Tokens as rewards became the dominant factor in gameplay instead of just a go-to-market strategy. As a result, economies became unstable and barriers to entry for new players became too high. And it all started out so promisingly…

In the Beginning, There Was GameFi

When GameFi emerged, it had so much potential. Games now offer property rights and value accrual to game assets, liquidity in secondary markets, governance, and the ability for players to port their reputations to other ecosystems using Soul-Bound-Tokens (SBTs, more on that later). In turn, developers are granted access to new types of funding and monetization capabilities, interoperability, and better alignment with their players.

By using blockchain — and not just for the sake of building on blockchain — developing games in a Web3 environment can offer a 10x improvement across many metrics. However, despite all of this, something went wrong along the way — and it’s got nothing to do with the bear market that arrived in early 2022.

In this article, I’ll describe what went wrong with GameFi and why. Finally, I’ll outline a practical implementation of these features, using MonkeyLeague as an example.

If designed correctly, Web3 games will dominate entertainment in years to come.

A False Dawn

The rise of the Play-To-Earn genre, spearheaded by Axie Infinity, has spurred ingenuity, and influenced the creation of games that use player-owned economies. However, as demand for new game assets surpassed the immediate supply available, those economies became overheated.

New players, fueled with stories of riches, rushed to buy in-game NFTs and currency to start playing for rewards. Naturally, this increased the price of those NFTs and tokens, making it lucrative for breeders to generate new NFTs, and further currency to facilitate breeding fees.

On the other side of this equation, more and more of the in-game currency was minted to pay rewards and inflation grew unreasonably. At a certain point, when the number of new players joining the games slowed, the economy was left with no new demand to sustain the increased supply needed to pay rewards. This led to the rapid depreciation of both the native NFTs and the in-game currency, sending the economies into a downward spiral.

When financial speculation overcomes active participation and a game is still in its infancy, an unsustainable environment is created. Purely extractive participants leave when asset prices decline, leaving an irreparable economy behind them.

This is a lesson that has already been learned during the so-called ‘DeFi summer,’ when the preferred go-to-market strategy was to incentivize users to deposit liquidity using new governance tokens. When these incentives declined, over time, a number of seemingly loyal users left, removing their liquidity before departing.

Tokens as rewards are a go-to-market strategy and a customer acquisition expenditure, not a business model. Game economies need to be sustainable.

Forced Friction

As economies continued to overheat, it became much more expensive to play Web3 games. This, in addition to the inherent friction of Web3 integration, made it extremely difficult for new players to participate.

Adoption is an obvious key factor for success, hence any barriers to entry must remain low.

With the rise of Play-To-Earn, we have seen crypto-oriented projects releasing poorly designed, low-production quality games with no meaningful entertainment value, which use an earning mechanism as the primary reason to play. We have also seen gaming companies repurposing games to include Web3 elements, usually resulting in non-native, cumbersome output that combines the worst of both worlds.

Native experiences work best.

Traditional gamers, having observed monetization dynamics from developers over the years, became weary that purchasing game assets would lead to “Pay-To-Win” dynamics that ruin the game experience. As such, in some cases, we have seen a tremendous ecosystem backlash, ranging from platforms completely censoring NFTs to gamers who are raging against their inclusion.

We’re still early and, to the untrained eye, Play-To-Earn can be easily mistaken for Play-To-Win, as players can buy lucrative game assets instead of actually winning them.

There needs to be a clear distinction between a game and its monetization method.

The core appeal of gaming has, and will always be, the entertainment value it provides, something for which there is no substitute. Regardless of whether you’re building a Web2 or Web3 game, players expect to be entertained and are willing to pay for it as long as it meets those expectations.

Key questions that need to be asked when designing Web3 games include:

● How do you build a sustainable Web3 economy? If players are rewarded, where do the rewards come from?

● How do you keep the barriers to entry low over time for new players?

● How do you address the skepticism that gamers have for Web3 games?

● How do you address the censorship imposed by major app stores and allow a game to be discovered?

In the follow-up to this article, I’ll endeavor to answer these questions and outline the blueprint for making GameFi great.

About MonkeyLeague:

The first in a franchise, MonkeyLeague is a turn-based, Web3 soccer game that’s easy to learn, yet hard to master.

Build your dream team, win matches & tournaments, and climb the ranks in your league!

MonkeyLeague combines high-production-value, multiplayer gaming with the Solana blockchain, NFTs, and decentralized finance to deliver an exciting, Web3 game that’s easy to learn, yet hard to master.

About UnCaged Studios:

UnCaged Studios is pioneering high-quality, fun-first Web3 gaming. Co-founded by seasoned Web3 and gaming experts, the studio has over a hundred years’ combined experience designing and developing high-production-value, immersive gaming experiences with sustainable economies. Through its own platform, Game OS, the studio’s first release is an eSports franchise called MonkeyLeague. Moreover, UnCaged leverages Game OS to co-develop with leading studios by providing core technical functionality, infrastructure, and live operation Web3 services.

Source: medium.com