Who is attracted by video games?

For traditional/typical game studios, they act similarly to many other consumer goods manufacturers, making profits by satisfying the needs of consumers. A lot of game players come to different games for fun and pleasure, while game studios design various retailing places to gain money. Nevertheless, not all players have the same willingness to pay or a similar level of time commitment in different games.

Based on the willingness to pay and time commitments, we can simply categorize all players into four categories as follows. Many successful games, especially in crypto, are highly contributed by guilds, who are mainly making a living by playing games and have a high engagement level but not a strong willingness to purchase. Other than guilds, for the general population, more time spent on gaming, higher willingness they have to pay for goods and services in a game. As a result, a successful/sustainable game should have a good chunk of active players and payers, which is the upper right corner in the coordinate system below.

Different ways of increasing player engagement

Usually, satisfaction is the direct metric quantifying how likely players would like to be engaged in a game. More specifically, satisfaction is an attitude formed by comparison between the actually perceived quality and the expected quality of a given game. Obviously, it will be affected by the actual gameplay experience and the expectation set up by outside voices including other peoples’ comments and the image set up by game studios.

To ensure an outstanding gameplay experience, game studios come up with various game categories and different pricing strategies targeting audiences of different preferences and demographics as shown below (source: Global WebIndex Q32019). For example, the Philippines has the largest group of esporters, who play esport games, around the globe. Female players play mobile games most frequently compared to games on other consoles. Similarly, premium pricing, subscription models, and advertisements were designed to target different customers as well. Besides, we have witnessed more investments from game studios in building their “content fortresses” by performing cross-promotion between games.

The other factor impacting players’ view toward a game is social influences, mainly peer group preferences and the opinions of KOLs or stakeholders in the industry. Comments or perceptions of friends about a given game usually work as one main driver for the organic growth of the game, while the promotion of KOLs or stakeholders accelerates the network process of games.

Why gamefi should exist and its current conditions

There are many innovations enabled by gamfi projects compared to traditional off-chain games:

• Crowdfunding realized by NFTs lower the financial barriers for game devs
• Additional channel for publishing games which is borderless, much faster, and cheaper
• A revolutionized promotion that can benefit early adopters more and also foster faster bootstrapping started by those “seed users”
• Game players can also be early investors of games which encourage their engagements in games, who are also early adopters of those games
• In-game user data sovereignty enabled by blockchain technology and protocol like Ceramic Network
• Players actually own the in-game assets and can freely trade them for other crypto-assets (even fiat money, kinda cliche)

More than those above, gamefi can potentially serve as one entry window of the future metaverses on the blockchain, it can be the origin point where people can find their on-chain occupations such as game developers, in-game asset traders, and professional hero trainers, hang out with their friends and have business meetings, like what we have seen in animal crossing. However, there is a still long way to go before we actually get there.

• Current demographics of crypto community: most people in crypto are here simply to make a fortune and usually don’t have enough time to play a single game, while a sustainable time usually needs countless hours of players spent on gameplaying.
• Technology limitation: gameplay usually have high requirements of network performances and faster transaction speed which are unavailable in current public chains. Thus, most gamefi projects have worse visual and poor gameplay design as a sacrifice.
• Shortage of talents: not many game devs and designers have joined the crypto community, which left us with devs of limited experience, which naturally leads to poor playability of current gamefi projects.
• Insufficient time for iterations: most gamefi projects are too young to find their own way of surviving in a long term

Why Ponzinomics is important in the early phase of gamefi projects and potential alternatives?

As we discussed in section 1 -- in an off-chain world, peer group preferences and communications between friends are usually the way how a new game gets ramped up. Research has shown that peer group preferences will significantly affect a players’ WTP. On the other hand, the opinions/attitudes of KOLs in the industry also have positive effects on peer-group preferences, further leading to increased WTP of players. With that being found, it is no surprise that game studios usually spend tons of money on marketing, including paid promotion by social media influencers, referral rewards.

While for chain games/gamefi projects, one main different go-to-market strategy is to return part of project projects back to early users through airdropping, NFT or liquidity mining. Another common way to successfully promote a project is ponzinomics, which more specifically ensures early adopters get rich in an instant. People like the story of getting rich overnight and enjoy dreaming of being one of them. Typically, people will flood in those projects, creating an illusion of booming growth in the corresponding project. However, as long as people cannot make money out of it, users will leave instantly and leave the project with nothing but collapsed token prices and poor liquidity. This is what we have seen in most gamefi projects last year such as CryptoMines and BinaryX.

Are there alternative ways of bootstrapping the network effects while rewarding early adopters at the same time? DeFi projects such as Curve provides us a potential way:

• Staking users’ assets to increase player retention rate: most gamefi projects have this part realized by increasing players’ upfront cost of playing the game
• Free trading of staking voucher: which is basically the secondary market of in-game NFT assets, the biggest issue is poor liquidity of most NFTs, especially compared to many fungible tokens (FT)
• Different ways of generating interests: one main reason why tokens like veCRV have healthy liquidity is that it is directly associated with the profit-making probability of those holders. While in gamefi projects, the chance of making profits out of holding in-game NFTs fluctuates drastically and rapidly. To overcome this, one potential solution is to associate the profits of NFTs with widely-accepted interest-bearing assets. Another way is to limit the number of NFTs or share NFTs used in multiple metaverse/gamefi projects, which is essentially protecting the liquidity of top-tier NFTs sacrificing other long-tail NFT assets.

Outlook of future gamefi projects

• Short-term(<5 years from now):
  1. Potential combination of DeFi and gamefi by either gamifying the current DeFi process or De-financialization of in-game assets (treasury and NFT for example)
  2. More non-crypto native people join with the joining of key industry players like Nintendo, Sony and Microsoft, or idle mobile games
• Long-term (in 5-10 years and even longer): with the evolvement of infrastructure (rendering, computing, transaction speed improvement of Layer 1 or 2, VR, AR and etc.), we will probably see two types of gamefi projects:
  1. Metaverse-like gamefi: it is more likely to be the replicate of off-chain real life (maybe like what we see in The Matrix)
  2. Replicate of current off-chain games

References

Setterstrom, Andrew John. Social influence and willingness to pay for online video games. Southern Illinois University at Carbondale, 2011.