The On-Chain Gaming Thesis

We are on the cusp of a golden age of building decentralized applications on blockchains. The trailblazers of this revolution may surprise you – it’s not finance, venture capital, or NFTs. Instead, it’s gaming.

On-chain games are video games whose state exists entirely on the blockchain. Their core code is written as smart contracts. In the past, cost and speed restrictions have disabled the development of on-chain games. Now, thanks to innovations in Dapp tooling, and fast, cheap layer 2 blockchains, we can finally envision fun on-chain games. We are seeing the rise of on-chain applications as developers platforms.

I define the on-chain gaming thesis as this: on-chain games will be the frontier for technological advancement of blockchain for the next five years. Web3 game developers like MatchboxDAO are building the toolkit for future consumer-facing Dapps.

Let me explain why.

Reason 1: Games Need (a ton of) Innovation

Up until now, Dapps have been designed for finance. Dapp developers have prioritized short, heavily audited smart contracts to keep gas costs cheap and prevent expensive hacks. Interactions with blockchains have been too expensive to build large on-chain code bases.

On-chain games require complex smart contracts. We are just starting to think about the challenging technical solutions to their relatively simple problems. These projects will impact Dapps across all markets, not just gaming. Here are some examples:

Hiding Information

Hidden information is common across all genres of games; it’s simply when one player knows something not everyone else does. In poker, for example, you are the only person who can see your hole cards until the hand ends. Countless games use hidden information to create unique mechanics.

Since all data on the blockchain is public, early web3 games like CryptoKitties do not feature hidden information mechanics. Anyone can see the entire game state by reading the blockchain. To feature secret information a game must use highly technical cryptographic tools, like zero-knowledge proofs, and commit-reveal protocols. They allow a player to verify their secret knowledge without revealing it.

Hidden information protocols are critical to creating cryptographically-verifiable security on public blockchains. They can be used to protect user data and create private transactions in a trustless, verifiable manner.

Code Organization

For the first time, smart contracts are becoming code bases. Games require complex logic to be fun and dynamic. Smart contracts have size limits, and don’t automatically share state and interoperate.

Innovation is required to create modularity within and between games, and allow for smart contracts to become elegant, upgradeable pieces of code. These tools can be used throughout the next generation of complex Dapps that need well organized, upgradeable code.

Infrastructure & Standards

The standards that exist on platforms like Open Zeppelin focus on security, access control, and tokens. Games need to go further and define a single language that defines how they are structured. This includes elegant definitions of in-game assets, gameplay mechanics, and physics. Once multiple games use these base libraries upon which to build, they will work together and communicate to build larger, meta-games.

Additionally, game developers need better tooling to build quickly.

Infrastructure standards are not just essential to games. All software benefits from interoperable, open libraries.

These examples only scratch the surface of the building that will come in the next few years. Other primitives include music tools, state management, user experience advancement, and artificial intelligence.

Many of these tools are being built openly and collaboratively. Dark Forest, the forerunning blockchain game, has open sourced their entire code base. MatchboxDAO is a community of StarkNet game designers building in public. Others, like Topology and Lattice, are building open infrastructures that will support future development of games.

Most importantly, solutions to building on-chain gaming will impact all of web3. They will be used throughout Dapps, allowing non-gaming developers to build the new internet. Builders from across web3 can harness them to explore untapped markets that will have unseen effects on web3 and the general market.

Reason 2: Gaming is NOT Intrinsically Financial

In comparison to DeFi and NFTs, on-chain gaming supports a tiny community. There is little financial incentive to build or play on-chain games, which are slow, expensive, and have no go-to-market strategy**. While some may see this as a negative, it is a major reason why it will spearhead innovation.**

Why is this?

Money Men Aren’t Interested

On-chain games are still too rudimentary for money men to extract their value for profit. We are potentially years away from a marketable blockchain game. The only people interested in participating are the intellectually curious or technically skilled. This means on-chain gaming communities consist solely of innovators, without the baggage of venture capital or scammers.

On-chain gaming communities innovate freely, without the implication of huge paydays or tight deadlines. Historically, these environments have driven innovation and produced world-changing products. I expect to see the same from on-chain gaming.

On-Chain Games Create Value

Web3 is rife with scammers, grifters, and rug pullers. Speculators are drawn to crypto trading, DeFi, and NFTs, and get-rich-quick schemes follow. Tokenomics encourage people to accrue tokens, with which they can purchase other tokens, and on and on. Instead of value being created, it is moved from one token to another.

Games, on the other hand, are not financial. Their primary goals are creating fun, community, and unique experiences. In other words, games create value. This value can be captured to generate sustainable methods of revenue. New tools can be tested and used in environments focused on quality instead of fast profit, improving the final result.

Now is Just the Beginning

If on-chain games are so promising, why have we not seen them explode into relevance already?

Up to now, it has been too expensive and slow to realistically build on-chain games. Now, with the invention of Ethereum layer 2s, transactions may finally be cheap enough to support gaming. ****One such example is StarkNet, a decentralized ZK-Rollup. MatchboxDAO is building fast, cheap on-chain games and primitives on StarkNet.

Developer tooling is growing more advanced. Coding environments like Hardhat are adding features, and new tools like Foundry are offering new ways for engineers to build their code quickly and inexpensively. Cairo, StarkNet’s primary coding language, is still primitive, but is still seeing massive growth in popularity as developers discover its intimate community and innovative projects.

Most importantly, skilled builders are uniting for the first time. The leaders of on-chain gaming met to present, build, and hack together recently at DEFCON in Amsterdam, hosted by 0xPARC. At the same time, StarkWare hosted a hackathon that brought together cutting edge StarkNet games like Loot Realms and Briq. Most exciting of all, innovators are building together at MatchboxDAO, the first on-chain gaming community.

Gaming is the only web3 community overcoming major technical problems and building in a low-stakes environment. For these reasons, it will be the frontier for technological advancement of blockchain for the next five years. If you want to locate the people creating value in blockchain, come join us at MatchboxDAO.

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