The Secret to Unlock Blockchain Gaming
A two-part formula
👋 Welcome to the 30th issue of The Syllabus from Invisible College — a weekly newsletter that helps you navigate the fast-moving world of web3. To get this newsletter delivered to your inbox, subscribe here:
Before we begin, a disclaimer — nothing in this piece should be construed as financial advice. With that, let’s dive in.
We’ve got some great learning events coming up:
Where Web3 is Heading Next w/ Kinjal Shah (Thurs. 8/18 @ 12 pm PT)
Town Hall (Fri. 8/19 @ 9 am PT)*
Office Hours w/ Rockwell Shah (Mon. 8/22 @ 1 pm PT)
NFTuesday (Tues. 8/23 @ 3 pm PT)*
*To access these events, you’ll need to hold at least one Decentralien NFT.
Now onto this week’s post…
You don’t need to be around the NFT space for very long before you see the same project roadmap over and over: it begins with a 10K profile picture (PFP) collection mint and ends with a vague promise of a blockchain-based game in the distant future.
It sounds great, in theory—you can own a character in the game and if the game becomes the next big thing, then it should be quite valuable. Until you dig in and realize how difficult it is to build any successful game, let alone a blockchain game.
This doesn’t mean it’s impossible though.
Two Part Formula
The secret to unlock blockchain gaming is simple.
Create a game where players:
Want to own the assets to experience the game
Actively want to trade to enhance their experience
Pretty straightforward. And stupidly difficult to pull off. In fact, no blockchain game has executed on both of these to a high degree.
But why these two? Let’s take them one at a time, starting in reverse.
In order for there to be an economy within a game, there needs to be trading. If you don’t have trade, you don’t have an economy. And if you don’t have an economy, you don’t need a blockchain.
If asset trading isn’t part of the game at some core level, developing it with blockchain infrastructure will likely just hinder the performance of the game, limit its distribution, and make it too complex to onboard users—not exactly great ingredients for a successful game.
Traditionally, players have owned the assets in most successful games, in the form of game cartridges or CDs. In theory, this allowed you to later resell the game when you were done with it, although personally, you have no chance of convincing me to part with my Super Mario Bros cartridge.
In recent years this has given way to centralized gaming platforms like Steam and the Epic Games Store, where you are “leasing” access to a game by buying and downloading digital versions of the game.
On top of that, people are now purchasing in-game items, like skins in Fortnite. The problem is, you don’t actually own your copy of the game or any of the items you buy. At any time, your account can be banned by the central platforms or the games themselves, losing you access to all of your purchases.
One of the core ideas of blockchain games is giving you that ownership back so that you are in control of what you buy.
But the key for blockchain-based games is that the players must want to own the assets. Not investors.
If players don’t want to own the assets, there will be misaligned incentives. Investors will speculate on the assets to make money, and players will play the game to make money, both of which will ultimately extract value from the whole ecosystem and cause an inevitable collapse.
A subtle but important caveat is that players should want to own the assets because they want to play the game, not so they can earn. If players are there only to earn, the game will again trend to zero since the players will focus on extracting value as quickly as they can to pay for “real-life” stuff.
Put more simply, people should be there for the game, not the money.
Axie Infinity provides a good case study. Many investors speculated on Axie NFTs in the hopes that they would appreciate in value. But they had no intention of actually playing the game. Meanwhile, players flocked to the game because of the potential money they could make by earning SLP tokens in the game. Many of these players were based in poorer countries and, for a time at least, they could earn more by playing Axie than they could at a typical job.
It doesn’t take a math whiz to figure out that it wasn’t sustainable. With both investors and players ultimately trying to make a profit and cash out, there either needed to constantly be more money coming into the ecosystem or the whole thing was going to crash. And crash it did.
SLP was trading at over $0.30 in July of last year and now it’s trading at less than a penny—$0.005172, to be exact.
The closest game yet
No blockchain game has really nailed both of the criteria. But the closest?
Most NFTs aren’t about appreciating the art or the underlying utility. They’re about playing the game of NFT trading.
This is why people often talk about the “meta" and "liquidity" of the NFT scene. They’re treating it like a giant adversarial game where the players are all trying to outsmart each other to accumulate ETH or Solana.
Is it possible to build?
People dream of blockchain games with sophisticated economies in the vein of Runescape or Eve Online. But we're not there yet. At best we have something that looks closer to poker. At worst we have gamified ponzi schemes.
But it will get better.
It’s important to note that top-tier games from companies like Epic Games, Rockstar, Blizzard, and others take years to develop.
When you realize that the most valuable NFT collection in the world–Bored Apes–launched last year in April of 2021, it reminds you of how early we still are in this space.
There’s a lot more work to be done, and a lot more iterating and experimenting to do. But when it all finally comes together, it’ll be a game changer.
Other Recommended Reads and Listens
Tetranode on ETH Merge, Bitcoin, DeFi, & NFTs
Anonymous, 9-figure whale and market maker Tetranode visits the Not Investment Advice podcast for a deep-dive on all things crypto
Creator Royalties in NFTs
Zeneca_33 breaks down the nuances within the recent NFT royalties debate
NFT Insider Trading Policy
Tim Ferriss worked with legal experts to draft an open-source insider trading policy that any NFT project can use
Invisible College, is a school that helps people learn to build and invest in web3. To access our courses, events, and learning community, you’ll need to hold at least one Decentralien. You can get yours on Magic Eden.