Preface

After the success of “Black Myth: Wukong”, as a gamer and Web3 professional, I couldn’t help but think about the current and future directions of the Web3 gaming industry. If there are any shortcomings or biases in my views, please kindly point them out. Meanwhile, entrepreneurs in the industry are welcome to communicate with us and explore more possibilities in this field together.

The Pursuit of Web3 Gaming’s Original Intention

“It’s just that I just said that you should follow the team and not be fooled by some new directions. I have seen a lot of game industry entrepreneurs who started doing Web3 after Web3 came out. I would never invest in those people. Firstly, they don’t love games, so how can they make good games? It’s a simple truth.”

This is the view expressed by Wu Dan (Daniel), the first investor in “Black Myth: Wukong,” in an interview with ZhenFund, which has sparked widespread discussion inside and outside the industry. Is Web3 gaming just a gimmick, or does it have a revolutionary future development direction?

As it stands, the main attraction of the Web3 gaming track seems to be its money-making effect, rather than actually driving innovation in the gaming industry. Many people enter this track with the expectation of earning short-term profits or winning Airdrop. In the last market cycle, the quality of Web3 games was generally low, and most projects were quick to drive traffic and then do one-off Be Played for Suckers. Behind these phenomena is the excessive pursuit of the “short-term profit” potential of Web3 games by developers. As Daniel, an investor in Black Myth: Wukong, explains, many developers don’t love games, but rather the speculative market of Web3. This “make a wave and go” mentality is especially prominent in the P2E (Play-to-Earn) model, where the result is often a piece of chicken feathers. The “2Earn” model, despite its marketing fanfare, is increasingly being perceived by the market as a gimmick rather than the core intent of game design.

Returning to reason and rethinking the true meaning of Web3 for the gaming industry, just as the original intention of blockchain was to “realize a fair monetary system”, what is the original intention of Web3 games?

Vitalik’s Warcraft story has been told to death. I’d like to share a major event that recently happened in the game I play.

On November 27, 2023, the Xuanwu District People’s Procuratorate of Nanjing City issued a public prosecution statement, which showed that since August 2022, the defendant Tang has been using the vulnerability of the personal backpack and warehouse program in the online game DNF, and using the script provided by the defendant Cai to illegally copy eight game props such as “Contradictory Crystal” and “Distorted Dimensional Crystal” and sell them, accumulating illegal profits of more than 91.63 million yuan.

Simply put, it means that two game players exploit game loopholes to duplicate and dump the highest liquidity items in the game, including contradictions, distorted dimensional crystals, flawless gold-green tourmalines, etc., and make a profit of over 91.63 million RMB in the in-game market.

This incident has sparked large-scale protests among players, as they found that the equipment and items they had invested a lot of time and money in 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 have legal ownership of their virtual items. Despite some compensation measures taken by the official after the incident, the rights of players have never been fundamentally guaranteed. This incident reflects a core issue in centralized games: the centralized system has not been able to timely prevent asset duplication, nor effectively address the long-term impact of such events on the game economy. In-game assets do not belong to the players, but are fully controlled and managed by the game company. Once problems such as asset duplication and economic imbalance occur, the rights of players are easily affected, and players cannot protect or manage their virtual assets.

Returning to the original question, what is the original intention of Web3 games? For me, it is a game world that is no less than traditional games in terms of gameplay and graphics, where players have complete control over their assets; it is a community where players have the right to decide the future direction of the game, no longer having to reluctantly read a ‘professional update notice’ suddenly updated by the official version; it is a metaverse with a more open and perfect cross-platform trading system, where assets can break through the barriers between virtual and real economies, and even across games and platforms.

Web3 Games Amplify the Virtual Economic Problems of Traditional Games

Ideals are always full, but reality will give idealists a hard blow. The original intention in the previous text has always revolved around “assets”, and as the pioneer of the first venture out of the circle, “P2E” has now fallen into the abyss.

Why is this so? The words “payback cycle”, “income”, “moving bricks”, and “picking up hair” are also topics that gamers are happy to discuss in traditional games, especially in MMORPG games, where “brick movers” are an indispensable part of the game, and the game time is exchanged for “gold” to invest and decorate their characters, or make RMT transactions, etc. So why is it that only Web3’s “play to earn” is despised by traditional gamers? Everyone gets some return on investment through games, is the income of web3 games dirty money?

We believe that a large part of the reason is because the Decentralization of Web3 assets indirectly magnifies some issues in Web2 games. In Web2 games, developers and operators can flexibly manage the in-game economy through a centralized control system. 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 drop probabilities, etc. If there is inflation or item depreciation in the game, the operator can control the supply and demand relationship in the virtual economy by increasing or decreasing the supply of resources or adjusting currency circulation according to actual needs. However, due to the Decentralization feature of Web3 games, developers cannot intervene and adjust the economic system at will, which makes the in-game virtual economy more prone to imbalance.

If a user plays a game only for profit, the game will collapse quickly. The virtual world is constantly changing and enriching every minute to meet new consumer demands. It creates new products, tokens, and markets, new supply and demand relationships, and new pricing models. Indeed, it’s difficult to stabilize the game economy. I have played DNF for 14 years, and the price of gold has dropped from 1 yuan = 200,000 gold to 1 yuan = 890,000 gold today. However, several big dumps in the middle were actually caused by game planners ignoring the demands of players and failing to protect player rights, such as inconvenient infrastructure like market place, vicious bugs, and malicious modifications, etc., resulting in a drop in gold prices and players quitting. This was not only caused by the imperfect design of the economic model. A more fair and transparent blockchain also needs to design more reasonable token usage scenarios to empower the value of goods.

Currency is a very important part of both the real world and the virtual system. In games, various aspects need to be considered, from single-player games, NPCs, merchants, and store transactions to the circulation between players in multiplayer games. Especially in MMO games, the price of gold coins to some extent attracts players willing to spend money to build on the premise. In a market with good liquidity, a high price of gold coins means that players are willing to spend money to buy gold for decoration and to enhance their characters, while brick players are more motivated to spend time on bricklaying to sell and make a profit. There is a classic saying in multiplayer games, ‘graduate to the brick factory,’ which means that after the version graduates, they turn around and start bricklaying to try to recoup the money.

In the economic system of traditional games, the design of ‘sewage tank’ is an important tool to ensure the economic balance in the game. In the game, players constantly earn gold coins through various activities, but without a corresponding gold coin consumption mechanism, there will be an excess of gold coins in the market, leading to currency inflation, out-of-control item prices, and affecting the player experience. Therefore, game developers create various ‘sewage tanks’ through clever design to allow gold coins to flow out of the game and maintain the balance of the virtual economy. There are many ways to design sewage tanks, including ‘products with expiration dates’, ‘products that can be damaged or consumed’, ‘products that can become outdated or obsolete’, ‘products with retention costs’, ‘limiting inventory quantities’, ‘developer buybacks’, ‘trade-ins’, ‘converting assets into real benefits’, and more. A good sewage tank can not only be accepted by users but also create fun for them, becoming a good complement to the game content. In Web3 games, the lack of a sound sewage tank design often leads to an excess of tokens and exacerbates the issue of inflation. How to introduce similar mechanisms as sewage tanks to maintain economic stability is an urgent problem that needs to be addressed in the design of Web3 games.

In the current Web3 market, although there are occasionally a few games with high-quality content and gameplay, they are often overwhelmed by many games that focus on ‘short-term benefits’. The game’s currency economy is very important. If it can combine blockchain technology to confirm the assets’ Equity and provide Liquidity support behind the gold coins, theoretically, it can bring players a more realistic experience and a more secure game mechanism, so that players do not feel that the game assets are just air, and prevent the destructive impact of hackers, cheating, and other behaviors on the ecosystem.

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

Web2’s well-known projects, such as ‘MIR4’, have gained astonishing user numbers and revenue after integrating the concept of P2E. However, it should be noted that these models do not rely solely on Token. Even without Web3 elements, these games can still succeed through ‘currency exchange’ functionality. When Sinjin | MAYG mentioned why adding Token to a successful Web2 game alone is not enough to succeed, he stated that Web3 games require a complete change in the entire design and monetization method, not just adding some new features. Traditional game design experience may become a barrier in this transformation because it relies on existing distribution channels, stable currency systems (such as fiat currency), and assets bound to player accounts. On the other hand, Web3 introduces new variables such as Token economy, player-to-player asset trading, and Token circulation, requiring designers to have a completely different way of thinking. Similarly, in Web3, similar transformations require Depth adjustments to each game mechanism, especially the generation and circulation of Tokens.

Can 3A games ignite a new fire?

With the explosion of “Black Myth: Wukong” in China, various media outlets and articles have been crowned with titles such as “China’s first AAA masterpiece”, and have been widely promoted. However, what is a “AAA game”? In the gaming industry, AAA (Triple-A) refers to high-quality games developed by major companies, with huge investment, excellent production, and large marketing budgets. These games are known for their outstanding graphics, vast open worlds, and complex gameplay mechanics. AAA games are regarded as 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 have also begun to frequently use the label “3A game”, attempting to attract the attention of investors and players. However, in fact, I am personally not very keen on this concept. As an investment manager, 3A means that a large and excellent background team with rich experience is needed, and there is a huge investment in both development and promotion. Regardless of the probability of risk in this emerging field of Web3 games with incomplete infrastructure, the projects that meet my expectations in terms of team background are few and far between. As a gamer, for me, games are only classified into two categories: fun games and not fun games. The label “3A” has no meaning for me. It cannot determine the true quality of a game. If I don’t like it, I don’t like it. Many so-called 3A games, although very well-crafted in terms of graphics and production, may not meet expectations in terms of gameplay and player experience.

Independent Games

Many indie games made by small teams can win players’ love with creativity and gameplay, even though these indie games often do not have the budget of blockbusters, they can provide a unique experience and bring players new fun. Similar to the continuous emergence of new protocols in the Decentralized Finance track, the Web3 gaming field also faces a trend: more and more projects are trying to package themselves with gorgeous labels and high-concept, while ignoring the most important point - the core fun of the game. What we hope to see is not just the ‘3A blockbuster’ in appearance, but more innovative small game developers who can break through the traditional game production framework, and truly bring unique experiences to players without losing the game’s creativity and gameplay, through new paradigms such as ‘full-chain games’ and ‘ServerFi.’ Just like the continuous innovation in the Decentralized Finance field, small developers can play an important role in the Web3 gaming field. Instead of pursuing the 3A label of big production and luxury promotion, I think this track needs more small teams that dare to try and innovate. They may not have the resources and funds of big companies, but they can break the inherent mode of the game industry and bring a more diverse gaming experience through creative design, profound narrative, and unique mechanisms.

Breaking the Unholy Trinity of Web3 Gaming Ecology

In the book ‘Virtual Economics’ written by Willy Leventvita and Edward Castellonova, it is mentioned that if a virtual balanced scorecard is designed for the game economic system, there are three ultimate goals: content, attention and profit.

Content creation: refers to the virtual economy’s ability to form an interesting single-player content, or to constitute a production framework for player-generated content. The attributes of the virtual economy can also facilitate direct incentives, promoting players and third-party developers to create new content. The attributes of the virtual economy - especially under a reasonable definition of virtual property rights and markets - can also ensure the optimal utilization of scarce resources, such as game content and player attention.

follow degree: attract and retain users. The attributes of the virtual economy can be used to provide some completely free content to attract their follow, while retaining some better content to sell to players willing to pay. If a player is willing to recommend the game to friends or persist in playing the game, they can be rewarded with some virtual goods or 01928374656574839201 as a reward. Virtual goods usually play a role in retaining users, because once a player leaves a game, the time and money spent in the game will be wasted.

Profitability: Real currency can be earned by selling virtual goods and Virtual Money to players. The attributes of virtual economy can also be used to convert game content and user attention into revenue. For online services that use other profit models, such as card fees and advertising costs, the virtual economy can also be profitable by adjusting the fees players need to pay for new content. If game content updates too slowly, players will feel bored and leave the game. However, if game content updates too quickly, new content will be consumed too quickly, which is also not conducive to retaining players.

In Web3 games, the three major goals of content, attention, and profitability have gradually formed an ‘The Impossible Triangle’ existence, which is difficult to achieve a perfect balance in these three aspects at the same time. The traditional gaming industry has long faced similar challenges, while the Decentralization economy and asset ownership concepts of Web3 further magnify these contradictions.

1. The diversity and Depth of the content

The scarcity and sustainability of game content are often difficult to maintain. If players only obtain short-term gains through Token or Non-fungible Token, their motivation tends to maximize the game economy rather than content innovation. This leads to a lack of Depth in the gameplay of many Web3 games, designed just to ‘make a wave’. How to make games both creative and motivate players to participate for the long term is a major challenge.

2. The difficulty of attracting and retaining users

The challenges faced by players in Web3 games go beyond simple gameplay. Overly complex economic systems, fluctuations in tokenized assets, and potential market speculation can confuse or even disinterest ordinary players. As more and more Web3 games enter the market, it becomes increasingly difficult to attract and retain players in the competition. This is especially true as the lifecycle of Web3 games is usually short, making it easy for players to lose interest after the initial experience. Developers need to create gameplay that is both fun and easy to learn, avoiding excessive reliance on token and non-fungible token economies.

3. Profit and Sustainable Development

The profit model of Web3 games is often closely related to token economy. Games that overly rely on tokenized economy are usually oriented towards short-term profitability and neglect long-term development planning. Players participate in the game to obtain profits, but once token prices fall or the game economy collapses, players will quickly withdraw, leading to the rapid collapse of the game ecosystem. Traditional games achieve long-term profitability through continuous content updates and maintaining a balanced economic system, while the economic fluctuations of Web3 games make this goal more difficult. In addition, excessive reliance on external market fluctuations 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 ecosystem.

Summary

Daniel’s view on Web3 games, although biased, points out an important question: those games that only follow short-term interests and forcefully ride on the Web3 concept are injecting poison into the entire industry. These projects not only disappoint players’ expectations but also make it increasingly difficult for us to achieve the long-awaited ‘breakthrough’. What players desire is not just games with the Web3 label, but works that can fundamentally subvert tradition and bring unprecedented experiences. Just like ‘Black Wukong’, which allows countless players to personally experience the legend of the ‘Great Sage’ in the game world, Web3 games should provide players with a completely new sense of immersion and unleash their creativity.

Developers of Web3 games 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 old frameworks and opening up new paths. Despite the 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 symbols of failure, but signs of progress. Just like how ‘Black Wukong’ brings excitement and anticipation to players, Web3 games also need true innovation and experiences that can touch people’s hearts. Only those who bravely embark on a new path can leave a profound imprint in this industry.

“Oh, are you lost? As the saying goes, only those with a path to take can get lost. This is proof that you are a hero.”

Look forward to meeting again in the future gaming world, see you in the game.