Web3 Gaming: A Trip

Re-read­ing our time­ly DeFi Guide remind­ed me of how much sim­pler things were back then. After all, lend­ing some­one mon­ey or swap­ping one token for anoth­er isn’t exact­ly rock­et sci­ence. DeFi builders do an invalu­able job lift­ing finance into the dig­i­tal age, but the prod­ucts they cre­ate fall into a well defined and well researched design space — with occa­sion­al blockchain chal­lenges added.

Gam­ing is dif­fer­ent. Game design­ers have to tack­le ancient mys­ter­ies like the con­struc­tion of “fun”. Well designed games tap into our dreams and most secret desires. They invite us into worlds that let us for­get about real­i­ty and be bet­ter, larg­er ver­sions of our­selves. One can­not sim­ply slap a gov­er­nance token on a game and be done with it. In fact, one might destroy a care­ful­ly designed game by doing so.

Back in Sum­mer 2020, DeFi felt very much like the arrival of some­thing we had long been wait­ing for. Web3 gam­ing right now feels like the prepa­ra­tion for a crazy jour­ney to an unknown destination.

So, put on your think­ing hats, make sure you wear your big girl pants and don’t for­get your rollerblades. We are about to intro­duce you to Web3 gam­ing. Ahead, there is no cer­tain­ty bar the cer­tain­ty that it’s going to be an awe­some ride.

The Promise

Digital Asset Ownership

Many suc­cess­ful games have spawned meta-economies that reach far beyond core game­play. High­ly cov­et­ed cos­met­ics for the tac­ti­cal shoot­er CS:GO are known to fetch 6 or even 7 dig­it prices. MMORPGs like EVE or Entropia Uni­verse seem par­tic­u­lar­ly well suit­ed for real-world-con­nect­ed economies, allow­ing a cho­sen few to roll high on in game assets, and send­ing many more to toil in the dig­i­tal mines, hop­ing to make a living.

Game assets have been car­ry­ing real-world val­ue for a long time now. But who is the real own­er of that 50’000$ gun skin, or of that 330’000$ space sta­tion? As many have learned the hard way, game assets are whol­ly owned by those who run the game, and our right to use them is gov­erned by the terms and con­di­tions that we accept­ed with­out read­ing when we first start­ed up said game.

Blockchain tech promis­es to change that. What if we could tru­ly own our most valu­able game assets? Be cer­tain about some of their prop­er­ties? What if we could car­ry them between games? What if we could incor­po­rate them into cre­ations of our own? Extend them? Give them a history?

There are many ques­tions still to answer regard­ing game asset own­er­ship. Can assets of a game that is no longer pop­u­lar con­tin­ue to car­ry val­ue? Is there at all a way to trans­port game­play val­ue of assets between dif­fer­ent games?

With­out any doubt, there are new forms of play, of won­der and excite­ment to be derived from irrefutable own­er­ship of dig­i­tal assets. The first suc­cess­ful Web3 games will take own­er­ship of game assets seri­ous­ly and sim­ply by doing so lift those assets into new spheres of value.

An Accessible, Transparent 24/7 Global Marketplace for Digital Assets

Tra­di­tion­al game devel­op­ers are reluc­tant to accept the con­nec­tion of their game-economies to the real world. Valve, the monop­oly hold­er in PC gam­ing makes it all kinds of awk­ward to trade game assets against real world mon­ey — unless you buy direct­ly from Valve that is. 3rd par­ty mar­ket­places for game assets often oper­ate in a legal grey zone, which again attracts unsa­vory actors and makes game asset trad­ing almost as shady as the shadi­est cor­ners of crypto.

This too will change with the intro­duc­tion of blockchain tech. Own­er­ship and trad­ing of dig­i­tal assets comes nat­u­ral­ly in our world. Beyond own­er­ship and trad­ing, clear con­tracts can be enforced on impor­tant top­ics like cre­ator roy­al­ties. Trans­paren­cy can be ensured regard­ing asset rar­i­ties, liq­uid­i­ty, trad­ing activ­i­ty or own­er­ship distribution.

The Pain

Money vs. Fun

Suc­cess­ful games are care­ful­ly craft­ed refuges from the real world. Because there’s noth­ing more real than mon­ey, hook­ing up games to the real world econ­o­my is a tricky endeav­or. All too quick­ly, real world greed kills the fun and fan­ta­sy space we are look­ing for in games.

CS:GO skins are valu­able because the tremen­dous fun of the game’s PvP bat­tles out­weights the destruc­tive pow­er of greed enact­ed by those who want to amass skins at any price. WoW still exists because the excite­ment so many derive from its worlds out­weights the bore­dom cre­at­ed by peo­ple and bots end­less­ly repeat­ing the same acts to farm for gold.

So far, no Web3 game man­aged to find a way to use real-world greed as a spice for in-game fun. We have real­ly good games with real­ly shit­ty Web3 inte­gra­tions, or real­ly shit­ty games with bril­liant Web3 visions.

Most like­ly, the first suc­cess­ful Web3 games will not even enter the mon­ey vs. fun mine field. They will sim­ply be good games in the con­ven­tion­al sense that use Web3 rails for their most valu­able dig­i­tal assets. Most like­ly, those games will not pro­mote them­selves as “Web3” either. They will be care­ful­ly designed to let new play­ers expe­ri­ence the game first, and only those who keep hang­ing around and dive deep will even­tu­al­ly dis­cov­er that there’s a whole new meta around valu­able game assets.

A Conservative Industry

I’ve nev­er want­ed any­thing to change.

Bar­bie

What do you get if you put togeth­er a lot of peo­ple who want to cre­ate the per­fect, fun refuge from the real world?

Mak­ing games fun is hard enough with­out real world con­straints. That’s why game cre­ators have tra­di­tion­al­ly focused on game­play alone and con­sid­er game mon­e­ti­za­tion and espe­cial­ly inno­va­tion in game mon­e­ti­za­tion one of those nasty things the evil peo­ple on the top floor of the build­ing do to finance the next game.

Gamers reg­u­lar­ly get their pitch­forks out when a game cre­ator dares to open­ly inno­vate on how they make mon­ey off their game. To this day, many gamers have a hard time accept­ing the two decades old mon­e­ti­za­tion inno­va­tion of free to play. And many game design­ers keep dream­ing of a world where the cre­ation of games is a pure­ly artis­tic endeav­or, far away from any mon­e­ti­za­tion constraints.

In an indus­try that is incred­i­bly timid when it comes to eco­nom­ic inno­va­tion, it will take a long time until the big brains direct their atten­tion towards Web3. In the mean­time, we are stuck with washed-up DeFi founders from 2017 who pay dam­ages for pain and suf­fer­ing to 3rd grade game design­ers, while boast­ing about the tremen­dous amounts of mon­ey they raised. The out­come in terms of fun can eas­i­ly be predicted.

Let’s face it, main­stream gam­ing, cre­ators and play­ers alike, loathe Web3 with a pas­sion. They sim­ply don’t see Web3 as a tech to con­sid­er for future games. The first Web3 gam­ing suc­cess will hap­pen in spite of that. Will it come from a tra­di­tion­al cre­ator that dares to defy main­stream think­ing, or will it come from a Web3 crew that man­aged to under­stand what makes suc­cess­ful games tick?

The Money Trail

If there’s one thing we blockchain peo­ple have always been good at, it’s sniff­ing out the mon­ey, while patient­ly wait­ing for the fun­da­men­tals to grow and legit­imize our eye-water­ing gains.

For a brief peri­od in time, we pumped “play to earn” so hard that seri­ous peo­ple start­ed believ­ing it’s an actu­al thing. We got them to “move to earn”, anoth­er very sus­tain­able Web3 idea. On vague gam­ing and meta­verse promis­es, we raised so much mon­ey that tra­di­tion­al gam­ing stu­dios grew pale with envy and start­ed issu­ing pub­lic con­dem­na­tions left and right.

It’s hard to not be cyn­i­cal in the face of how the Web3 crew has approached the mag­i­cal world of gam­ing so far. But cer­tain­ly, there must be a way to fol­low the mon­ey trail in a more pos­i­tive spirit?

Shovel Makers

The fix­ture of the tra­di­tion­al gam­ing world that is most obvi­ous­ly ripe for dis­rup­tion is own­er­ship and trad­ing of dig­i­tal assets.

Often monop­o­lized, always intrans­par­ent and with take rates of 35% or more pro­found­ly unfair towards those actu­al­ly cre­at­ing games, real­i­ty has clear­ly out-grown what­ev­er dig­i­tal asset rails tra­di­tion­al pub­lish­ers cre­at­ed for their games.

All it takes is one des­per­ate indie or one ball­sy incum­bent to cre­ate a suc­cess­ful game on Web3 rails and who­ev­er pro­vid­ed those peo­ple with the nec­es­sary tools will be a winner.

For that rea­son, we are bull­ish on projects that pro­vide infra­struc­ture for dig­i­tal asset own­er­ship and trad­ing in the con­text of games. A sin­gle, huge­ly suc­cess­ful game project using Web3 rails for its assets could chime in the next phase of blockchain mass adoption.

Some projects that we are following:

• Immutable ($IMX) is a plau­si­ble win­ner among the gam­ing-ori­ent­ed scal­ing lay­ers. Immutable’s easy onboard­ing, trans­ac­tion- and mar­ket­place infra­struc­ture and ded­i­cat­ed ser­vices for game devel­op­ers (like Uni­ty or Unre­al SDKs) man­aged to attract many seri­ous builders. Over 150 games based on Immutable are in the making.
• Mer­it­Cir­cle ($MC) was born out of an Axie schol­ar­ship orga­ni­za­tion called Axie 420. The DAO has since matured and grown into a seri­ous force in the blockchain gam­ing space. Mer­it Cir­cle is orga­nized in ver­ti­cals: Invest­ing, Gam­ing, Stu­dio and Marketplace/Infrastructure. Their recent­ly released Beam ($BEAM) scal­ing lay­er is based on Avalanche and takes a direct stab at the big infra­struc­ture play­ers like IMX. Beam already seems to be gain­ing some trac­tion with builders.
• Enjin ($ENJ) has been around for a scary long time, but recent­ly upped their game by launch­ing their own, sub­strate based chain. We will be look­ing for signs of trac­tion here. $WAX, anoth­er ecosys­tem play­er with its own chain seems to have been able to retain a bit more inter­est than Enjin. $GALA is anoth­er enti­ty in this area that impressed us with the enor­mous prices they charge for the right to run a node on their bare­ly exist­ing chain. We’ll add $RONIN here too, Axie’s chain that by now has man­aged to attract sev­er­al oth­er projects focussed on play­er owned economies. Hon­or­able men­tions in this cat­e­go­ry: Ultra ($UOS) and Bluzelle ($BLZ).
• Nakamo­to games ($NAKA) is tak­ing more of a game pub­lish­er approach to the blockchain gam­ing chal­lenge. It has a dis­tinct­ly blockchain OG vibe, a niche area where play to earn how they under­stand it might still fly.
• Ech­e­lon Prime Foun­da­tion ($PRIME), the mak­ers of the Par­al­lel TCG have recent­ly shown ambi­tions to grow beyond Par­al­lel. Thanks to the atten­tion that Par­al­lel already man­aged to attract, this could lift them into the shov­el mak­er sphere.
• Oasys is a new­com­er that we’ll be watch­ing most­ly because their found­ing team has seri­ous heft. 

Who Will Crack the Code?

Mak­ing games is hard and takes a lot of time. Fol­low­ing game cre­ators and pre­dict­ing their suc­cess or fail­ure is even hard­er. We believe that as a broad­ly ori­ent­ed investor in cryp­to, we do not have the time and brain pow­er to fol­low indi­vid­ual Web3 games while they are being devel­oped and to react to the con­stant changes in game asset eco­nom­ics that are an essen­tial part of the devel­op­ment process. We there­fore believe that bet­ting on indi­vid­ual games with­in a gen­er­al pur­pose cryp­to port­fo­lio is futile and we won’t do it.

That said, we fun­da­men­tal­ly believe that one day, some­body will crack the code and pull just enough siz­zle from the wild world of cryp­to into a new kind of game that will pro­vide an entire­ly new depth of fun and mer­ri­ly dis­tract­ing competition.

While we wait for this mir­a­cle to hap­pen, we will try to squeeze as much fun as pos­si­ble out of the cur­rent offer­ing. Here’s a hand full of Web3 enabled games that we already like play­ing or are look­ing for­ward to play in the near future:

• Dr. Disrespect’s Mid­night Soci­ety is work­ing on Dead­drop, what they call a “ver­ti­cal extrac­tion shoot­er”. Their first pub­lished game snap­shots show promise and progress. Mid­night Society’s approach to Web3 has been lack­lus­ter so far, not even giv­ing their orig­i­nal “founder’s pass” investors any advan­tage on new item releas­es. That said, the Dr. is one of the few core gam­ing peo­ple who still dare to even utter the “B” (Blockchain) word, timid­ly, from time to time.
• Sharp­nel impressed us with a very well thought out eco­nom­ic paper and with some deep think­ing on gaming/web3 avenues for the future. Their game, anoth­er extrac­tion shoot­er, seems to be com­ing along nice­ly, but we haven’t got­ten to play it yet.
• The Par­al­lel trad­ing card game’s art­work cap­tured our atten­tion long before the game even exist­ed. And it seems that we are not alone. Unfor­tu­nate­ly, the actu­al expe­ri­ence of play­ing the recent­ly released game has been rather lackluster.
• Look­ing at the price, and the fund­ing, and the price, and the fund­ing, and the founder’s pride, there must be some­thing there, but we still don’t get it. We are talk­ing about Illu­vi­um. Guess we’ll have to keep playing.
• Phan­tom Galax­ies has shown some promis­ing ear­ly game­play a while back and promis­ing ear­ly access trail­ers more recent­ly. We do have doubts whether the unbe­liev­ably ambi­tious goals this team set them­selves can actu­al­ly be reached.

Wait! No Alien Worlds, or Splin­ter­lands, and what about good old Axie? It’s not unlike­ly that play to earn will have a revival in this upcom­ing bull mar­ket. Play to earn might even be the top­ic of a sep­a­rate MAV arti­cle one day. We do how­ev­er believe that play to earn games lack cru­cial com­po­nents of what defines a game, most notably they lack fun. Play to earn isn’t a game in our eyes but a sep­a­rate, 3rd thing like DeFi yield farm­ing. While play to earn might again attract a lot of atten­tion in the cryp­to com­mu­ni­ty one day, those mod­els are ulti­mate­ly not sus­tain­able and can­not have the kind of mass appeal that we are look­ing for here.

Conclusion

With­out any doubt, Web3 tech will dis­rupt game mon­e­ti­za­tion and maybe even help cre­ate com­plete­ly new ways for us to find fun in games. How­ev­er, nobody has cracked the code yet and much-hyped ear­ly attempts have been piti­ful from a game­play and/or cryp­to inte­gra­tion per­spec­tive. We here at MAV bet on those build­ing the rails for the future of gam­ing, all while, in the late after­noons, try­ing to squeeze as much fun as we can out of the games that are already being made.

Cov­er image: Scene from Death Strand­ing (not a Web 3 game)