Exploring the Future Prospects of Crypto Games: How to Break Free from the "Web2.5 Game" Label?
Cryptocurrency games still need to overcome some significant obstacles to achieve true commercial success.Original Title: 《Our Questions About Web 2.5 Gaming》
Original Author: Asa Li, Maverick Capital
Original Compilation: 深潮 TechFlow
This article discusses the future prospects and challenges of crypto gaming. While many believe that crypto gaming is a natural application of blockchain technology, Maverick Crypto researcher Asa Li argues that under the current technological and market conditions, crypto gaming still needs to overcome some significant obstacles to achieve true commercial success. This article introduces some key issues and suggests some exploratory directions for applying crypto technology in the gaming field.
Introduction
Today, based on the funds raised, attention gathered, and expectations ignited, the dominant crypto metaverse games are often variants of "Web 2.5 games," characterized by the following features:
Web 2.5 Tokenization: Many projects and investors focus on adding tokenization and financialization to popular Web 2 game genres like FPS, action-adventure, simulation, MOBA, and MMORPG.
Web 2.5 Economy: A significant amount of research has focused on how to make a hypothetical crypto economy function within a fictional, highly immersive MMO world.
Web 2.5 Gameplay: Many investment and engineering resources are being devoted to developing artistic effects and gameplay to compete with today's Web 2 giants.
In this article, we aim to:
1) Interact with the current popular Web 2.5 gaming approaches and raise questions,
2) Point out some interesting alternative options in the crypto + gaming crossover space that we believe are currently underexplored.
Visualizing the Search Space
Apart from Ethereum, gaming has been an important testing ground for new technologies. Collective thinking on how to make crypto + gaming interact typically takes two directions:
From Crypto to Gaming: Starting from the core features of crypto (programmable value, trusted neutrality, etc.), developing it into an engaging experience. (e.g., fully on-chain games, cryptoized DeFi, etc.)
From Gaming to Crypto: Investigating existing gaming domains to find areas where crypto is most likely to adapt and add value. (e.g., racing games from Ubisoft, Animoca, and many other crypto games currently in production)
We at Maverick are somewhat biased towards the first approach (as it aligns with our crypto-native and token maximization philosophy). However, this article focuses on the second approach, which we are interested in but not very familiar with, and we are very curious to learn from those who know more.
We visualize the search space from gaming to crypto as follows:
Horizontal (Game Categories): There are many game types, each with its own domain expertise, target audience, gameplay, and in-game dynamics.
Vertical (Tech Stack): A successful and profitable game product requires most layers to come together: token economics, gameplay, GTM, operations, economic management, ecosystems, and decentralization, etc. A weak layer can easily destroy the entire experience. Since crypto + gaming is so novel, there have been no attempts or validated designs targeting any single layer. Finding the optimal solution for a single unit (e.g., how to market a crypto-supported strategy game) has already proven difficult. Finding vertical lines that can work together (e.g., how to solve more than seven issues in strategy games) is several orders of magnitude more challenging. We believe that before finding a full-stack solution, we will see more iterations, experiments, and trial-and-error.
Cells (Count of Successful Attempts): The number in each cell represents the relative number of successful attempts seen in the crypto space. Even if ultimately failing, each successful game will push the collective expertise of crypto forward and bring us closer to solving one or two cells. So far, the most well-known iterations have occurred in P2E (Axie Infinity and StepN), fully on-chain (Dark Forest and CryptoKitties), casino games (several old and new designs have not gained much DAU), and strategy games (Dark Forest).
Collective Exploration: Builders in the crypto gaming space are building and iterating their products so that we have more and higher numbers of green dots. As we accumulate collective expertise, talent, experience, best practices, and case studies, we are probabilistically getting closer to creating the right crypto game.
In this search space, we found the Web 2.5 approach in the yellow shaded area:
In terms of game types, Web 2.5 games primarily focus on already proven popular genres such as MMORPGs, MOBA, and FPS.
In terms of the tech stack, Web 2.5 games have traditionally focused on reshaping gameplay and tokenization. The latest discussions have begun to explore more complex possibilities around in-game open economic management and ongoing operations.
Our Questions About Web 2.5 Gaming
Question 1: Should significant resources be invested in disrupting gameplay and artistic effects?
The challenges of gameplay and artistic effects in popular genres hinder the potential for iterative crypto + gaming.
Today, many crypto game studios and investors focus on reshaping the gameplay of popular genres like MMORPGs, FPS, and MOBA. While pursuing the largest potential market sounds reasonable, the product/market fit in these areas is often the least clear. Crypto startups often spend significant resources developing gameplay before players attempt the risky but crucial design of the crypto economy.
Historically, it has been extremely difficult to disrupt existing game operators with data, distribution, and social barriers. There are several important reasons:
Data: For over a decade, data optimizers like Sensor Tower and Unity have accumulated endless data and analytics at the game level, aimed at finely optimizing retention rates, viewing times, and payment tendencies for each player. Building an economic model and game loop that rivals over a decade of experience in data optimization, whether in UIUX or profitability, is no easy feat.
Artistic Effects: According to Unity's CEO, the number of artists in game companies is 3-5 times that of engineers. For popular games like Fortnite, Genshin Impact, and Honor of Kings, Unity and Unreal customize rendering engines to optimize performance.
Gameplay: Each new gameplay undergoes rigorous A/B testing, and even for the most successful studios, successful game titles are rare. Over 95% of game titles operate at a loss. For new crypto companies, this upgrade path will only become steeper.
Moreover, focusing resources on gameplay and artistic effects means allocating fewer resources, attention, and product iterations to open economic design (which will be detailed later). Founders and foundations instead focus their attention on hiring former studio product managers, artists, and renderers to create the most eye-catching concept videos.
We believe that not all games need world-class art and gameplay to have a fighting chance at success. We believe games exist on a spectrum from creative/gameplay-heavy to economic/strategy-heavy. Games like casino games, board games, strategy games, and strategy-focused RPGs typically do not require the latest graphics cards. These games, instead, compete in distribution, operations, economics, game loop design, etc. These categories will feel more natural in the context of crypto-driven reshaping.
We believe that limited resources in Web 3 are better spent exploring how crypto economics can unlock new paradigms in gaming rather than funding former AAA producers to create another MOBA/FPS game with just a few tokens added. To further emphasize this point, the chapter that truly propelled DeFi into its own historical context was its native composable Legos, which allowed people to play, iterate, and ultimately reimagine finance and leverage.
So, let’s set aside the discussion about gameplay and artistic effects and turn to how to design an internal open economic system with cryptocurrency in gaming.
Question 2: Benefits and Challenges of Designing an Open Economy
The potential benefits of an on-chain MMO economic system are enormous, but the challenges are equally significant.
This section is inspired by a detailed article by Aiko, which discusses how to design a sustainable in-game economic system and a tax-based revenue model.
In our view, Aiko's article represents the cutting edge of Web 2.5 game design: creating an internally sustainable economic system that facilitates frequent in-game transactions so that creators can profit by imposing internal transaction taxes. In this way, the incentive goals of players and operators align, as both desire a thriving economic system, higher GDP, and capital velocity.
We have no doubt that the ultimate goal is very exciting. Leveraging the promise of cryptocurrency to increase the vitality of in-game economies tenfold to recreate games like Genshin Impact or Fantasy Westward Journey is a dream for anyone. However, before the crypto MMO economy can take off from scratch, we have identified many difficult prerequisites:
Necessary Complexity: To have a sufficiently sustainable economy, the game itself may need enough diversity and complexity. To accurately represent such game logic, we need many different fungible and non-fungible assets across different levels and areas of expertise.
Aggregating Transaction Liquidity: Given the complexity and number of assets, the market needs sufficient trading activity to have actionable liquidity. This aggregated trading activity can be interpreted as DAU x average daily transaction count. However, is there a sufficiently large player base to support a transaction-centric immersive MMO game?
Freedom and Abuse: Freedom implies the potential for abuse and exploitative behavior. Even in simple games like Dark Forest, guilds may exhibit abusive behaviors that harm other players' experiences. More complex games will face even greater risks. How to regulate these abusive behaviors, or whether they should be centrally regulated, remains an open question.
Economic Management and Centralization: In a real economy, there are central banks and treasury departments that regulate economic activity in a relatively free manner. In traditional games, large operations teams work tirelessly to balance the numbers. Establishing a perfect economy is impossible, and it cannot operate perfectly forever. However, central economic regulation will naturally create tension with the promises of ownership and trusted neutrality in crypto. Finding a delicate balance between playability and ownership predictability will be challenging.
We do not believe that the challenges mentioned above are insurmountable.
On the contrary, we believe there may be many worthwhile paths to explore in addressing each individual challenge. Each solution could be exciting, but they may require multiple iterations to be ready for mass production.
Our question/suggestion is: Given how difficult it is to solve all challenges in a complex MMO game, would it be better for game studios to start from smaller, simpler game types so they can gradually address different dimensions of the challenges? For example, we could start with a simple on-chain casino, simulation, or board game, exploring one or two practical issues at a time. Here are some specific questions we hope to see product explorations answer (the list will continue to grow):
A paradigm for evaluating and exchanging certain in-game assets without overly complicating UI/UX.
Best practices for assessing and integrating tangible and intangible assets across games.
Best practices for opening certain mod SDKs to the community and adjusting economic incentives.
Best practices for managing in-game economies through democratic, algorithmic, or technical means to address internal and external cycles.
Original solutions for fundraising, distributing, and purchasing games.
Profile and differentiation solutions to address user abuse or bot behavior.
Question 3: Is Asset-Centric Immersive Gaming Declining?
Most players today prefer fast-paced games over immersive game worlds and plots.
We have observed some clear trends in the gaming industry over the past 10-20 years:
After inflation adjustment, only mobile games are growing, while the market share of PC games and consoles is declining.
Overall engagement/immersion of games and players is decreasing. Average game time is getting shorter.
This phenomenon is easily understandable; it is driven by our collective shift towards a more fragmented lifestyle. Our time is divided by long commutes, always-on notifications, and many competing forms of media and entertainment. The comfortable basement gaming console may forever remain a fantasy of the past. This trend is similar to how ultra-short video formats like TikTok and Reels are dominating the entertainment landscape, overtaking YouTube, Netflix, and cinemas.
Take Tencent's Honor of Kings (MOBA), one of the highest-grossing mobile games of all time, as an example:
Tencent has continuously shortened the average game time of Honor of Kings from an initial 25 minutes to the current 15-18 minutes, while introducing faster-paced game modes.
Tencent has consistently simplified the non-competitive narrative of the game, making it more focused on the MOBA competition itself, gradually downplaying the importance of accumulated assets like player levels, experience points, gold, and collectibles.
We recognize that there is a small subset of players who enjoy deeply immersive games. For these fans, gaming is like a second life, even more important than what others call "real life."
However, if we look at the current list of top mobile games, the rankings are primarily dominated by non-immersive fast games that feel like quick supplements to busy and mundane modern life, rather than mature alternatives.
So far, the vast majority of tokenization designs we have seen add more complexity to the games themselves. It’s almost like playing a super game on top of the original game. This approach leaves some questions:
Games have specialized categories suitable for different user groups and contexts, and trying to forcibly introduce a strategy-centric super game into FPS/MOBA/SLG games is unlikely to integrate naturally. Similarly, concepts like assets, ownership, accumulation, and hyper-realistic game professions are not universally present features.
The additional layer of tokenization in games is likely to make the games more complex and lengthy, which may frustrate modern gamers who just want a quick entertainment experience.
Question 4: What is the Degree of Tokenization for Immersive MMO Games?
Let’s finally focus on a specific category of games: MMORPGs and MMOSLGs. Many consider these two categories to be the most natural on-chain categories for traditional games.
The reasons are quite intuitive: they inherently possess concepts like identity, ownership, accumulation, growth, and P2P exchange in their gameplay. For example, games like Animal Crossing: New Horizons, Grand Theft Auto, SimCity, The Sims, and Genshin Impact. Theoretically, we assume there exists a perfect MMORPG/SLG that fits cryptocurrency perfectly. However, we still have some unknown questions without answers:
- "Escape and Reality": "Escape" was the first word in Nintendo's promotional campaign for the hit game Animal Crossing: New Horizons in 2020. Part of the game's appeal lies in players being transported to a relaxing and predictable parallel universe. Compared to typical traders obsessed with monetizable goods and securities, the typical MMORPG player tends to be more risk-averse and calm. We are uncertain whether the promises of interoperability, connectivity, and global liquidity are what players want to have on their Nintendo islands.
- Non-financialization may be a feature of MMOs. A successful MMO game must gather people from all social strata. Different players have different opportunity costs for the time they invest in the game. I would gladly spend an hour of leisure time waiting for SimCity Trade HQ to refresh every 30 seconds to find rare items. However, once I realize that my efforts and time investment come with a price tag, and that price tag is likely far below my hourly opportunity cost of trading cryptocurrency, the emotional value of the game suddenly loses its commodity and financialization.
While we cannot discuss all possible MMO games in detail, there must be some exceptions. One exception that comes to mind is NetEase's Fantasy Westward Journey, an MMORPG where almost all items can be traded. This game has been around for 8 years, with total revenue exceeding $4 billion (and still growing). If there is a game that can serve as the dream of a crypto MMO game, it is undoubtedly one of them. There is much to learn from Fantasy Westward Journey, but it remains to be seen whether it is an exception or a paradigm, which requires our continued observation.
So, Where Do We Go from Here?
To be honest, we do not know. We are trying to engage in this ongoing discussion by posing our sincere questions, and we are open to being persuaded to change our views.
Today, we feel that people are trying to remake popular Web 2 game types with crypto. But we see many difficulties to overcome, such as competing with Web 2 counterparts, designing an open economic system, and attracting a sufficiently broad player base to ensure economic prosperity.
On the other hand, we have identified several currently underexplored gaming areas that may be more conducive to meaningful crypto experiments:
Categories: Crypto economic (and social) experiments in "games" that do not require perfect art and gameplay as industry prerequisites. (Fully on-chain casinos, strategy, casual, board games, sports, simulation games, etc.)
Stack Layers: Even within these categories, we are more interested in projects that do not solely focus on gameplay but broadly consider how cryptocurrency can reimagine other stages of the game lifecycle.
We believe that the categories we pointed out will face a series of challenges and difficulties, but we think exploring undeveloped areas to advance our collective expertise is the most beneficial for studios, investors, and the entire crypto industry.
