Introduction
The end of 2022 to the beginning of 2023 marks the beginning of the growth of on-chain gaming. The fundamental knowledge in this field is detailed in articles such as "Infinite Games," "Autonomous Worlds," or "Pureplay On-chain Games." This article will not discuss why on-chain gaming is needed, but rather assumes that the reader already acknowledges this viewpoint.
As interest in this field continues to grow, I have noticed that many people, even those who have been developing on-chain games for some time, still do not fully realize that this is a completely new and atypical concept, and that this concept cannot be effectively applied to traditional games or some blockchain solutions, such as the DeFi field.
Blockchain offers many advantages and opens up new opportunities, but at the same time, it does not forgive mistakes. Anything done on the blockchain must consciously accept the many principles and constraints that must be followed to create a viable system.
The purpose of this article is to assume and demonstrate the basic facts and principles that on-chain game developers should follow when striving to create a sustainable system.
In addition, it is useful for those involved in specific on-chain game research, as it can serve as a basic standard.
I will only discuss topics that may seem unclear or controversial to many who are not familiar with on-chain games, to emphasize how fundamentally different this direction is from our previous understanding of games and to encourage serious discussion.
Furthermore, I declare that in this article, I do not consider short-term on-chain games, fully centralized on-chain games, so-called "NFT games," or games that only use the EVM. Their attributes and reasons deserve a separate article.
About the Author
My name is Bohdan Melnychuk, with an engineering background, and I have a special interest in game theory.
I have been designing and researching the concept of on-chain games since 2017, and have been developing on-chain games since 2020.
The game I am developing is called Mithraeum. The theoretical basis of this article is formed by my team and me through years of development and testing in Mithraeum, focusing on the real-time players who have true value in the system.
Let's get to the core insights.
#1 Financialization is Inevitable
Any popular on-chain game will be highly financialized, whether developers are willing or not.
Being an on-chain game means having two important characteristics: lack of natural regulators and minimal transaction costs (not to be confused with blockchain transaction gas fees).
In traditional games, the natural regulator is the server administrator/developer, who often uses their privileged position (e.g., ban hammer) to prohibit external economic activities, monopolizing currency circulation. The foundation of on-chain game concepts implies absolute autonomy, so there are no such regulatory bodies.
Conversely, this factor is multiplied by the killer features of the smart contract environment: low transaction costs (achieved through trustless operations, transparency, and interoperability). The result of these two factors multiplied leads to the phenomenon of an Ultra-Free Market.
This phenomenon is the most important game rule changer, but many game developers underestimate its power. If on-chain games become popular, its "invisible hand" will financialize any valuable asset, including game progress, without permission. This will inevitably lead to on-chain games defaulting to an extremely financialized system, at least compared to traditional games.
There is no directly similar situation in traditional games. For example, the Steam game item market is not truly open. It is "permissioned," hosted, and usually very limited. Even the initially unregulated passive regulator (server administrator) can act as a deterrent to this phenomenon, as they can always change their minds and recreate them. Therefore, we cannot use traditional game experience to predict and simulate on-chain games.
Many people mistakenly believe that the possibility of prohibiting game assets from being transferred directly from one wallet to another at the smart contract level is enough. However, even such conditionally non-transferable assets can be packaged into transferable derivatives by third parties using account abstraction, prediction markets, and other tools.
Design your financialization, or it will design you.
As an on-chain game designer, you must recognize the inevitable presence of an open market, incorporate it into game design, and build the basic financialization layer on your own before the open market arrives.
I always use poker as an example here. Because of the different motivations of players, recreational poker and money poker are two different games.
Therefore, testing the game with real value as soon as possible will allow you to objectively validate your game design and economic model, and understand in advance what might happen as your popularity grows. Deliberately delaying it may make your model unfeasible in the face of the upcoming financialization and rationalization.
#2 Game Design is Everything
Any trivial game process in on-chain games is meaningless because bots can and will automate it.
Games are meaningful non-productive activities, where the motivation is not in the outcome, but in the process itself.
But due to the phenomenon of ultra-financialization, this principle does not apply to on-chain games. This is also one of the main reasons why on-chain games cannot be fully considered games.
As the capitalization of game assets grows, the rationalization of game processes begins to transform "for fun" activities into full-time work, and even a serious business activity.
Conversely, this means that any trivial game mechanism that does not require special intelligence/creativity/social work is meaningless, as it will be automated by opportunistic rational participants.
It must be noted that this statement filters out most known game types, such as casual, shooting, action, and other simple game types.
Game design in on-chain games is a fundamental pillar. Any imbalance in mechanisms or economics is equivalent to exploitation and will be almost immediately exploited by rational actors.
This frees the hands of true game design masters, giving the green light to more complex models, but closes the door to amateur enthusiasts.
A time-tested on-chain game will have the most innovative game design that is difficult to imagine in traditional games.
All on-chain game mechanisms must have an unsolvable, non-trivial puzzle. The best source of this puzzle is the players themselves. This is why on-chain games are obviously primarily PvP.
The financial market is a good example, where participants are part of a big puzzle that determines price movements, and this is an extraordinary mechanism.
We must also remember that transactions cost money. Therefore, strategizing any transaction behavior in the game will be most effective. This means: you should strive to involve as much player intelligence work as possible in a transaction. Offline game elements such as social interaction, diplomacy, conspiracy, and content creation can enrich the basic gameplay.
#3 Immutability is the Key to Prosperity
If there is any entity that can change the rules of an on-chain game, it will become such a powerful player that, apart from the mechanism of changing the rules, no other truly important mechanism exists.
Imagine if a casino owner could instantly change the rules of Texas Hold'em or blackjack. What if players could do it too?
The ultra-financialization of on-chain games blurs the boundaries between players and project parties. When the distinction between project parties and players is not clear, any mechanism that changes the game rules, whether it is multi-signature or even DAO, becomes a game element.
Speaking of DAO as an entity that can change the rules, we must recognize that, by its nature, DAO does not strive to make the product better; it only seeks to increase the interests of the majority.
In "games" such as DeFi or venture capital DAO, this can lead to product improvements because the interests of all participants are the same.
Although isolated game loops do not generate zero-sum, one player's gain will always be another player's loss. Therefore, as we have found, DAOs aimed at enriching participants will come at the expense of sacrificing the few who do not have enough influence, using the ability to change the game rules for their own benefit.
No one builds skyscrapers on loose foundations.
The second important argument is: on-chain games have the opportunity to become meta-games and the foundation for other possible structures/projects/protocols that can be built on top of them.
Such an opportunity cannot be ignored, as it is one of the main advantages of on-chain games, for which they have paid a high price.
Therefore, if your on-chain game is considered the foundation of the entire ecosystem and can potentially evolve into the entire ecosystem in the future, then this foundation should be as solid as possible.
In other words, if rule changes in your protocol may violate the rules in my protocol, I will not build anything worth millions of dollars on top of your protocol.
When a virtual universe becomes immutable, it becomes real.
For the above reasons, the rules of on-chain games must ultimately become immutable. Thus, such a virtual world is trustless and autonomous. This enhances the confidence of residents, builders, entrepreneurs, and capital.
It is worth noting that the basic rules of on-chain games are immutable, but can still be "changed" through forks. Therefore, each player can choose an alternative solution they want to stay with, setting the engine for the evolution of the on-chain world, but this great model deserves a separate article.
#4 Ponzi Economics is a One-Way Ticket
Most crypto games are now just variants of a fool's game.
Ponzi Scheme: The game of the big fool. From a game design perspective, it's a race against time. The main problem with this type of "gameplay" is its transience, which makes the project essentially disposable.
A strange trap is that the typical economic model of most traditional games is a potential Ponzi scheme. Traditional games do not become true Ponzi schemes due to their closed economic systems, while on-chain games naturally have open economies.
In most games, the inflation curve changes over time. If we assume that players enter the game world over time rather than all at once, those who enter earlier will have an economic advantage.
Rewarding early players is not a bad thing, but if such a strategy becomes the main factor for the success of the game, such a game is ultimately destined to collapse under the pressure of assets.
No potential participant wants to be the one left holding the bag, hoping for opportunities and upward mobility.
By incentivizing early entry, you get a one-time player. By incentivizing skill play, you continuously get players.
It is obvious that to prevent the "Ponzi economic engine," the gradual inflation of game assets must be prevented.
If your on-chain game has a mechanism for continuous asset creation (minting), then there must be a mechanism for continuous asset burning. More importantly, the balance of your game design must ensure that assets are adequately burned. We discussed this issue in detail in another article.
#5 Quality Over Quantity
Three players can already be considered successful… if each player is worth millions of dollars.
In traditional games, one of the main measures of success is the number of players. But how is this measured in the on-chain world? One person can hide behind multiple addresses or underlying game assets, just as many people can hide behind one address or underlying game asset.
Additionally, a controversial issue is whether we can calculate meta-players. For example, speculators' in-game assets or guild members, such as leaders, negotiators, and programmers, as they can all influence the game without directly playing it.
It must be recognized that even here, traditional game approaches are no longer effective. The main difference is that, due to financialization factors and the lack of punishment for multiple accounts due to the natural lack of regulatory bodies, player commitments have become scalable value.
From a business perspective, an effective standard for measuring the success of an on-chain game is the capitalization of its assets. The balance between the number and quality of players becomes crucial. Given that we have found that viable on-chain gameplays require wise commitments from players, and the blockchain itself has technical scalability limitations that affect transaction costs, we can conclude that it is better to rely on quality rather than quantity.
The quality of players, in turn, is the "lubricant" of network effects. A top ten arena will always be more spectacular and prestigious than a thousand mediocre arenas.
By default, any on-chain game will be a niche market, unlikely to have a large audience, at least before achieving success in other parts of the crypto world. But unlike traditional games, the niche is no longer the ceiling for the value growth of on-chain game projects.
Conclusion
In general, the main assumption that needs to be accepted and remembered is the inevitable super-financialization, which is the fundamental basis for all the sharp points described in this article.
Based on them, we can predict that viable eternal on-chain games may have the following attributes:
Financialized assets
Complex game design
Uncommon mechanics
Strict balance of inflation and deflation
Immutable core contracts
Intellectual games
Challenging competition and PvP in all aspects
Possible types of strategies
The key ability of on-chain game teams should be professional game design and blockchain engineering. Because only these two types of people can adjust the concept of the game to the technical limit and super-financialization by maximizing the advantages and minimizing the disadvantages on-chain.
Please remember that stereotypes and clichés from traditional games may not necessarily apply here, and this is important. The experience of most traditional game studios is more harmful than beneficial.
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