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

Introduction: What is a full-chain game?

Recently, the Pass card for the full-chain game Sky Strife has fomo’d to 21,000 ETH (testnet), which has amazed many players from non-full-chain games at the magic of this track. Since the release of “Pong” in 1972, the gaming industry has been on a wild ride, from classic 8-bit games like “Super Mario” and “The Legend of Zelda” to today’s highly complex and socially engaging online games like “Fortnite” and “League of Legends”. Games have long ceased to be mere entertainment. The social, competitive, and immersive experiences provided by these games have surpassed our past imaginations.

However, with the rise of blockchain technology and the development of encryption currency, the gaming industry is reshaping our experiences in unprecedented ways. From innovative works that closely integrate games with the encryption economy to gaming projects centered around social interaction and innovation, blockchain games are gradually being seen as a hope for Crypto Mass Adoption. People are also starting to explore new ways to combine games and blockchain, questioning whether it is possible to put more elements on-chain beyond just asset tokenization. This has led to the birth of full-chain games.

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

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

The subsequent asset-on-chain games (commonly referred to as Web2.5 games) will put assets on the chain. On one hand, players can own the rights to the assets, while on the other hand, it can improve the liquidity of the assets. However, when faced with game shutdowns, the game assets will still face the dilemma of losing circulation value. The relationship between asset-on-chain games and traditional games is more of a supplement rather than a replacement, similar to the relationship between food delivery and dining stores. Similarly, Web2.5 games also face competition from both similar Web2.5 games and traditional Web2 games.

Recently, the highly anticipated full-chain games will 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, thereby achieving truly decentralized gaming.

To facilitate everyone’s understanding, I have summarized the characteristics of the full-chain game into 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 a true source of game data; it is not limited to merely recording asset ownership, but is a storage hub for all key data. This approach fully leverages the features 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 a vast creative space for third-party developers. They can creatively output content and share it with the entire community through plugins, third-party clients, and interoperable smart contracts, or even redeploy and customize their own gaming experiences.

4. The game is independent of the client. This is closely related to the previous three points, as the key to truly encrypting native games lies in the fact that even if the core developer’s client disappears, the game can still continue. This depends on the unauthorized storage of game data, the unauthorized execution of logic, and the community’s ability to independently interact with core smart contracts without relying on interfaces provided by the core team. This truly achieves decentralization.

2. Why do humans need full-chain games?

Before understanding why we need on-chain games, let’s first briefly understand the current situation and operational model of the traditional gaming industry.

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

1. Current Status of the Traditional Gaming Industry

With the development of the gaming industry, a large number of excellent Web2 games were born during our growth. Whether it’s FPS games like Counter-Strike and CrossFire, RPG types like Dungeon Fighter Online and Dragon Nest, MOBA games like League of Legends and Honor of Kings, or card games like Onmyoji and Hearthstone, games have accompanied our generation’s growth and occupy a very important part of our entertainment lives.

According to data from Fortune Business Insights, the global gaming market size was 249.55 billion USD in 2022, expected to exceed 280 billion USD in 2023, and surpass 600 billion USD by 2030. In comparison, the global market size of the film and entertainment industry was 94.4 billion USD in 2022. It can be seen that, as part of the entertainment and leisure industry, gaming occupies a very important position in economic development, with many aspects worth exploring in terms of its commercialization depth and variety of types. One could say it is the crown 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 world’s population? The core reason can be summarized as satisfying human needs and weaknesses from multiple aspects.

1. Escaping Reality to Reboot Life: The game provides a space to escape the pressures and challenges of daily life. In the game, people can break free from the troubles of reality, immerse themselves in a virtual world, and have a second life.

2. Burden-free socializing: For multiplayer online games, the game provides a platform for social interaction, which is relatively friendly for those with social anxiety, allowing players to engage in activities they want without worrying about others’ gazes in real life, thus establishing relationships with others.

3. Rewards for Timely Feedback: Unlike the daily struggles of students and workers in real life, the charm of games lies in their rich reward systems and timely reward mechanisms. After putting in effort, leveling up by defeating monsters, and completing challenges, players quickly gain new skills, unlock new levels, or receive new items. This incentive mechanism can stimulate people’s motivation to keep moving forward.

4. Low-cost free exploration: Many games offer rich virtual worlds that allow players to explore unknown realms, interact with NPCs and other players, and drive the development of the storyline, satisfying humanity’s innate desire 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 that in the gaming world is significantly higher.

5. Pursuing achievements and self-realization: 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 games, people can more easily achieve self-challenges and character growth.

By targeting certain or even multiple weaknesses of human nature, games can cleverly meet the needs and preferences of different users, thereby playing a good role in both the breadth of coverage and the provision of a Depth immersive experience.

2) Current Status and Development of Traditional Games

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

In traditional games, they can be roughly divided into game types such as Shooter, Adventure, Role Playing, Battle Royale, Strategy, Sports, Puzzle, Action, and Simulation.

According to Newzoo’s data, role-playing and adventure games perform excellently across PC, mobile, and console platforms, both ranking in the top five. Additionally, shooting and battle royale games are very popular on PC and console. On mobile, however, puzzle and idle games are also quite favored by users.

2. The Predicament of the Traditional Gaming Industry

However, traditional games currently face two major difficulties: first, game distribution is restricted by licensing numbers, and second, the costs before game distribution are too high, leading to a slow recovery period and potential for silent costs.

1) Game releases are restricted by license numbers

A game version number refers to a specific license issued by the government that is required to release 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, to protect minors from inappropriate content and maintain social stability.

For example, in Germany, content review for games is relatively strict, with a particular focus on content that may have adverse effects on young people; South Korea and Japan have a game rating system, assessed and issued by relevant national agencies.

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

After the release of 87 licenses on July 22, 2021, there was a long period of stagnation, until a gradual turnaround began in April 2022. In April 2022, 45 licenses were issued, followed by another batch announced in September and December. However, during the stagnation period from mid-2021 to April 2022, only a few large companies managed to survive, while many small and medium-sized companies faced the prospect of closure. According to data from the Tianyancha App, over 14,000 small and medium-sized gaming companies (with registered capital below 10 million) were successively deregistered from July to December 2021.

As the largest gaming market in the world, China has over 500 million people playing video games. However, the approval number has become a pain point for countless Chinese companies. Even with the resumption of approval number releases, the contraction or constant adjustment of these numbers has become a Damocles’ sword for every game project party. In the days without the awaited approval number release, one can hear countless sighs from project parties lacking a financial chain facing bankruptcy.

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, during the game development phase, the initial human resource and infrastructure costs must be borne. There is idle time cost during the waiting period for the license number, and revenue sharing can only occur when the license number is released, the game is published, and commercial profits are generated.

It is not difficult to find that a large amount of costs are spent in the preliminary stages. Once there are problems in the development stage, licensing stage, or user acquisition stage, all the previous costs become sunk costs. For a medium-sized game, the costs are generally in the millions of dollars. The long development and release cycle in the early stages makes the profitability cycle very long, resulting in a higher risk of achieving the expected returns.

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