Author: Krishna Mandal

Intro

Blockchain games are video games that rely on blockchain technology for in-game functionality, or facilitation of the game. Other names that it goes by include crypto games, NFT games, web3 games, or metaverse games. One purported mission of blockchain games is to “redefine the relationship between players and game creators to be fairer and more transparent.” While this sounds promising in a world riddled with data privacy and security concerns, we will soon see that this is not always (or even typically) the case.

Abstract

The purpose of this article is to provide an overview of the history, opinions, and future of video games using blockchain technology (BCT). It will begin with a brief background on concepts and terminology that reside at the intersection of video games and BCT. Then, it will provide a timeline outlining the most significant games in the field as well as a discussion of consumer and developer sentiment. To conclude, the article will highlight predictions of the future trajectory, specifically those that stray away from the previously established trend.

Terms and Definitions

MMOs and Battle Passes

Massive Multiplayer Online games (MMOs), are video games that feature large pools of (typically) international gamers clustered into different servers that each host their own session of the game. Archetypal examples of these games include League of Legends, Fortnite, and Counterstrike. A significant (and recently widely adopted) incentive mechanism in these types of games is the Battle Pass. A Battle Pass is a list of in-game rewards that are earned progressively as you play. The free version provides a limited number of unlockable items, while the paid version provides rarer and a more comprehensive set of items. A reward type that is common among MMOs and other games is the concept of skin.

Skins

Skins are different clothes, colors, or styles that gamers can apply to avatars or items within the game. As the rarity or scarcity of a skin goes up, so does its perceived value. As such, players stand to gain if there is a way for them to trade these assets. Accordingly, many games have built-in platforms that allow gamers to trade skins with one another. Even if this is not an in-game feature, there exists external means (websites) through which gamers can buy and sell skins. This has lead to some controversial use cases such as skin gambling. Skin gambling is the use of in-game items (like skins) to bet on the outcome of a match within a game. This then compounds into something greater called a gray-market issue. In the case of skin gambling, in-game commodities are exchanged in a manner that was not intended by the manufacturers of that commodities (the game company). This could easily violate the EULA of the game, which could result in the termination of offending players accounts or even a personal ban from the game.

Smart Assets

How do these concepts change when BCT is involved? Let’s explore the example of a single instance of a sandbox game that all users interact with . Assume every item in this game is an NFT (or smart asset) and that this game is built on top of a reputable L1 chain such as Ethereum. Each in-game item has an intrinsic, real-world value associated with it. If you need to uses in-game wood and stone to make a tool like a hammer, those constituent resources would be spent and converted into a new resource with a new value. The value of this asset do not follow a linear scale (such as increasing denominations of bills), but rather would be contained within a web of different items of different values. This is because these constitutent resources can be combined with other resources to create different products with different uses. When the hammer gets used up or destroyed, its global supply will lower (and therefore its global demand will rise). How would games be different if resources could or could not be replenished? Given that certain games can be built on a common chain, what if you could move in-game resources from Game A to Game B? Would this create a game-chain-wide super economy? And what would happen when gamers use the resources yielded by these game to handle real-world transactions? In the upcoming section, we will look at a games that explore the consequences of this.

History

CryptoKitties

The first major blockchain game to gain mainsteam attention was CryptoKitties. Released in November of 2017 by Axiom Zen, this game featured a collection of Kitty NFTs that could be bought with Ethereum. Two Kitties could be could be bread together to mint a new Kitty NFT with it own value. The word “NFT” became a buzzword thanks to this game. It made headlines when one Kitty sold for the equivalent of $114,000 in USD. Another interesting consequence of this game was that it exposed significant scalablity issues within Ethereum. Upon its initial release, upwards of 30% of the transaction on Ethereum were specifically for CryptoKitties. This was further exacerbated the release of the mobile version of this game.

The Sandbox

The Sandbox debuted in 2018. This game’s primary feature is its in-game toolbox. With it, users can create they own digital assets that can be bought and sold within the game using cryptocurrency. Once a user is in possession of these digital assets, they then arrange they in their own virtual landscape.

Axie Infinity

Released in 2018 by the Vietnamese gaming company known as Sky Mavis, Axie Infinity has been arguably the single most disruptive game in crypto. Sky Mavis build Axies Infinity on an L2 chain above Ethereum called the Ronin Network. The premise of the game is similar to CryptoKitties. You can buy, sell, and breed characters called “Axies”. Along with this, you can farm resources for the Axies and battle with them. These in-game operations yielded Smooth Love Potions (SLP), the in-game cryptocurrency. The main mechanism of this game was the concept of play-to-earn. Since SLPs were backed by Ethereum, they held legitimate monetary value, meaning players could earn money by playing Sky Mavis’ game. This was made evident by their website at the time, and by the fact that players could cash out their in-game currency once every two weeks. In fact, in June 2021, a growing number of people in the Philippines were using Axies Infinity as their primary source of income. At the time the country was in an economic slump, due to the lasting economic effects of the pandemic. In contrast to this, the price of Bitcoin, Ethereum, and other cryptocurrencies was steadily rising. This created a situation in which the income earned by playing Axies Infinity a few hours a day would surpass the income earned by working a minimum wage job. This situation was not sustainable, and in the next section, we will see how it came crashing down.

The Consequences

Start of the 2020s

By the start of the new decade, no major breakthrough had been made in the space. The reputation of blockchain games from the past was that they were just speculation-based money making schemes. Not only did this prove to be quite unappealing to the general gamer audience, the volatility in the in-game currencies and the attention of the games proved to be too risky for most investors. Despite this, in 2021 three major gaming companies announced that they were seriously considering integrating blockchain technology into future games.

Valve’s Ban

Not much later, in October 2021, Valve, the parent company of Steam, banned all games using NFTs or other blockchain technology tied to real-world assets. Many journalists and players saw this as a win for the general gaming community. Valve had a history of skin gambling issues,

and the move to remove blockchain technology from the platform was perceived as an attempt to retain user trust. On the other hand, blockchain game developers urged Valve to reconsider this decision, since this platform is one of the main way that small game companies deliver their product in the first place.

Ubisoft Makes a Move

In December of 2021, Ubisoft announced that it would be releasing the Quartz Program. This was a system based on Tezos, a proof-of-stake crypto currency. It enabled the buying and selling of “Digits”, which were in-game character customization items. The most significant game to implement this technology was Ghost Recon Breakpoint.

Ghost Recon Breakpoint

This was actually the first game to implement the Quartz system. Almost immediately, it received heavy criticism from a variety of media outlets. Ars Technica stated that Quartz is so deeply controlled by Ubisoft that the same effect can be achieve with an internal database. The major concerns for this surrounded the fact that there was no liability for damage, and the system could subject to unknown and untested blockchain security weaknesses. A French trade union named Solidaires Informatique casted it down as a, “a useless, costly, ecologically mortifying tech which doesn't bring anything to videogames”. On March 17, 2022, Ubisoft released the last Digit for Ghost Recon Breakpoint. On the same day, support for the game was terminated.

Revisiting Axie Infinity

An interesting quirk of Axie Infinity was that it had quite a high entry fee. This was a fee that a large part of the fanbase (particularly players in the Philippines) could not afford. As a result, organizations called guilds were formed to cover the costs of entry fees in exchange for the labor of the player. This enabled the guild to collect the majority of the rewards. Alongside this morally questionable practice, Axie Infinity suffered a massive loss in playerbase. In the wake of the February 2022 Crypto crash, SLP (the primary in-game currency of Axie Infinity) lost 99% of its peak value. This prompted Sky Mavis to remove play-to-earn on its website. To add insult to injury, Sky Mavis’s Ronin Network was compromised. In March of 2022, Lazaurus, a group of hackers associated with to North Korea, stole nearly $620 million in Ether and USDC. As of May 2023, largest breach in the crypto currency sector by dollar value.

More Backlash

This sentiment reflected a broader sentiment on the genre. An FPS horrer game called S.T.A.L.K.E.R. 2 planned to include in-game NFTs. One day after their Twitter [announcement](https://twitter.com/stalker_thegame/status/1471620399997886472?ref_src=twsrc%5Etfw%7Ctwcamp%5 Etweetembed%7Ctwterm%5E1471620399997886472%7Ctwgr%5Efac762e27671d39f8b88dc1f1655554 d3e95e42e%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.theverge.com%2F2021%2F12%2F16%2 F22840488%2Fstalker-2-nft-metahuman-gsc-web3-canceled), they went back on what they said, after copious amount of negative retweets on the original post. A similar sentiment was reported by the gaming marketplace Itch.io. Even Minecraft announced that they would not condone the use of NFTs in their game. Their rationale was that it did not align with their values of [“creative inclusion and playing together”](https://www.minecraft.net/en-us/article/minecraft-and-nfts#:~:text=Each%20of%20these,of%20our%20pla yers.). Instead, it encouraged profiteering.

A General Consensus

The point of view that a large majority of game companies, creators, and marketplaces have is that blockchain games are just a money making scheme. The monetary value of these games rely on the artificial scarcity of a fictious item that can be generated infinitly. These items only have value when their is hype around the game, which has proven to be temporary. Despite these sentiment, creators have found other, more user focused means of building games using BCT.

Future Trajectory

Casey Wescott

A major proponenet of this type of game is Casey Wescott. With a professional background in music, but a interest in creating interactive sounds systems and video games, Casey has two projects in particular that I believe highlight the future of blockchain games. One project is MuMu. Mumu is a grid-based game where users can align icons in a sequence to generate a formula. These formulas generate new objects overtime. Casey has a developed a random music generation algorithm that he has deployed to Starknet (an L2 Validity rollup on Ethereum). This enables music to be generated in accordance with the exact sequence, position, and presence of icons overtime. As new entities are created, parameter values change, which leads can lead to the addition of a new instrument, or a denser harmonic texture, etc.

Another interactive system that he has built is an art installation. Users enter a room or outside venue that is filed with lightup, cylindrical speakers. They can interface with the speakers by using their smart phones to interact with a web app. Once the user inputs testnet Eth and taps a button, a Cairo contract is pinged, which emits events on Starknet. These events are then scraped using the Apibara indexer, which sends this information to a PostgreSQL database, where these events can be interpreted as musical information. The explicit goal of this installation is to foster a unique, colloborative and creative environment that anyone can experience and contribute to. Notice how this sits in stark contrast to the goals of the aforementioned blockchain games.

Dark Forest

Although this game has been around since before 2020, it once again represents a different and rather unexplored side of blockchain games. The idea of the game goes as follows; Users spawn on their own home planet. To begin with, players only have a view of a small part of their map. The rest of the map, including locations, movements, and planets of opponents, is concealed behind a cryptographic fog. Their mission is to explore the infinite universe, competing with hidden opponents to discover and capture other planets and resources while completing round-based competitive tasks to grow their empire. The significance of this game is due to the technology that it uses and the vision that it has. Dark Forest is built on Etheruem and makes use of zk-SNARKs. Concretely, each player’s move is validated on the blockchain without revealing information to other players. This game realizes the possibility of a blockchain entity or metaverse that is run in a decentralized manner, free from the ownership and control of a single large company. In other words, it represents a step towards constructing and hosting rich, new, shared decentralized metaverses that provides bottomless, non-deterministic exploration.

Sweat Coins

Sweat Coins is a a health and fitness platform that leverages the Move-to-Earn model by allowing users to convert their physical movements into digital currencies (SWEAT tokens). Move-to-Earn aims to keep people physically active throughout the day, motivating them with the opportunity to earn incentives and rewards for moving around and exercising in the real world. Users can generate rewards by participating in various fitness exercises, such as walking or running through the app. After accumulating rewards, you can spend them internally to purchase goods and services, exchange them for SWEAT tokens, or hold them in a web3 wallet. Rewards include vouchers and discounts for various brands, tickets to popular sports activities, and stablecoin prizes. While there is a monetary incentive behind playing this game, the mechanism through which SWEAT tokens are earned enforces an upper earnings limit (due to the physical limitations of the individual) and is not subject to nearly the same level of price volatility as play-to-earn games (due to the fact the value of SWEAT tokens only fluctuate drastically if the size of the active user base fluctuates drastically).

Conclusion

As we have seen, play-to-earn blockchain games in particular have caused multi-million dollar economic consequenes and security breaches. Due to this, I do not believe that this genre of blockchain games is sustainable in the near future of crypto. It will require siginifcant advances in cryptographic technology – and once that is in place – the renewed trust of consumers. As such, new play-to-earn blockchain games – and other blockchain games in general – must do a better job of factoring in the long term consequences of their system. Instead, I believe that games who’s primary mission is to provide users with an engaging experience without trying to pump their internal cryptocurrency will not suffer from the volatility of the external cryptocurrency that its in-game currency is tied to. Blockchain games that emphasize the traditional appeals of video games – whether that be art, open world exploration, exercise, or something new entirely – that still maintain a user-centric, experience-first philosophy are the ones that will persist in the long term.