The way forward for Web3 games

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Compiled by: Web3 navigation (official account)

Although declaring the demise of "pay to earn" games has become a mainstream view, and some even say that Web3 games are dead, I want to provide an optimistic and operable prospect. We will also explore how to use encryption elements to build a sustainable game economy and how games can benefit from consistent incentives for token holders.

The report of my death has been greatly exaggerated - Web3 gamesใ€‚


Argument 1: more targeted tokenization


So far, many Web3 games have tokenized most of their in-game assets.

The money earned by players and NFT can be sold directly in exchange for cash, which brings great pressure to the game economy.

Challenge 1: economic outflow

Let's take a look at the cycle that most Web3 games have experienced at present. You may haveRead a lot about thisSo I will briefly introduce it.

Since revenue is the main driving force for players, they cash in the in-game currency to lock in profits. At the macro level, the problem is that when almost everyone is a value extractor, the entire economy will collapse. First of all, we must create value, which is not formed out of thin air. Since no one sees the value other than money and assets on the demand side of money and assets, the price falls, which means that players' income decreases. The game becomes boring - existing players leave and new players are less likely to join.P2e games usually rely too much on player growth rather than the frequent loss of tokens, which leads to a rapid economic decline.

Challenge 2: speculation crowding out other motives

When in-game assets are tradable, they change why people play games. This will affect all players.

The preferred example isAuction house in Diablo 3ใ€‚ When players can buy assets from others, they become less valuable to players who acquire assets through games. What shows skills and time investment can now be replaced by money. The long-term Diablo players lost momentum, and Diablo later removed the auction house.

Easy to trade assets take away the sense of achievement that some players seek. As a result, games with an in-game market are less exposed to such players (they are usually economic valuers) and are more likely to attract players who are attracted by monetary rewards (usually value extractors). Over time, speculators have pushed up prices, making non speculators unable to afford the assets they need to play the game. Finally, there are only speculators left. As stated in "challenge 1", the work economy becomes impossible.

Another problem arises when all in-game activities are valued at the same asset. Web3 games often reward an in-game currency for all operations across game modes. This means that the team sets the value of each activity in advance, expressed in revenue per minute. Players only focus on economic benefits and optimize their game play for this. Therefore, some modes or game activities may never be played, even if they make the game more diverse and interesting. To some extent, it needs to choose the game content and way far away from players. Player selection is a key element of the game, and it is also a part of making the game interesting and fulfilling. Daily activity or income ceiling can help alleviate the problem, but it is a hard solution for players. Another option is a daily reward pool shared by all players for each activity.

But wait, there's more.

When all game systems are interconnected through in-game money, the failure of a certain part (such as hyperinflation) will lead to the collapse of all systems. For example, if making money is the main reason for playing games, then falling prices will make all game modes uninteresting to players.

Meet challenges

tl; Doctor "make an interesting game" - no, just kidding. Although this seems to be the answer given by the supporters of "Web3 game is dead", in my opinion, it misses the point. First, a productive input will be how to make an interesting game. Secondly, if this is the answer, why bother adding encryption to your game? Therefore, I would like to share my thoughts on how to design the elements of encrypted games, the intersection of games and encryption, in order to build excellent Web3 games.

Weakening tokenization model

In order to reduce speculation, the game can limit the number of assets that can be traded, especially with other players. Although NPC merchants' behavior can be controlled (for example, the cost of goods has doubled), point-to-point transactions between players depend on market dynamics and player psychology. Therefore, restricting the use of NFT makes it easier for game economists to control the economy.

On the other hand, at first, players' income potential seems to be small because they cannot sell all the items they receive. But think like this: you can decide to create a paradise for speculators, which will fail after a period of time, or limit speculation to build an economy with long-term operation potential. Finally, by preventing speculation from becoming an important part of the game, and ultimately the only thing caused by the crowding out effect, the game allows other types and motivations of players to participate, all of which are needed to build a sustainable economy. We will return to this later.

There is a design scope between markets where everything that is not traded and fully open is traded by NFT or erc-20 and everyone. No matter how many transactions the game allows, it is crucial to tax transactions.


The main token receiver of eve online (probably the most complex and longest running virtual economy) isTransaction taxใ€‚

In order to encourage trading, we can reward different nft/tokens for various activities, and make the progress of players depend on a variety of resources. This will lead to higher transaction volume, resulting in more tax / token burning. Another benefit of this system is that activities no longer receive the same token / asset rewards. The transaction price between assets (markets) now determines the value of each action. Simple tasks will see many people involved, resulting in increased supply and lower prices. Therefore, players are motivated to find different activities. The market will attach importance to the resources needed for progress, so the action of generating assets will be a worthwhile effort, and at least some players will participate. If an activity is underrepresented in the market, game designers can, for example, increase the correlation between assets and progress, or reduce taxes on it.

Finally, by making multiple activities a valuable task, players must choose / specialize.

For example, one player can improve their fishing skills, while other players can upgrade their axes to cut firewood.

Another question is whether to mark input or output. The game can increase the trading volume by tokenizing the input, because every player must trade. Then the player converts the input into rare assets. These outputs still need work (for example, planting non tradable assets to upgrade). Such a system can prevent situations like Diablo auction house. Rare assets still indicate actual skills and time investment. At the same time, players have the opportunity to preempt the opportunity by purchasing items rather than farming, which is an opportunity for other players to make money. In order to ensure that players can cash in when they no longer enjoy the game, this is one of the main arguments of Web3 games, and the deconstruction mechanism can be used. Here, players convert their output assets into input assets (tax burden).

Another way is to rewardNon tradable assets that can be upgraded to NFTFor example, integrate with resources that require skills and commitment. Such a token system can minimize asset inflation / inflation. Because players can only make limited transactions with others, it is easier to control the player experience. On the other hand, the overall trading volume will remain at a low level.

In my personal opinion, both systems can work. Every game designer must decide which position in the continuum between openness and transaction orientation and control and transaction minimization.

Isolation system

Similarly, it may be valuable to restrict transactions between assets from different activities to some extent. The goal is to isolate systems from each other to reduce interdependence, which means more control. In addition, this helps to reduce the risk that a failure in one system will have a negative impact on other areas of the game.

Game developers need to control levers to guide the economy, similar to the central bank. One warning is that players do not have to participate in the economy. Therefore,Having fun is essentialEconomics. The economy should fluctuate along equilibrium rather than stagnate. Otherwise, it will be boring and will not make too many transactions. In contrast, a perfectly balanced game is not the goal of game design. For example, having powerful weapons and adjusting metadata over time is often a good thing. This keeps players engaged. The second warning is that mapping real-life examples to the virtual economy is challenging, because these are usually simplified versions of reality. Making the in-game economy more complex is not the solution, because most players are not interested in highly complex economic simulation. Therefore, the performance of central bank policies in the game will be different.

In order to find out which assets can be traded and which assets need to be isolated, game designers canMap economic pillars (money, resources) to game pillars / game stylesAnd use different currencies / resources for various systems. Let them interweave with each other to some extent, but don't make them interchangeable. In order to isolate the system, the game needs a variety of resources and currencies. Isolated systems are easy to control. But they are also boring. Therefore, an economy needs interaction between systems. In addition, interchangeability increases players' initiative, giving them more choices to focus on in-game activities.



NFT > Replaceable token (FT)

By rewarding players with NFT instead of FT, the game can shift players' attention from monetary rewards to in-game utility.

There are several factors at work:

  • NFT comes with in-game utilities. In contrast, FT's in-game value proposition is more abstract. Players can use tokens to buy assets, but this requires additional steps. By setting in-game assets as the default option instead of "get tokens > decide to use it to buy assets", on average, the economy will reduce outflows.
  • In addition, FT is easier to sell due to its high liquidity. Due to insufficient liquidity, players are less likely to sell NFT in exchange for cash, which will make a big difference when observing the whole economy. Some conversion rate optimizations here and there will soon increase. For example, efficient markets focus participants' attention on financial optimization, while barter systems (NFT < -> NFT) encourage social interaction.
  • NFT is more personal than ft. Using visual effects and telling stories (Legends) can create emotional value. Players who are emotionally attached to characters or items will not sell their NFT.

From the perspective of game design, it is also meaningful to put NFT in the center. NFT is similar to resources, while ft is similar to money. Resources themselves have value, and money is the bridge between resources. Therefore, games often have more resources than money. When designing money and resources, keep the economic map in mind.

About land NFT

Web3 game companies use land sales to raise funds before development. Although this is a good way to start the project, it also brings economic challenges. If the direct land utility is not conveyed, investors may first expect to obtain financial returns. As a result, prices soared, squeezing out players who really added value to the game economy. Instead, mining speculators took their seats.


In the worst case, because the owner is not interested in actually playing the game, nothing in the game can be built on the land. They only speculate that numba will rise. If land plays an indispensable role in the system, this problem can even be extended from normal value creating in-game activities to user generated content (UGC). As we will discuss later, UGC provides good growth opportunities for Web3 games, so the potential negative impact is huge.

In another case, landowners may lease their property to other participants, but "tax" activities. They are not used as taxes for foreign exchange, but are cashed out by the rich. Landowners receive unlimited benefits at zero incremental cost. They often use their profits to buy more land, resulting in more and more concentration of land ownership. There are two types of players - landlords and civilians. The latter group may be locked out of many functions. If they leave, the speculative foam will burst.

As a result of speculation, there will be other harmful behaviors, such as robots sniping land NFT in the mint. In addition, those who already own land usually need restrictions (as observed in the form of NIMBY in the real world), which will bring risks to the growth of players. Landowners who hold game governance tokens exacerbate this problem.

Game designers face a tricky trade-off, especially when they sell land to investors. If land is an integral part of the game, it will reduce the retention and participation of players. If not, landowners / investors will see minimal returns. In short, current land models feel more valuable than additives. So, what different things can we do?

Land price tax(LVT) seems to be an idea worth exploring. Their goal is to encourage game use while reducing speculation. Land is taxed, but everything built on it (such as houses) is not, because these activities add value to the economy. This distinguishes land value tax from property tax. Land occupation becomes expensive and the return is uncertain. As a result, land eventually falls into the hands of productive players who use it in the game and can create a surplus (revenue > cost). Buying land becomes cheap (reducing the speculative premium) but the holding cost is high.

There are several ways to merge LVT, which I won't discuss here. One option is to view the market data of transactions to value the land, and to regression or ML model the land use that has not been traded recently. Another option is the harburg tax, which relies on self-assessment + automatic listing at self-assessment prices. Players are encouraged to quote the real value they get from the land in game theory. Otherwise, they may sell below value (low price) or pay too much tax (high price).

LVT may be beneficial to the economy, but it also brings the risk of maximizing productivity. Only the most productive players can own land because they can pay the highest taxes. But making land ownership so competitive is not fun for less competitive player types (most players). Some systems, such as the harberger tax, also increase complexity and require a certain degree of complexity for the target group to obtain land ownership in the player group.

But as usual, game economists can design a continuum between pure productive and pure speculative land systems according to tax rates. Then, game developers can use taxes to build sustainable games. For example, funding in-game public goods or UGC, token destruction to balance the economy, market making on AMM, and even some form of UBI.

In addition to LVT, other methods can minimize speculative problems, such as providing only non tradable in-game assets (no real-world ROI) to landowners or not making land scarce and limiting the accrual of value at specific locations.


Argument 2: accommodate crypto more wisely


As mentioned above, it is impossible to create an effective and interesting game economy, in which the encrypted use case is to obtain tradable erc-20 tokens by clicking a button. Here are some trends that may be more sustainable, and I hope to see them more frequently in the future.

Encryption as a meta game

Crypto adds layers around the core gameใ€‚ The core game remains (relatively) unchanged, while encryption elements are targeted at other player types and build economy on the game.Brooks BrownUse the analogy of football (Hamburg's Translation: football). The rules are simple. Everyone can play for free. The organization extends this through teams, tournaments, merchandise, video games, and sports betting. But this does not prevent non professional players from playing football and having fun.

Due to the nature of encryption, I expect meta games to be mainly financial. It is better to separate financial games from other games, rather than turning the main game into economic activities. Some players may like it, but Tam is very small. Eve online is a financial game with a solid player base, but it is still a niche game compared with mainstream games.

Although crypto meta games will bring new types of players, it will also help to clearly distinguish the differences in the current F2P games. Whales play different games with other players to optimize numbers. Separating these may be the first step in reducing game exploitation without requiring regular players to act as the content of a few whales.

The game can completely separate the core game from the meta game to reduce the risk or try to connect the layer. The latter has the potential benefit of producing flywheel effect. For example, using encryption to integrate E-sports into core games can establish a stronger relationship between player groups and E-sports audiences. Ordinary gamers will be exposed to the pleasure of E-sports when playing games, which may persuade them to watch the game. Vice versa, viewers will find a game that is more similar to the experience they just watched, so they may choose it by themselves. In addition, this increases the opportunity to reactivate inactive players through large E-sports tournaments. In the next section, we will study an example of how to bring E-sports into core games.

Combine F2P and Crypto

Keeping basic games free will increase Tam. After joining the game, players can become consumers, and NFT presents a new form of micro trading. If players value real ownership and are willing to spend more money, because they can be resold later, NFT may receive a premium over standard in-game assets.

Due to the recent advertising regulation, it is difficult for mobile games to obtain a positive ROI, which makes it difficult to locate whales. Historically, a small number of players, called whales, were responsible for most of the revenue. If you can't target them, the game will bring a wider and wider audience. Filtering now only starts after installation, rather than choosing the player with the highest LTV before application installation. Therefore, games should focus on more detailed segmentation based on in app activities and monetization strategies specific to market segments. NFT has the opportunity to become a "new thing" that some players want to try.

Another advantage of the F2P + encryption model is that it is easier to get started. Players do not need to understand the working principle of wallet, NFT and AMM before playing the first game. The job of game publishers is to turn the installation into an active group of players, not to turn non encrypted players into advanced encrypted users. Over time, by making it easier for players to use these new products, the game will achieve a higher conversion rate. And, of course, players do not need to pay high admission fees by purchasing NFT or understand the working principle of the scholarship system.

The shift from NFT gated game experience to F2P means that game developers can no longer rely on early-stage investment. Overall, this should have a positive impact on the game economy, as it will force teams to develop more sustainable receivers.

The classic F2P games and the parts supporting Web3 can be strictly separated or partially overlapped. The latter can improve the conversion rate without dispersing the player group. On the other hand, the game must ensure that Web3 elements do not have an adverse spillover effect on the non encrypted part of the experience (for example, increased speculation).

Let's take an example of such a model. In addition to using cryptocurrency as the meta game layer, games can also use tokenization as the voluntary layer above the core game playing method to enhance the experience (rather than crowding out the core motivation by focusing on monetary incentives). By introducing betting competitions and tournaments next to traditional pairing, skill based games such as grand escape games can bring the tension of E-sports to all player levels. The method of separating two player groups (interested and not interested in tokens) may be as follows:

  • Players get tokens based on their position in the game
  • According to the number of hits received, the player's armor will decay
  • After reaching the hit threshold in the game, players will no longer receive rewards
  • In order to continue to make money, players need to burn tokens to repair their armor

This system makes players get used to rewards, and gives them some tokens to play in the betting game, hoping to convert them. At the same time, we have prevented unnecessary inflation, because players who are not interested in tokens will not receive any tokens in a short time, and we have added regular receivers in the form of a repair mechanism. If enough people can be turned into participating players in this way, and they are usually more willing to spend money, then the system can even increase the balanced economy, in addition to becoming a UA driver.

However, this way of enhancing game play through encryption is not popularized. It may be applicable to E-sports titles, which have their own requirements (based on skills, watching fun...). For example, adding betting games or other forms of betting in super casual games does not seem to be a good idea. But I believe game designers will find different ways.

Using crypto to adjust game motivation

Generally speaking, cryptoeconomics is good at stimulating value-added, guiding communities and lightning growth by providing an open and participatory framework.



Games are no longer just games. They bring people together to socialize, participate in activities, watch e-sports, etc. along withGames as a platformWith the trend of (some people may now call them virtual worlds), providing a steady stream of new content becomes critical. Some game platforms such as roblox rely on UGC, but

a) They took a lot of money from the creator.
b) They still fully control the platform, resulting in a wide gap of power, and prevent third parties from investing a lot of resources without guarantee due to business risks.
c) UGC is limited to in-game content and will not be extended to broader value-added areas, such as streaming media, E-sports or commodities.

The encrypted network acts as a neutral settlement layer, allowing participation without permission (for example, anyone can build on the NFT), providing the creators with the required guarantees. In addition, game studios can now incorporate external value-added activities such as streaming media into their UGC strategy, while benefiting from the trust assertion of blockchain. Making the game platform an open economy can encourage global builders to participate, which is impossible in web2, because the traditional legal structure of trust building cannot be extended internationally.

UGC can help create local flavors for different target markets (for example, cultural specific activities or skin), which has proved to be a good way to expand new markets.

It's only important for some players, but for them, it means everything.

Such efforts, which at first seemed to be non scalable, are a good use case for UGC. UGC is mainly performance-based compensation. The platform reduces risk because expenditures only occur after they have a positive impact. UGC is also an ideal choice for mixing. Users may not be the most creative in building new things, but they don't have to be. By combining different trends, UGC can ensure that the game is consistent with the spirit of the times, keep it relevant for a long time, and generate viral transmission to obtain and reactivate players.

Turning games into platforms will further help introduce additional token receivers and increase the depth of spending, generally making the economy healthier (which is usually a problem with Web3 games) and increasing revenue potential.


Argument 3: game type


Some types and games seem to be more suitable for Web3 mechanism than others. For example, MMORPG involves a large number of transactions, can be taxed, and has many social components, in which encryption can help coordinate and align. Card games focus on NFT rather than ft. players need to collect multiple card decks to compete with enemy decks, act as an important sink, and divert attention from monetary rewards.

Super casual games are a continuing trend in mobile terminals,More than 25% of all game downloadsใ€‚ Under certain circumstances, I can see how cryptocurrency can add value here. This is not only applicable to super casual games, but also take it as an example:

  • For simple games, adding Web3 elements (even in an abstract way) is a huge challenge for game designers and players.
  • The game requires considerable complexity to add encryption as a meta layer. For example, simple games that do not require too many skills are not suitable for E-sports for players, and they are not fun to watch. Or their economy tends to become low-key, which makes it more difficult to build an interesting financial game on it.
  • Super casual games are an extremely competitive market, in which CPI and retention rate are the most important. Social elements, such as UGC, have been shown to increase retention and revenue. Challenge: Super casual game players usually play several games at the same time, so it is difficult to get enough attention to turn them into contributors. Perhaps encryption incentives can help here. But I willUGC is regarded as a supplement to the content being built by the core teamใ€‚ The market competition is too fierce to give up control. Therefore, I hope that super casual games can try Web3 elements, but they will not be completely submitted / decentralized.
  • If the studio wants to distribute tokens to players, not just creators, the game play should be complex enough to have a certain degree of skill. Being able to segment players effectively is an integral part of reward allocation. Otherwise, the possibility of it becoming a farm and garbage dump similar to the first Web3 game will increase. There needs to be an obstacle to getting rewards, so people can't just come in and make sure they earn a certain amount every day.
  • In a word, I mainly regard UGC as an interesting use case of encryption in super casual games. NFT, P2P transactions and other elements are unlikely to be adopted. 95% of the revenue of super casual games comes from advertising monetization. They don't have the right target group to sell NFT. And their game playing methods may not be complex enough to add meta game layers.

Blockchain also supports a new subset of games - full chain games. Chain games will span many types, similar to web games. Existing types will be transplanted, such as strategy games or poker (it is not a bad idea to do this on the chain, because centralized services are now highly regulated). New experiences will be developed. For example, there may be some games designed to be played by robots, in which the meta game created by robots becomes the main game playing method.

No need for online gamesLicensed interoperability, which means that others can build game modes, markets, new games, clients, plug-ins, etc. without asking. The core team does not need to participate in commercial development and technical support as in the licensing system, which makes this structure more scalable. Through cryptocurrency to improve the incentive mechanism, third-party creation is the strength of online games. In addition, players and builders can ensure that no one can prevent their access.

Online games are still in their infancy and face many bottlenecks. Scalability, zksnarks (or other privacy protection technologies) and the developer experience all need to be improved. Unauthorized creation will lead to a large amount of content, potential fraud and a more complex user experience. Curation and abstraction will become essential, similar to how steam creative workshop makes refitting more convenient. I don't think online games will become the mainstream, but they will create a viable niche economy for themselves, just like refitting scenes.


Argument 4:3a games are overestimated


Frankly speaking, most Web3 games at present, even if they say yes, are not 3A games. I don't think this is necessarily a bad thing. Maybe you don't need a 3A game masterpiece yet.

Your AAA is not AAA - Nintendo Kwon.

AAA is not a well-defined term. Refers toGames with large budget and long development cycleใ€‚ But AAA is not a sign of game quality. It is associated with better graphics, huge marketing budgets, well-known IP and a lot of content (game as a service).

As Web3 games become mainstream, they need encryption as a whole to become easier to use. This is an infrastructure challenge, not something the game should change. We are still in the initial experimental stage, and graphics and marketing to the public are not very important. Players will come to try new experiences. Only in this way can they be motivated to overcome the barrier known as cryptocurrency entry.

In the experimental stage, a fast iteration cycle is needed to quickly accumulate knowledge. Smaller studios and non AAA games are more flexible here. Large studios are unlikely to be the first adopters. Building AAA level games is resource intensive, so it has a high risk. AAA games are usually played safely, and most of them do not add Web3 components, which is also because of the strong opposition of their player groups.

Most importantly, large studios also tend to avoid smaller experiments, because even if they succeed, they will not increase their bottom line. Therefore, smaller studios may have advantages. They can use NFT to raise money, and then expand through consistent contributors (such as additional content provided through UGC).Further development of infrastructure (for example, with coreSuch advanced creation tools (high-end game engines) reduce the entry threshold for game developers, supporting this trend.


Argument 5: Web based experience


Because web2 companies like steamNegative attitude towards cryptocurrency, plus attempts by Google and Apple App StoresControl paymentFor the walled garden with channels and substantial spending cuts, it should be a top priority to have a Web3 native distribution platform. They are in line with the spirit of open accessibility of cryptocurrency and cutting off intermediaries. Without it, players will still be at the mercy of monopoly. Switching from web2 platform to Web3 distribution channel is like switching from CEX to defi.

Building a web-based experience based on open Internet standards is the most flexible solution (second only to online games). On the other hand, they usually lack functionality. In the bull market, with the increase of attention and crypto incentive mechanism, we may be able to promote the development of tools in this field.

The challenge is that using open standards can minimize locking, thereby minimizing value acquisition, and the app store is an important part of the user search process. Although some players are willing to overcome small obstacles to play games, changing the habits of the public is a difficult task. I hope we can fully promote the development of new trends.


conclusion

Developing games is inherently challenging, and creating games using Web3 elements will be more complex. Looking at the current trend, I think we are going better than a year ago. I'm picky about Web3, but I'm also optimistic.

In view of the above argument, investing in game token is risky. Even if a game gains a player base, it is not possible for many teams to maintain relevance for a long time. Token investment based on game platforms and Game Studios is currently a more attractive investment theme for me.


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