In-Depth Research on Full-Chain Games: Is Crypto-Native at Its Core a Bubble or a Revolution?

This article is about 13,000 words long, with a reading time of approximately 10-15 minutes.

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

Recently, the Pass card for the full-chain game Sky Strife has reached 21,000 ETH (testnet), which has amazed many players from non-full-chain games about the magic of this track. Since the release of "Pong" in 1972, the gaming industry has been skyrocketing, from classic 8-bit games like "Super Mario" and "The Legend of Zelda" to today's highly complex and socially interactive online games like "Fortnite" and "League of Legends"; games are no longer just simple entertainment. The social, competitive, and immersive experiences these games provide have surpassed our past imaginations.

However, with the rise of blockchain technology and the development of encryption currencies, the gaming industry is reshaping our experiences in unprecedented ways. From innovative works like Axie Infinity that closely integrate gaming with the encryption economy, to gaming projects like Stepn that focus on social interaction and innovation, blockchain games are gradually being seen as a hope for Crypto Mass Adoption. People are also beginning to explore new ways to combine gaming and blockchain, asking whether more elements can be put on-chain besides asset tokenization, leading to the birth of full-chain games.

So what exactly is the difference between blockchain games and traditional games?

In traditional games, all 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 blockchain games (commonly referred to as Web2.5 games), such as Axie and Stepn, put assets on the chain. On one hand, players can own the rights to their assets, while on the other hand, it can enhance the liquidity of those assets. However, when faced with the closure of a game, the game assets still face the dilemma of losing their circulation value. The relationship between asset blockchain games and traditional games is more of a complement rather than a replacement, similar to the relationship between food delivery and dining establishments. Similarly, Web2.5 games also face competition from 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 status mentioned earlier, all of which will be processed by the blockchain, thus achieving a truly decentralized game.

To facilitate everyone's understanding, I have summarized the characteristics of on-chain games into the following four points:

1. The authenticity of the data source is ensured by the blockchain. The blockchain is no longer just an auxiliary storage for data, but the true 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 to achieve 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 third-party developers with ample creative space. They can creatively output content and share it with the entire community through plugins, third-party clients, and interoperable smart contracts, even redeploying and customizing their own gaming experiences.

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

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

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

The essence of blockchain games is also games. Understanding the operational model of traditional games is very important and necessary for us to understand and analyze the future of blockchain 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, RPG games 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 occupied 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 as a part of the entertainment and leisure industry, gaming holds a very important position in economic development, with much to explore in terms of the depth of its commercialization and the breadth of its types. It can be said to be the crown of the leisure industry.

1) Why do humans love playing 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 fulfilling human needs and weaknesses from multiple aspects.

1. Escape Reality and Restart Life: The game provides a place to escape the pressures and challenges of daily life. In the game, people can free themselves from the troubles of reality and immerse themselves in a virtual world, experiencing a second life.

2. Burden-free socializing: For multiplayer online games, the game provides a platform for social interaction and is relatively friendly towards socially anxious players, allowing them to engage in activities they want without worrying about the gaze of others in real life and to 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 the rich reward system and timely reward mechanism they offer. 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 territories, 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, exploration compared to the game world significantly increases costs.

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

For certain weaknesses, even multiple human traits, games can cleverly meet the needs and preferences of different users, allowing them to perform well in both the breadth of coverage and providing a Depth of 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 are roughly divided into Shooter, Adventure, Role Playing, Battle Royale, Strategy, Sports, Puzzle, Action, and Simulation game types.

According to data from Newzoo, 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 consoles. The mobile platform shows a slight difference, with puzzle and idle games also being quite favored by users.

2. The Dilemma of the Traditional Gaming Industry

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

1) Game distribution is subject to licensing restrictions

A game license refers to a specific permit issued by the government 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, the content review for games is relatively strict, with a particular focus on content that may have a negative impact on young people; South Korea and Japan have a game rating system, evaluated and issued by relevant national agencies.

In China, the impact of the game license number is even greater. China implements a strict game license number 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 license numbers on July 22, 2021, there was a long period of stagnation until a turning point gradually arrived in April 2022. In April 2022, 45 license numbers were released, and another batch was announced in September and December. However, during the stagnation phase of license approval from July 2021 to April 2022, only a few large companies survived this period, while a large number of small and medium-sized companies faced the prospect of bankruptcy. According to the data from Tianyancha App, more than 14,000 small and medium-sized 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 approval number has become a pain point for countless Chinese companies. Even with the resumption of approval number releases, the shrinkage or constant adjustments of approval numbers have become a Damocles' sword for every game project. In the days without the release of approval numbers, one can hear countless sighs from project parties without funding chains facing bankruptcy.

2) The cost before issuance is 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, there are upfront human resources and infrastructure costs that need to be borne. There is idle time cost during the waiting period for the game license approval. Only when the game license is released, the game is published, and commercial revenue is generated can profit sharing take place.

It is not hard to find that a large amount of costs are spent in the initial stages. Once problems arise 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 stages leads to profitability.