two. It will all just be a game with an added technology on top. Whether you call it a free-to-play game or blockchain game it doesn’t matter. We think it’ll merge.”
Startups vs existing publishers
Anton: “In terms of existing publishers in the market, I think it’s more of a structural challenge - similar to AAA and premium trying to innovate around free to play in the early days. If we look at the big free-to-play companies right now, they started out as startups during that time. I think it has a lot to do with corporate politics and going outside the core competence of the company. We have seen that larger publishers are looking in the space with experimental units. But eventually, I think the dynamics of a startup can be a lot faster - iterating faster, not being stuck into office politics with shipping - that will inherently give the edge. Startups will definitely lead the way in terms of pushing out new successful games and reinventing new business models.”
10 years from now
Anton: “I don’t necessarily see inherent value in something being run fully on-chain just for the sake of it. It’s about being critical about what actually needs to be on-chain and what doesn’t need that permission-less nature. I think we’ll see a gray zone and a spectrum here. Though core components like the economy of the game is something we’re likely to see on-chain. … It’s really about prioritizing what the best user experience is.”
The best suited categories
Anton: “Game categories or genre where monetization is tied to progression, where the NFTs actually affect the gameplay rather than just skins or cosmetic items. So games in the midcore category, RPGs, the wider strategy genre - the whale driven categories are interesting for using blockchain and having users even more invested. Potentially it could open these games up to a larger audience … One thing I”m curious to see is how the midcore games of the future will incorporate these play-to-earn guilds that have come about. You might have a whale player that’s been playing midcore strategy for quite some time, but instead of that whale player purchasing the gems directly from the developer - they might be purchasing all the resources needed for progression from other players. You could also enhance the social components of those games.”
Kenrick: “Understanding the main concept of what crypto and blockchain actually are and then choosing the technology stack that’s right for that. Often the question is, ‘what chain should we actually build on?’ Then also how do you design your game around this concept - how do you integrate it into an actual blockchain. It’s a) the technology stack and b) the game design. It does require you to rethink the in-game economy. It’s one thing to have an in-game economy that’s centrally managed and controlled by the developer. It’s another to have one that’s completely open and free - or maybe not completely open and free, but some assets might be and you get market price for those that impact your game. So you have to think about that carefully.”
Most exciting projects coming up
Anton: “If I have to choose something outside our portfolio investments, there’s a very early stage game gaining traction called Crypto Raiders. The core gameplay is quite simple - it’s an old JRPG but they managed to build a very engaged community around the game. It’s also interesting from the perspective of how they keep players engaged with the wider game economy instead of playing just the core gameplay. I think that’s also going to be an interesting topic of study for free-to-play developers.”
Kenrick: “Since Anton refuses to share our own portfolio, I’ll do that. Meta Soccer. I think it’s a great example of a blockchain native game experience, a game design team now building a blockchain game first as a fantasy football game. So keep an eye on that.”