Could GameFi help change the world for the better. Pt 1
30 years ago, it was hard to believe the video games industry would ever become a trillion-dollar industry. Today, the video game industry is only a few years away from reaching the 300-billion-dollar mark. It is very plausible that a trillion is reached very soon in this current trajectory. So how did this novelty passed around by programmers and technicians in research labs grow to become the behemoth it is today? I have a hypothesis and it is based around ‘trust’.
Raph Koster, lead designer of Ultima Online, one of the first popular virtual worlds once posited that multiplayer games exist on a trust spectrum and different kind of games require different levels of trust to play them¹. For example, end-game raiding in World of Warcraft requires a higher level of trust with your teammates compared to a four-player dungeon farm in Genshin Impact since individual members can drop out mid-game in Genshin without significantly impacting the outcome of the game.
When there is less trust required in games, they become more accessible and more popular. Ultimately, more players play games that requires less trust in other players and developers.
Trustlessness and the Metaverse
A blockchain project and consequently a GameFi project is trustless in its nature because we elect a third party — a decentralized blockchain to be the authority overseeing the transactions between all users. We don’t need to trust the game developers. We can just trust what we see in the smart contract on the blockchain and interact with it to execute game transactions correctly.
Why trustlessness is important in the evolution of gaming how it will become a trillion dollar industry
High value transactions for game items now possible
Due to the immutable nature of the blockchain, high value transactions to trade in-game items no longer need to go through a centralized exchange such as the game developer’s marketplace. The record of ownership of game items is now resistant to tampering and single points of failure.
Traditionally, the hacking of a developer’s server or the accidental destruction of data backups would prove devastating to a live service game project. Data records would need to be recovered from a previous backup snapshot where transactions would possibly be lost.
What this means for games is that the state of the user’s in-game account is fully guaranteed to be accurate no matter what. So, any high value transactions made by the user is always ensured, so long as catastrophic events on the blockchain such as 51% attacks do not occur. These 51% attacks are further mitigated by the security measures and designs of the blockchain used for a game.
According to Ark Invest, video game revenue is shifting to virtual goods with 75% of Global Gaming Revenue coming from in-game purchases in 2020².
The new monetization model of the metaverse shifts the narrative of in-game items from pure expenses into the realm of assets with earning potential providing an additional layer of support for the price of virtual goods. The packaging of in-game items and characters as NFTs is the perfect catalyst to bring video game revenue in virtual goods to all-time highs.
The Veblen goods market for Metaverse games is just starting to heat up with music artists such as Snoop Dogg making a music video fully in his metaverse mansion in THE SANDBOX and someone paying USD450,000 to be his virtual neighbour³
New modes of gameplay that do not require people to trust each other increases accessibility
If Raph Koster’s thesis about trust and accessibility is correct, metaverse GameFi gaming will become the most popular and biggest gaming market in the history of mankind as its final evolved form will be one where the question of trust is no longer an issue.
The predominant forms of Metaverse GameFi projects we see fall under the genre of:
- Auto-battlers/racers — Pegaxy/Zedrun
- Card battlers — Splinterlands / Storybook Brawl / Gods Unchained / Axie Infinity
- Social MMOs — Decentraland / The Sandbox
- Hypercasual Games — Gamee / Blanko’s Block Party
- Sandbox MMOs — Star Atlas
- Themepark MMOs — Mir4
- MOBAs — Thetan Arena
- Gamefied DEX — DeFi Kingdoms
Of all the forms given, only the last game DeFi Kingdoms attempted to create a new model that did not involve purely converting the current micro-transaction model in games to NFTs or tokens but instead is structured more like a trading game with perma-death events⁴. What we will likely see is the quick evolution of the genre to a form that is only possible with NFTs.
The culmination of this would be creator led social worlds and the rise of large metaverse corporations that focus on creating content for these worlds. Creator studios like RTFKT are just the start.
Social impact across borders and beyond entertainment
With the Generation Alpha and Generation Z spending more of their time in front of their screens compared to Millennials and Boomers, Web3 and its embodied form — the Metaverse — will become the third place of the future.⁵
People all over the world are already able to earn significant amounts of capital developing games for Roblox⁶ and large numbers of people in the Philippines earn a living playing Axie Infinity during the COVID pandemic⁷, it is inevitable that the first interaction of Generation Alpha with games will be play and earn games.
Due to its trustless nature, GameFi projects should be able to transcend the current narratives of just high yield earnings and passive income and start providing avenues to open up access, reduce friction and achieve social good. It is very possible for us to create a Metaverse where potential Universal Basic Income is provided for all its inhabitants using ideas of taxation and redistribution enabled by smart contracts.
The Metaverse could distribute social impact faster and wider than currently possible with our existing systems.⁸ GameFi with its unique blend of easy accessibility, immersion and finance has the ability to create abundance for all without discrimination.
We will be posting Part 2 — ‘What is the current state of Gamefi’, and the final Part 3 — ‘Arcade’s mission to change gaming’ shortly.
As a token of our appreciation to the growing community, we are giving away 100 $ONE everyday for 7 days (2 random winners per day). To win, join our Discord. The contest will run till 15 April, 2022.
[1]: https://www.raphkoster.com/2018/03/16/the-trust-spectrum/
[2]: https://research.ark-invest.com/thank-you-big-ideas-2021
[3]: https://fortune.com/2022/04/04/snoop-dogg-metaverse-music-video-virtual-world-nfts/
[4]: https://docs.defikingdoms.com/learn/the-perilous-journey
[5]: https://www.forbes.com/sites/cathyhackl/2021/05/02/defining-the-metaverse-today/
[6]: https://www.businessinsider.com/how-24-year-old-game-developer-makes-1-million-roblox-2020-9
