AUG 30, 2023
Decoding the Full On-chain Game's Value Chain
by 吴说猫弟, WuBlockchain
Author：@minta0103, PSE Trading
1. Introduction to the Fundamental Concepts and Significance of Full On-chain Game.
2. Value Chain Breakdown - Comparison between Web2 Gaming Value Chain and Web3 Gaming Value Chain.
3. Infrastructure Layer - Game Public Blockchains, Game Engines, Communication Structures, Rendering Layers, etc.
4. Middleware - Integration of SDKs, Service Integration, Communication Protocols, Monitoring Tools, etc.
5. Distributors - Analysis of Various Distribution Strategies and Case Studies.
"Full on-chain games" refer to games where both the game rules and data are stored entirely on the blockchain. In these games, everything from playing to interacting relies on smart contracts. On the other hand, we have "Partial on-chain games," where only certain game elements are stored on the blockchain. Depending on what is stored on-chain, partial on-chain games can be further divided into categories like "Core Logic On-chain," "Assets On-chain," "Achievements On-chain," and "Interactions On-chain", etc.
"Core on chain" is like placing the heart of a game on blockchain. Picture a game of chess, where the rules are etched onto the blockchain and each move, victory, and defeat is scripted by smart contracts.
"Assets on chain" means your virtual treasures – be it a mythical sword or a rare character skin – now exist tangibly on the blockchain. You truly own them, trade them, and nurture them.
"Achievement on chain" is like immortalizing a player's journey through the gaming landscape. Every victory, every milestone achieved, they become indelible imprints etched onto the blockchain.
"Interactions on chain" entails placing players' interaction data within the ecosystem, such as chats with other players and participation in community activities, onto the blockchain.
Yet, "Full on-chain game" is like a young hero setting off on a quest. We're in the early stages, discovering uncharted territories, and learning as we go. But like any epic tale, the full impact of this transformation is still unfolding. By abstracting game components onto the blockchain, innovation is boundless. Although the specific outcomes of this shift are yet to be fully realized, and the industry is in a continuous phase of exploration and experimentation.
And the reasons behind this evolution are becoming clearer:
1. Composability: By utilizing smart contracts, we can craft a multitude of game modules, including secure audits, access control, and resource measurement. Conversely, traditional games struggle to adapt to this environment and find it challenging to reconfigure around these versatile modules. Moreover, smart contracts facilitate the creation of more User-Generated Content (UGC) modules, lowering content production barriers, encouraging UGC creation, thereby boosting gameplay and content composability.
2. Open Economy: With the surge of Web3 players and the heightened interoperability across ecosystems, the game economy becomes increasingly open. Players can now partake in in-game economic activities with greater flexibility.
Future articles will delve deeper into the rationale behind FOCG. This report centers on elucidating the concept of FOCG and illustrating the value chain to offer readers an overview of the different facets within the FOCG industry.
02 Value Chain Analysis
2.1 Web2 Game Value chain
As we delve into the value chain of the Web3 gaming realm, let's take a page from the book of Web2 gaming's journey. The Web2 gaming industry can be broadly divided into four essential layers: Infrastructure layer, Middleware layer, Tools layer and Application layer.
Imagine a game like a big puzzle. To put it together, we need different layers.
First, there's the "Infrastructure Layer." It's like the ground where the game stands. This layer helps set up the game on servers, like how we arrange things in a room. Also, it takes care of making sure players can connect online and play together.
Then comes the "Middleware Layer." Think of this as the team that makes the game look and feel amazing. They create cool graphics and make sure things move like they should. It's like the special effects in a movie.
Next, there's the "Tools Layer." This is the helper that makes sure players have a smooth experience. They help get the game to players, make sure everything works well, and even help players if they get stuck.
Last but not least, we have the "Application Layer." This is the fun part that players see and use. It's like the game's face. The main game actions, the way it looks, sounds, and the way players chat with each other – all of that happens here.
These layers work together to create a great game experience. And by looking at how things work in traditional games, we can better understand how new Web3 games can be made even cooler.
2.2 Web3 Game Value Chain
Compared to the well-established Web2 game scene, the world of fully on-chain games is still in its early stages. Consequently, the granularity of the FOCG value chain is not as refined as that of Web2 games. Nevertheless, the interrelationships between the upstream and downstream segments of the blockchain gaming value chain follow a similar logic to that of the Web2 gaming value chain.
The chain of FOCG can still be split into four main parts, just like in the Web2 game world: The Infra Layer, the Middleware Layer, The Tool Layer, and the Game (Autonomous World)/AW layer.
03 Infra Layer
In the gaming world, think of the infrastructure layer as the strong base. It's like the solid ground beneath everything – from running game servers to connecting players online and handling their game data, etc. Remember when we talked about Web3 and Web2 games? The big difference is that Web3 games would put some parts on blockchain. In this chain-connected gaming world, something cool happens: games can mix together and the ecosystem becomes bigger. It's like building with colorful blocks, and every single game is a block, then you can add them all together.
Thus, what's important for this FOCG's Infrastructures are two things. First, the "Public Gaming Blockchain," which is like a special road just for games. Then, the "Blockchain Game Engine," which is the power helping games grow easily.
3.1 Game Chain
Currently, there are two main types of gaming chains. One type is Layer 2 chains specifically designed for games, and the other is Layer 1 chains that encourage the gaming ecosystem. This article provides some examples as follows:
Looking at the data, referring to the information from Footprint, currently, in the Gaming field, BNB Chain, Ethereum, Polygon, and Wax are still leading. More than 80% of online games are deployed on these chains.
Referring to the monthly transaction data of online games from Footprint (Note: Data is up to August 2023), the Wax ecosystem has been in an absolute leading position in terms of transaction volume in the year 2023. As of the time of writing, the transaction volume on Wax on August 23 reached 429.24 million, accounting for 86.56% of all game transactions across various chains.
Referring to the annual transaction data of online games from Footprint (Note: Data is up to the year 2023), Wax has held an absolute position in terms of transaction volume since 2020. During this period, there hasn't been a significant change in the ranking of transaction volume among public chains.
3.2 Game Engine
Creating games involves a lot of coding and graphic stuff. But many of these things can be used over and over again. So, smart game makers decided to put all the common code and stuff that games need into a special toolbox called a "SDK." This toolbox helps them work faster and better, and they give this special toolbox the name: "Game Engine".
Imagine Unity – it's like a super toolbox that gives game makers lots of cool tools and things. With it, they can make games that look like drawings or games that feel like real 3D worlds. And then there's Unreal Engine – it's like a superhero in making things look amazing. It's super good at creating awesome pictures and special effects, especially for those AAA games.
And there's more. Some Web3 game makers, like Planetarium Labs and Lattice, are making game engines too. These engines are like special toolboxes for making Web3 games.
Drawing from the compilation by IOSG Ventures - Ishanee on Web3 Game Engines, both Mud and Dojo are public products, whereas Argus and Curio are built by former commercial teams through fundraising efforts.
Ishanee has provided an excellent summary. For more detailed insights, you can refer to: Game Engine
Among them, MUD pioneered the Web3 game engine, holding a first-mover advantage and boasting a large player community. Curio's keystone is also constructing a game design engine, with a focus on enhancing blockchain's ticks. Argus, on the other hand, specializes in various expansion solutions and crafting diverse frameworks for game design. Dojo, meanwhile, is dedicated to constructing a game where all logic can be proven to have been executed off-chain.
Moreover, MUD v2 and Dojo are two engines with rapid development progress. Currently, several fully on-chain games utilizing MUD and Dojo have already gone live. This article provides an overview of these, as detailed in the table below:
In a nutshell, all the different engines are trying really hard to make things like tick rate better and expand networks. They want blockchain to handle even more complicated game stuff.
But there's a tricky part. Right now, the biggest challenge for fully on-chain game engines is that they don't have a common way of building things. If we look at how Web2 games grew, game engines had a really strong "big fish get bigger" effect. In the future, only 1 or 2 engines might become super popular, and they'll set the rules for the whole sector.
Following the usual path of how things grow in an industry, the first engine that perfectly matches what players want in a fully on-chain game (We also call it "Product-Market Fit") will have a big advantage in the competition.
In the world of making games, there's a puzzle we often need to solve. Imagine you're creating a game with sea creatures, land animals, and those that can live both in water and on land.
Putting sea creatures in the water and land animals on the land is pretty straightforward. But what about those special creatures that can switch between both places? Should they belong to the water or the land? How can they smoothly transition between these environments? Figuring this out is quite tricky and requires a lot of thinking.
To tackle this challenge, traditional games use a framework called ECS, which stands for Entity-Component-System. It's like a toolkit that helps organize game elements. It's handy for managing creatures that need to adapt to different surroundings. This system involves techniques like keeping track of their state, detecting their environment, and adjusting their behavior and traits accordingly.
In the world of Web3 games, they looked at this toolkit and came up with their own unique solution, called ARC – Action Registry Core. Think of it as a special toolbox for game elements. Here's a closer look at how it works:
1. Objects as Actions
In ARC, the central components of the game are treated as actions. This means that characters, events, decisions, and more in the game are abstracted in the form of actions. This approach makes the game more flexible and easier to expand.
2. Only the final game outcomes are recorded on blockchain.
3. Other game-related data is stored offline, but it can be accessed using tools like data indexers and relay infrastructure.
So, just like solving a puzzle, game developers use these clever tools to create games with creatures that can seamlessly navigate various environments.
So, to sum it all up, ARC, which stands for Action Registry Core, serves as the communication foundation in Web3 games. It takes inspiration from the ECS framework. By turning game elements into actions, putting game outcomes on the special chain, and blending offline data with infrastructure, ARC gives Web3 games more flexibility, scalability, and efficiency.
As of now, there isn't a separate project solely developing the ARC communication structure. However, major Game Engines and some independent Web3 Game Studios are working on this exciting endeavor.
3.4 Rendering protocol
In the world of Web2, the most famous rendering foundation is the Unreal Engine. But in the world of Web3, they added a special twist by creating a distributed rendering protocol called RNDR.
Behind RNDR is a project called Render Network, which uses decentralized networks for distributed rendering. The company behind Render Network, OTOY.Inc, was founded in 2009, and their rendering software, OctaneRender, was optimized for GPU rendering.
For regular creators, doing rendering on their own machines takes up a lot of resources. So, the idea of cloud rendering came up. But renting servers from companies like AWS and Azure could be costly. That's where Render Network comes in. It connects creators with everyday people who have spare GPUs, letting creators render their work cheaply, quickly, and efficiently. And those with spare GPUs can earn a little extra money from their unused hardware.
In the world of Render Network, there are two types of participants:
• Creators: These folks initiate rendering tasks and buy credits using RNDR tokens.
• Node Providers (those with unused GPUs): People with GPUs not in use can apply to become node providers. Their reputation from previous tasks determines if they get priority matching. Once they complete a rendering task, creators review the final file and download it. The fees locked in the smart contract are then sent to the node provider's wallet. This setup lets those with spare GPUs make extra money and makes the whole network more efficient.
In short, Render Network, with its unique setup, not only tackles performance issues in rendering but also creates a win-win opportunity for creators and those with spare GPUs.
04 Middleware Layer
4.1 SDK Integration
Similar to a Game Engine, SDKs make it easy for developers to deploy with just a single click. However, these SDKs are tailored for more specific functions.
Projects approach the path of integrating SDKs in different ways. Let's take a look at three common "GTM strategies" that are commonly seen nowadays.
Case 01 - SDK Store
The first strategy is SDK store. It's kind of like a shop where they gather all the SDKs available out there. Then, developers can go to this store and pick the exact SDK they need, just like picking items from a menu.
For example, there's something called the Unity Asset Store SDK. It's like a collection of verified SDKs from different places like MetaMask, Magicblock (Solana), Tezos, Nefta, and Immutable. Another popular option outside of this store is something called Web3.Unity from Chainsafe Gaming. And for folks using the Unreal Engine, they can think about options like Game7, Emergence, or Mirage's Web3.Unreal.
Case 02 - Segmented Functions
Let's explore another strategy-it's like breaking down the job into smaller parts. Take a look at specific function-based SDKs:
1. NFT Markets:
For creating NFT markets, there are different ways to go about it:
• In-game markets require more customization. Current solutions often offer APIs or Unity/Unreal SDKs to simplify common marketplace tasks on blockchain. These tasks might involve listing NFTs, checking inventory, and making purchases, etc.
For instance, there are options like Nefta, Particle Network, Venly, Sequence, Mirror World, Fungies, and Chainsafe Gaming.
2. In-Game Services:
Some companies, like Aqua, offer no-code/low-code in-game market services. They embed a system right into the Unity game, allowing players to access virtual markets directly within the game. This means they can buy things like decorations and character looks without leaving the game. By teaming up with Unity, Aqua makes it easier for game creators to give players cool in-game buying experiences.
3. In-Game Store System SDKs:
Although this isn't exactly the same, there are companies like Ready Games and MetaFab that provide customized in-game store system SDKs/solutions. They help game makers set up personalized in-game stores for players.
4.2 One-stop service providers
One-stop service providers are like those shops that have everything you need, all in one place. They have a complete toolbox of blockchain integration skills and offer services to game developers and publishers.
Case 01 - Forte
Forte gives a bunch of helpful services to developers, communities, and players. Their goal is to build a friendly world of blockchain games. They cover everything from starting a game, following the rules, making tools, helping players, creating games, and designing tokenomics in games. They even have a fund to help game makers.
Forte also brings in things like DeFi and NFTs, which are like magic game items. They help game makers get more money in new ways. Forte sets up a market and makes it easy to trade digital stuff, all in one place. Plus, they're really careful with rules like stopping money laundering. With all these cool things, Forte helps games use special tokens, which makes them last longer and make more money.
Case 02 All-in-One Help
There are game studios, like Open Loot from Bigtime and Sequence from Horizon (skyweaver), that provide help and advice. It's like having an expert friend guide you. They use their big brains to help regular game makers and games get into the special world of Web3.
For example, Open Loot doesn't just help with tech stuff, they also do marketing, handle payments, and give a big picture look at how games are doing. Sequence from Horizon (skyweaver) helps regular games become cool Web3 games. They help turn special game things into NFTs and show how ownership works on blockchains. These helpers don't just make the game world bigger, they also help game creators find new chances and ways to grow in the digital world. And there are even more helpers, like Ready Games and MetaFab, that offer tools to set up custom in-game stores. It's like a team of experts ready to help out.
4.3 Communication Protocols
Case 01 - XMTP
XMTP is an early Web3 communication protocol project with the aim of building a unified decentralized messaging system, providing communication infrastructure for all Dapps. Think of it as a decentralized version of XMPP (Extensible Messaging and Presence Protocol) in the blockchain realm. By using the built-in XMTP client, users can send and receive encrypted XMTP messages within applications and verify their identities through wallet signatures. This protocol ensures effective encryption of messages and helps prevent spam and other malicious activities.
Case 02 - Web3MQ
Web3MQ is an open-source decentralized secure communication protocol aimed at becoming the native encrypted communication infrastructure. It extends and enhances the concept of XMTP, offering an all-in-one communication solution with features like push notifications, chat, and community functions.
Moreover, Web3MQ is also compatible with a wide range of social identity and social graph protocols. It acts as a bridge to unlock the potential of every social relationship, integrating existing Web3 ecosystems like web3 storage (such as IPFS) and computation (such as Internet Computers) to complement the messaging ecosystem. Users can also achieve advanced privacy protection and other personalized features through custom configurations.
4.4 Monitoring Tool
Many Web3 games come with built-in economic systems, making the understanding of economic cycles crucial for Web3 gaming. This led to the need for tools that simulate, test, and monitor the health of GameFi systems.
Machinations offers game developers a visual way to design and optimize the economic cycles of their games. Currently, over 20 Web3 games have partnered with Machinations to enhance their in-game economy design using this tool.
For instance, consider a Web3 strategy game where players gather resources, build cities, and recruit armies. Resources in the game include wood, stone, and coins, which interact within the game, influencing player decisions and strategies. With Machinations, game developers can create a chart that visually represents factors such as resource production, consumption, and more. They can set the rate at which resources are generated, how players use them, and the relationships between resources. For example, developers can allocate wood and stone for city construction, and coins for recruiting armies. They can also define the costs of different actions, like building new structures, recruiting troops, or engaging in trade.
Through Machinations, developers can simulate the operation of the in-game economic system, observing how the flow and changes of resources impact the entire game ecosystem. If a particular aspect is too scarce or abundant, developers can adjust the values to optimize resource distribution, making the game's economic cycle more balanced and engaging.
With the development of web3 and blockchain technology, there are new protocols emerging to enhance specific aspects of Games or certain functions of NFTs, adding more power to in-game tokens.
Take Furion, for example. It's designed to break down Non-Fungible Tokens (NFTs) into corresponding ERC20 tokens. These tokens can freely trade and circulate on the Furion platform, supporting various financial operations like lending, borrowing, leveraged longs, and shorts.
Let's use an example to explain. Imagine an artist's digital artwork turned into an NFT. The Furion platform can help divide this NFT into corresponding ERC20 tokens. These tokens can represent different parts or shares of the artwork and can be traded freely on Furion's platform. Art enthusiasts can purchase a portion of these ERC20 tokens, granting them ownership stakes in the digital artwork. Additionally, Furion supports financial activities like borrowing, allowing users to invest and trade using the ERC20 tokens they hold.
This also brings new possibilities to the token model of GameFi. For instance, instead of directly issuing tokens, GameFi might choose to issue NFTs first, assigning them utility. These NFTs can then serve as underlying assets for issuing tokens and more.
Within the gaming industry, channels and distributors are pivotal. In the Web 2.0 era, distribution took two main forms.
Firstly, there were platform-based distributors like Steam and Nintendo, succeeding due to platform traffic and standout games. These evolved into comprehensive platforms, boosting user engagement.
Secondly, hardware manufacturers like Huawei and Apple relied on user traffic. Their quality devices introduced users to ecosystems, making them important distribution channels.
Both distributor types have driven the gaming industry through user traffic, renowned IP, and ecosystem building. In the emerging Web3 landscape, mature distribution is lacking. The next sections outline current distribution strategies in Web3 gaming.
5.1 Following the Web2 Path
This path is quite similar to what happened in the Web2 era with platforms like Steam, Nintendo, and TapTap. Starting by getting a lot of users through great games and then growing into a bigger distribution platform.
The advantage of this strategy is that it's been successful in Web2, but there are also clear downsides. It's a heavy approach, needing a lot of money and skills from the team. Plus, it's still not clear who the first users of Web3 games will be. There's an ongoing debate about whether to focus on Web3 native users or bring in users from Web2. This makes it hard to define the exact target audience for distribution platforms, which creates challenges for the team's plans and product lineup.
Case 01 - XterioGames
XterioGames secured a $15 million investment from Binance Labs in July 2023. Xterio is a Web3 gaming platform and distributor, set to release a variety of cross-platform games on both PCs and mobile devices. The ecosystem will also distribute digital collectibles through Xterio's network platform and marketplace.
For players, Xterio will offer a game library, NFT marketplace, user-friendly on-chain interface, decentralized identity system, wallet, and community app. On the developer side, Xterio provides solutions to ease the burden of on-chain programming. It helps developers with funding and promotion, creating a seamless path from development and launch to ecosystem integration.
In essence, XterioGames is also exploring the Path One strategy. Xterio is actively developing core games and has released several successful games through acquisitions and partnerships. The image below showcases some of the games already released by XterioGames.
Case 02 - Cartridge
Cartridge is a gaming integration platform within the Starknet ecosystem, positioning itself as the Web3 Steam. For developers, Cartridge introduces the Cartridge Controller and Dojo Engine, streamlining the development process and lowering barriers through a unified framework. For players, Cartridge offers a swift gateway to discovering games. Currently, Cartridge presents a selection of playable games. The following image displays just a portion of the available gaming options.
Case 03 - Createra
Createra is a user-generated content (UGC) metaverse engine backed by a16z investment. It empowers creators to design, share, and MetaFi games. Createra offers users an exclusive encrypted native autonomous world with features like cross-play and instant access. Moreover, everything built on the platform's land is tradeable, including models, games, APIs, and more. The project also focuses on integrating ERC-6551 with gaming, particularly in the realm of decentralized identity (DID).
In a broader sense, Createra can be thought of as the Web3 version of Minecraft. By collaborating with popular IPs like BAYC, it encourages Web3 users to step into the gaming world, create their own virtual environments, and engage across the ecosystem. The project continues to introduce more features and services within the ecosystem, such as mapping player achievements to DIDs or embedding other games within the world, making it a gamified comprehensive distribution platform.
5.2 Crypto Native Path
Path Two involves a more Crypto Native approach, gathering users through their interactive behaviors and becoming a focal point for traffic. Currently, there are various attempts in this realm, including building achievement systems, aggregating airdrops, creating educational systems, and establishing decentralized identities (DID), among others.
In contrast to Path One, Path Two is more Crypto Native, with a lighter model that requires less financial strength from the team but demands higher user operation capabilities. In this route, teams need the ability to swiftly capture the most engaging interactions for Web3 users and promptly integrate these trends into their platforms to achieve effective user acquisition.
However, it's important to note that the exploration of Path Two has not been fully proved by the market yet. Among different development paths, which approach will ultimately be the market's choice remains highly uncertain. Therefore, teams need to maintain keen market insight, continuously adjust strategies to adapt to market changes, and closely monitor shifting trends in user demands. Below is a summary of some case studies related to choosing Path Two.
Case 01 - Carv
Carv is a GameID platform that enters the scene through achievement systems. What's fascinating is that it calculates users' reputation scores based on their past blockchain data. The overall presentation of the GameID is determined by this reputation score along with the collected SBT (Soul Token). The platform fetches data from the blockchain to verify the achievements users have accomplished. Once the conditions are met, they can claim the corresponding Soul Tokens (SBT).
The platform offers social data analysis for the listed projects, allowing players to quickly discover promising and popular games. It also helps them keep track of the latest social trends related to the games they're interested in, which is very helpful for players. Additionally, the platform has an INO (Initial NFT Offering) section, where games can launch their NFTs for the first time. However, this aspect relies on the project's business development capabilities and has seen only 10 releases so far.
Case 02 - DeQuest
DeQuest is a GameID platform that takes a unique approach through the Quest system. It adds a touch of gamification by allowing users to embody their GameID as a virtual character (which can potentially be used in a sandbox). As users complete tasks and quests, they have the opportunity to unlock equipment and skills for their virtual character.
Case 03 - Parami
Parami Protocol is an ERC5489 protocol that holds the potential to revolutionize the economy of creators on the internet and turn NFTs into gateways for Web3 content discovery. Imagine a social media platform where users can utilize Parami Protocol to upload their social data, posts, photos, and more onto the blockchain. This data is securely stored and encrypted, and users can authorize others to access and use this data with permission.
Beyond applications in data sharing and privacy protection, Parami Protocol actively collaborates with numerous gaming projects, opening up broader possibilities for users. For instance, a game based on Parami Protocol could allow players to map their achievements and item ownership within the game to NFTs, enabling richer asset value transfer and interaction within the Web3 ecosystem. This partnership elevates the gaming experience to a whole new level, tightly connecting the virtual world with the real world.
In essence, Parami Protocol not only paves the way for new forms of data governance and content discovery but also holds the potential to become an entry point for traffic in the gaming realm.
5.3 Public Chain/Exchange Incubation
In the world of Web2, many content providers (CPs), like game developers, often pay fees to distribution platforms to gain access to the platform's traffic and exposure. However, in the current Web3 landscape, due to the scarcity of high-quality content, there's a trend where platforms are paying premium CPs. To be more specific, hackathon events hosted by some public chains and exchanges serve as prime examples. In these events, exceptional content creators are identified and offered resources and training support, encouraging the emergence of top-notch content within their own public chain/exchange ecosystems, thereby driving the development of the entire ecosystem.
For instance, a prominent player in the 2021 GameFi landscape, Stepn, is a classic example. Referencing statements from Stepn's Co-Founder in their Space, a crucial turning point for them was winning at a Solana hackathon, which not only boosted team morale but also provided initial resources.
Currently, numerous public chains and exchanges are organizing hackathon events, and some even collaborate to co-incubate projects. This presents a fantastic opportunity for industry growth and the emergence of exceptional projects.
Closing Remarks: The preceding sections outlined the concept and value chain of Full On-chain Game, aiming to provide readers with an industry-wide overview. Subsequent articles will delve more deeply into various facets of FOCG from different perspectives.