Among crypto’s hottest trends is GameFi, which brings Web 3’s advantages to gaming. Web 3’s meaning varies by individual but reflects rising demand among people who are spending more time and money in meta worlds to own their virtual assets, free from the interference of platform developers.
But are strong in-game property rights compatible with fun, escapist experiences that users are seeking?
Skeptics are not convinced. They say that GameFi games are not fun but rather merely repackaged versions of the worst elements of decentralized finance (DeFi). Play-to-earn games, some skeptics say, suffer because they are more or less pyramid schemes.
Let's set that issue aside for a moment and acknowledge that fun is subjective. Let’s also assume that just because fun Web 3 games have not arisen so far doesn't mean they won't arise in the future. But let's also point out that a major problem with the Web 3 vision for gaming is that developers believe that closed, non-interoperable environments provide users with a good experience.
The bull case for GameFi hinges on the power of self-custody, open source platforms and composability – the ability of different components to work together efficiently. GameFi promises game players the ability to shape gaming ecosystems. Assets should be interoperable between worlds and inalienable. What does that mean?
For Web 3 proponents, users are passive spectators in the Web 2 world. In gaming, greedy and autocratic developers treat them as cash cows. Web 3’s goal is for players to actively influence game dynamics. GameFi’s vision is that whatever users imagine, should be possible.
Think of user generated levels, user generated items, vast customized quests and challenges, or “better” alternate endings to stories. Games evolve organically, no longer constrained by the rigid vision of a single game developing company. In a world where Web 3 wins, fans don’t have to wait over a decade for the new game Half-Life 3, but can engage infinitely in the Half-Life universe, defeating the Combine over and over again across infinite different scenarios.
Building complex games
Part of the reason why building complex games is hard is that like all complex systems, it is not entirely clear how different parts can interact with each other. Moreover, when you have hundreds of motivated individuals exploring how they can get ahead in a game, some will find elements or combinations of elements that game creators hadn’t considered. These can potentially ruin the experience for everyone else.
A good example of this is the locked jewel saga of Defi Kingdoms. Defi Kingdoms is among the most popular GameFi games, with approximately 150,000 monthly active users. Defi Kingdoms developers had originally stipulated that users would earn jewel tokens by “planting seeds” (i.e., providing liquidity in automated market makers). The majority of the earned jewels would be locked however, with linear vesting at some point in the future. These locked jewels could also be “unlocked” using miners, which are in-game non-fungible tokens (NFTs).
What they hadn’t realized, is that the GovernanceToken contract they forked for the vesting schedule contained an emergency function that allows a user to transfer all jewel, both locked and unlocked. The original intent of this function was to save a user in case of a compromised wallet, but it was then used to create all sorts of secondary markets for locked jewel.
The first market created for locked jewel was a discord server with a trusted third party named Sarah serving as an escrow. This market has since disappeared, with accusations being thrown around on Twitter that Sarah was a man and had stolen money from several market participants.
Permissionless markets then sprang up, such as dfk.market, where people could buy and sell their locked jewel via smart contracts. The most advanced iterations, including the Greedy Merchant Guild, allow users to create a locked jewel “stash” which is then exchanged for gmjewel, a standard ERC20 token that represents a locked jewel. This final step makes the supposedly locked jewel tokens completely fungible and tradable.
GameFi proponents will say that this scenario is evidence of lively communities, and that building these communities is only possible due to Web 3’s interoperability. While this point is true, it overlooks that game developers never intended for users to be able to trade their locked jewel tokens.
This “hack” is not just an issue for the developers. Many other players have grumbled on Twitter that this has ruined the experience for them (as an aside, by this they mean that they think the price of jewel has declined). Finally, the game developers have taken notice of the market, and have now started moves with the intent to kill this secondary market. So much for permissionless and composable.
Building complex systems, like massively multiplayer online role-playing games (MMORPGs), is incredibly complicated. Making them interoperable, permissionless and composable is even more so. In financial systems decentralization, interoperability and self-custody are powerful benefits that reduce counterparty and censorship risk, and increase capital efficiencies. These things come at a cost: Blockchains are slow and clunky.
This additional complexity may be warranted if you are investing considerable amounts of time building a virtual reality that you call home. But is it warranted for people who simply want to have fun playing a game? If you are seeking escapism, would you want to escape to a virtual world with strong property rights, where metaverse oligarchs are significantly wealthier than you ?