Bankless: The False Promises of Current Blockchain Games and the True Architecture of Web3 Games

Original Title: “Bankless: The False Promises of Current Blockchain Games and the True Web3 Game Architecture”

Original Author: Donovan Choy, Bankless

Original Compilation: DeFi Dao

When Ethereum finally becomes mainstream in 2087 and the Federal Reserve no longer exists, historians will trace the origins of Crypto back to a moment in 2011 when Blizzard nerfed Vitalik Buterin's "Siphon Life" spell in World of Warcraft (thx blizz!).

As the story goes, this made 15-year-old V God see "the horrors of centralized services," and thus Ethereum was born, ultimately to end the madness of centralized video games.

Or at least, that’s our direction.

Unfortunately, most existing blockchain games are still affected by the aforementioned scrutiny cases, even though their marketing pages are filled with trendy promises of "permissionless interoperability" and "true ownership."

The (False) Promises of Current Blockchain Games

Let’s revisit the purpose of blockchain.

The role of blockchain is to facilitate shared consensus in a distributed database. People often have disagreements—hence the entire crypto community is constantly forking. Forks readjust consensus between irreconcilable differences.

So, why build games on the blockchain?

For the same reason: people fundamentally disagree on how to construct game universes, just as Vitalik disagreed with Blizzard's decision to nerf his beloved warlock. Thus, the true promise of games on the blockchain is to enable divided gaming communities to resolve their differences.

The problem is that most blockchain games do not meet this standard. Games like Axie Infinity or CryptoKitties are minimal on-chain games. Their assets exist as on-chain data, but the fundamental logic of the game (game rules) and state (action history in the game) exist on centralized game servers off-chain.

Of course, your Axie NFTs and tokens exist as immutable data in smart contracts as long as you keep your private keys safe. However, if the company behind Axie, Sky Mavis, shuts down—your Axie assets' value will also collapse. Ownership is not just about securing a piece of data in your wallet. Ownership also entails control and voice over the environment in which that data exists, namely the game rules.

The financial value of these assets entirely depends on Sky Mavis's ability to successfully deliver the Axie Infinity ecosystem as a commercial product. They are marketed as web3, but are more akin to web2.5, as players have almost no control over the fundamental rules of the game, which are off-chain and centrally planned.

True Web3 Game Architecture

How do we begin to build a truly censorship-resistant and unstoppable blockchain game? According to Gubsheep's "The Strongest Crypto Game Theory":

The logic and state of the game are on-chain. The game rules—how you act, fight, harvest, and consume—should be embedded as rules in open-source and on-chain smart contracts. All game data is on the blockchain, making it interoperable. The game is independent of the developers. If the core developers disappear tomorrow, players do not have to rely on them to continue playing; people in the community can create their own clients to send players' actions on-chain.

When the above conditions are met, some important things start to happen.

Permissionless Innovation

When the game logic is on-chain—first, the game world achieves permanence, continuing to exist even if the company goes bankrupt or abandons development, just as DeFi protocols continue to run indefinitely. As Ronan Sandford said, on-chain games provide "real independence."

Second, it opens the door for permissionless innovation. Any player can creatively "modify" the game by introducing second-layer rules (Curio calls it user-generated logic) in the form of smart contracts, "referencing" the basic game rules (i.e., "digital physics").

This may sound confusing, but it is not—it's just DeFi's composability 101, where developers build new protocols on top of existing protocol code, also in a permissionless manner.

As long as the second-layer rules do not violate the foundational rules, they are permitted. Notably, second-layer rules differ from add-ons/mods in existing games, which only alter your personal user interface and local experience; they are embedded in on-chain smart contracts and affect the shared virtual game experience with all other players.

For example, a fully on-chain game determined to preserve the classic rules of chess would enshrine those rules as non-negotiable and immutable rules in the core developer's smart contract. Knights can only move in an L-shape, bishops can only traverse diagonally.

However, anyone can create new second-layer rules on top of these immutable digital physics. They could be a token, a guild system, or a quest line similar to RPGs, where you do not need to capture your opponent's king to win the game, but simply move your king to the other end of the board to win. You could also introduce a trading system to buy back dead pieces with accompanying token currency or exchange pieces with opponents. Anything is possible as long as the logic of the basic rules allows it.

True Interoperability

In on-chain games, assets are not bound by a strict set of game logic and possess the greatest interoperability in the broadest sense. They often exist merely as another token in an ever-expanding game universe, just as thousands of tokens in DeFi compete with each other according to their own rule sets, i.e., token economics models.

In contrast, Epic may allow Fortnite game assets to "interact" within its game library, but they are only interoperable if permitted by the developers. The same goes for game assets in web 2.5 blockchain games.

High Incentives

The final piece of the puzzle is: incentives. Traditional games have many highly active mod communities, but they operate under the constraints of core developers. The history of Minecraft provides the best example. As I wrote previously:

For years, Microsoft has used intellectual property law to allow Minecraft users to modify and create user-generated content but prohibited them from selling officially licensed code for profit, effectively maintaining a gray economy sustained by passionate fans.

From an economic perspective, these weak property rights for mods lead to weak incentives for creation. Thus, mods are often maintained by enthusiasts and amateurs out of altruism.

Fully on-chain games solve this problem. In on-chain games, players have stronger motivations to create mods because the mods created are immutable, permanent creations (the aforementioned second-layer rules) and are encoded in unchangeable smart contracts. The foundational ownership rules for any token, game mechanism, social institution, or rules created by players in the game are entirely within their control, unbound by the underlying permissioned game logic and rules. Most importantly, they compete with what other players create in the game economy.

In the world of on-chain games, core game developers cannot unilaterally change the fundamental rules of the game. This will save Vitalik's toon in World of Warcraft! The days of game dictatorship will be over.

OK, enough theory, let’s look at some examples of blockchain games.

Blockchain Game Cases

Dark Forest may be the prime example of blockchain games. Created by Gubsheep at the 0xPARC Foundation, Dark Forest is a space-themed multiplayer strategy game that has been deployed on the Gnosis chain since 2019.

The entire game logic and state of Dark Forest are contained on-chain. Unlike today's traditional online games, there are no centralized servers or databases to handle actions in the game or store the game's state.

As explained, the magic of blockchain games lies in the emergent rules that players spontaneously form by leveraging their on-chain attributes. Dark Forest has many such examples. Its players created in-game markets that allow for the trading of in-game resources without requiring core developers to roll out patches for trading systems or auction houses.

Dark Forest does not have a built-in guild system, so a group of players (DFDAO) proactively built their own permissionless, on-chain guild system through external smart contracts. This enables many smaller players to coordinate and pool their resources in a completely trustless manner, aiming to become competitive on leaderboards dominated by experienced players. As recorded on the DFDAO blog:

In the fourth round… we deployed The Astral Colossus, a smart contract player that allows other players to contribute [resources] as a team. This eliminates the trust factor between players because all the code for what is happening is in a smart contract that you can read and know what it will do, making the process trustless and permissionless.

DFDAO also completely forked Dark Forest onto a different chain. Their forked version, called Dark Forest Arena, introduced various new game modes. In any other MMORPG, all these actions would be considered illegal, black market trading, or "hacking." But in on-chain games like Dark Forest, everything is allowed and runs on code.

Examples of community-led emergent rules can also be found in OPCraft, an on-chain version of Minecraft built by the Lattice team on Optimism. In early testing of OPCraft, players created plugins to automatically gather resources, chat with each other, teleport on the map, and change the color schemes of the world.

A player named SupremeLeaderOP created a communist republic by deploying on-chain smart contracts and established a corresponding set of rules. Any player voluntarily joining the republic would forfeit all their existing property and merge their inventory into a collectively shared treasury according to socialist philosophy.

Of course, examples of new rules emerging in games are not new. If game developers do not create tools for game guilds, players in EVE Online would establish offline social alliances on Discord. Players in Everquest and World of Warcraft developed informal social currency systems—DKP (Dragon Kill Points)—to manage and reward them based on their time invested in the game.

The difference in the creation mechanisms of blockchain games is that they are permissionless creations embedded on-chain due to the open composability of the games. Players in the OPCraft communist republic do not know who he is, but they do not need to trust him to fulfill his promises.

In the diplomatic strategy game Conquest on the Gnosis Chain, players stake xDAI to produce spaceships, form alliances, and attack each other in a Civilization-like manner. Similarly, the ability to create on-chain smart contracts means that player alliances are bound by actual value assets to ensure players take real actions, demonstrating trustless interactions between player alliances.

Barriers to Blockchain Games

If blockchain games are so magical, why haven't they gained wider adoption?

The most obvious barrier blockchain games face is scalability. Sending each player's actions on-chain is computationally intensive, which is why most blockchain games are turn-based and do not operate on the Ethereum mainnet. The immutable code that permanently exists on-chain also means that vulnerabilities arising from developer oversight will be difficult to patch.

Moreover, permissionless games also open the floodgates for exploitative players and bots. Existing blockchain games, like Axie and Pegaxy, mitigate this issue to some extent through expensive entry barriers, while traditional games handle this through KYC methods and selective bans, but these centralized levers cannot be applied to permissionless on-chain games.

To some extent, the problems of blockchain games bear a striking resemblance to imperfect real-world institutions that are difficult to change due to social entrenchment and collective action problems (think of imperial systems or democratic politics). These issues must be faced collaboratively by the community and core developers, finding entrepreneurial solutions and creative mechanism designs to curb misconduct rather than directly censoring them.

A Brief Note on Blockchain Games

Blockchain games largely still exist as proof of concept. Developers are still trying to figure out the best ways to scale, and the terminology is quite fragmented. Lattice calls it autonomous worlds, Bibliotheca DAO calls it eternal games, Etherplay calls it infinite games, and Topology calls it "on-chain reality."

The above are just a few examples of new rules emerging in blockchain games, but the possibilities are endless. Just as DeFi's open composability allows tokens to interoperate and be sliced and diced in various ways, because each dapp's root exists as a shared state on the blockchain, so too will fully embracing blockchain games.

Create your own ERC20 token as currency in the game. Create any imaginable social structure—religions, nations, factions—and put it on-chain. Write your own quest lines, reward or punish with tokens, and link them to immutable smart contracts.

To call this "in-game economy" is a misnomer because they are not isolated from the real world as traditional games are. These are value economies of the real world, blurring the lines between creators and players. They exist permanently on the blockchain. They have the potential to evolve continuously from countless spontaneous decisions of private individuals, experimenting with new ways of production and trade without restrictions, providing players with infinite avenues to acquire economic value.

In Conclusion

I have been quite harsh in my attitude towards existing blockchain games in this article, but it is worth noting that web2.5 games still offer stronger ownership than traditional games. Web2.5 games at least provide players with the freedom to exit. Unlike traditional games, where assets are protected as intellectual property and cannot be sold, players can sell their tokens in the game and be rewarded for their time.

However, what makes web2.5 games better than traditional games is also a shortcoming compared to fully on-chain games. Off-chain game logic hinders games from fully leveraging the potential of blockchain technology. Only fully on-chain games will seriously utilize the human ingenuity allowed by open and permissionless blockchain infrastructure.

Some of the greatest works and genres in video games are products of emergent orders. They embody a common pattern: game enthusiasts and amateurs "play around and figure it out." The fervent MOBA (Dota) and tower defense genres both originated from the custom game modding community of Warcraft 3. PUBG was originally a mod of the FPS shooter DayZ, which itself was a mod of another FPS shooter, Arma 2. Counter-Strike is a mod of Half-Life, which was one of the most popular games of the 90s.

Blockchain games simply elevate this to a new level.

Finally, special thanks to ludens, Ronan Sanford, guiltygyoza, lordofaffew, and cha0sg0d_ for their helpful comments on this article.