Web3-games. Anti P2E

Web3 is a concept that involves the use of decentralized infrastructure and token incentives to run modern services on the Internet.

Previously, services personally created content, which they then tried to monetize through various promotional integrations on their resource. This is quite expensive, because content creation is a complicated production process. The more competition, the more you need to improve your material in order to keep profits - it's difficult.

At some point, golden heads realized that you don't have to create content yourself, you have to create the conditions for people to create it themselves. That's when social media, the most powerful source of personal content, came into being.

Any social network forces one to interact with people, to try to conform to accepted norms, to participate in the virtual world. The more a social network is used, the more technical information a person leaves behind. 

If it all started with trivial gathering of IP-addresses, matching geo-location, device type, and so on, now there are special algorithms based on self-learning systems that constantly monitor what content you like, what you spend more time on, what users you subscribe to, what transactions you make, and much, much more.

The main objectives of social media are:

1. Collecting as much personal data as possible.
2. Retention of users on the site.

Personal user data serve as the basis for the operation of special marketing tools that make it easier for companies to sell goods and services. It is possible to identify certain groups of people who are most likely to be interested in an advertising offer and thus effectively spend the advertising budget.

Based on personal data, the algorithm produces the most relevant content for the user, creating a state of flux from which it is difficult to get out. It's that moment when you seem to open the feed for 5 minutes, but a whole hour has gone by.

As you browse through the content, the system pops in promotional offers that relate to topics of interest to you. The algorithm is always learning and adjusting to your new interests. It's a never-ending process.

The vicious circle. Personal data is used as the basis for marketing tools, at the same time to retain your attention by customizing the algorithm. At the same time you are being sold even more services and products.

It turns out that services use user content that they don't actually own, collect users' personal data as they interact with that content to show increasingly relevant content, and get paid by companies to use data-driven tools to fulfill their purposes.

Yes, you can always say that services maintain infrastructure, create a convenient product, release updates - it all costs money. However, the skyrocketing profits of technology corporations show that they are not so altruistic anymore.

People's dissatisfaction with this business approach, as well as mass leaks of secret government documents (PRISM) showing that total surveillance of people was being conducted using the Internet, led to the new concept of the Web3 Internet.

Starting from 2017-2018, the crypto market began to actively develop broadly. A large number of projects appeared, trying to create a decentralized analogue of a similar product from the field of technology. 

For example, such attempts can be divided into separate segments:

• Traditional Finance (TradeFi) -> Decentralized Finance (DeFi).
• Centralized Exchanges (CEX) -> Decentralized Exchanges (DEX).
• Fiat money -> Stablecoins.
• Corporation -> Decentralized Autonomous Organizations (DAO).
• Classic games (Games) -> Web3 games (GameFI).

Web3-gaming is a segment that uses decentralized solutions to financially incentivize players and build modern ecosystems.

Players can own and control their gaming assets stored on the blockchain. This means that players have full control over their assets and can transfer or sell them at any time.

The most often talked about P2E (Play-to-Earn) is the concept aimed at creating an in-game economy that allows you to receive rewards from the project for your game activities.

Most people think of Web3 games (GameFI) and Play-to-Earn as the same thing, but we need to separate the concepts. GameFI is a segment that uses blockchain technology to improve and extend the capabilities of classic games. P2E is part of GameFI as one of the solutions for improving games.

Attention to the Web3 game segment has increased after the success of Axie Infinity. The project showed the first massive P2E model of player incentives.

The explosive growth in the value of game assets has caused a massive flow of investment into the GameFI segment. Most funds in the market have opened separate game investment areas.

Since blockchains at the time could not boast good performance, network scaling solutions began to appear, making it possible to release more games.

Scaling Ethereum - Immutable.

Blockchain WAX.

The allocated funds are starting to work with a lagging effect. The bull market was going all the way through 2021, but the investments in 2022 were bigger. Funds are investing in the gaming segment so far, with the second quarter of 2022 standing out in particular. These investments are geared for several years, the funds believe in the segment.

The most important thing in any project is the economic model. It is necessary to balance supply and demand so that everything works steadily.

It has already been described above that the P2E model allows for game tokens as a reward for game activity. Consequently, the tokens received by the player are very likely to be immediately sold on the market - the supply increases. Consequently, we must create conditions such that the price does not fall.

As an example, you can take the already mentioned above project - Axie Infinity.

To start the game, the user must buy in-game pets for ETH tokens, and the platform charges a fee for this transaction. Playing your character, you fight other players. You get SLP tokens and some AXS for winning.

There are two tokens in the game. The control token is AXS and the reward token is SLP.

The SLP token has an unlimited supply, it is infinite. The main task of this token is to create new game characters from a pair of existing characters. Players earn these tokens and can exchange them for money. When this token is used, it is burned out of stock. The cost of breeding playable characters increases as the level of the playable character increases. This allows you to burn most of the new SLP tokens that are unlimitedly produced.

The main purpose of the AXS token is to enable users to influence the game economy, which is the spirit of decentralization. To do this, they can earn them during the game, pay for in-game virtual items, contribute to tokens to the stack, and participate in DAO (decentralized autonomous organization, something like a parliament) votes.

As a result, there are three assets in the game: NFT, AXS token, and SLP. The task of the developers is to try to maintain a balance of supply and demand for these assets, to keep the economy in check.

One of the main problems of the P2E model is multi-accounts. Players create entire offices by playing and earning tokens to then sell them. 

On the one hand there is no problem, because the supply is balanced by the demand, but this is not entirely true. When most of the players in the game engage in this practice, it creates an imbalance between the players themselves. There are more people who want to make money than there are who want to play and develop further. If the game does not attract enough new users to create demand for an asset that is sold by experienced players, then the price will plummet.

The worse the market conditions are, the faster the token will fall, as there are fewer and fewer real players to balance.

Fall Loop. A bear market causes an exodus of users and a decrease in interest in the game. As shown above, the price starts to fall harder, causing even more user churn and decreasing interest for new players.

For people who regularly use cryptoassets this may not seem like a problem, but people who have not previously encountered the crypto market experience great difficulty when buying a basic network asset, setting up a crypto wallet, transferring assets to a wallet, and connecting to the game platform.

The additional element in the form of blockchain imposes its own technical features on the user experience and interface, which current games have not yet solved.

More often than not, development teams are quite small and try to do a quick product launch. To do this, they take an old game idea that has long lost relevance. A blockchain is tied to it and the game is launched.

There are several problems with this approach:

1. A game with an internal economic model was not originally developed.
2. Morally obsolete game, which is not interesting to users.

Games are a whole world. They evolve, the players change. What was popular in 2010 is no longer appropriate for 2023.

Almost 20 years of development - new concept, new graphics, new functionality, new performance, new features.

Therefore, the main incentive for GameFI players remains only rewards, because there is no interest in playing. As soon as a game's rewards stop satisfying players, they abandon it.

The P2E narrative has attracted a large number of developers trying to create the appearance of a project, raise money, and leave. In a bull market, even such projects created an opportunity to make money on initial token sales.

Specialized game lunchpads began to be developed for launching projects, where there were very, very many such projects.

An example is the Galaxy War project. The project was launched on several major lunchpads.

A few important things were touched on above:

1. Investment in the GameFI sector continues to flow.
2. Players do not like the cryptogames on the market.
3. Classic games have come a long evolutionary way. 

It used to be that most games had a linear story and were sold as a separate copy. There wasn't as much competition and it allowed the studios to release interesting games even with the meager functionality that was available.

As time went on, more and more money began to flow into the industry. The competition became more powerful. This forced developers to release games faster, as other teams could implement the idea first.

Production was constantly becoming more complex, requiring more investment. Developers could not rely only on a single tranche made by players when purchasing. Mechanisms were invented to sell the game in parts (DLC). The player buys the main part of the game and completes various updates to make the gameplay more interesting.

But the development continued. Free access to fast Internet caused a new round of evolution, online modes in which you could play with a large number of players began to appear. The social factor began to come into play.

The next stage was the emergence of free (free-to-play) games. Profit in this format comes from the sale of content or game paraphernalia that gives an advantage in the game.

When companies started making money from subscriptions, content, and attributes, the business became like a mathematical equation. From that point on, the unit economy is a very important parameter, because each parameter determines the whole system - how much you earn.

The next stage that is developing right now is user-generated content. Why should companies spend millions of dollars on idea creation, production, when you can give this opportunity to the players themselves.

Companies don't lose as much money, they allow users to make money from their content. Everyone wins.

• Players can earn.
• Content becomes as relevant as possible, as it is created by the players directly.
• The game is getting more interesting and there are more and more users.
• Developers make a lot more money.

Perhaps you have caught deja vu. This was written above, when the concept of Web3 was discussed. The Internet went through the same evolution.

Now the answer to the question "Why aren't crypto-games interesting?" is obvious, they are behind technologically, conceptually, and ideologically. Crypto games are trying to copy something that has long been scrapped by the gaming community.

As modern games increasingly begin to interact with user-generated content, they are associated with transactions and ownership.

Any company that makes a transfer has to identify the final recipient, which is quite a painful process. In this case, each user is an individual, which is even more difficult.

It makes more sense to use blockchain technology, as it allows for transparent transfers without unnecessary intermediaries. The game doesn't need to deal with user identification, as there are fiat gateways - exchanges that act as a verifier. Tie in stabelcoins and there you have it - fast, transparent transfers.

User-generated content has a big disadvantage at the moment. A player can come up with a cool gimmick that will bring in a lot of money, but he is not the owner of it. The legal owner remains the game; if it wants to block you, you can no longer be rewarded for your work.

Blockchain again helps with this. Users tokenize their asset while adding a usage fee. The automation will do everything itself. At any given moment, it will be the player who owns the game attribute.

So why aren't we seeing all of this? Why haven't the developers of projects that have already entered the market done so?

The answer is simple, they had no motivation to do it. Why do it when you can build a game on a crank using an ancient template, superficially implement the economy there along with the token and sell it all to players/investors under the guise of know-how.

As noted above, the game must be interesting, only then can you make money in it, if the internal model and economics allow it. The teams that developed cryptogames in the last bull market did not have the resources for such large-scale projects.

The GameFi investments discussed above are not going anywhere, they are being used by quality projects currently in development.

Examples are cryptogames of different genres. I would even say that they are entire ecosystems. There are many ways to earn money in them:

• Receive project tokens for gameplay.
• Trade game paraphernalia.
• Rent their own pumped game paraphernalia.
• Create game content.

It's much more than P2E, it's an entire industry. Therefore, GameFi cannot be equated with P2E, and the first attempts at GameFi discredited themselves. So we can say that GameFi 1.0 is the basis of GameFi 2.0.

Serious teams, big money, ecosystem support - we'll watch the projects succeed. Cryptology believes in you!