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Macro Research

Fully On-Chain Games: Unlocking the Virtual Autonomous Economies

Latest updates: Nov 03 2023

Key Takeaways

  • Fully on-chain games are characterized by their unique attributes: on-chain logic, shared state, and client agnostic. Notably, games like Axie Infinity, The Sandbox, and Illuvium do not fit the native blockchain game category; they align more with Web2.5 games.
  • This emerging domain has experienced significant growth, particularly after the success of Dark Forest. Starknet (an L2 Ethereum leveraging zk-STARKs technology) currently leads in the number of FOC games.
  • Building games on the blockchain offers advantages such as permissionless innovation, potential interoperability, and robust player incentives.
  • However, FOC games still face several challenges that stop them from flourishing such as latency, botting and development costs. Ongoing efforts are being made to address the current issues including the development of gaming engines.

For a quick read on this topic, check out this thread.

Fully on-chain games (FOC) are set to challenge what people have understood about Web3 gaming. They embrace the ethos of the blockchain which is decentralized, transparent and permissionless. In the simplest explanation, FOC games are those games that exist fully on a blockchain (logic, animation, data, etc.). Since the games are running on blockchain, the game worlds are permanent and also called “Autonomous Worlds”.

Specifically, FOC games possess the following properties:

  • FOC Logic: all the game moves, scores, assets and achievements are recorded on-chain and implemented by smart contracts.
  • Shared State: game data is stored on the blockchain and is accessible by all players
  • Client Agnostic: the gamer community can create their own clients and run the game instead of relying on the developers.

Source: The Bankless

Based on the definition mentioned above, those so-called Web3 games we’ve referred to so far like Axie Infinity, The Sandbox and Illuvium don’t fall into this category. They are minimally on-chain and are akin to “Web2.5” games, or, as @3pa15 (from Dialectic) classifies, “weakly on-chain” games. This is because their assets exist on-chain while the game’s core logic and state live off-chain on a central node. These games have full control and can ban players (and bots) from playing. Even worse, if the company shuts down its server the next day, every accomplishment and all the efforts the players have put in will vanish. In contrast, games on the far right spectrum are called “strongly on-chain” or FOC games.


Why Do We Put Games on Chain?

Here are some advantages that FOC games bring to the table:

1. Permissionless innovation/Open economies

FOC games provide a level of permanence, meaning they don't face the risk of shutdowns, ensuring that players can continue to enjoy their gaming experiences. Moreover, they grant players the creative freedom to modify (or mod) games using user-generated logic (UGL) through smart contracts, akin to the composability in DeFi. Think of MakerDAO and Curve which are built on top of Ethereum protocol.

In Web2 games, players can mod the games to make them different. Some examples are modding zombies in GTA 5 and Genshin Impact’s characters within the Elden Ring’s world. However, the mods typically operate at the local user level, affecting individual experiences rather than altering the global game states. There’s no way that those mods can directly merge into the real game.

In contrast, FOC games’ infrastructure is often designed to be front-end client agnostic, which means it can adapt to various user interfaces and is not bound to a single client type. They strike a balance between retaining classic rules and accommodating new second-layer rules. Players have the ability to generate tokens, establish guild systems, create quests, and develop trading systems, as long as they adhere to the underlying base rules. A prime illustration of these activities can be found in games like Dark Forest (details below).

2. Possible interoperability

On-chain games break free from the constraints of single-game logic, enabling assets to transcend the boundaries of a single virtual world. In this expansive gaming multiverse, assets are no longer confined to their respective games. Think about the scenario of wielding a $1 million knife from CS:GO within the world of Valorant – it's a fascinating idea that hints at the exciting cross-game possibilities that FOC games can unlock.

3. High-powered incentives/Financialized

Unlike Web2 games where there are weak property rights for players, FOC games offer stronger incentives for them, with uncensorable, permanent creations in immutable smart contracts. In this environment, creators have full autonomy over their tokens, game mechanics, and rules, creating a competitive ecosystem within the gaming economy.

This approach empowers game developers to cultivate a vibrant and open gaming landscape by refraining from constant rule changes, allowing player-generated content to flourish, and bringing an end to gaming dictatorships. Notably, blockchain-based games and Web3 projects tend to favor relatively modest take rates when compared to traditional fee structures (e.g. Roblex boasts a substantial take rate of 75%). This economic model promotes a fairer distribution of rewards and opportunities within the gaming ecosystem.

Let’s Explore How This Niche Domain Has Been Developing

The FOC games trend was kicked off by Dark Forest, a real-time strategy (RTS) that emerged in 2020 and was developed by MIT graduate Gubsheep (Brian Gu). In the game, players compete for planets and resources, utilizing ZK-SNARKs to keep coordinates secret while verifying action. Players can play individually or form a guild to conquer other planets and claim their dominance. And of course, all the moves are completely recorded on chain.

Gamers can extend the game’s functionality, features and content using plugins. Plugins enable customization to enhance user experience and prolong the game’s lifespan. Nightmarket, a plugin for Dark Forest, introduces an escrow smart contract for buying/selling planet coordinates, enabling players to profit from in-game success.

Screenshot 2023-11-03 at 17.46.40.png

Dark Forest’s gameplay

Following the success of Dark Forest, now there is a growing industry of new FOC games/autonomous worlds. Starknet is leading this domain in terms of the number of on-chain games. Here are notable titles across chains:

2023-11-03 17.22.19.jpg

Several projects are actively addressing ongoing issues and building infrastructure/engines for on-chain games. An in-depth analysis of these projects/gaming engines will be covered in a future article.

2023-11-03 17.22.23.jpg

Challenges in Building On-Chain Games

1. Latency

When thousands of players simultaneously make moves to update a shared state in online games, it often results in network congestion. The sheer volume of data being transmitted can lead to delays in the communication between players and the game server, affecting the real-time nature of gameplay.

Slow syncing with the blockchain can lead to a degraded user experience. Blockchain technology, while offering benefits like security and transparency, can bring up latency issues due to the time it takes to validate and record transactions on the chain. This can be especially problematic in fast-paced games like DOTA and Counter-Strike where split-second decisions are crucial. In these high-intensity environments, the blockchain doesn't take into account whether you're stuck in a transaction queue, waiting for those twitch reflexes to be processed.

2. Botting

Due to its permissionless nature, this domain opens the floodgate for bots. These automated programs can disrupt the fairness and integrity of the gaming experience by allowing players to gain unfair advantages or manipulate in-game economies.

Traditional games can mitigate botting through Know Your Customer (KYC) processes, selective bans, and costly entry barriers, making it harder for malicious actors to infiltrate the game. However, free-to-play blockchain games often lack such centralized control mechanisms. This makes botting a persistent pain point in this segment, as policing decentralized, permissionless systems can be challenging.

3. Cost

Developing blockchain-based games can be costly, especially in the absence of Web3 game engines (still in development and early stage). The integration of blockchain technology requires specialized knowledge and development resources, which can be a barrier for game developers, particularly independent ones.

On-chain interaction costs and gas fees also pose a burden on players, particularly those unfamiliar with the concept of crypto wallets in Web2. These additional costs can deter players from engaging with blockchain-based games. However, it's worth noting that the industry is actively working on solutions, such as account abstraction, to reduce the cost barriers and make blockchain gaming more accessible and affordable for all.

Other trade-offs of this domain and the level of their impact are visualized as below:


Source: Various

Directions for Development

Robbinson (core contributor at Alliance DAO) has proposed several intriguing directions at ETHDenver 2023. These ideas offer innovative solutions to the challenges faced by the niche domain:

  • Ephemeral Chains: In scenarios where the data generated in activities isn't particularly valuable, these data can be designed to automatically disappear after a certain period. The beauty of this approach is that even ephemeral data can be bridged off to more permanent chains, preserving any valuable information.
  • App-Specific Precompile: Robbinson envisions the development of chains that are specifically tailored for gaming applications. These chains would be constructed from the ground up with gaming loops at their core. Imagine, for instance, shuffling a deck of cards but performing this operation directly on the blockchain. While this might seem like a considerable computational burden, it has the potential to create a more seamless and efficient gaming experience.
  • Battle Rollup: Rather than fully recording the entire state of the game, only snippets of the state are retained. This strategy allows games to remain trustless and permissionless while significantly reducing the computational load. The battle rollup approach promises to enhance scalability and performance without sacrificing the integrity of the game.

An Optimistic Path Forward

The list of solutions and challenges can go on but the fundamental question is: Do players care about “permanent games”?

In short, the answer is often “NO”….at least for the majority.

For many, gaming is a transient experience. They engage with the game for the sheer enjoyment and the experience it offers, and they often move on after some time.

However, there are groups of hardcore gamers who do care. They heavily invest in the game and are there for the community/franchise that they’ve fostered. EVE Online is a solid example. The game existed for 20+ years and currently still boasts an impressive 100,000 DAUs that many Web3 games aim to reach. Players come to the game not because of new content from the developer, but because of the rich emergent social and economic world driven by the other players. Other classics, such as Starcraft 2, Minecraft and RuneScape, continue to attract hundreds of thousands of DAUs even after more than a decade.

FOC games can utilize this point to build a long-lasting game economy that empowers players with full control over their purchased items and the results of their in-game efforts. They can even reshape the original gameplay according to their preferences and form a guild with fellow players to maintain its longevity. Even if they decide to leave the game, newcomers can seamlessly pick up where they left off and continue building upon their progress.

Building games entirely on chain is a fresh area that triggers innovation for builders. Similar to new possibilities unlocked through innovation: internet → multiplayer, mobile → casual games and AR/VR → spatial (1kx Ventures). And now blockchain → composability

“Much of the innovation is a result of people being willing to work on the blue sky moonshots” - Gubsheep (Dark Forest)

In his sharing at Ethereum Devcon, Gubsheep beautifully quoted "A finite game is played for the purpose of winning, an infinite game for the purpose of continuing to play”

Playing infinite games in this context means:

  • Engendering innovation
  • Experimenting with new rule sets
  • Developing new tools for continued creative expressions

Rather than entering a head-on competition with current desktop and console gaming, FOC games pave a fresh path. This distinct route offers both game developers and players the opportunity to explore a variety of game types that exist beyond the boundaries of typical gaming traditions.

If complex UI is a hurdle due to technical limitations, builders can turn this weakness into a strength or a unique niche for on-chain games. Some indie Web2 games with minimal graphics like Flappy Bird, Stardew Valley, RimWorld, Battle Bothers and Crypt of the NecroDancer still prove massive success. This suggests that FOC games can find their footing in minimal graphic but strong story/gameplay, carving their own distinctive space. The genres of Strategy, Casual, and Simulation appear to be a promising avenue for FOC games.


Sources for Fully On-Chain Games

Excited about FOC games yet and want to explore more? Here are sources that you can track recent and upcoming on-chain games/autonomous worlds, people rosters and educational content:

Closing Thoughts

Every groundbreaking innovation, before establishing its success, encounters a series of initial challenges. FOC games are currently in their early stages, poised for growth and improvement. While there are numerous advantages to on-chain game development, there's a pressing need for enhanced tools and gameplay to improve the player experience. The evolution of the FOC gaming domain will take time, whether it's a year or five years remains uncertain. Nevertheless, it's clear that visionary minds are actively engaged in this niche, relentlessly working to turn the concept of autonomous worlds into a reality. So, for now, let them cook!

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  • Key Takeaways
  • Intro
  • Why Do We Put Games on Chain?
  • Let’s Explore How This Niche Domain Has Been Developing
  • Challenges in Building On-Chain Games
  • Directions for Development
  • An Optimistic Path Forward
  • Sources for Fully On-Chain Games
  • Closing Thoughts