The Apocalypse of Chain Games: How to Build a Real Crypto Game?

Author: Wenxin, SevenUp DAO

In 2022, the bull market in the crypto industry came to an end, and winter arrived. During this year, mainstream assets experienced repeated halving, and no sector such as DeFi, NFT, or GameFi could remain unscathed. FTX, 3AC, Voyager, BlockFi, and Terraform Labs all collapsed one after another. Although such situations had occurred multiple times in previous bear markets, this time was different.

First, the crypto ecosystem today is much richer than in previous years; second, the amount of capital invested in the crypto industry in 2022 actually increased compared to the bull market in 2021; third, the confidence of crypto practitioners in the future development of the industry is unprecedented.

All of this indicates that the winter will eventually pass, and now is the best time to focus on industry building. As for which sector will stand out in the next bull market, everyone has their own thoughts, and many institutions and individuals believe that crypto games will once again showcase their charm.

I have always referred to it as "crypto games" rather than GameFi, because the GameFi sector needs a self-reform in its concept.

The first generation of GameFi represented by Axie had already hit rock bottom by early 2022, and then the X2Earn model represented by StepN reignited GameFi. However, almost all projects have not escaped the Ponzi trap; such projects can become popular for a time but will not last long. Even StepN, its governance token GMT has already dropped by 95% from its peak, so we need to re-examine GameFi and think beyond the established concepts!

Previously, in my article "GameFi is Dead ------ Counting the Seven Sins of Chain Games," I listed seven problems that currently exist in GameFi. This article will provide detailed answers based on that. Please note that many of the solutions mentioned in this article have not yet been effectively verified and are merely the author's opinions.

This article mainly discusses the following content:

• Making money is just a process; entertainment is the goal
• Returning value to gamers rather than speculators
• Lowering the entry barrier for games
• Creating an interesting game
• Improving the economic model

1. Making money is just a process; entertainment is the goal

If a chain game only attracts players with the prospect of making money, it will not last long. Some may consider introducing third-party funds, such as providing advertising or co-branding services, using B2B funds to subsidize C-end players. However, the premise of all this is that the game has enough traffic; looking at the current daily active users of chain games, it seems that very few project parties are willing to invest in advertising (according to incomplete statistics, there are only 6 chain games with daily active users exceeding 1K, many of which inevitably involve multiple accounts and studio participation).

Without a "blood transfusion machine," we return to the classic question: If every player in a chain game wants to make money, then whose money are they making? The answer is clear: old players make money from new players, which is a typical Ponzi scheme.

Of course, you can also focus on improving the economic model design, using clever game theory to provide old players with various options for input and output, thereby achieving a balanced economic system. Such designs are not uncommon in DeFi projects, but directly transplanting them into GameFi is not a good choice.

An excellent economic model is the finishing touch for chain games; it can open up traffic entry points in the early stages of the game and extend the game's lifecycle, which we will discuss later. However, it is definitely not everything; otherwise, the existence of the game would be meaningless.

The online gaming industry has been around for over 50 years, with many games like DNF, Fantasy Westward Journey, and World of Warcraft having similar money-making mechanisms as chain games. They have operated stably for many years, and there are many points worth learning from. Games were created for entertainment, to pass the time, and players are willing to recharge for a better gaming experience. Project parties need to provide better game content to sustain profits, creating a very solid business loop. As games grow and develop, the mall function gradually expands until it can provide external transactions or in-game fiat transactions, giving rise to "gold farming" players.

However, from the perspective of the entire player base, gold farming players are just a small part; they mainly serve mid-spending players and heavy spenders, while the largest user group in the game remains the ordinary free-to-play and low-spending players. Therefore, the most stable player structure for a game is "a small number of gold farming players + a small number of spenders + a large number of entertainment players." Entertainment players form the foundation of the game, the demands of spenders promote the development of gold farming players, and gold farming players, on one hand, promote game activity, and on the other hand, meet the needs of spenders.

Thus, when developing a product, it is essential to clarify the needs of the majority of users. Playing a game while making money, occasionally obtaining rare equipment to earn money—these are all "icing on the cake." The primary driving force for players should be that the game is fun, allowing players to play for reasons beyond just making money. A good player structure is a prerequisite for the long-term existence of a game.

Currently, there are many chain games on the market, but very few projects can achieve the above goals. The fundamental reason is that creating an interesting game is inherently challenging; project parties want to make quick money and are unwilling to spend time and money refining the game's playability. However, the industry continues to develop, and projects without value will not last. The era of making quick money will eventually end; this path is not competitive at all, and it is worth every project party to reflect on how to position their project.

2. Returning value to gamers rather than speculators

Whether it is public chains or DeFi, staking has been widely used, and many game project parties have also launched various token staking activities. The design of such activities is relatively simple, merely staking governance tokens to obtain more governance tokens or staking governance tokens to earn game tokens. At first glance, there seems to be no problem, and it can reduce the circulation of tokens, creating application scenarios for tokens and empowering governance token holders.

However, there is a risk here: the biggest beneficiaries of these empowerments are DeFi players, who do not participate in the game but buy and sell tokens, and when the tokens unlock, they may directly sell them, harming the game ecosystem, which is unfair to those who play the game seriously. I do not oppose adding DeFi elements to chain games, but the returns need to be controlled, allowing the greatest value to return to gamers, so that more people will participate in the game. Based on playability, game content can be divided into two parts: simple repetitive tasks and more challenging complex operations. Rich rewards should be given to genuine gamers, reducing rewards for simple repetitive tasks and increasing rewards for more challenging tasks or leaderboards.

Additionally, it is necessary to control the power of capital to avoid whale operations directly affecting the game ecosystem. What players earn in the game cannot just be tokens and NFTs that can be bought in the market; they need to be given value accumulation. Upgradable NFTs might be one approach. Rewards obtained by players in the game are attached to NFTs with lower liquidity. Different gaming experiences lead to different evolution paths for NFTs, which record a player's gaming journey and cannot simply be replaced by buying a new NFT. This value accumulation is better in terms of both commemorative significance and playability than merely obtaining tokens. Alternatively, certain event items, rare items, or upgradable items can be designed as SBTs to enhance the value of accounts and the attractiveness of events.

The above principles emphasize not allowing money to dominate the game (this is also one of the principles of traditional game design). Additionally, experience and skill should be significant factors determining the outcome of the game. Just like a novice with the strongest League of Legends account cannot defeat a player in the gold tier, this can meet the needs of most players; otherwise, the gaming experience for ordinary players will be poor.

3. Lowering the entry barrier for games

In my previous article, I mentioned that using NFTs as a game entry barrier is self-defeating, and the reason is simple: early investors in NFTs will certainly hope for the price of NFTs to rise. However, if the price rises, it raises the entry barrier for new players, effectively cutting off the traffic entry; if the price of NFTs falls, the entry barrier for new players decreases, but the interests of old players are harmed, and a decline in game asset prices is generally seen as the beginning of a game's decline. Perhaps market economics can price assets, but this hinders most people's experience of the game.

If we view chain games as investments, everyone will pay attention to one indicator: the payback period. It acts like a deadline, with everyone nervously calculating time and monitoring returns, in which case entertainment is almost nonexistent. Not to mention that this directly cuts off the possibility of Web2 players participating in the game, and NFTs costing thousands of dollars also hinder most Web3 players who are willing to try chain games.

Therefore, since this is a game project that requires more people to participate, everyone should be able to play for free; downloading the game and registering an account should be enough to play, without needing a wallet or buying NFTs, providing players with the most direct path to participation. The doors should be wide open to gather people first. Don't be stingy; free players may not bring revenue to the project parties, but they also contribute to the game's activity.

Afterward, player tiers can be set, allowing Web3 players who purchase NFTs and Web2 players to enjoy playing together. Players with NFTs can take on the role of "merchants" in the game ecosystem, which is not difficult. It is also necessary to set up Web2 recharge channels to further simplify the entry barrier for players. The approach to product development is universal, of course, this refers to creating long-lasting products; Ponzi schemes do not need to consider these aspects.

4. Creating an interesting game

A few days ago, I posted about the "chain game paradox" on Twitter, and many friends shared their opinions. Most people believe that chain games should focus on gameplay, and Web3 players also hope that chain games become fun. I also believe that chain games should enhance gameplay, but whether gold farming players in chain games prefer games with high playability and difficulty is debatable. Gold farming players still prefer reward paths to be as simple as possible, especially studios, which is a force that cannot be ignored!

This issue can refer to the views of traditional gamers. I consulted a seasoned MMO player, and their response was: "They don't care whether it's fun or not; they just watch movies while they farm." Thus, even classic web2 game gold farming players do not care about how fun the game is because their goal is also to make money, which is evident.

But does chain gaming really not need playability? Of course not; the above only indicates that gold farming players do not care about playability. However, games like DNF and Fantasy Westward Journey have survived for a long time, not because of gold farming players but because of a large number of entertainment players, and playability serves the core users (entertainment players). These users satisfy the gaming experience of spenders, while gold farming players meet the spending needs of spenders, and spenders provide cash to project parties.

Therefore, the best state is:

• Gold farming players do not care about game playability; they just focus on gold farming
• Ordinary players are willing to play games to pass the time

Spending big can earn players a sense of honor in the game, and they are willing to spend money on equipment.

Games can provide a sense of honor to big spenders, entertainment to ordinary players, and money to gold farming players.

You need to carefully design game content to meet the needs of different types of players, promoting the prosperity of the ecosystem while satisfying their own needs. In short, the goal is to reach a point where even if the money-making aspect is stripped away, players are still willing to play the game, and even willing to pay for a better gaming experience. This could become a turning point for chain games.

5. Optimizing the economic model

Chain game project parties need to re-examine the design of their economic models and not be constrained by existing projects. The rule of Web3 is to hype the new rather than the old; simply imitating the designs of previous projects is unlikely to produce a hit.

The initial single-token model was straightforward: assetizing in-game items, allowing users to purchase NFTs for use in the game to earn token rewards. However, this design has many drawbacks: for game participants, the rise and fall of token prices have a significant impact on the game, and the capital market can directly affect the game ecosystem, leading to a death spiral for the game. For investors, infinitely inflationary tokens are not good investment targets; even investors confident in the game are unlikely to purchase such "assets destined to depreciate."

Thus, the dual-token model emerged, effectively addressing the second issue by separating in-game tokens from investment tokens. Governance tokens carry the value of the project, and this fixed amount of tokens is more suitable for investment. On the other hand, issuing two tokens gives project parties more opportunities to gain benefits. But does the dual-token model have issues? Certainly! First, it does not solve the first problem; the fluctuations in the capital market still directly affect the in-game ecosystem. Secondly, the function of governance tokens has always been somewhat awkward; those who genuinely want to participate in game governance need to obtain sufficient voting rights, but this requires purchasing a significant amount of governance tokens, and those who hold large amounts of governance tokens are unlikely to focus on game governance.

Governance, voting, ve models, and other gameplay mechanics are all learned from DeFi. In DeFi, voting on the direction of protocols can directly affect individual returns, so many whales are willing to hold. However, voting in GameFi generally does not have much impact on returns, so there seems to be insufficient reason to hold GameFi governance tokens. As for staking for yield, that only ensures that one's assets are not diluted, making it difficult for governance tokens to maintain their price.

Ideally, the economy inside and outside the game should have relative independence, at least not allowing the rise and fall of token prices to directly affect the gaming experience of non-gold farming users. Governance tokens need to increase truly effective use scenarios; perhaps they can participate in late-game item upgrades, unlocking hidden levels, and other content. Reasonable burning mechanisms and holding (staking) yield mechanisms also need to be considered, as deflationary tokens will have more stable prices. Do not allow items and tokens obtained in the game to be traded; there is no rule that all items obtained must be NFTs. Let more rewards be retained in game items; traditional game mechanics like decomposition, synthesis, and refinement can be referenced. Setting all rewards as tokens is not a wise choice.

6. Conclusion

Creating a valuable game is very challenging, and the key point is whether it is worth doing. After chain game project parties initially issue NFTs and tokens to obtain a lot of money, the subsequent construction of the game needs to involve "vision," as the money is already in hand. Very few projects adhere to long-termism; there are not many sustainable hotspots in Web3. Whether to follow the crowd to make quick money or to create a carefully polished product is a question worth pondering.

However, that said, while everyone knows that Web3 needs new hotspots, who can say that a chain game capable of lasting long isn't worth looking forward to?