*Forward the Original Title：5 principles for building viable on-chain gaming system

Introduce

The period of late 2022 and early 2023 marked the beginning of the growth of such a phenomenon as on-chain games. The basics of these theses are well described in articles such as ”Infinite Games”, ”Autonomous Worlds”, or ”Pureplay On-chain Games”. This article will not touch on the question of why on-chain games are needed at all, but assume that the reader is already aware of these theses.

As interest in this area grows, I notice that many, even those who have developed on-chain games for a while, are still not fully aware of how completely new and atypical a concept it is, which cannot be effectively applied to either the clichés from traditional gaming or the sector of blockchain solutions such as DeFi.

Blockchain provides many advantages and opens up new opportunities, but it also does not forgive mistakes. Doing anything on the blockchain is the conscious acceptance of the many principles and constraints that must be followed to create a viable system.

The purpose of this article is to postulate and justify the basic facts and principles that should guide builders of on-chain games if they strive to create persistent systems.

Also, it will be useful for those who are engaged in the research of specific on-chain games as a set of basic criteria.

I will deliberately touch on only those topics that may seem unobvious or controversial to many who are especially unfamiliar with on-chain gaming to emphasize how fundamentally this direction differs from everything we knew about gaming before and encourage serious discussion.

Also, I will make a reservation right away that in this article, I do not consider short-session on-chain games, fully centralized on-chain games, so-called “NFT games” or games utilizing only the EVM. Their properties and justification are worthy of a separate article.

About the author

My name is Bohdan Melnychuk. I have an engineering background with a strong focus on game theory.

I have been designing and researching the concept of on-chain games since 2017 and have continued developing the on-chain game since 2020.

The game that I am developing is called Mithraeum. The theoretical basis for this article was formed by my team and me during the years of development and testing of Mithraeum on live players with real value in the system.

Let’s get started with the core insights.

#1 Financialization is inevitable

Any popular on-chain game will be hyper-financialized, whether the developers want it or not.

Being an on-chain game means having two important properties — the absence of a natural regulator and minimal transaction costs(not to be confused with blockchain transactions).

In traditional gaming, the natural regulator is the server admin/developer, who often uses his privileged position (e.g., banhammer) to forbid external economic activity to monopolize monetization streams. The basis of the concept of on-chain games implies absolute autonomy and, therefore, the absence of such regulators.

This factor, in turn, is multiplied by the killer feature of the smart-contract environment: low transaction costs, which is achieved through trustless operations, transparency, and interoperability. The result of multiplying these two leads to the phenomenon of an Ultra-Free Market.

This phenomenon is the most significant game-changer, the power of which is underestimated by many game devs. Its “magical hand” will financialize any valuable asset, including game progress, without asking permission if the on-chain game dares to get popular. This inevitably leads to the fact that on-chain games are extremely financialized systems by default. At least compared to traditional gaming.

There are no direct analogs to this phenomenon in traditional gaming. For example, the Steam item market. is not truly open. It is ‘‘permitted’’, custodial, and generally quite limited. Even a passive regulator (server admin), which initially does not dictate economic restrictions, is a deterrent to this phenomenon simply because he can always change his mind and create them. Therefore, we cannot use traditional gaming experience to make predictions and patterns for on-chain gaming.

Many are mistaken that it is enough to forbid the possibility of direct transfer of game assets from wallet to wallet on a smart-contract level. However, even such conditionally non-transferable assets can be wrapped into transferable derivatives by third parties using instruments such as Account Abstraction, Prediction Markets, etc.

Design your financialization, or it will design you.

As an on-chain game designer, you must recognize the inevitable open market, price it into game design, and build the basic financialization layer on your own before the open market does.

I always use poker as an example here. Poker for fun and poker for money are two different games by experience due to the different motivations of the players.

Therefore, testing the game as soon as possible with real value at stake will allow you to objectively validate your game design and economic model and find out more in advance about what may lie ahead for you as your popularity grows. Deliberately postponing it may render your model unviable in the face of the coming financialization and rationalization.

#2 Game design is everything

Any trivial gameplay process in an on-chain game is meaningless because the bots can and will automate it.

A game is a kind of meaningful unproductive activity where the motive lies not in its result but in the process itself.

But due to the phenomenon of hyper-financialization, this principle does not work for on-chain games. This is one of the main reasons why on-chain games cannot be fully considered games.

With the growth of the capitalization of game assets, the rationalization of the gameplay process begins to grow, turning the activity “for fun” into full-time work or even a serious business venture.

This, in turn, means that any trivial game mechanic that does not require exceptional intellectual/creative/social work is meaningless since it otherwise will be automated by opportunistic rational actors.

It is essential to point out that this statement cuts off most known game genres, such as casual, shooter, action, and other genres of trivial gameplay.

Game design in on-chain games is a fundamental backbone. Any imbalance in mechanics or economy becomes equivalent to an exploit that will be abused by rational actors almost immediately.

This unties the hands of real masterminds of game design, giving the green light to more complex models but cutting off amateurs.

On-chain games that stand the test of time will have the most innovative game design unimaginable for traditional gaming.

All your on-chain game mechanics must carry a non-trivial mystery that cannot be solved once and for all. The best source for such a mystery is the players themselves. That is why it becomes obvious that on-chain games are primarily PvP.

A good example is the financial market, where its participants are part of a big mystery that determines where the price goes, which is also a non-trivial mechanic.

We must also remember that transactions cost money. Therefore, it will be most effective to make any transactional actions in the game strategic. This means you should strive to put as much of the player’s intellectual work into one transaction as possible. Off-chain meta-gaming elements such as social interactions, diplomacy, intrigue, and content creation can be great to enrich the basic gameplay.

#3 Immutability is the key to prosperity

If any entity can change the rules of an on-chain game, it becomes a player so powerful that no mechanics other than the mechanics of changing the rules really matter.

Imagine if casino owners could change the rules of Texas Hold’em or Blackjack on the fly. What if players could also do it?

Hyper-financialization in on-chain gaming blurs the line between the players and the project’s shareholders. When a shareholder cannot be clearly distinguished from a player, then any mechanism for changing the game’s rules, whether a multisig or even a DAO, turns into a gameplay element.

Speaking about DAO as an entity that can change the rules, it is essential to realize that by its nature, DAO does not strive to make the product better. It seeks to increase the profits of its majority.

In positive-sum “games” like DeFi or venture DAOs, this can lead to product improvement since the interests of all participants are the same.

Whereas the isolated game loop does not produce a positive sum, one player’s gain will always be another’s loss. Accordingly, the DAO, which, as we found out, seeks to enrich its participants, will enrich itself at the expense of a minority that does not have sufficient influence, exploiting the ability to change the rules of the game to its advantage.

No one will build skyscrapers on a loose foundation.

The second important argument is: the opportunity for an on-chain game to become the foundation for meta-gaming and other possible structures/projects/protocols that can be built on top of it.

Such an opportunity cannot be ignored because it is one of the main advantages of on-chain games, for which they pay a very high price.

Thus if your on-chain game is conceived as the basic foundation of an entire ecosystem, which it can turn into in the future, then this foundation should be as solid as possible.

In other words, if a rule change in your protocol can potentially break the rules in my protocol — I won’t build anything worth millions on top of your protocol.

When the virtual universe gets immutable, it gets real.

For these reasons above, the rules of the on-chain game, in the end, must become immutable. Then, such a virtual world is trustless and autonomous. This increases the confidence of its residents, builders, entrepreneurs, and capital.

The remarkable fact is that being immutable, the basic rules of on-chain games can still be “changed” by forking the world, along with the migration of progress. So each player has a choice of which alternatives he would like to stay, thus setting the engine of on-chain worlds evolution. But this great model is worthy of a separate article.

#4 Ponziomics is a one-way ticket

Most of today’s crypto games are nothing more than variations of the game of greater fool.

Ponzi — the game of greater fool. From a game design point of view, it is a race against the clock. The main problem with this type of “gameplay” is its ephemeral nature, which makes the project essentially disposable.

A curious trap is that the typical economic model of most traditional games is a latent ponzi. Whereas traditional games do not become real ponzi due to closed economies, on-chain games naturally have open economies.

In most games, the inflation curve is constantly progressing over time. If we assume that players come to the game world over time and not all at once, then those who entered earlier will have an economic advantage.

Rewarding players for early entry is not a bad thing, but if such a strategy becomes the main factor in achieving success in a game, such a game is doomed to collapse under the weight of its assets eventually.

No potential player wants to be exit liquidity or be a whipping boy. He wants to see opportunities and upward mobility.

By incentivizing early entry, you will get players once. By incentivizing the skill play, you will get players continuously.

It becomes obvious that to prevent the “ponzinomics engine”, it is necessary to prevent the progressive inflation of game assets.

If your on-chain game has mechanisms for continuous asset creation(minting), there must be mechanisms for continuous asset burning. And more than that, the checks and balances of your game design must ensure that assets are burned sufficiently. We considered this problem in detail in a separate article.

#5 Quality is more than quantity

Three players can already be considered a success…if each is worth millions.

In traditional gaming, one of the main measures of success is the number of players. But how do you measure this in an on-chain world? One person can hide behind multiple addresses or base game assets, just as many people can hide behind one address or base game asset.

Also, a controversial point is whether we can count meta-gamers. For example, speculators’ in-game assets or guild personnel, such as leaders, negotiators, and programmers, since they all can influence the game without playing it directly.

It must be recognized that even here, the traditional gaming approach no longer works. The main difference is that due to the financialization factor and the lack of punishment for multi-accounts due to the natural absence of a regulator, the player’s commitment becomes a scalable value.

An effective measure of the success of an on-chain game from a business point of view becomes the capitalization of its assets. The equilibrium between the number and quality of players becomes essential. Given the fact that, as we have found out, the gameplay of viable on-chain games requires an intelligent commitment of players, and the blockchain itself has technical scalability limitations that affect the cost of transactions, we can come to the insight that it is better to rely more on quality than on quantity.

The quality of the players, in turn, is the “lubricant” for the network effect. An arena of the top ten will always be more spectacular and prestigious than an arena of a thousand mediocrities.

Any on-chain game will be niche by default, there can be no talk of a mass audience, at least until the rest of the crypto world succeeds in this. But unlike traditional gaming, the niche is no longer the ceiling for project value growth in on-chain gaming.

Conclusion

In general, the main thing that needs to be accepted and remembered as a postulate is the inevitable hyper-financialization, which is the root cause of all the razor-sharp statements described in this article.

Based on them, we can predict that viable eternal on-chain games are likely to have the following properties:

• Financialized assets
• Complex game design
• Non-trivial mechanics
• Inflation is in strict equilibrium with deflation
• Immutable core contracts
• Intellectual gameplay
• Challenging competition and PvP in every aspect
• Likely strategic genre

The key competencies of the team around the on-chain game should be professional game design and blockchain engineering. Since only these two are able to adjust the concept of the game to technical limitations and hyper-financialization, by maximizing the advantages of on-chain and minimizing the disadvantages.

Remembering that stereotypes and clichés from traditional gaming may not necessarily work here is important. And the experience of most gaming studios is more harmful than useless.

Disclaimer：

1. This article is reprinted from [Aicoin], Forward the Original Title‘5 principles for building viable on-chain gaming system’,All copyrights belong to the original author [Bohdan Melnychuk]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.