Three characteristics of true Web 3 games: native, sustainable, composability

Original Title: "Building Web3 Games"

Source: Blue Fox Notes

1. Web2 Games vs Web3 Games

Web2 games operate on a F2P (Free To Play) model, where the core is selling virtual items such as equipment. In this model, game companies control the direction of game development, with the primary goal of capturing more revenue from game design. Additionally, while players purchase virtual items, they do not truly own them. Of course, there are necessary trade-offs; it is not all about profit, and player experience must also be considered.

Web3 games adopt a P2E (Play To Earn) model and an open ecosystem, where the core is to allow players to become true owners of in-game items. Once players become the main participants in the game through P2E, their retention rates also increase. This can be seen in Axie Infinity, which has a retention rate higher than most Web2 games.

2. Web2 Modified Games vs Web3 Games

Axie Infinity has become the flagship of Web3 games. Many Web2 games attempt to replicate its success, hoping to become the next Axie Infinity. However, some games still operate under a company-controlled model, and their incentive mechanisms have not activated players. This may lead these "modified" games to face certain developmental challenges.

These "modified games" wear the guise of "crypto games," characterized mainly by using NFT technology to represent their virtual items while also issuing their tokens. However, the games themselves are still controlled by the project team, including the direction of game development and player experience. For the project team, the core goal is to sell more "NFTs" and gain greater profits from them.

These "modified games" utilize crypto technology but share many similarities with Web2 games. Although the sold NFTs (virtual items) are owned by users, the design and issuance of the NFTs remain under the control of the project team. In other words, "modified games" are not true DAOs nor genuine open ecosystems; rather, they have constructed a still-closed system using blockchain.

Native crypto games not only NFT-ize the "virtual items" within the game but, more importantly, are a process of building an open ecosystem that connects all participants through economic incentive mechanisms. This includes developers, publishers, players, guilds, and investors. If there is a certain dominant model during the initiation phase, it can be understood, but the ultimate direction should be towards openness. For example, a portion of game revenue could enter the DAO treasury to support ecosystem development; the direction of game development should be determined by participants, and player experience and incentive mechanisms should be gradually advanced through the DAO. Here, composability may even be used to interconnect with other metaverses.

Web3 games ultimately evolve into community games, allowing for bottom-up development. Web2 "modified games" still rely on top-down promotion, ultimately limited by their closed systems.

3. Web3 Games as Crypto-Native Games

• P2E and Community DAO Governance

In Web3 games, P2E is a crucial component. It can integrate players into its developing ecosystem, where players have real stakes. Regarding game development, players have a need to express their opinions and will actively participate. As the game evolves, participants will increasingly focus on its developmental direction.

For instance, how to balance in-game assets? Without balance, the in-game economy may collapse. How to achieve a balance between token output and consumption? How does the game DAO treasury accumulate assets to support ecosystem development? How does the game explore more application scenarios? Does the game collaborate with other games? How does the game enhance player experience? And so on.

Many significant decisions require the participation of all community members. If a particular type of participant overly considers their own interests, such as investors, it may lead to player attrition, which could ultimately be detrimental to long-term interests. These are all issues that need to be taken into account.

Since Web3 games adopt a DAO governance mechanism, their core is not about maximizing the benefits of a single entity, not about prioritizing user growth, and not solely about retention rates, but rather prioritizing the ecological interests of participants. Of course, there will still be interest games among different participants, but the overall interests of the community will also be considered. This is an open ecosystem with creators, builders, users, investors, etc. Without a suitable balance or dominant direction, the Web3 game may also decline. Ultimately, like Web2 games, successful games will always be the minority.

Exploring a path to promote game development through DAO governance is a significant topic, and there are no successful precedents yet; it is a process of continuous exploration.

• True Open Ecosystem

In Web2 games, data itself is one of the biggest moats, while in Web3 games, data is open, allowing any builder to innovate across different game ecosystems.

If a game's community building is better, it has the opportunity to attract more builders, thereby generating a larger game ecosystem. In an open environment, games no longer have the data moat of Web2; the quality of the game and player experience become increasingly important, and a reasonable economic incentive mechanism becomes more crucial.

In this scenario, Web3 games can have endless possibilities. Through economic incentive mechanisms, creators can build various innovative games, creating unprecedented experiences. Players can unite to decide which metaverse to collaborate with. The composability of Web3 games is similar to the composability of DeFi; on the foundational Lego blocks, we can see the birth of creative products. Here, cross-metaverse interoperability may include item representations, interaction rules, asset values, player reputations, etc. Even through cross-chain protocols, interoperability between different chain games like Illuvium and Star Atlas can be achieved.

4. Sustainability of Web3 Games

Like Web2 games, Web3 games also face sustainability issues, and successful games remain a minority.

The sustainability of a game mainly depends on the accumulation of value within the ecosystem. When the value flowing into the ecosystem exceeds the value flowing out, sustainability is achieved. This is what we often refer to as having application scenarios. When players invest time or money into the game, there is consumption; once consumption exceeds output, the in-game economy begins to grow, attracting more players, builders, and investors.

The reason Axie Infinity was able to develop is largely due to its overall SLP consumption being higher than its output. Consumption occurs through breeding Axies, while participation in battles or completing tasks generates output; a certain balance must be achieved between the two. However, breeding alone may require more players and investors to maintain sustainability, necessitating new use cases to sustain and enhance its value.

Therefore, for Web3 games to be sustainable, they must consider the issues of value inflow and accumulation.

5. Composability of Web3 Games

Web3 games, through their token economic incentive mechanisms, have constructed various economic systems of different sizes, some of which are sustainable and developmental, while others struggle to achieve a cold start, and some, after achieving a cold start, fail to find the momentum for development, each facing different situations.

In this cold start, developers act as the primary drivers, proposing the game's world design, themes, player types, player interactions, game assets, etc. On this basis, to attract more participants, game ownership can be distributed among participants, early supporters, and players. The economic incentive mechanism connects early participants, and the early distribution model often determines community loyalty and future support. TreasureDAO initially distributed its MAGIC tokens to community users, forming the first batch of loyal users. Once basic support is established, it means early consumption can sustain output, thus completing the cold start.

Games that truly develop may not be grand from the outset. They may start from a specific point, with a brand-new mechanism that can attract a loyal community of users, such as players, builders, and investors, continuously breaking through from this foundation.

As the game develops to a certain extent, composability will emerge, leading some games to possess greater ecological resilience.

6. Data is No Longer the Moat of Web3 Games

TreasureDAO initially developed from the community, finding inspiration for its launch from the loot project's development. It connects through community distribution of tokens, builds an NFT market (based on the Arbitrum L2 network), collaborates with different metaverse games, constructs its flagship game, partners with liquidity protocols (like OlympusDAO), and collaborates with NFT circulation protocols across different EVM chains like Mural, attempting to weave its own network.

Moreover, its token mechanism aligns with resources in the game; new tools and equipment in the game must upgrade and iterate in conjunction with its MAGIC tokens and resource NFTs, further generating a mutually reinforcing effect.

Of course, merely having a mechanism does not guarantee the success of a game. The success of a game requires a fair distribution model, excellent game narratives and gameplay, ultimately leading to a solid player base.

The true foundation of sustainability lies in the community culture formed by the game itself. What attracts users to stay long-term is culture, which subsequently leads to value retention and sustainability. Therefore, Web3 games need to have their own culture; if they can form a MEME culture, their sustainability will be stronger and their foundation more stable.

As the number of Web3 games increases, participants' time and money are more likely to become decentralized. In this situation, focusing on players becomes increasingly important.

The more core participants there are, the more costs they incur, and the higher their loyalty, which will attract more people. Initially, Web3 games may experience the same situation that DeFi once did, where funds flow to whichever DeFi protocol offers higher returns. At this point, the design of economic incentives becomes increasingly important: rewarding true contributors and allowing them to settle down, rather than rewarding capital that flows back and forth.

Ultimately, the value of Web3 games depends on how many loyal community users have settled and the corresponding culture. The data moat of the Web2 game model no longer exists. Culture and a reasonable economic mechanism are the strongest moats of Web3 games. This is also the fundamental reason why Web3 games must initially build games that align with the spirit of Web3; if they start without distractions, the culture behind the game will eventually stand out, ultimately returning to the idea of "everything is for my use, but not owned by me."