The future of TCG: GameFi or full chain?

Written by: @Caesar @Holographic Research Group

Edited by: @Lexi

After the rise of GameFi, the entertainment nature of games seems to have been diluted. It appears that people are willing to spend time on Web3 games primarily because they can make money, rather than because Web3 games are fun or offer any unique native experiences. Indeed, due to technological limitations, the high-frequency interaction and immediacy of games cannot be guaranteed.

However, this does not prevent us from thinking about what traditional game paradigms are more suitable for entering Web3 at this stage. Card games might be one of them, and trading card games (TCGs) can focus on playability, shifting the economic attributes of GameFi to the trading market of in-game derivatives. The playability of the game and its economic attributes can complement and enhance each other.

1. What is TCG

First, what is TCG? TCG stands for Trading Card Game. As the name suggests, these games are based on collecting cards. Players need to purchase randomly packaged booster packs to collect cards and then use different cards flexibly according to their strategies to build a deck that complies with the rules and play the game.

Since each player's deck is different and the order of drawing cards varies in each game, endless variations arise. Throughout the preparation and gameplay, players need to constantly think and strategize. Generally speaking, these cards have certain values, and players can trade their cards with each other.

Magic: The Gathering

Cards in Splinterlands

Cards in Skyweaver

1.1 Common Features of TCGs

The cards in Splinterlands indicate the card name, the mana cost required to use the card, the character's health/speed/toughness and life, rarity, card level, experience points, and special abilities.

a. Each card will have text that describes the rules, detailing the conditions and effects of using these cards.

b. Players are required to have a deck, and players need to select a certain number of cards from thousands of cards to work together to win the game, providing a lot of openness and diversity to the game. To lower the entry barrier for newcomers, most TCGs offer pre-constructed decks, but players need to enhance the strength of their decks based on their understanding to achieve victory.

c. Using any card requires certain conditions, such as the mana cost mentioned above for using cards in Splinterlands.

d. The basic rule of the game is to use one's resources wisely to produce certain effects and meet the winning conditions of the game.

e. Regardless of the game type, the rules are followed in a turn-based manner, and the turns adhere to a certain structure.

1.2 Turn Structure

Turn Start / Reset Phase ------ Reset all cards to a new turn state. Most TCGs have similar designs, although some may have unique designs.

Draw Phase ------ Draw cards from the deck to become hand cards. Newly drawn cards may imply new effects.

Use Phase ------ Use the effects indicated on the cards to reasonably utilize the cards in hand to influence the game.

Conflict / Battle Phase ------ Use available resources to engage in battle. Generally speaking, winning in conflicts is the primary means of achieving victory in the game.

End of Turn ------ Typically, in this phase, the effects generated by the cards used this turn will cease, and players will be required to discard any excess cards in hand to maintain a certain number of cards.

1.3 Issuance and Operation

Players need to purchase cards from game publishers to play the game. This is mainly done by buying "booster packs," which contain a certain number of random cards. Most games will have a "starter pack," which contains a complete set of basic cards designed to help new players understand the rules.

The effects that cards can produce in the game vary in strength, so to prevent the oversaturation of powerful cards, almost all game publishers use rarity to control the ratio of various strength cards. A three-tier division is a common method, categorizing cards as "common," "uncommon," and "rare." For example, in Magic: The Gathering, a booster pack contains 15 cards, with only one rare card, three uncommon cards, and the rest being common cards.

To give cards some added value, game publishers print special cards, with the traditional method being "foil cards." These specially printed cards are exquisite and have strong collectible value.

Taking Yu-Gi-Oh! (a card game based on the namesake Japanese anime) as an example, it has audiences worldwide, translated into multiple languages, and has spawned a huge card trading and collecting market, with over 22 billion Yu-Gi-Oh! cards circulating in the market, many of which are valued at thousands of dollars, with the most collectible cards reaching up to 9 million dollars.

Next, I will analyze the different developmental situations of two projects, Splinterlands and Skyweaver, focusing on the reasons behind their differences, discussing the present and future of on-chain TCGs.

2. Splinterlands and Skyweaver

2.1 Basic Information

2.2 Development Status

Due to the lack of data on Skyweaver from various data analysis platforms after 2022, we can look at the closest data point from mid-2022. It can be seen that the number of users and transactions in Splinterlands far exceeds those of Skyweaver, and it is in a relatively stable state. Since July 2021, with the popularity of TCG games, Splinterlands has experienced unprecedented growth and gradually entered a stable period, while Skyweaver has gone through two to three years of testing without breaking the ice age.

As of April 12, 2022, Splinterlands ranked first multiple times with over 350,000 daily active users, leaving the second and third places, including Axie Infinity, far behind. It can be said that it was a time of great prominence, the undisputed king of blockchain games.

In a similar environment, why do two TCGs with core gameplay similarities have such drastically different developments?

2.3 Core Differences Between Splinterlands and Skyweaver

2.3.1 Tokens

After its funding in July 2021, Splinterlands issued its own tokens, establishing a dual-token model with $DEC and $SPS.

$DEC is the in-game currency, currently priced at $0.00076335, primarily used for purchasing various card packs, land, items, and improving personal rankings, among other things. It can be obtained through various tasks and official events in the game or purchased on trading platforms. $DEC can be withdrawn for trading or used to buy items, rent cards to improve battle win rates, earn more battle rewards, and acquire scarce cards. Scarce cards can be traded for profit in the NFT trading market.

$SPS, on the other hand, is the governance token, currently priced at $0.01717423, mainly used for community governance voting, game rewards, and earning staking rewards, among other things. Holders can stake $SPS to participate in voting, which can determine any adjustments to the project, including the schedule, settings, and prizes for tournaments sponsored by Splinterlands, updates to card availability, task, season, and leaderboard rewards, battle settings (time limits, mana caps, rule sets, inactive shards, etc.), and the $DEC inflation pool.

Skyweaver, however, has not issued tokens, using the stablecoin USDC as its in-game currency.

2.3.2 Play-to-Earn

In Splinterlands, players can participate in the game for just $10. Compared to similar games, the entry barrier for Play-to-Earn is relatively low, and there are simple and diverse ways to earn rewards.

Daily Tasks: Daily tasks refresh every 24 hours based on the time of first completion, with different levels of daily tasks offering different quantities of chests, which may yield $DEC or various levels of cards.

• Battle Win Rewards: The winning side of each battle receives $DEC token rewards, currently priced at 0.00076335U, and the DEC reward per match increases with the player's level.
• Opening Card Packs: Opening card packs is similar to blind boxes, with each pack containing cards of varying values, and what you get is based on luck. However, based on historical returns, the average value of card packs is greater than their selling price. Additionally, potions obtained from daily tasks can increase the chances of opening legendary or gold cards.
• Guild Rewards: Participating in a guild can yield some exclusive rewards, but both guild construction and battles require members to have a certain level.
• Card Trading: The supply and demand of different cards vary, and the trading value of each card is different.
• Card Renting: Cards can be temporarily rented out, allowing renters to use the cards to improve their win rates.
• Tournament Prizes: The entry fees paid by all participants in tournaments form a prize pool, with different prizes awarded based on final standings.
• Season Rewards: Season rewards also increase with different levels. In addition to scores, the corresponding value of the cards held is also considered, measured in power value in the game. To earn stable season rewards, many may consider holding high-value cards, somewhat like staking card NFTs to earn rewards.
• Airdrops: Distributed based on players' contributions to the game (mainly the weight of on-chain in-game assets) and the amount of staked SPS.

Skyweaver's Play-to-Earn mechanics differ, mainly divided into a free-to-play ranked mode and a paid conquest mode. The game's earnings primarily come from gold and silver card NFTs.

• Silver Card NFTs: Can be obtained through weekly leaderboard rewards in the ranked mode (the higher the rank, the more silver cards won) or by winning matches in conquest mode. Silver cards are tradable versions of basic cards and can be used to pay for entry into conquest mode.
• Gold Card NFTs: Loot version cards created and obtained by winning all three matches in conquest mode, with limited supply. Each week, there are 8 different gold cards to choose from, and once the week ends, these 8 gold cards cannot be won again; thereafter, players can only obtain them from other players in the store.

2.3.3 Others

Splinterlands

In addition to NFT-ifying cards, it has added elements such as land auctions, NFT card trading, and card synthesis to increase the liquidity of cards and land. Players can trade or sell game assets to other players. Splinterlands also has a larger imaginative space based on a land-based metaverse world, supporting players to create guilds, build castles, and create a broader metaverse space. Splinterlands has a clear roadmap, presenting various future plans to players.

Skyweaver

In contrast to Splinterlands, Skyweaver does not have a particularly clear roadmap, and its game balance is relatively poor compared to Splinterlands. Earlier this year, the project team Horizon directly stated that their current focus is on helping more games, applications, and brands enter Web3. The team indicated that they will announce more partnerships, ranging from games to mapping technology, loyalty reward programs, and token experiences being developed by different companies and brands. This may indicate that Horizon will not invest too much effort into Skyweaver in the future, leading to a general loss of confidence among players in the project.

2.4 Reasons for Development Differences

Both games emerged during the GameFi boom, where playability and economic benefits are two ends of the same scale.

Splinterlands offers more diverse earning gameplay, making it a relatively efficient gold mining model under certain playability, closely aligned with the early design of GameFi. The game's dual-token model is primarily designed to serve economic attributes, and the airdrops of SPS and open governance rights have brought low-cost community marketing and highly sticky early participants, allowing Splinterlands to gain momentum and become extremely popular. The roadmap released by Splinterlands is not only clear but also envisions a land-based metaverse world, aligning with the popular narratives of the time, resulting in higher discussion heat and participation.

On the other hand, Skyweaver's gameplay is relatively monotonous, lacking special means to attract players during the cold start phase. The small number of players leads to longer matchmaking times, reducing the efficiency of earning rewards. The NFT market for cards lacks driving behavior, and when playability is insufficient to cover the inefficiency of the gold mining model, the high learning and time costs of TCG games, combined with market sentiment, wear down players' patience. Meanwhile, the Skyweaver project team has not provided a sufficiently clear and imaginative roadmap, further leading to negative community sentiment and continuous user loss.

The reasons behind the development differences between Splinterlands and Skyweaver can be summarized in four aspects:

• Economic incentives: Value capture and economic subsidies are crucial. In this environment, to gain more traffic and users and attract more attention, economic incentives are necessary, but the trade-off with playability needs to be carefully considered.
• Community culture and creator economy: Player feedback on games, the internal culture and atmosphere of the community, and UGC content are vital for the operation and development of games. Highly sticky early participants have a profound impact on projects.
• Operational issues: A clear roadmap and a long-term community atmosphere can lead to higher user retention and activity, reducing user loss. Not to mention aligning with current hot topics, at the very least, it should be clear, reasonable, well-planned, and implemented step by step.
• Industrialization of games: Whether the learning and time costs of games are reasonably estimated and measured relates to how to balance rewards and costs. This requires systematic, well-established industrial design and experienced game planners.

3. Questions to Consider in Web3 TCG Game Design

3.1 How to Reasonably Regulate the Economic Sustainability of NFTs?

The mindset of most NFT holders in Web3 games is similar to that of NFT investors, hoping that game NFTs possess scarcity to maintain their original prices or even bring higher value. Game NFTs can serve as scarce rewards, bearing the functions of value carriers and investment tools, circulating in the market, but this needs to be based on the premise that the game is fun. Essentially, what is needed is the richness of game development. The contradiction between these two may lead to conflicts between the community and developers, triggering governance issues. If the community can maintain a long-term and rich mindset and continue to build, ecological prosperity will bring about a virtuous value cycle.

Taking LOOP as an example, the development of LOOP derivatives and related protocols initially caused the price of LOOP NFTs to drop to half, but subsequently captured far more value than expected. Before the community autonomously develops and builds, game developers can control the inflation rate of NFTs through appropriate mechanisms to ensure a balance and consistency of interests between early participants and newcomers, allowing developers to adjust their development paths.

Currently, seasons or limited-time game cycles are one relatively feasible sustainability mechanism. Dark Forest and Dookey Dash also control the scale of reward acquisition, i.e., the inflation rate of NFTs, through limited-time openings. This mechanism in Web2 is reflected in achieving "seasonal iterations" through different gameplay and deck strengths, combined with worldviews and backstories. For new players, they can participate in the game with a reasonable learning cost, while for veteran players, new season compensations can be provided to retain them. Coordinating the interests of early participants and new entrants is essential for growth.

Another healthy economic design that has been practically implemented is controlling supply through the release and burning of tokens and NFTs. The seasonal reward mechanism provided by Splinterlands and the burning of silver cards to exchange for conquest mode passes in Skyweaver have actually brought about reasonable economic circulation on a small scale.

3.2 How to Balance the Two Ends of Play-to-Earn?

Web3 games have attracted a lot of market attention and user adoption through GameFi and P2E, but many GameFi mechanics are essentially no different from DeFi mining, where users enter by purchasing NFTs as production tools to earn continuously. In other words, early GameFi was mostly a Fi-centric fun earning mechanism rather than a game-centric experience. Of course, there has yet to be a gameplay that can achieve mass adoption in the Web3 gaming space, centered on unique Web3 experiences. If judged solely by traditional "fun" games, many game mechanics and developments require a long period of sedimentation.

From a playability perspective, TCGs have both vertical and horizontal expansion methods. Taking Hearthstone as an example, seasonal iterations bring vertical card mechanism designs, differences in races and their characteristics, while horizontal gameplay expansions include ladder, arena, and battleground modes, providing different but rich playability experiences for different types of players.

From the Fi perspective, due to the early GameFi providing a pool-style funding model, users have become accustomed to obtaining high returns through super simple gameplay. TCGs, being games with high learning costs, need to consider how to balance gameplay difficulty and the rewards obtained:

The difficulty of Play needs to consider learning costs, matchmaking times, and the costs of building decks;

If Earn rewards are card NFTs, then the value needs to be viewed in two parts: the utility value of the constructed cards and the collectible value determined by rarity. However, in the current NFT market, the judgment of collectible value is difficult to define, significantly reducing the willingness to collect. As for utility value, game developers need to weigh the acquisition costs and game balance.

If Earn rewards are the game's native tokens, developers need to design the economic model of the tokens, value capture, and utility. Currently, GameFi's solution is to adopt a multi-token model.

From the success of Splinterlands, Fi can be considered from two aspects: opening card packs (primary market) and card renting and trading (secondary market). Game NFTs are more determined by utility and community culture, with the former being more decisive and linked to the game's playability. The act of opening card packs can be seen as acquiring basic tools for the game, such as opening card packs and providing potion items in Splinterlands. Such randomness can enhance players' sense of value for the rare cards opened from the packs. The gameplay of renting and trading is diverse, but the essence remains treating cards as basic production tools for economic rewards.

Of course, in the comparison between Splinterlands and Skyweaver, we can find that in the current Web3 game ecosystem, diverse earning pathways and strong Fi attributes are still indispensable parts for users to participate in games and activate game ecosystems.

3.3 How to Balance Free Players and Paid Players?

For games, in the scarce traffic world of Web3, free players need to be taken into account as they can bring activity to the early ecosystem of the game. This requires game developers to pay attention to two points:

• The cultural considerations of the game should avoid being too niche. While this helps attract long-term participants and sticky users with similar interests, quickly building a community and endowing it with cultural attributes and strong social relationships, it is not conducive to triggering explosive growth and attracting significant market attention, thus compressing the game's subsequent expansion and operational margin for error.
• Game projects need to be cautious about issuing tokens. Some project teams have caused collapses by treating token issuance as a marketing tool without the ability to run a Ponzi scheme, leading the game to fall into trouble too early.

From the game's attributes, TCGs are relatively "friendly" in terms of "spending." Compared to monetary costs, more costs are in terms of time. Players need to spend time unlocking free basic cards and time learning and thinking about how to build a powerful deck to win more rewards. As users participate longer, through the exchange and trading of card NFTs, deck iterations gradually form a "perpetual motion machine," allowing players to play with decks that can P2E in each season. Meanwhile, in this process, players' understanding of the game continually improves, increasing the likelihood of obtaining higher rewards. In other words, it is possible to effectively utilize potential, continuous, and long-term rewards to incentivize players to invest more time, potentially transforming free users into light-paying users.

Of course, it has also been mentioned that many players currently still have a strong speculative nature. Some players do not engage in the game but hold card NFTs as investments or for flipping; some players attempt to monopolize and pump a certain card NFT for higher returns; and the frenzied atmosphere during the meme coin boom often permeates the gaming community, where everyone seems more eager to make quick money. Therefore, for the ecosystem of Web3 games, users are a double-edged sword, depending on the developers' mechanism design and the culture and atmosphere of the community.

3.4 Do We Need a Fully On-Chain TCG?

In GameFi's TCG, whether entering by purchasing game NFTs or earning card NFTs through P2E mechanisms, it is similar to the behavior of buying card packs to draw cards, and the NFT trading of games is akin to the TCG card trading market in Web2, including the so-called common cards, uncommon cards, rare cards, and foil cards' collectible levels, which also align well with the rarity mechanisms of the NFT market.

Taking Yu-Gi-Oh!, a game with a developed trading and collecting market, as an example, over 22 billion cards are currently circulating in the market, with many cards valued at thousands of dollars, and the most collectible card reaching 9 million dollars (the high price is due to it being the champion prize of the first Yu-Gi-Oh! tournament, highlighting the potential that Web3's ability to trace ownership history may bring to the card collecting market). The more open and transparent NFT market of Web3, along with the collection of secondary trading fees, provides greater space for the TCG card market to design, nest, and develop.

GameFi + TCG can allow developers to give games "Fi" without deviating from the focus on "Game," which is a solution to consider before clarifying the native experiences and operational methods of Web3 games. Despite increasing criticism and reflection on GameFi in the market, I still believe that games like TCG are currently more suitable for being GameFi-like games.

Recently, discussions about fully on-chain games have increased, with many viewpoints suggesting that fully on-chain games are the only solution for on-chain games. In August, Norswap tweeted that 0xFable aims to create a highly scalable fully on-chain TCG, while Paradigm and Base support the development of an on-chain card game, Parallel, which has also begun public testing and operation. However, a question worth discussing is: do we really need a fully on-chain TCG?

First, from the perspective of fully on-chain games, we inevitably have to consider the "impossible triangle" of decentralization, security, and scalability. Due to the performance limitations of blockchain and storage constraints, the high-frequency interactions of games, i.e., immediacy, will be significantly affected. However, with the optimization of tickrate in fully on-chain game engines, the development of technologies such as Ephemeral Chain, app-specific precompiles, Battle Rollup, and synchronization mechanisms, it is possible to achieve high-frequency interactions for players in the future, pushing the user experience of on-chain games to new heights. Whether traditional MMORPGs, SLGs, or more open, customizable rule sandbox worlds, there is much to look forward to, and I am optimistic about the future development of fully on-chain games.

However, if performance issues are resolved, many more playable game mechanics can be moved on-chain. Taking Dark Forest as an example, all interactions are completed on-chain, and the technology of zero-knowledge proofs can help Dark Forest achieve higher information games, enhancing the game's playability and compensating for its shortcomings in high-frequency interactions.

If performance issues are resolved and game experiences are optimized, the unique experiences of Web3 will undoubtedly attract a large number of participants and supporters. However, TCGs are ultimately niche games, and they do not possess the best playability experiences in the Web2 world. Competing with other gameplay for a place in the already small Web3 space can be a long and arduous journey. It is difficult to envision the significance of moving an entire card game on-chain, especially since card games require considerable interaction, which undoubtedly increases the cost for players, a part that is hard to compensate for with playability.

Of course, in the gaming space, there are other influencing factors, such as marketing, world design, and UGC coordination. In the community culture, especially in the Web3 world, some fully on-chain TCGs may experience a temporary surge, but with fixed game modes, the overall process cannot undergo too many adjustments after the game is launched; otherwise, it will increase players' learning costs and lead to user loss. If a fully on-chain TCG is to be developed, it cannot be solely TCG but needs elements like land and open worlds similar to Splinterlands or a game matrix with a unified worldview like Parallel.

Besides GameFi and fully on-chain games, are there other possibilities for TCGs? Yes. The core gameplay of the game can be designed and moved on-chain, while other imaginative spaces can be freely developed by ecological participants. Similar to playing cards, only the suit, size, and material need to be designed, while the specific gameplay can be developed and designed by players themselves. Taking Magic: The Gathering as a case, due to the rules not prohibiting it, there were instances in early competitions where players tore cards to maximize card effects (utilizing the physical properties of cards), known as the famous Chaos Orb incident, which led to the addition of a rule stating "cards must be intact." Players possess infinite imagination, and the combination of UGC and creator economy grants on-chain TCGs greater freedom and design space. Under the same card system, we can have countless rooms and countless gameplay. My ideal development trend for Web3 games should not only bring ownership of game assets but also unify player and creator identities, fostering co-construction, mutual prosperity, and common wealth in games.

To conclude, quoting the new CEO of Yuga Labs, Daniel Alegre, he believes that the advantage of Web3 lies in achieving low marketing costs through tight community-driven promotion and giving players true ownership. In his view, the experience of games and the applications of Web3 share strong similarities—placing creators and communities at the forefront, creating a strong connection between content, entertainment, and users.

4. Conclusion

When Web3 and games come together, I find it challenging to identify a suitable perspective for observation and reflection. Naturally, we assume various roles: investors, players, creators, developers… But setting aside these identities, we must remember that the core priority of games is entertainment.

The fervent atmosphere of GameFi is not only driven by game creators but also by game participants. In reflecting on GameFi, we must also consider that initially, we hoped Web3 would bring us ownership of game assets, higher-quality virtual experiences, and unprecedented gaming experiences. However, gradually, acquiring assets in Web3 game projects has become the sole purpose for many users participating in games.

As a player, I do not merely want to see ways to earn money while walking, sleeping, or raising digital pets; I want to see resonance with the game, an emphasis on the visual quality of the game's graphics, the richness of the game's storyline, and the immersive experience of every battle, every story, and every world. This is what can attract players long-term and create a vibrant and creative crypto gaming ecosystem.