Original Author: Zhensen-Chain Hill Capital, Arthur-Chain Hill Capital

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Research Summary

With a large number of venture capital pouring into the blockchain game track and a large number of entrepreneurs devoting themselves to creating blockchain games, we are glad that the industry has received widespread attention, but at the same time we are seeing more and more chaos. But the early stage of every industry change must be accompanied by a lot of bubbles, and in this bubble, the founders who can truly grasp the core of the industry change have the opportunity to create real value.

What is the core innovation of blockchain games? We believe that there are three core elements that have contributed to the industry revolution brought about by blockchain games. The first is that game assets are uploaded to the chain through the blockchain NFT/FT standard to establish the ownership of game assets. Asset ownership belongs to players, which actually forces game developers to distribute part of the benefits to players participating in the game. This will also break the monopoly of game developers on revenue rights in traditional games. The third point is the blockchain The community autonomy culture brought about by the spirit of decentralization will encourage game developers to give game community contributors the governance rights of the game through the form of DAO, which will also strengthen the interaction between game developers and players to promote more benign game development.

But it is a pity that in the era of GameFi, the current popular chain games emphasize "Play to earn". Ponzi economic design. We believe that blockchain games at this stage have not attracted real players, but attracted a large number of short-term speculators through the unsustainable Ponzi economy. The game assets inside the chain game have no actual gameplay support, so when the number of new players decreases, the game economy will lack net inflow of funds, and the price of game assets that are severely overissued will drop rapidly, causing players further Sell ​​game assets, thus forming a death spiral.

To design a sustainable blockchain game, the game must be a game that players are willing to pay for continuously, so we encourage entrepreneurs to still focus on improving the playability of the game. This is the key issue that the blockchain game industry really needs to think about at this stage.

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1. The development history of chain games

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l Phase 1: Embedding BTC (2013-2017)

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l The second stage: NFT (2017-2019)

After the emergence of smart contract technology and the ERC-721 standard that led to the birth of NFT, chain games have also ushered in the second stage of development.

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l The third stage: Play to earn (2020-2022)

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l Phase 4: Return to Game Playability (2022-future)

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Relative advantages of blockchain games

Compared with traditional games, the key advantages of chain games are mainly reflected in the ownership of assets, the redistribution of game benefits and the decentralization of game governance.

(1) Ownership of assets

In traditional games, players' game assets such as game props and game gold coins essentially belong to the game developer. Even if players buy skins or props in the game with real money, they only have the right to use, not ownership. In the traditional game world, players have no right to sell or lease game assets such as skins. Therefore, once the developer changes the game rules or the game has to be shut down due to external shocks, players are likely to suffer the risk of losing digital assets. The chain game benefits from the non-tamperable and traceable features of blockchain technology combined with the establishment of ERC-20 and ERC-721 standards, so that the ownership of the assets obtained by players in the game belongs to themselves, and these assets have Circulation in a broader sense, players can rent or sell assets. The emergence of chain games ensures that the ownership of game assets belongs to players, which is also the core advantage of chain games that can surpass traditional games in the future.

(2) Redistribution of game benefits

In traditional games, the sale of game props is mainly monopolized by game developers or operators. Although many game props are obtained by players spending a lot of money and time, players still do not have the right to sell their game assets. But because all game assets in chain games truly belong to players, players also have the right to become sellers. And this fundamental change will reshape the distribution of interests in the game industry, and will also reshape the profit model of game developers. Game developers will transform from the role of sellers in the market to the role of managers who collect taxes from market transactions. And the player will transform from a pure payer to the owner of game assets. And this series of role changes is actually the game party distributing the revenue to the participating players. And this redistribution of income will also set off a revolution in the game industry just like every political situation in history.

(3) Changes in governance rights of game participants

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Relative disadvantages of blockchain games

Compared with traditional games at this stage, the key disadvantage of chain games is mainly reflected in the playability of the game. At present, the chain game industry is still in a very early stage, and many elite game entrepreneurs have not yet joined the chain game industry, so there are not enough interesting games in the chain game industry.

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3. Goldsmithing Union – role switching under the iteration of game history

The goldsmith union has always been a controversial existence in the game, whether it is a traditional game or a chain game industry, you can see such characters. In the traditional game industry chain, games mainly include developers, publishers, distribution channels, and players. In the traditional game industry, game merchants and gold-making studios often have interest disputes with the game production team, and they are in a gray area. Existence is also regarded as disrupting the ecological balance of the game, and is a key target of the game publishers.

In the current chain game industry, because many popular games are Ponzi economies, players are required to invest a lot of money (500-1000 US dollars) to get started, so the Goldsmithing Union is responsible for the initial funding provider and identifying the risk of game goldsmithing The role of Gamefi is an important part of Gamefi in the PALY TO EARN stage. [7]

The current stage of chain games is still relatively financial in nature, so from the starting point of game design, it often attracts short-term speculators who come for gold, not players who are willing to pay for the game in the true sense. In the current chain games, due to the lack of gameplay and information asymmetry, the criteria for screening games for chain game players are often vague, and it is impossible to conduct all-round due diligence on individual game projects, and the risks have always been high It is a topic that players often focus on, and the Goldsmithing Union plays the role of a "compass" in the current stage of chain game development, which plays a certain reference role for players in project screening. The goldsmith union generally maintains a good relationship with the game project party. Compared with the players, the union has a greater chance of approaching the game project party, or has relatively more due diligence information. The trade union will generally first measure the overall attention of the game, the professional background of the project party’s own team, and the investment strength of the capital institution. Screening and research on gameplay, and finally a set of gold-making plans are drawn up and sent to community managers and gold-making players.

In the minds of chain game gold users, if a chain game project can get the endorsement of the gold trade union, everyone will tacitly believe that the project has a certain monetary effect. Therefore, we can see that at the current stage where GameFi is more focused on P2E industry development, the existence of roles such as goldsmith unions has gradually changed from a gray industry in the original traditional model to an important reference for industry development. The switch of the game industry is very rare in the development history of the game industry.

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4. The current profit model of the chain game industry

Many traditional manufacturers are worried that distributing the original monopoly revenue to players will reduce the company's revenue, so they are reluctant to try to develop blockchain games. However, from Axie's 2021 contract revenue of US$1.3 billion, it is not difficult to see that when game companies distribute revenue to players, players will have greater motivation to participate and willingness to pay. And when the entire game is bigger, even if most of the revenue is allocated to users, the revenue of the game company will still be very significant.

More importantly, if we assume that there are two very similar games, one distributes 50% of the revenue to participating players and the other distributes 0% to players. It is not difficult for us to see which game users will choose to play. We also hope that traditional game developers will become more aware of the tremendous changes brought about by blockchain games and participate more.

How do blockchain games make money? Let's introduce them one by one. At present, the common profit methods of project parties in the chain game industry are as follows: selling NFT game assets, setting fees in the generation of game NFT assets, and collecting taxes from game asset transactions.

The logic of selling NFT game assets is similar to the logic of selling game props in traditional games, but developers need to pay attention that developers will no longer be able to sell unlimited props, because the NFT they sell will have market liquidity. Once players can When buying the same game items at a lower price through the open market, players will no longer have to buy from developers. Therefore, at present, blockchain game developers mostly sell game NFTs by selling blind boxes or limited/time-limited auctions of game items. And behind this is actually creating the scarcity of game assets, so that game assets have room for appreciation, so that players are willing to buy them.

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5. Distribution channels of blockchain games and breakthroughs

At present, there are three main distribution channels for chain games, namely, social media (such as Discord, Twitter, Media), project airdrops, and the joint efforts of goldsmith unions and capital.

Operations on social media are now the most mainstream way of publicity for all chain games. On Discord, the community manager of the project party will give users feedback from time to time on the current status of the game’s implementation, the design progress of the character’s skin, or NFT The progress of the asset sale. At the same time, interact with players in the form of AMA (live broadcast) on various video channels, and answer questions from players. In this part, many blockchain games have created new ways of playing games based on the original ones. Taking Hero of Mavia as an example, the community will hold a Mavia Elite publicity plan[10]. Everyone in the community Users can sign up to participate in the group, and the users who participate in the group will have an identity within the community. If the game is announced in a small team (such as writing in-depth tweets related to the project, uploading wonderful game explanations to Youtube videos, beautifully drawn game works, etc.), the small teams that pass the community jury's rating will have NFT, Skins or rewards on the whitelist. This list of publicity methods is formed by community users, and teams often have competitive attributes in publicity, which also helps the quality of the game’s publicity to a certain extent compared to individual user publicity. May be improved.

In addition, in order to attract players' attention to a certain chain game project, many chain games will try to promote the popularity through airdrops, reward tokens, NFT assets, etc. to attract users to participate in the game, Further promoting the short-term increase of DAU data has attracted market attention, which is also one of the more commonly used publicity methods for blockchain games.

Finally, many chain game projects will be promoted through cooperation with goldsmith unions and well-known investment institutions. This part of the method is mainly to attract the attention of user targets through financing news. Some players will think that the game is at least endorsed in terms of safety when they see the news about financing from well-known institutions or cooperation with the leading goldsmith union, which will also attract their attention to a certain extent and play an indirect role in publicity. effect.

The above are the more conventional publicity channels for chain games at present. It can be seen that the current chain games tend to fall into the "Crypto" thinking circle in terms of promotion and acquisition of customers. It is believed that a project mainly uses social media or airdrops to create momentum in terms of publicity, etc. . This article believes that if subsequent chain game projects still use the above publicity channels to promote and acquire customers, then the reachable user range will always be limited to participants in the cryptocurrency industry, rather than a large number of players in the traditional game industry. Existing chain game projects should try to jump out of this cognitive circle, and need to realize that the announcement of the game is not limited to the above-mentioned types.

Summarize

Summarize

This article does not put too much emphasis on Play to Earn like the current blockchain game report in the market. It mainly believes that the real charm of blockchain games lies in the asset ownership of game props and the decentralized revolution of games (interests and governance). If a game focuses too much on financial attributes, it will backfire on the long-term ecological development of the game. And chain games that can really create long-term value must be products that are fun enough to attract players to pay for them.

Play to Earn is a very wonderful narrative, especially the rendering under the epidemic window adds a color. After seeing the success of Axie, many project parties are eager to try, thinking that they can create a better gold mining game than Axie. Starting from this dimension, they have gradually deviated from the original design intention of the game. Players in real life, many of them play the roles of school students or employees in the workplace. After facing daily setbacks in their studies and careers, they all try to enter the game world to realize their real life. Unrealized social status and self-worth. An inconspicuous subordinate in the workplace may be the leader of the alliance who is popular in a certain game, and an introverted student who is bullied by the school is likely to be the top player on the ladder leaderboard. For real players, the charm of the game is not money, but a higher dimension of emotional value and social attributes, and they are willing to pay and work hard for this part of emotional value; for project parties in the chain game industry, a Games with high-quality playability need to maintain the concept of "Mind over matter (spirit over matter)", and elevate the design dimension of the game and not just limit it to short-term money effects.

An article titled "Technology Giants Metaverse Series Report" pointed out that the Metaverse is a huge and complex project. If the Metaverse is to truly operate, economic activities are indispensable. Other technologies in the current metaverse (such as 5G, AR, artificial intelligence, etc.) are essentially just infrastructure. The most important feature of the metaverse is the need for an economic system that connects reality and virtuality, and the cryptocurrency system in blockchain technology is one of the key structures established [11]. Games are the business form closest to the metaverse, and blockchain technology is a vital part of shaping the metaverse's technical system. The chain game that empowers the ownership of blockchain technology assets will surely have a huge and far-reaching impact in the future.

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About Chain Hill Capital

references:

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