Leisure Finance - DeFi’s Next Evolution?

A high-performance decentralized solution to fun on the blockchain

On March 6, Andre Cronje, the “godfather of DeFi”, announced his withdrawal from DeFi, causing token prices and total value locked (TVL) of related projects to plummet, with projects such as chainlist being forced to shut down. This exit served as a reminder of the risks of centralization (whether perceived or real), where a person's personal decisions or actions can amount to the unintended and consequential death of a project. 

In light of the ongoing Russia-Ukraine crisis which has only exacerbated the already tense geopolitical situation globally, many GameFi projects' secondary market valuations have not only been negatively impacted, but also broken correlation in performance with US equities and China 'A' shares, charting an independent course of no return.

Having analyzed the host of common problems running through the most recent wave of GameFi/NFT projects, the fact remains that most GameFi/NFT projects are still centralized, traditional games in essence but with a token deployed on the blockchain. Two crippling areas of concern that have remained unaddressed to date are: Robustness against Centralised Risks & Business Continuity.

Geekcartel seeks to challenge the prevailing misconception of a trade-off between complete decentralization and efficiency, and proposes a high-performance decentralized solution to this trade-off via the structure of a decentralized server completely controlled by smart contracts.

1. What is Decentralised Leisure Finance (DLF)?

Decentralised Leisure Finance broadly encompasses the existing domains of GameFi, Metaverse, and gamified DeFi platforms/ offerings. From CryptoKitties to pioneering virtual land auctions, to trending games such as StarSharks and Defi Kingdoms, their popularity is due to the fact that they've played for leisure!

We have coined the term DLF for the convenience of the discussion that is to follow, in the hopes of creating a single focal point that unifies the common threads running through the related domains that encompass DLF.

2. Data Analysis of Decentralized Leisure Finance

As GameFi currently takes up the largest proportion among DLF projects, with many NFT projects also having gamified aspects or metaverse aims, we shall focus on a data-driven analysis of GameFi in seeking further insight:

2.1. Overall

2021 was a watershed in GameFi’s evolution, with GameFi exploding in popularity due to the influx of talented contributors into the space and strong support from exchanges notably Binance’s. Axie Infinity also catalyzed the market with a meteoric rise in their user numbers and their token’s ($AXS) price, making the concept of the Metaverse viral in H2 2021. This was taken mainstream by the big boys of traditional tech, with Facebook undergoing a symbolic name change to Meta as a signal of changing times.

According to statistics gathered from data platform Footprint, the number of GameFi projects increased twofold (from 671 to 1,297 projects) in 2021 itself, excluding rugpull and short-lived projects. Daily Active Users in the GameFi space have increased by more than 23 times (from 64,000 to more than 1.5 million users).

GameFi’s 1.5 million daily active users seem to be a high watermark. Yet these numbers are still extremely low when put in context with the wider blockchain space. As of the end 2021, the number of Ethereum addresses has reached 180 million, with wallet addresses on Binance Smart Chain (BSC) reaching 110 million and counting.

From a plain reading of the statistics, it is immediately clear that GameFi’s emergence vis-a-vis the wider blockchain space is only just starting to gather pace.

In terms of fundraising, notably from 21 September 2021, investments flowing into GameFi projects increased significantly, affected by the overall hyped market conditions. Referencing the graph above, the majority of project financing occurred at the seed round stage, followed by pre-seed financing.

Considering that high-quality games typically require a development cycle spanning many months to even years, these high-quality games

these high-quality projects will be launched one after another in the future. Although the industry as a whole is considered bearish at this stage. But in terms of GameFI alone, it is worth looking forward to, and there may still be explosions.

2.2 Data Analysis of the public chain to which the game belongs.

In the past year, although the number of Ethereum games has always remained at the top, its increment is lacking. From the perspective of growth performance: the number of GameFi projects on BSC has increased from 8 to 420, which is close to Ethereum, and its growth rate is ranked number 1. The second-largest is followed by Polygon, which has grown by 75 GameFi projects in a year.

It can be seen that the project party's answer to the important question of the choice of the public chain is usually: BinanceSmartChain (BSC), followed by Polygon.

2.3 User Analysis

BSC has only been launched a little more than a year, and the current number of independent addresses has reached 144 million. However, the winner ranked first in the number of daily active users of blockchain games is - WAX, accounting for 30.4%. Followed by HIVE and Polygon, accounting for 30.24% and 14.82% respectively. According to the data from Dappradar, among the top 10 games with the most users last week, the top three were Splinterlands, Alien Worlds, and Crazy Defense Heroes from HIVE, WAX and Polygon. Among the top 10, only MOBOX is on BSC.

Therefore, it is the natural ‘user acquisition’ attributes of games that create vitality for the public chain, not vice versa.

2.3 The problems we are facing today

DLF projects can be roughly divided into two types:

-        relatively centralized and highly decentralized.

The current problem of highly decentralized projects is that their UI has poor interactivity and cannot host open-world game applications; while relatively centralized projects have certain advantages in terms of display and game design, but cannot solve the problem of centralized servers and databases.

The user's connivance has spoiled the GameFi project party leaning toward developing and operating the project in a centralized form, which not only deprives the users’ actual decision-making rights of a decentralized project but also rendered the ecosystem with frequent systemic risks such as lost or embezzlement of user’s fund and rug pull.

Recently, the so-called "decentralized project" Metamask and Opensea have decided to stop serving users in certain areas. Coincidentally, the withdrawal of Andre Cronje caused the related tokens to plummet, and the chainlist project was also forced to shut down.

In the blockchain industry, decentralization is always and should always be the core requirement and element, we still have a long way to go.

3. The solution of a high-performance DLF

Efficiency and decentralization are not incompatible, all you need is

3.1 Scalable smart contracts will be an obligatory skill for contract developers

Programming languages ​​such as Solidity, Rust, and Go are not a problem in themselves. The problem is that the addresses of smart contracts that have been deployed on the blockchain will change after each redeployment, which will lead to loss of users and distrust. Solidity-based upgradeable smart contracts have already taken shape, while most smart contract developers in other languages still ​​have no clue. In fact, the core logic of upgradeable smart contracts is the separation of data and logic.

The data contract remains stable, the logic is stored in another contract, and the logic contract can be redeployed. Every upgrade and modification are logical contracts, and this idea can be applied to any chain available. In this way, the function, logic, and security of the contract can be upgraded, or new plug-in contracts can be added under the premise of keeping the contract address unchanged. At the same time, exploring the formation of a better-depth flow pool between multi-chain through multi-chain smart contracts may also become the next big thing.

Meanwhile, the decentralization of the contract is crucial as well. If the smart contract is only controlled by an administrator's address, it will be meaningless. Since there are already many decentralized governance solutions in the industry, we will not repeat them here.

3.2 The Client is also the Server

In general HTTP/FTP download, the files are only published on one or several servers, when there are too many people downloading, the bandwidth of the server will easily be overloaded and becomes very slow. The characteristic of BitTorrent protocol download is that if more people download, the more bandwidth is provided, and the faster the download speed is. At the same time, there will be more and more users with complete files, making the "life" of the files continue to extend.

This method can also be applied to decentralized games. The current blockchain games are mainly based on “round battles” and character cultivation, which means it does not require a low-latency response speed as low as milliseconds. Based on this situation, the project party can completely abandon the use of centralized servers that can become overwhelmed when the number of users grows too fast, and instead, they can choose:

  1. Based on the P2E complex games, players will be mining while they are playing the game. When the player is playing the game, it broadcasts its coordinates and behavior to nearby users (nodes) so that other players can obtain the user's location and behavior and as well as getting rewards.
  2. Based on a simple game, the blockchain online game is transformed into a stand-alone game + blockchain, that is, open-source of both client + contract. The user runs the client locally and selects the public node of the blockchain - accessing the smart contract of the project party

This distributed game system can conduct slot auctions like Polkadot, providing slots to provide computing power for public chains that require computing power support. And users can obtain computing power income to solve the current situation of zero-sum games in the existing market.

3.3. A self-evolved DLF that is based on UGC

Future DLF projects must be based on user-generated content. What the project party needs to do is to build an open, transparent, and free platform. And more importantly, allowing and incentivizes users to create freely and maximize their talents so that unlimited activity and vitality can blossom.

In fact, users have been exposed to many traditional UGC-based games, such as:

  • Games with strong mod support (e.g. Mount & Blade, The Elder Scrolls V: Skyrim)
  • Basic creative games (eg: Minecraft, Mario Maker)
  • Games that require continuous updating of content (example: MMORPGs such as WOW)

Compared with these existing GameFi, Leisure finance based on UGC content creation will not be limited by the existing framework and can complete the hotfix of almost all content, with greater possibilities.

4. Author’s comment

Leisure financial platforms such as GameFi and Metaverse have only been around for a short time, but they have objectively attracted a large number of new users to enter the market, injecting vitality into the industry and bringing new answers to the growth of users in the blockchain industry.

During the bull market of 2021, the “Goldrush” of various GameFi entrepreneurial teams had an unsatisfactory understanding and technical depth of decentralization. Geekcartel believes that in the next stage, true decentralization will become the main advantage of differentiating competition between blockchain game teams and major game studios, it will also become an important evaluation attribute for identifying the value of blockchain games along with the number of users and game production level.

For the 100+ DLF projects that Geekcartel has analyzed since the beginning of 2022, most of their current solutions are only to use the model of traditional games with tokens or create some NFT auctions and FOMO methods. The problem of depleting creativity is worrying.

Geekcartel believes that the development of Leisure Finance is far from limited to the so-called economic model innovation of a traditional game that issues a token. We believe that the future of DLF is to usher in the real 2.0 era with a set of decentralized solutions that can operate with high performance.

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