Breaking the Impossible Triangle: The Ideal and Reality of Web3 Games

Author: Luke, Investment Manager at Waterdrip Capital

Preface

After the explosion of Black Myth: Wukong, as a gamer and Web3 practitioner, I cant help but have some preliminary thoughts on the current and future direction of the Web3 game track. If there are deficiencies or biases in the views, please criticize and correct me. At the same time, entrepreneurs in the industry are welcome to communicate with us in depth to explore more possibilities of this track.

Pursuit of the original intention of Web3 games

I just said that you should pay attention to the team and not be deceived by some new directions. I have seen a lot of game industry entrepreneurs doing Web3 after Web3 came out, and I would never invest in those people. First of all, they don鈥檛 love games, so how can they make good games? It鈥檚 a very simple truth.

This is the view expressed by Daniel Wu, the first investor of Black Myth: Wukong, in an interview with ZhenFund, which has aroused widespread discussion inside and outside the industry. Is Web3 game just a gimmick, or a revolutionary future développement direction?

From the current situation, the main attraction of the Web3 game track seems to be its money-making effect, rather than truly promoting innovation in the game industry. Many people enter this track with the expectation of earning short-term profits or airdrops. In the last round of market cycles, the quality of Web3 games was generally low, and most projects quickly attracted traffic and then cut leeks at one time. Behind these phenomena, developers are exposed to the excessive pursuit of the short-term profit potential of Web3 games. As Daniel, an investor in Black Myth: Wukong, said, many developers do not love games, but are attracted by the speculative market of Web3. This mentality of making a profit and leaving is particularly prominent in the P2E (Play-to-Earn) model, and the result is often a mess. The 2 Earn model, despite its huge marketing momentum, is gradually regarded by the market as a gimmick rather than the core intention of game design.

Return to rationality and rethink the true meaning of Web3 for the gaming industry. Just as the original intention of blockchain is to achieve a fair monetary system, what is the original intention of Web3 games?

Vitalik鈥檚 World of Warcraft story has been told to death, and I want to share a major event that happened recently in the game I play.

On November 27, 2023, the Peoples Procuratorate of Xuanwu District, Nanjing City, issued a public prosecution statement, the content of which showed that since August 2022, the defendant Tang had exploited loopholes in the personal backpack and warehouse programs of the online game DNF, and used the scripts provided by the defendant Cai to illegally copy eight game props such as Contradiction Crystal and Twisted Dimension Crystal and sell them, accumulating illegal profits of more than RMB 91.63 million.

Simply put, two game players took advantage of a game loophole to copy eight of the most liquid props in the game, including contradictions, twisted dimensional crystals, flawless golden beryl, and sold them on the in-game market, ultimately making a profit of more than 91.63 million yuan.

This incident triggered a large-scale protest by players, as they found that the equipment and props they had invested a lot of time and money to obtain were rapidly depreciating. However, due to the centralized operation model of traditional games, all in-game assets belong to the official, and players do not actually have legal ownership of their virtual items. Although the official took some compensation measures after the incident, the rights and interests of players have never been fundamentally guaranteed. This incident reflects a core problem in centralized games: the centralized system has neither been able to prevent the duplication of assets in a timely manner, nor has it been able to effectively deal with the long-term impact of such incidents on the game economy. In-game assets do not belong to the players, but are completely controlled and managed by the game entreprise. Once problems such as asset duplication and economic imbalance occur, the rights and interests of players are easily affected, and players cannot protect or manage their virtual assets.

Back to the original question, what is the original intention of Web3 games? For me, it is a game world that is not inferior to traditional game play and graphics, and players have full control over their assets; it is a community where players have the right to decide the future direction of the game, and will no longer be forced to read the career revision notglace helplessly because of the official version update; it is a metaverse with a more open and complete cross-platform trading system, where assets can break through the barriers between the virtual economy and the real economy, and even cross games and platforms.

Web3 games amplify the virtual economy problems of traditional games

Ideals are always full of hope, but reality will give idealists a hard blow. The original intention mentioned above has actually been repeatedly conceived around the concept of assets. As the first pioneer to break through the barriers, P2E has now fallen into the abyss.

Why is this so? Payback period, income, moving bricks, making money are also topics that gamers enjoy discussing in traditional games. Especially in MMORPG games, moving bricks is an indispensable part of the game. Players use their game time to exchange gold coins to invest in and decorate their characters, or conduct RMT transactions. So why is only web3s play to earn despised by traditional game players? Everyone gets some returns on their investment through games. Is the income from web3 games dirty money?

We believe that a large part of the reason is that the asset decentralization of Web3 indirectly amplifies some problems of web2 games. In Web2 games, developers and operators can flexibly manage the in-game economy through centralized control systems. For example, game companies can maintain the balance of the in-game economy by adjusting the output of virtual items, adjusting the currency system, launching new activities, or modifying the drop probability. If inflation or item depreciation occurs in the game, the operator can control the supply and demand relationship in the virtual economy by adding more water to noodles and more noodles to water, that is, increasing or decreasing the supply of resources or adjusting the currency circulation according to actual demand. However, due to the decentralized nature of Web3 games, developers cannot intervene and adjust the economic system at will, which makes the virtual economy in the game more likely to be unbalanced.

If a game is played by a user only for the sake of profit, then the game will soon collapse. The virtual world is changing and enriching every minute and every second. In order to meet the new consumption needs of human beings, new commodities, tokens and markets, new supply and demand relationships, and new pricing models are being created all the time. It is true that it is difficult to stabilize the game economy. The price of DNF gold coins, which I have played for 14 years, has dropped from 1 yuan = 200,000 gold coins to 1 yuan = 890,000 gold coins today. However, the several sharp drops in the middle are actually due to the game planners ignoring the demands of game players, the lack of protection of player rights, such as the inconvenience of infrastructure such as market places, and the malicious modification of malicious bugs. Most of the reasons caused the gold price to fall and players quit. It is not just caused by the imperfect design of the economic model. A fairer and more transparent blockchain also needs to design more reasonable token usage scenarios to empower the value of commodities.

Currency is a very important part in both the real world and the virtual system. In the game, from stand-alone games and NPCs, merchants, store transactions, to the circulation between players in multiplayer games, all aspects need to be considered. Especially in MMO games, the price of gold coins is a prerequisite for attracting players to enter the market and spend money to build. In a gold coin market with good liquidity, the high price of gold coins means that there are players willing to spend money to buy gold to decorate and upgrade their characters, while brick-moving players are more motivated to spend time moving bricks and selling them for profit. There is a very classic saying in multiplayer games, graduation into the brick factory. That is, after graduating from the version, you start moving bricks to try to get back the money you made.

In the economic system of traditional games, the sewage tank design is an important tool to ensure the economic balance within the game. In the game, players constantly earn gold coins through various activities, but if there is no corresponding gold coin consumption mechanism, there will be an excess of gold coins in the market, which will lead to currency inflation, out-of-control item prices, and affect the player experience. Therefore, game developers have created a variety of sewage tanks through ingenious design to allow gold coins to flow out of the game, thereby maintaining the balance of the virtual economy. There are many ways to design sewage tanks, including goods have a service life, goods may be damaged or consumed during use, goods may become obsolete or obsolete, goods have retention costs, limit inventory quantity, developer repurchase, old for new, assets for real benefits, etc. A good sewage tank can not only be accepted by users, but also create fun for them and become a good supplement to the game content. In Web3 games, the lack of a perfect sewage tank design often leads to an excess of tokens and more serious inflation problems. How to introduce a mechanism similar to the sewage tank to maintain economic stability is an urgent problem that Web3 games need to solve in design.

In the current Web3 market, although there are occasionally a few games with high-quality content and gameplay, they are drowned in many games that focus on short-term benefits. The game currency economic system is very important. If the blockchain technology can be combined to confirm the ownership of assets and provide liquidity support behind the gold coins, it can theoretically bring players a more realistic experience and a more secure game mechanism, that is, players will not feel that the game assets are air, and prevent hackers, cheating and other behaviors from causing destructive blows to the ecosystem.

Is it a feasible direction to directly add tokens to Web2 games?

Well-known Web2 projects such as MIR 4 have gained surprising user volume and revenue after integrating the concept of P2E. However, it should be noted that these models are not entirely dependent on tokens. Even without Web3 elements, such games can still succeed through the currency exchange function. When Sinjin | MAYG (https://x.com/SinjinDavidJung) mentioned why it is not enough to just add tokens to a successful web2 game, he pointed out that Web3 games are not just about adding some new features, but need to completely change the entire design and monetization method. Traditional game design experience may become an obstacle in this transformation because it relies on existing distribution channels, stable currency systems (such as fiat currencies) and assets bound to player accounts. Web3 introduces new variables such as token economy, asset transactions between players, and token circulation, requiring designers to think in a completely different way. In Web3, similar transformations also require in-depth adjustments to each game mechanism, especially the generation and circulation of tokens.

Can 3A games ignite a new fire?

As Black Myth: Wukong became a huge hit in China, various media and articles have been hyping it up with titles such as Chinas first 3A masterpiece. However, what is a 3A game? In the gaming industry, 3A (Triple-A) refers to high-quality games developed by large manufacturers, with huge investments, excellent production, and a huge marketing budget. These games are usually known for their excellent graphics, large open worlds, and complex game mechanics. 3A games are regarded as the top works in the industry, representing the pinnacle of production scale, quality, and technology.

During the development of the Web3 game market, a large number of Web3 game projects on the market began to frequently use the label of 3A game in an attempt to attract the attention of investors and players. But in fact, I personally dont like this concept. As an investment manager, 3A means that a large team with excellent background and rich experience is required, and huge funds are invested in the development and publicity ends. Regardless of the risk probability of doing this on the basis of incomplete infrastructure in the emerging field of Web3 games, there are only a handful of projects that meet my psychological expectations in terms of team background. As a game player, for me, there are only two categories of games: fun games and unfun games. The label of 3A has no meaning to me. It cannot determine the true quality of a game. If you dont like to play it, you dont like to play it. Although many so-called 3A games are very sophisticated in graphics and production, they may not meet expectations in terms of gameplay and player experience.

Indie Games

Many independent games made by small teams can win the love of players with their creativity and playability. These independent games often do not have the budget of big games, but they can provide unique experiences and bring new fun to players. Similar to the new protocols that continue to emerge in the DeFi track, the Web3 game field is also facing a trend: more and more projects are trying to package themselves with gorgeous labels and high-end concepts, while ignoring the most important point-the core fun of the game. What we hope to see is not the 3A masterpieces that are only on the surface, but more innovative small game developers who can break through the traditional game production framework and use new paradigms such as full-chain games and ServerFi to truly bring unique experiences to players without losing the creativity and playability of the game. Just like the continuous innovation in the DeFi field, small developers can play an important role in the Web3 game field. Instead of pursuing 3A labels with large productions and luxurious publicity, I think this track needs small teams that dare to try and innovate. They may not have the resources and funds of large companies, but they can break the inherent pattern of the game industry through creative design, profound narratives and unique mechanisms, and bring richer and more diverse game experiences.

Breaking the Impossible Triangle of Web3 Gaming Ecosystem

In the book Virtual Economics written by Willy Leydenvita and Edward Castronova, it is mentioned that if a virtual balanced scorecard is designed for the game economic system, it is divided into three ultimate goals: content, attention and profitability.

Content creation: refers to the ability of the virtual economy to form interesting single-player content, or to form a production framework for player-generated content. The attributes of the virtual economy can also communicate a direct incentive to promote players and third-party developers to create new content. The attributes of the virtual economy – especially when virtual property rights and markets are properly defined, can also ensure that scarce resources, such as game content and player attention, can be fully utilized.

Attention: Attract and retain users. The properties of the virtual economy can be used to provide players with some completely free content to attract their attention, while retaining some better content to sell to players who are willing to pay. If a player is willing to recommend the game to friends or keep playing the game, then some virtual goods or virtual currency can be provided as a reward. Virtual goods usually play a role in retaining users because once a player leaves a game, the time and money he spent in the game will be wasted.

Profitability: Earn real money by selling virtual goods and virtual currency to players. The properties of the virtual economy can also be used to convert game content and user attention into revenue. For some online services that use other profit models, such as card fees and advertising fees, the virtual economy can also make profits for designers by adjusting the fees players need to pay to obtain new content. If the game content is updated too slowly, players will get bored and leave the game. But at the same time, if the game content is updated too quickly, the new content will be consumed too quickly, which is also not conducive to retaining players.

In Web3 games, the three goals of content, attention, and profitability have gradually formed an impossible triangle, that is, it is difficult to achieve a perfect balance in all three aspects at the same time. The traditional game industry has long faced similar challenges, and the decentralized economy and asset ownership concepts of Web3 have further amplified these contradictions.

1. Diversity and depth of content

The scarcity and sustainability of game content are often difficult to maintain. If players only gain short-term benefits through tokens or NFTs, their motivation will tend to maximize the game economy rather than content innovation. This leads to a lack of depth in the gameplay of many Web3 games, which are designed only for making a quick buck. How to make games both creative and motivate players to participate in the long term is a major challenge.

2. Difficulty in attracting and retaining users

The problems players face in Web3 games go far beyond simple gameplay. Overly complex economic systems, volatility of tokenized assets, and potential market speculation may confuse ordinary players or even make them lose interest. As more and more Web3 games enter the market, it becomes increasingly difficult to attract and retain players in the competition. Especially since the life cycle of Web3 games is usually short, it is easy for players to churn after the initial experience. Developers need to create gameplay that is both fun and easy to use, and avoid over-reliance on tokens and NFT economies.

3. Profitability and sustainable development

The profit model of Web3 games is often closely integrated with the token economy. Games that rely too much on the token economy are usually oriented towards short-term profits and ignore long-term development plans. Players participate in the game for profit, but once the token price drops or the game economy collapses, players will quickly withdraw, causing the game ecology to collapse rapidly. Traditional games achieve long-term profitability by continuously updating content and maintaining a balanced economic system, but the economic volatility of Web3 games makes this goal more difficult. In addition, excessive reliance on fluctuations in the external market makes it difficult for game operators to maintain economic stability through simple content updates. In order to achieve long-term profitability, developers must design a more stable economic system, reduce dependence on external market fluctuations, and ensure the sustainability of the game ecology.

Résumer

Although Daniels view on Web3 games is biased, he points out a crucial issue: those games that only focus on short-term interests and forcibly use the concept of Web3 are injecting poison into the entire industry. These projects not only disappoint players expectations, but also make it more difficult for us to break the circle that we have always longed for. Players are not only eager for games with the Web3 label, but also for works that can fundamentally subvert traditions and bring unprecedented experiences. Just like Black Wukong allows countless players to experience the legend of Monkey King in the game world, Web3 games should give players a new sense of immersion and creativity.

Web3 game developers will inevitably encounter setbacks and confusion in the process of exploring new areas and breaking traditional rules. This is exactly the process that the Web3 game industry must go through – breaking through the old framework and opening up new paths. Although there are various challenges in the short term, these explorations prove that we are moving towards the future.

Every developer and player who persists in this revolution is a hero of change. Challenges and setbacks are not a sign of failure, but a sign of progress. Just like Black Goku brings players long-lost excitement and expectations, Web3 games also need innovations and experiences that can truly touch peoples hearts. Only those who bravely embark on a new path can leave a deep mark in the exploration of this industry.

Oh, you are lost, right? As the saying goes, only those who have a way to go will get lost. This is proof that you are a hero.

Looking forward to meeting you again in the future gaming world. See you in the game.

This article is sourced from the internet: Breaking the Impossible Triangle: The Ideal and Reality of Web3 Games

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