Crypto Gaming, a thought piece

How to think about crypto games

One of the greatest takeaways for crypto natives from the bull market of 2021 is that the next million crypto users will be onboarded through “consumerism”, not DeFi. I define “consumerism” here to include categories like NFTs and Games. Onboarding users into these sectors is easy: the average person on the street doesn’t understand finance, but they know how to desire luxury goods or what it’s like to play games. I think there will a generational opportunity to participate in this paradigm shift, for those who pay close attention.

Below I share my thoughts on crypto gaming in the hopes that others may understand this sector in a simple manner.

Summary

• What does crypto gaming look like today?

• What might crypto gaming look like tomorrow?

• What’re the most critical factors you should be focused on if you’re building a crypto game?

The state of crypto gaming | What does crypto gaming look like today?

• Player POV

  • P2E for now is just yield farming with extra steps.

  • Guilds resemble factories hiring laborers to perform mundane tasks.

  • Financial layers on top of guilds resemble banks offering credit lines.

• Game POV

  • Asset A is used to farm Token X emissions. 

  • For new entrants to farm Token X, they first purchase Asset A from existing players.

    • Existing players can multiply Asset A through some breeding mechanics.

  • The rest of the steps involved in “playing” these games are just extra steps to earn reward tokens and generate positive ROI on the purchase cost of Asset A.

• Sector POV

  • Crypto games in their current form are MVPs for more sophisticated crypto-laced gameplay in the future.

  • Today, crypto games market themselves as P2E because without incentives these games would probably have 0 users. Just as with testing MVPs in any business, test users must usually be lured with finance incentives to use a product.

Revenue streams of a GameFi Farmer

• Revenue Stream #1: farming Token X

• Revenue Stream #2,3,4,5…: multiplying Asset A through breeding mechanics.

  • Revenue stream #2 depends on #1. It grows when players expect Revenue Stream #1 to grow (i.e. higher ROI). 

Where is GameFi headed?

• As with all farms, the key factor which determines longevity of a farm is the price of Token X being farmed. This makes the volume of in-game farming activity positively correlated with the price of Token X. Alas, game devs now must play the role of economists.

Evolving from GameFi to crypto gaming | What might crypto gaming look like tomorrow?

• Crypto games will evolve beyond farming. GameFi gamified finance. The future of crypto gaming will financialize gaming. The difference is where emphasis is placed — ‘finance’ or ‘gaming’.

  • I think that projects which prioritize gaming over finance will win because only then can there be sustainable incentives for players to return.

  • Farmers’ revenue stream will come from genuine players spending for consumption rather than new entrants spending for investment. This makes farmers’ ROI sustainable. Usually this requires a high ratio of genuine players to farmers.

    • The thread below expands on this point:

Quirky Qwerty @QuirkyQwerty_

A thought on #P2E and #GameFi Consider two types of gamers: 1. The Consumer: players who play for the love of the game. 2. The Farmer: players who play to earn.

• Builders will become more thoughtful about how they incorporate crypto into their games. There are trade-offs to using the blockchain such as transaction cost, poorer gameplay UX, poorer onboarding experiences, to name a few.

• Over time I expect crypto games to improve in:

  • Build quality: Currently many games are worse than Y8/miniclip games of the past. We can do better.

  • Gameplay complexity: More “fun” games.

  • Luck- and skill-based currency sinks: Strong sinks keeps games challenging for power users.

Critical points to focus on if you’re building a crypto game:

1. Onboarding experience: how easy is it for first-time users to start playing?

2. Gameplay loops: what will keep users coming back?

3. Currency sinks: what can users do with the in-game currency they earn?

Though the first two points above are typical factors in considering product-market fit (PMF), I think they’re critical because, unlike DeFi, community vibes and player-to-player interactions often form a part of the product.

Lastly, tokenomics make or break projects in crypto, and games are no exception. Designing effective currency sinks to control inflation is crucial in keeping a game challenging.

Conclusion

I know what it’s like to love a game, to hear the BGM on repeat while going about my day. We are not at that stage with crypto games yet. But, I am optimistic about the future of crypto gaming. I believe we will see forms of gaming and use cases of crypto in games that we can’t yet think of today. The amount of talent and capital entering the space is too immense for the state of gaming to remain status quo.

I want to work together with passionate and innovative teams to deliver this vision. If this is you, do reach out and we can chat about product, gameplay, or tokenomics. You may reach me at https://twitter.com/QuirkyQwerty_

Useful reads

• On player retention:

GameFi Player Retention

• Framework on finding PMF:

cpt n3mo @cptn3mox

5/ Then comes evaluating PMF once your MVP is ready Would usually recommend alpha testing within a small group, then closed beta with investors, followed by open beta with community members Evaluation metrics below - works well for SaaS companies and applicable to crypto teams

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