In-Depth Research on Blockchain Games: Is Encryption-Native at the Core a Bubble or a Revolution?

1. Introduction: What is a full-chain game?

Recently, the Pass card of the full-chain game Sky Strife reached a fomo of 21,000 ETH on the testnet, astonishing many non-full-chain game players with the magic of this track. Since the birth of "Pong" in 1972, the gaming industry has developed rapidly, evolving from classic 8-bit games like "Super Mario" and "The Legend of Zelda" to today's complex, highly social online games like "Fortnite" and "League of Legends". Games are no longer just simple entertainment. The social, competitive, and immersive experiences these games bring have surpassed our past imaginations.

With the rise of blockchain technology and the development of encryption currencies, the gaming industry is reshaping our experiences in unprecedented ways. From Axie Infinity, which closely integrates games with the encryption economy, to Stepn, which centers on social interaction and innovation, blockchain games are increasingly seen as a significant application of encryption technology. People are also beginning to explore new ways to combine gaming and blockchain, questioning whether more elements can be put on-chain beyond asset tokenization. Thus, full-chain gaming has emerged.

So what are the differences between blockchain games and traditional games?

In traditional games, all game logic, data storage, digital assets, and game state are stored in centralized game companies. For example, when we play Honor of Kings, Genshin Impact, or Dungeon & Fighter, all game content, including in-game assets, is owned by centralized companies.

The subsequent asset blockchain games (commonly referred to as Web2.5 games), such as Axie and Stepn, bring assets onto the blockchain. On one hand, players can own the assets, and on the other hand, they can enhance the liquidity of those assets. However, when a game shuts down, the game assets still face the dilemma of losing circulation value. The relationship between asset blockchain games and traditional games is more of a complement rather than a substitute, similar to the relationship between food delivery and dine-in restaurants. Web2.5 games also face competition from peer Web2.5 games and traditional Web2 games.

Recently, the highly anticipated full-chain games have put all interactive behaviors and states of the game on the chain, including the game logic, data storage, digital assets, and game states mentioned earlier, all handled by the blockchain, thus achieving true decentralized gaming.

The characteristics of blockchain games can be summarized in the following four points:

1. The authenticity of data sources is ensured by blockchain. Blockchain is no longer just an auxiliary storage for data, but rather the real source of game data; it is not limited to merely recording asset ownership but is the storage center for all key data. This approach fully utilizes the characteristics of programmable blockchain, achieving transparent data storage and permissionless interoperability.

2. The logic and rules of the game are implemented through smart contracts. For example, various operations in the game can be executed on-chain, ensuring the traceability and security of the game logic.

3. Game development follows the principles of an open ecosystem. Game contracts and accessible game clients adopt an open-source model, providing ample creative space for third-party developers. They can creatively output content and share it with the entire community by using plugins, third-party clients, and interoperable smart contracts, or even redeploying and customizing their own gaming experiences.

4. The game is independent of the client. This is closely related to the previous three points because the key to truly encrypted native games is that even if the client of the core developers disappears, the game can still continue. This depends on the permissionless storage of game data, permissionless execution of logic, and the community's ability to interact independently with the core smart contracts without relying on the interfaces provided by the core team. Thus, true decentralization is achieved.

2. Why do humans need a full-chain game?

Before understanding why we need full-chain games, let's first take a brief look at the current situation and operation model of the traditional gaming industry.

The essence of a fully on-chain game is still a game, and understanding the operating model of traditional games is very important and necessary for us to understand and analyze the future of fully on-chain games.

1. Current Status of the Traditional Gaming Industry

With the development of the gaming industry, many excellent Web2 games have emerged during our growth. Whether it's FPS games like Counter-Strike and CrossFire, or RPG types like Dungeon and Fighter and Dragon Nest, or MOBA games like League of Legends and Honor of Kings, or card games like Onmyoji and Hearthstone, games have accompanied our generation's growth, occupying a very important part of our entertainment life.

According to data from Fortune Business Insights, the global gaming market size was $249.55 billion in 2022, expected to exceed $280 billion in 2023, and to surpass $600 billion by 2030. In comparison, the global market size of the film and entertainment industry was $94.4 billion in 2022. It can be seen that gaming, as part of the entertainment and leisure industry, occupies a very important position in economic development. There are many areas worth exploring in terms of the commercialization Depth and breadth of types, making it the crown jewel of the leisure industry.

1) Why do humans love to play games

According to data from Statista, the number of gamers worldwide has exceeded 2.5 billion, approaching 3 billion. So how does gaming manage to attract more than a third of the global population? The core reason can be summarized as meeting various human needs and weaknesses.

1. Escape reality and restart life: The game provides a space to escape the pressures and challenges of daily life. In the game, people can free themselves from the troubles of reality, immersing in a virtual world and having a second life.

2. Burden-free socializing: For multiplayer online games, the game provides a platform for social interaction and is relatively friendly for those with social anxiety. Players do not have to worry about the gaze of others in real life, allowing them to do what they want and build relationships with others.

3. Rewards for Timely Feedback: Unlike the daily struggles of students and workers in real life for their studies and jobs, the charm of games lies in providing a rich rewards system and a timely reward mechanism. After putting in effort, defeating monsters, and completing challenges, players quickly acquire new skills, unlock new levels, or receive new items. This incentive mechanism can motivate people to continue moving forward.

4. Low-cost free exploration: Many games offer rich virtual worlds that allow players to explore unknown territories, interact with NPCs and other players, and drive the development of the storyline, satisfying humanity's innate craving for adventure and exploration. In the real world, however, due to constraints of money, energy, time, and geographical location, the cost of exploration compared to the game world is significantly higher.

5. Pursuing achievements and self-fulfillment: By completing a series of tasks and goals, people can fulfill their desire for success and recognition, whether it's through leaderboards or achievement points. In the game, individuals can more easily achieve self-challenges and character growth.

By targeting certain, or even multiple, human weaknesses, games can cleverly meet the needs and preferences of different users, allowing them to play a good role in both the breadth of the covered audience and providing a deep immersive experience.

2）The Current Situation and Development of Traditional Games

Next, let's take a brief look at the current situation of the traditional gaming industry.

In traditional games, they are roughly divided into Shooter, Adventure, Role Playing, Battle Royale, Strategy, Sports, Puzzle, Action, Simulation and other game types.

According to Newzoo's data, role-playing and adventure games have performed excellently on PC, mobile, and console platforms, ranking in the top five for each. Additionally, shooting and battle royale games are very popular on PC and console. On mobile, there is a slight difference, as puzzle and idle games are also quite favored by users.

2. The Dilemma of the Traditional Gaming Industry

However, traditional games currently face two major dilemmas: first, the distribution of games is restricted by licensing, and second, the costs before game distribution are too high, leading to a slow return on investment and easily resulting in silent costs.

1) Game releases are subject to license number restrictions

A game version number refers to a specific license issued by the government that is required to publish games in certain countries or regions. This system aims to regulate game content, ensuring that games comply with the laws, culture, and values of the country or region, in order to protect minors from inappropriate content and maintain social stability.

For example, in Germany, there is strict content review for games, with a particular focus on content that may have a negative impact on young people; South Korea and Japan have a game rating system, which is evaluated and issued by relevant national institutions.

In China, the impact of game licenses is even greater. China implements a strict game license system, which is administered by the National Radio and Television Administration. Games must obtain a license before they can be released in the Chinese market.

After the release of 87 license numbers on July 22, 2021, there was a long period of stagnation, which gradually began to change only in April 2022. In April 2022, 45 license numbers were released, and another batch was announced in September and December. However, during the period of stagnation in license number approvals from 2021 to April 2022, only a few large companies managed to survive, while many small and medium-sized companies faced bankruptcy. According to data from the Tianyancha App, more than 14,000 small and medium-sized game companies (with registered capital below 10 million) were successively deregistered from July to December 2021.

As the world's largest gaming market, China has over 500 million people playing video games. However, the publishing license has become a pain point for countless Chinese companies. Even with the resumption of license issuance, the contraction or constant adjustments of licenses have become a Damocles' sword for every game project team. In the days without a publishing license, one can hear countless sighs from project teams without a funding chain facing closure.

2) The costs before issuance are too high, and it is easy to incur a lot of sunk costs

In the development model of Web2 games, one needs to bear the initial human resource and infrastructure costs during the game development stage, incur idle time costs while waiting for the license number, and can only share profits once the license number is issued, the game is released, and commercial revenue is generated.

It is not hard to find that a large amount of costs are incurred in the preliminary stages. Once there are issues in the development phase, licensing phase, or user acquisition phase, all the costs incurred earlier become sunk costs. For a medium-sized game, the costs are generally in the millions of dollars. The long cycle of development and distribution in the early stage makes the profit cycle very long, leading to a higher risk of not achieving the expected returns.

3. Attempts to Break the Deadlock of Web2.5 Games

Faced with these two dilemmas, Web 2.5 games took the lead in breaking the deadlock. On one hand, Web 2.5 games