By Richard, Investment Manager, Bing Ventures

Developments in Blockchain Game sector

Interaction with Game Dapps Accounts for nearly half of Industry Data

According to the statistics of Dappradar, the interaction with game Dapps has far surpassed DeFi and other verticals as the most common category of on-chain activity. 49% of interaction activity in the blockchain industry comes from Games, with over 1.4 million unique wallet addresses interacting with Games daily, and the total number of transactions sent to smart contracts is approaching 2 million. Overall, gaming-related interaction activity has grown by 65% since Q2 2021, and by 4,330% overall compared to 2020.

Primary Market Investment and Financing is hot

The primary market figures are even more surprising, with $80 million invested in 2020 related to Blockchain Games and $4 billion invested in 2021 to Blockchain Games and its underlying infrastructure, an increase of 5,000% over the previous year and nearly 13% of all investment pens in 2021.

There is no better example of this in the primary market than Animoca Brands, which, in 2 years, has grown from a traditional handheld game company that was forced to delist from the Australian Stock Exchange to the unicorn that it is today in Blockchain Games, NFT and the Metaverse. Animoca Brands is not only the developer of The Sandbox, but is also an early investor in quality projects such as Axie Infinity’s developer Sky Mavis, Decentraland and Dapper Labs. It recently closed a $358.8 million funding round at a $5 billion valuation financing.

The size of Animoca Brands’ investments and the number of shots it has made have skyrocketed in 2021. According to publicly available statistics, Animoca Brands has completed at least 81 investments, with an average of one investment every six days, including Yield Guild Games, Bloktopia, GuildFi, ConsenSys, DeHorizon and many other well-known projects.

Animoca Brands has also made a significant return on its investment from the primary market. According to Animoca Brands’ financial results released in early December, Animoca Brands’ total revenue for the period January to September this year was $670 million. Revenue from investments and digital assets accounted for 79% , at around $529.6 million. And the company held digital assets with a reserve value of approximately $15.87 billion at the end of November.

Animoca Brands has jointly launched a $200 million gamefi investment fund in December 2021 with BSC. Animoca Brands is likely to continue its fast-paced investments in the future.

Exploration of Blockchain Game 2.5

As a fusion of the blockchain and gaming industry, it is probable that Gamefi will diverge in two directions in the future, one of which is the Revenue-based Blockchain Game . The biggest development of Crypto industry in the past two years has been the prosperity of DeFi. Therefore, an unavoidable feature in the Crypto ecosystem is the exploration of revenue, which can also be understood as financial attributes, i.e. GameFi (Game+Finance). Another direction of divergence and also the way forward in future is more inclined to the gaming industry itself, exploring the application of NFT and how to bring fun to players.

1.GameFi of Traditional Games: The Gainfulisation of Traditional Gameplay

The explosion of Axie Infinity brought the new concept of「P2E」to the crypto industry in July this year. Although 「P2E」is still essentially a drumbeat, by taking the money invested by latecomers and the money consumed by players in the game, the profits of traditional gaming companies and platforms are collected and fed back to the players.「P2E] still promises to bring the crypto industry to third world countries and low income groups.

The two countries with the largest user groups of Axie Infinity are the Philippines, where unemployment is as high as 45.5% during the COVID-19 pandemic, and Venezuela, where inflation is high and per capita GDP is less than $2,000. Although Axie Infinity’s average daily earnings have declined below the minimum wage level in the Philippines since November, there is still a lot of room for imagination in many underdeveloped areas. The crypto market has grown from $800 billion to $3 trillion in the past year, and the revenueisation of traditional gameplay will allow these less developed regions to share in the incremental dividends of the crypto market in a simpler way of participation.

The majority of games currently on the market fall into this category, combining traditional game play with the 「P2E」 economic model.This type of chain game project has the following characteristics:

「Mature gameplay with a certain degree of playability」

「Stable&Long-term P2E economic model」

「The game’s lifecycle lies in the operation of the project side」

「Good relationship and long-term cooperation with GameFi guild」

「Thetan Arena」

Thetan Arena is a fairly mature blockchain game with MOBA gameplay + P2E mechanism. Players can choose to fight alone or form a team to fight in the game, with a wide range of hero characters and a wealth of skills.

Hero upgrades within Thetan Arena can help players improve their winning rate and obtain higher profits. For each level, hero attributes increase by 1.5%. All heroes are limited to a maximum number of games per day and a total maximum number of battle. After the limit is exceeded, the battle will no longer receive the token gTHC.

The specific gameplay of Thetan Arena includes double/single battle royale, 4V4 deathmatch, 4V4 tower defense, 4V4 superstar, when players win the game, they can get THC. The game also has eight types of leaderboards to encourage players to participate and share rewards from specific events.

Thetan Arena has a good relationship with most GameFi Guilds, and YGG has also invested in its token and NFT sales, buying 250 common heroes, 100 epic heroes and 50 legendary heroes.

According to the statistics of L2Y on December 8, which is a professional game data and information aggregation platform. The income of heroes of different rarity in the case of 50% win rate and 90% win rate completing the upper limit game is as follows.

To many investors, this type of game seems to be more accurately called “mining game” in essence. Heroes of different rarity are similar to mining machines with different computing power. The process of playing the game is mining. As IOSG’s Alex said, “P2E is a great marketing tool, but definitely not the core driving force behind the rapid development of blockchain games.”

2.Crypto’s GameFi: Gamification of DeFi Products

The entry point on the Crypto side is DeFi products and likewise, brings relatively stable benefits to users. A high-quality DeFi project can achieve double-digit interest rates by providing liquidity, lending and staking, while banks in most countries often offer savings rates below 5%. Crypto’s GameFi actually gamifies the elements, rules and usage tutorials of DeFi products. Such an attempt not only improves the enjoyment of users in the process of use, but also lowers the barriers to entry of DeFi to a certain extent. This can transform users inside and outside the crypto world.

「DeFi Kingdoms」

DeFi Kingdoms is a pixel-style game based on Harmony. DeFi Kingdoms presents the process of DEX trading and liquidity pool management (LPs provide liquidity to get rewards) as a game. Users participating in the game are participating in the DEX Trading and liquidity contributions. In addition, DeFi Kingdoms has also created more playable game content based on NFTs. Players can get rewards through daily tasks of heroes of different professions and collect rare NFT game assets.

「DeFi First」

The development route of DeFi Kingdoms is to get the DeFi product right first to ensure stable and sustainable income for users. Early participants of traditional DeFi products tend to execute a ‘mine-withdraw-sell’ operation after earning high returns, and continuously dumping the Tokens obtained from liquidity rewards into the market. Many emerging DeFi projects are unable to attract more capital investment after the sell-off and are not sustainable.

Lock-Up Mechanism

In response to this problem, DeFi Kingdoms has set up a lock-up mechanism. The JEWEL rewards obtained by players for providing liquidity will not be unlocked all at once. LP providers can only receive a portion of the rewards each time, and the other part will be locked and released proportionally at certain intervals. This mechanism protects JEWEL from the risk of selling pressure, avoiding the risk of a ‘mine collapse’ and making it more sustainable.

Source: https://docs.defikingdoms.com/how-defi-kingdoms-works/the-gardens

Dispersed liquidity

DeFi Kingdoms has also designed a bank within the game, where players can enter the bank and interact with the teller to deposit JEWEL into the bank (locked position). During the lock-up period, they will receive a share of the platform’s transaction fees, and there will be the occasional NFT airdrop rewards. The bank will use “xJEWEL” as JEWEL’s lock-up certificate. Through this certificate, players can withdraw the lock-up assets at any time, and they can withdraw them all at one time. The “bank” link disperses the liquidity of JEWEL.

「Enriching the game content」

Having designed and gamified the DeFi product well, DeFi Kingdoms began to enrich the game content by giving users more playable gameplay. The gameplay revolves around the ‘hero’ character, with each hero differing in terms of attributes, class, profession and rarity. Within DeFi Kingdoms, players can buy land and build their own kingdoms, and can also perform daily tasks.

Daily Goal for Different Occupations

DeFi Kingdoms has four different occupations and a wide range of growth paths for heroes.Heroes have four occupations: farming, mining, fishing and foraging. Heroes of different occupations have different skills, and the energy consumption of each occupation is also different. Each occupation has corresponding occupational skills, and each time a hero performs a relevant profession quest, players have the opportunity to increase the hero’s skill and level. As skills increase, so does the hero’s ability to receive rewards from that class.

At present, DeFi Kingdoms games only open the occupations of mining and gardening, and the other occupational functions are still under development, and the occupational functions of foraging and fishing will be opened in the later stage.

Kingdoms

Lands are highly collectible NFT in DeFi Kingdoms, and the owner of the land can receive a portion of the income generated on the plot. Players can also explore resources on the land, and have the opportunity to find rare materials and equipment for heroes.

In addition, players can build building upgrades on the land to increase rewards. The player’s buildings on the land can improve the player’s efficiency in the game. Some building types can provide passive bonuses for heroes, improve task efficiency and attributes, and some building types can allow players to obtain higher pledge rewards in the garden. .

Land can be bought and sold at real estate offices in the capital, including all upgrades to the land and all buildings built on it.

3.Crypto Native — On-Chain Games

The crypto industry’s exploration in this direction will lead to the growth of original and innovative on-chain games. Such chain games often appear in pixel style, which are in perfect harmony with the native residents of crypto world, such as Wolf Game, a pure on-chain game that combines NFT with gaming mechanics, and Worldwide Webb, an open-world MMORPG Game that combines NFT with interoperability.

「The Wolf Game」

Wolf Game is a fully on-chain game launched at the end of November,with pixel-style NFT as the game’s core. The game demonstrates the possibility of interaction between ERC-20 and ERC-721 protocols. Through the design of the game’s gaming mechanics, players’ NFTs can acquire other NFTs (ERC-721 tokens).

The Risk Game Mechanism of Games

There are two types of characters in the game, and the actions that sheep can perform include:

“Enter the Barn (Stake), where a sheep can produce 10,000 WOOL a day (Proportionally calculated to the next day)”

“Sheepshearing (Claim), the player can get 80% of the wool from the sheep, and the wolf will charge a 20% guarantee tax on the sheared wool in return for not attacking the barn. After the tax is collected, a single wolf will share WOOL, which will be distributed proportionally by the pledged wolves according to their Alpha value”

“Leaving the barn (Unstake), the sheep needs to stay in the barn for at least two days, that is, after producing 20,000 WOOL, the pledge can be released. At this time, there is a 50% chance that the WOOL on the sheep will be stolen by the wolves.”

The action that wolves are ale to do is relatively simple. During the pledge process, wolves can obtain 20% of the WOOL produced by all sheep in the barn, and steal newly minted sheep or wolves.

The total number of wolf and sheep NFTs is 50,000. Each time a player creates a new NFT, there is a 10% chance of being a wolf and a 90% chance of being a sheep. Each wolf also has a certain Alpha value, which is between 5–8. The higher the Alpha value, the higher the percentage of WOOL the wolf can get from the tax, and the better chance to successfully steal a new sheep or a new wolf.

The first 10,000 of these NFTs were Gen 0, the minting price is 0.069420 ETH, 8,903 sheep and 1,097 wolves have been hatched from the 10,000 NFTs in the initial sale. Wolves and sheep numbered 10,001 to 20,000 cost 20,000 WOOL to mint, wolves and sheep numbered 20,001 to 40,000 cost 40,000 WOOL to mint, wolves and sheep numbered 40,001 to 50,000 cost 80,000 WOOL to mint.

Due to a contract loophole, the game stopped minting after 13,809 NFTs were minted, and there are currently 12,066 sheep and 1,725 wolves in total.

Game Token Consumption — Risky Game

The total amount of WOOL tokens in the game is set at 5 billion, which are mainly used for the minting of wolves and sheep. When the supply of WOOL reaches 2.4 billion, the in-game pledge of wolf sheep will not continue to produce WOOL tokens, developers will receive 600 million WOOL, and the remaining 2 billion will be used as community rewards.

Due to the contract loopholes in the game, after completing the transfer of the contract, the game ended the original wolf-sheep game. Although the game consumes some WOOL tokens by launching two new game characters of land and farmers, there are still a lot of WOOL tokens. The game developers therefore launched the WOOL pouch, a new NFT, to put the remaining part of the 2.4 billion WOOL rewards in the game pledge reward into the WOOL pouch, and based on this, a new risk game mechanism Risky Game was launched.

Firstly, the owner of the sheep can choose whether or not to play the Risky Game. If they choose not to participate in the game, players can receive the WOOL produced before the game is suspended and the WOOL after the game is suspended until the migration starts, but they need to pay a 20% tax to the wolf. If they want to participate in the game, the player has a 50% chance of taking away all the 2.4 billion WOOL tokens in the form of a WOOL pouch, but there is also a 50% chance of leaving all the tokens previously produced to the wolf.

About WOOL pouch:

1. Players can get 10,000 WOOLs in the wool bag immediately after obtaining the wool bag;
2. The remaining WOOL in the wool bag will be unlocked at a constant rate for the next 4 years;
3. The holder of the wool bag can claim the unlocked WOOL at any time, and can also trade at any time (reminder: remember to claim the unlocked WOOL before trading).

Alpha Game

After dealing with the issue of excess token output within the game, Wolf Game subsequently set up a prize pool of 500 million WOOL tokens and based on this launched a new gaming mechanic to play the Alpha Game.

The rules of the Alpha Game are that the 14 wolves of the highest rank (Alpha) are the lead wolves and each of the 14 lead wolves will lead a team of wolves and sheep. Each sheep in the team can contribute 50 points per day, while the leader of the team cannot contribute points and the rest of the wolves can contribute 490, 360 and 250 points per day according to Beta, Delta and Omega.

Attacking and defending between teams led by different leaders can be done by pledging WOOL to gain Action. Action can be used to build fortifications to defend against a single attack by another team, without affecting the team’s points, or it can be used to attack another team, reducing the other team’s total points by 3%.

In addition, sheep and wolves can also change teams at any time, but they cannot take away the previously contributed points (it will be accumulated to the total points of the original team, but the associated rewards will be destroyed), and the contribution points of sheep or wolves will be reset in the new team to zero.

After the Alpha Game is over, the champion team will receive 20% of the total reward pool, and the rewards of the rest of the teams will decrease in order of ranking.

Among them, the leader wolf gets 5%, and the remaining 95% belongs to other participants in the team. The rewards of other participants are proportional to their contributions, 50% depending on the points earned by staking “sheep” or “wolf”, and 50% depending on the WOOL and duration of the pledge.

Wolf Game community member Wolf #1026 has modeled and analysed the gaming mechanics of Alpha Game: https://medium.com/@woolish1026/on-alpha-game-2fa2d8b70c8b

The choice of attacking or defending between teams, the choice of sheep and wolves between different teams, the income distribution of different teams, etc. are all unpredictable variables, which fully demonstrate the richness and complexity of the game mechanism in Alpha Game. This also shows us the innovation of pure on-chain games such as Wolf Game, the exploration of NFT’s application and how players can have fun with interactive activities within the game.

BlockChain Games 3.0 — BlockChain Games that Can Truly Get Users From the Traditional Game Market

BlockChain games are still at a relatively early stage, and there is no blockchain game that can capture users from the traditional game market for a long time. We have long believed that Chain Games and NFT will be the gateway to new incremental funds and traffic for the crypto industry. What we are looking forward to is a blockchain game that can allow players to have enough fun in the game with enough rich gameplay and are willing to consume NFT in the game.

The blockchain games that can really capture users from the game market may not necessarily have tokens, and the overall game design is still biased towards traditional games.

IOSG wrote it in a report, “According to incomplete statistics, buying traffic from the Web2 community to BlockChain Games has extremely high losses. Registering wallets, replacing legal currency, downloading games… Each of these steps will reject a large number of players. In the end, the funnel rate will not exceed 1 in 10,000. Such figures can no longer be described as a failing grade within the framework of Internet products, but can be described as handing in blank paper.”

Right, there are still high thresholds in the crypto world. The financial attributes of cryptocurrencies may conflict with gameplay, since players need a certain level of financial knowledge to enjoy the game. The in-game economic system will not necessarily be in the form of cryptocurrencies. It is obviously more acceptable for players to settle in-game consumption and NFT transactions in the form of fiat currency, and the conversion between the local country’s currency and fiat currency is more convenient and mature.

Dungeon and Fighter is actually a relatively perfect case of blockchain games. Although the game operation is inevitably going downhill now, DNF once had a huge Gold farming industry and achieved a balance between krypton gold players and gold farming players. At the same time, the game developers and operating platform earn a bowl full of money.

There are two things to reflect on with Dungeon and Fighter. The first reason why DNF can attract many players: In the era of 2D games, DNF’s gameplay, game experience and game operability are unique, therefore players are able to have enough fun.

The second reason why DNF is going downhill is precisely because players want fun, not spending money to build equipment. Now DNF seems to have become a daily goal game. After the player goes online, the goal is to build equipment by drawing pictures, and then build another to repeat . The difference of equipment can only be reflected by the increase, and the increase requires a lot of money support.

The gold coins in DNF are actually a good match with crypto tokens. The game satisfies the game experience of krypton gold players, and therefore derived a relatively large gold farming industry . But first of all, DNF can provide a wealth of gameplay, while the current blockchain game is difficult for players to have fun, whether it’s gameplay or the art. Adding crypto tokens will undoubtedly only attract players who come running for revenue.

Of course, this does not mean that blockchain games must not have tokens. On one hand, we believe that a more suitable development route for blockchain games is to provide enough gamepaly and playability first. Players will recognise the value of NFTs, and then it is time to think about the embedding of tokens. On the other hand, we believe that the tokens of blockchain games should be more towards governance tokens, and the main function is to build a bridge between game operation and player consumption.

NFT must be an important part of the game design and players will gradually accept and recognise it.

Ubisoft announced a program called Ubisoft Quartz in December 2021 to launch three sets of NFTs in the form of digital devices such as helmets and guns. These NFTs were made available for free in the shooter Ghost Recon Breakpoint to players who reached certain levels in the game. Gamers can keep these items or sell them on third-party marketplaces.

In fact, there are still a significant number of traditional gamers who are very resistant to NFTs, with more than 90% of viewers disliking Ubisoft’s YouTube video about the move. Ukrainian game developer GSC Game World also abandoned the NFT plan due to strong opposition from players after announcing that the new game “STALKER” would include NFT. Although these game companies also stated that the NFT plan is not motivated by profit, the form of NFT allows players to have more possibilities to trade and collect digital assets.

We believe that such phenomenon is due to the fact that people’s awareness and acceptance of NFTs are still quite shallow, although NFTs have been known outside of fixed circles since March 2021, from Christie’s auction house to luxury goods, sporting goods and many more, the outside of NFTs should not only be the price.

On the other hand, traditional game developers with huge volumes are quite conservative in their exploration of NFTs and games. At present, the application of traditional games to NFTs is only a new form of skin sales, which does not allow players to agree with the value of NFTs. The reason for traditional gamers’ resistance to NFTs is more because they believe that this is a new way for game developers to obtain benefits from users.

Whether NFTs are playable within the game, or whether they have collectible properties, or whether there is a perceived appreciation in the value of investing in NFTs, or whether the process of generating NFTs has value etc., this is a process in which players themselves identify the value of NFTs such as props, assets and skins within the game. Only when players truly recognise the value of NFTs, can NFTs truly become one of the core components of the game design.

As Animoca Brands’ website writes: “Driving digital property rights via NFTs and gaming to build the open Metaverse”. In the past, players’ in-game data and ownership belonged to the game developers. The closure of the centralized server will means the end of all. Players cannot truly own virtual assets such as in-game props, assets, and skins. The confirmation of ownership of digital assets is the revolution that blockchain will bring to the traditional game industry, and it is also the cornerstone of the future open metaverse. Our application of NFT and exploration of chain games are just the tip of the iceberg.

Author: Richard, Investment Manager, Bing Ventures