Play-to-Earn Everyone should be familiar with it. By participating in the game, you can get Token in the game economy. Players can get Token by selling Token profit. Most Play-to-Earn games have a certain entry threshold and adopt a dual Token model. After the player purchases the required props, they can obtain Tokens that can be consumed during the game, rather than the ownership of the agreement. Some deep players may exchange the tokens obtained in the game for governance tokens, but most players participate in the game with the mentality of making money and become "digging, selling and withdrawing" players. In the end, when the buying was unable to support it, the entire economy collapsed in an instant, and the price of governance tokens plummeted along with it. This model is short-lived, but it is a good start for the distribution model of Web3.0 protocol ownership.
Ownership of a protocol means more than just having the right to participate in the logic of the protocol In governance, the economic value generated by the agreement should also be captured. In addition to the team responsible for building the agreement and the investors who risk capital injection, the long-term value of the agreement is created by the agreement participants, so the agreement should be based on the contribution of the participants to the agreement value (Proof of Contribution) to assign ownership.
Different types of applications have different measurement standards for value contribution Similarly, most on-chain protocols will award protocol ownership to the behavior that contributes the most to the value of the protocol (for example, AMM will give governance tokens to liquidity providers). But for applications with complex logic, there are various dimensions that can add value to the protocol, and the value is not uniform, so we should record all behaviors that increase the value of the protocol on the chain, and perform some kind of award.
X-to-Own, by agreement Make a valuable contribution to own the agreement. When participants use the application, all value-generating behaviors are recorded and rewarded with the ownership of the agreement, and the ownership can directly capture the economic value generated by the agreement, then perhaps most token-holders will choose to use ownership as operating assets to earn Take dividends instead of selling outright. Therefore, in the design of the token economic mechanism, not only the measurement dimension of contribution value needs to be considered, but also the value capture ability of the protocol should be paid attention to.
This article is from Arthur, the founder of DeFinance Capital, from Starting from the development history of the game business model, from stand-alone games to the first generation of online games and then to chain games, it introduces the interest structure of the game's internal participants in detail, and puts forward guiding opinions on Web3 game design. Rhythm Research Institute translated the full text:
The first video games were released and hit the market in the 1970s, and a lot has changed in the decades since. From paid stand-alone games on home consoles and PCs to free-to-play mobile games in the past decade, the game experience and business models have followed the advancement of technology and have undergone considerable changes. Today, the video game market is worth more than $300 billion (according to Accenture and BitKraft), a figure that is expected to grow 12% annually between 2022 and 2028.
Our view is that the combination of Web3 and gaming will enable Play-to-Own gaming new era. In our view, the development of in-game economic activities will substantially increase the game industry's product accessible market (“TAM”) and fuel value creation.
In 2021, the success of Axie Infinity showed us the huge potential of Web3 games. According to the Nansen report, Axie’s , from 10,000 DAU at the beginning of the year to a maximum of 3 million DAU, bringing in revenue as high as 1.3 billion U.S. dollars, successfully making P2E well-known to everyone. What's even more surprising is that Axie was still in its infancy at the time, and the game it released was only a beta version.
Axie's parabolic growth has shown the entire gaming industry the bright future of Web3 in gaming, Attracted a large influx of game talent into Crypto.
Compared with Web2 games, Web3 games integrating NFT have better player retention rate, user Greater success in terms of growth and revenue effectiveness. Accordingly, many projects have begun to embed innovative P2E mechanisms in their games. In addition to game studios, the P2E ecosystem has also spawned many new organizational forms, such as game guilds, DAOs, game discovery platforms, trading infrastructure and regulatory and analysis institutions.
However, the defects of the P2E model are also obvious. Unmanageable and attracting legions of profiteers rather than players. Therefore, in order for P2E to continue to develop, many Web3 game developers are optimizing this model. It is expected that in a few months, new models will continue to emerge, and I believe they can be successful without using the P2E model.
Before predicting the future of Web3 games, we can review the development of game business models, So as to understand what changes we have experienced before reaching this inflection point.
In the past 50 years of game development, the business model Innovation always goes hand in hand with technological progress, and many unique game modes have been derived in different periods.
The first successful game model was "pay to play" led by the arcade game Pong Mode - Players need to insert coins into the arcade and complete the game within the specified time. Arcade games are often easy to operate and highly interesting. Players will participate in the game over and over again in order to obtain high scores.
Later, with the popularity of personal computers and game consoles, boxes such as Diablo Installed and paid games have also begun to rise, and players can play these games at home instead of going to the game hall. The limitation of this type of game is that developers often can only charge once, and then only by releasing multiple game series can they make more income.
The advancement of digital distribution technology has made real-time game services possible, and game developers The thirst for recurring revenue led to the birth of a subscription-based premium gaming model. In this model, gamers need to pay a fixed monthly fee to obtain regularly updated game content. At the time, many games were successful because of this model, including World of Warcraft, which even had more than 11.5 million monthly paying users at its peak.
With the rise of mobile applications and players’ preference for casual games, the free-to-play model also became popular. In this model, the basic gameplay of the game is completely free, and game publishers make money through "microtransactions", including season passes and loot boxes, which players can get skins and equipment after purchasing, which makes them more valuable compared to other players. Competitiveness.
The advantage of the free-to-play model is that it reduces the difficulty for users to participate in the The latter provides a recurring source of income. However, as time goes by, developers only think about how to make money, and it becomes easier for those kryptonite players to win. This can't help but make many players feel dissatisfied, because they will feel that the developers are just "grabbing money". ", but didn't bother to design the game.
The common logic behind these business models is that game developers are increasingly inclined to learn from players Capture lifetime value while minimizing financial and time-cost investments.
Nowadays, the goal of game design has changed from optimizing user experience to earning as much money as possible from players. Possibly more money, and the improvement of data granularity also allows developers to better understand user behavior, so as to formulate predatory plans to further profit from players.
In many cases, the game equipment that players want is either crazy in price or sold without Symptoms are weakened, and these are developers' means to let you buy new items, and the final income belongs to them. There is no ownership of assets in the game, so once the player exits the game, all their previous efforts are for naught.
At the same time, what players pay for the game does not match what they get in return . Developers will not take community input into account when making game ecosystem decisions, and players or creators who have contributed to improving the game will not be rewarded in any way. What's more, the developers simply don't realize this.
With the support of blockchain technology, the designer introduced Token rewards and game asset ownership into the game framework in the form of NFT Among them, the Play-to-Earn game mode was born. P2E players can obtain Token and NFT during the game, which can be exchanged for cash that can be used in the real world. When promoting such games, they will emphasize their money-making mechanism to attract players, and hope to convert some users into paying players.
In Axie Infinity, strong players can even earn $200 a day. In developing countries such as the Philippines, this amount can be much higher than their daily minimum wage of $10. However, it is not a wise choice to take the game as your own work, because once the supply and demand are out of balance, the Token price will fluctuate violently. In addition, if the content of a new game itself lacks depth, its game economy will also be difficult to maintain players whose main purpose is to make money.
For P2E game designers, they not only need to ensure the smooth operation of the game economy, It is also necessary to maintain a balance between the supply and demand of Token, so that the value of its core currency and items will not fluctuate greatly. Not only that, newly released games must also limit in-game speculation in order to maintain the user's gaming experience.
After the success of Axie, some P2E games started to follow suit. However, due to poor design and poor management, many of them suffer from in-game currency inflation. When the price of Token rises to a certain level, players will cash out on a large scale, causing the price of Token to drop sharply. At this time, players will also withdraw because they cannot make money.
Through Axie Infinity, we learned that in the initial stage of the game economy, those early players with the purpose of making money will get A large number of assets and resources are sold to later participants.
However, this mechanism is unlikely to work for long, so game developers must find a way to pursue Players earning income are transformed into consumers, so as to achieve sustainable development of the game.
Although this can be achieved in the short term by adjusting the token supply and introducing new token pools , but in the long run, content and experience are king, and players will even be willing to pay for these content and experiences without expecting any financial return. In other words, building an immersive game experience and characters loved by the community is the most effective way for the sustainable development of the game.
We believe that Play-to-Own will be the next leap in the game business model. Games are different from jobs, and we shouldn't place too much emphasis on the profitable nature of games. Based on NFT technology, the Play-to-Own model aims to allow players to obtain real ownership, thereby improving the ownership ownership mechanism in the game.
We define Play-to-Own as:
"A blockchain game developed on the basis of Web3 realizes incentive consistency and real ownership. Players who have contributed to the game can obtain game ownership rewards in the form of Token or game assets." b>
Unlike P2E, Play-to-Own will focus on Interesting gameplay, sustainable game economy, enhance people's awareness of in-game assets and IP ownership, so that they can abandon the concept of short-term profit in the past. We believe that in this model, games can take full advantage of the true advantages of blockchain, capture value from game assets, form a better price discovery process, and build a stronger sense of community ownership.
In Play-to-Own games, players will experience the fun of the Earn asset ownership rewards instead of playing poorly designed P2E games to earn money like before.
Additionally, for new players, the barrier to entry for Play-to-Own games will be lower, and they continue to hand out in-game rewards in order to acquire users.
For example, a game could be free to start, allowing players to earn small rewards , and players will then invest these rewards back into the game for valuable game assets. In addition, users can rent NFT assets from the market through a profit-sharing agreement, and can participate in high-level competitions without spending money.
Nansen visualizes the stakeholder graph in Web3 games:
At the end of the day, we think of Play-to-Own as a positive-sum game, and the picture below is a simple example:
We estimate that players in this Spending in similar games will be an order of magnitude higher than what they earn in Web2 games, and Web3 games will use Gross Merchandise Value (GMV) as a measure of all transactions in the virtual economy.
The point is that the creation of net value in the ecosystem will be able to be shared by developers and the community. With more sound economic management and better game content, Play-to-Own will be more sustainable than Play-to-Earn, and can generate income for developers and the community for a longer period of time.
In our view, the misalignment of incentives in the current business model and the value proposition provided by Web3 together accelerate Play-to -Formation of the Own model:
Pushing factor 1: Gamers have continuous pursuit of income and flexible operation
According to experience, gamers spend a lot of time in the game, We will definitely look for ways to monetize and display the highest configuration of game equipment in the personal interface.
The trading places in the game, such as the Grand Exchange in "Runescape", have made a generation of players Learned about the economic model in the game. In popular MMO or MOBA games, gold farming and account sponsorship operations are also common. Players have their own set of criteria for what items are valuable in the game (this may include rare loot, hidden content, and entire accounts), and they will always think of exchanging these valuable items for money when exiting the game.
The restrictive economy of current games will drive more players who understand the value of virtual items into Web3 games , in which the Tokenization of resources and assets in the game reduces the obstacles encountered in the process of exchanging value, thus creating more economic activities.
However, if the players cannot profit from the game, then they invest a lot of money It doesn't make much sense. With NFTs that can be resold, the flow of value changes from one-way to two-way. When the player's mentality changes from pure consumption to asset ownership, the game's TAM will increase significantly. This is because players are able to psychologically justify their spending when assets can grow in value and be sold to recoup a portion of the remaining value.
Concerns about self-custody of funds and sending on-chain transactions through wallets such as Metamask Emotion has always been the biggest obstacle to the promotion of decentralized applications. However, we believe this will not be an issue for players who are used to managing their game accounts with high value items and in-game currency.
Driver 2: Due to a misalignment of incentives between developers and players, Players are starting to get frustrated with game developers
Most games now It's all about getting higher returns, not focusing on entertainment and playability. The goal of the game company is to spend the least amount of resources on players while obtaining the greatest amount of benefits. In addition, pressure from investors, expensive overhead, and tight delivery deadlines can force development teams to start selling games to players before the game is officially complete.
In recent years, a large number of cases have shown that many games failed to provide exciting Satisfactory game experience, players no longer believe in the game's propaganda.
The list goes on: expensive premium content, unfair game patches ( Items that players have worked so hard to get are weakened), expensive microtransactions, intrusive ads, low-quality battle passes, irreparable past season game equipment, and so on.
As in-game pricing becomes increasingly unreasonable, player dissatisfaction grows , I am increasingly disappointed with the game studio.
Driver 3: Game Developers and Publishers Don't Consider Community for Revenue opinion, without regard to the personal interests of UGC creators
Currently , game developers get a high commission from UGC creators, but they don't give compensation to these creators. Game publishers can change the rules and royalty payments at will, as we've seen with Steam.
An interesting example is DOTA, which is Blizzard's Warcraft 3 UGC game mode, attracting a large number of players. But so far, it's unclear how much the mode's creators will get. Eventually, the game's active developers all went to Valve and got involved in designing DOTA 2.
In Web3 games, royalties executed through smart contracts give professional UGC creators Confidence allows them to build their own businesses on the basis of games, which in turn brings higher-quality works to the community, and also forms a high-quality UGC market.
In addition, if UGC creators can get Token incentives, then more creators can Benefit from game content creation. At the same time, this also lifts the limit on the speed at which game content can be generated. Decisions related to revenue sharing should also be discussed and decided by stakeholders, so as to enhance effective communication between all parties.
Pull factor 1: The high liquidity of the secondary market leads to larger transactions Volume and income
The development of the game asset secondary market is inseparable Develop an open and trustless game economy based on blockchain technology. This is because, in such an economy, the price of gaming equipment is determined entirely by market demand, independent of game developers.
Using smart contracts, game developers can set up an alternative monetization strategy and leverage transaction Fees and transaction commissions to obtain income. In this way, not only assets can be freely realized, but players who have invested a lot of time and money in the game can also recover part of the economic value.
We believe this will significantly increase the TAM of the games industry in the long run.
Pull Factor 2: Web3 Games Can Align Players, Investors and Developers Incentives among players to empower players and increase community engagement
Currently, the game community cannot grow together with the game and share any form of revenue.
Players do not have a say in the direction of the game as most games are developed and tested None of the work will be made public. Game revenue was also never shared with early players, although they contributed considerably to the game's success.
NFT and Token-driven games provide a new solution, players can Invest in game tokens after the game is launched.
These early players tend to have a high reputation and know the game very well. Therefore, in the early development stage, game developers will let some of them participate in the construction of the game, and listen to their suggestions on the future development direction of the game.
After the game is launched, players can use governance tokens to participate in the supervision of the game. This open communication channel can build trust and understanding between game developers and players, while increasing player engagement, it can also allow developers to learn more about their real thoughts.
Pull factor 3: interoperability between game assets, records and tokens Boost Offers New Ways to Acquire Users
Blockchain The permissionless and open environment allows game developers to incorporate third-party NFT assets (even assets from other games) by creating custom gear for use in their own games. In addition, developers can also seek out some ardent fans or other suitable people to help them promote the game.
Tools for determining legitimate wallet activity are maturing and other games can browse players' links On record or metaverse profile for user acquisition and airdrop. In this way, game developers not only have new ways to acquire users, but also strengthen the IP, utility and network effects of integrated NFT assets.
Ownership of Tokens and NFTs will help with organic marketing as the community will spontaneously Promote the game to the outside world without paying too much for promotion.
Pull factor 4: Fundraising ability of game studios with the use of Web3 Gradually increase
Compared with equity investment, institutional investors are more Willing to invest in Token, because they think this way is less risky. A report by Dappradar and BGA shows that in 2021, blockchain games will raise a total of US$4 billion. In comparison, traditional gaming startups raised a total of $4.7 billion in 2020.
Developers can sell future in-game assets as NFTs to raise more Funding, providing more budget for the development phase. For players, since such NFTs are easy to sell in the secondary market, they are also more willing to buy these game assets.
In addition to pure asset speculation, many players buy game items to get better games experience. As the market matures, players are more inclined to choose projects that focus on community building and continuous optimization and upgrading.
To fully realize the benefits of building in Web3, we believe developers should implement the following core Elements:
Simply put, when there are a lot of tasks to do in the game world, players will spend more time and money in it.
Game worlds can be designed with more user input, allowing the community to participate in the story and characters , thus generating more UGC. This creates a strong emotional attachment to the game and IP as the community engages in world building. At the same time, developing a cross-media content strategy and reaching audiences across a variety of mediums is critical to making this happen.
In addition, developers should conduct social coordination around common technical standards and actively advocate for these standards adoption to improve the transferability of assets in various virtual game worlds. As more and more third-party game and content creators begin to integrate original NFT assets, the value of IP is also increasing with increasing attention.
Game developers should place more emphasis on customization, identity building, and social interactivity. As people pay more attention to in-game avatars and possessions, they are more willing to spend and display their achievements in the game.
In both PvE and PvP modes, the multiplayer experience enhances the interactive and social nature of the game sex. The setting of the leaderboard and the war between guilds also cater to the competitive psychology of players, thereby encouraging in-game consumption.
In an open game economy, developers can meet the psychological needs of players and make them Bring in the "magic circle" (magic circle) to make them forget the profit attribute of game assets, so that they can truly Experience the fun of the game.
Players who are highly skilled or willing to contribute should be rewarded more than passive and spending players because they Only users with higher value can promote the long-term development of the game economy. The steady output of content patches and live broadcast events both contribute to the trading of game materials and items in the secondary market, thereby increasing the copyright income of the game.
In the start-up stage of game release, the increase in Token value can better attract and retain early players. After that, developers should monitor key economic indicators in real time and make adjustments to Token supply to ensure the long-term sustainability of the game. The inflation level of the token should match the growth rate of the players, thus maintaining the stability of the base token. Players' confidence in the game economy is the cornerstone of in-game gameplay and model building.
Opening up the economy can be a double-edged sword if speculation is not restricted in the early stages . Developers should devise ways to protect nascent economies from extreme volatility and asset misuse, such as direct or indirect taxation of transactions and assets.
In general, the goals of game developers and players need to be aligned—the The success and benefits that can be achieved should be premised on the value players get in the game experience and economic return.
In order to extend the life cycle of the game, developers should listen to the opinions of stakeholders in the community who are invested and reputable when making decisions. When properly governed, a game that is owned and listened to by the community will better drive player engagement and retention.
In addition, once the economic scale of the game develops to a certain level, the authoritative department may initiate a review , so developers should prepare for this in advance. A decentralized tech stack could keep games safe from censorship and keep them going in the long run, though it might work for more mature games.
The openness of the game code is also very important, the community can use these codes to share the game Fork, so that even if the developers do not manage well, the game economy can continue to develop. In the future, maybe the start-up team of the game will hire different developers to create content and maintain the real-time operation of the game, and players can vote at the end of each season to decide whether they can continue to stay.
The success of a game is the result of the combined effects of product, distribution and game economy, and these links are inseparable from the proper management of the team. Here are a few areas covered in our evaluation process:
To launch a game, the founding team It is not only necessary to attract and retain talents, allocate resources reasonably, but also coordinate the work of various functional teams. Therefore, many games have to complete a lot of complicated work before going online, and any mistakes in any link may lead to delays or even premature death.
Additionally, understanding distribution channels (publishers and marketing partners) and hype are key to a successful game launch key link. Even after launch, developers must ensure that content is updated and patched, thereby promoting the long-term development of the game.
For Web3 games, due to the different business models, Crypto native experience also plays an important role character of. Teams need to understand how to enable and drive the value accumulation of Tokens and NFTs, manage treasury and incentive programs, and leverage the mechanisms provided by smart contracts (such as staking) to accelerate the growth of the game. At the same time, the team should also actively carry out community building, maintain communication and build trust, and build a good community environment for players, contributors and game owners.
Essentially, the team's job is to create the base layer of the game's ecosystem and ensure that Strong execution of vision. Therefore, hiring people who have experience in game publishing and have a great passion for Web3 will be the key to the success of the game.
One of the questions we like to ask ourselves is if there is no late payoff, would we Are you still willing to invest a lot of time and energy in the early stage?
Before the official release, the creative team should continuously test and iterate the game until the The game main loop has enough confidence. An open, iterative approach to working with the community will help build the game along the way. The team also needs to design different game main loops to meet the needs of different stakeholder groups:
-Free-to-Play players who just want to experience the game
-hardcore players who are committed to breaking through difficult levels and are keen to play PK games
- Creative players who help design and build game areas and experiences
- Hype Economy Merchant and Trader for Resources and Meta Games
Founding Team Required Understand the preferences of different target player groups to effectively acquire these users through distribution channels. Before the game is officially released, they also need to organize marketing partners, launch related promotional activities, and conduct community building to ensure the successful release of the game.
We believe that the sustainability of a game cannot be separated from the healthy development of its economy. As blockchain technology continues to iterate in the virtual game economy, our first task is to design a token supply mechanism and establish a macro lever to adjust the relationship between token inflation and player growth.
We need to convert speculators and value extractors into consumers and control them . In the long run, having high-quality content to stimulate consumption endogenously is the only way to establish an efficient Token pool and reduce the impact of inflation.
Developers should fully listen to the opinions of community stakeholders when making major decisions. At the same time, developers should design a reasonable token system to ensure that all homogeneous and non-homogeneous tokens in the ecosystem have clear utility and value accumulation mechanisms.
We believe that the underlying blockchain technology can already meet the needs of mainstream audiences, what we really need to innovate now is user experience ( asset custody, gas fee payment, cross-chain requirements, etc.). Developers should use simple language to educate users on the difference between on-chain assets and off-chain assets, while for those advanced users, some on-chain elements can be gradually introduced.
Massively multiplayer online role-playing games such as World of Warcraft and 4X (exploration, expansion , development and elimination) strategic games, such as "Clash of Clans", are most suitable for the introduction of Web3 mechanisms, because they have a relatively mature economic and social circulation system. Blockchain technology will also help the innovation of game design from 0 to 1, and derive new game types.
When we are researching more possibilities for game design, the "top-down " and "bottom-up" approaches to building Web3 games, although we also understand the different challenges that each approach will encounter. The image below is a brief introduction to the two methods:
We will invest in games and supporting infrastructure such as guilds and game discovery platforms, and will steer clear of short-lived games The development team, the games they design are zero-sum games in our opinion, and the only purpose is to make money.
Instead, we actively support long-term projects because they provide interesting content and experiences, And put the focus on the sustainable development of the game economy, and implement all value propositions as a Web3 game. Those most successful projects will become the core of the metaverse, affecting the digital life of many players.
Looking at the current situation, a large number of young talents are starting to enter this field, and we have reason to believe that the next generation of typical franchise institutions will be built on Web3, thereby reversing people's General negative sentiment towards Play-to-Own games.
We believe that games built on an open peer-to-peer network will unleash a greater economy value, and dramatically expand the total addressable market for the games industry—an estimated $1 trillion in economic output over the next 10 years.
We are very willing to invest in such a future: real value can flow in the virtual world, online experience becomes as real as offline, DeFi as financial Tools serve the on-chain economy.