#4 Deep Dive - GameFi V2 or Same Old Story?
The First Wave of GameFi failed spectacularly with the fall of Axie Infinity, are we repeating the same mistakes or learning from them?
Welcome fellow investooors! It’s crypto time so let’s dive right in. To access more content find us here on Twitter. Enjoy!
Today we’re diving into one of the hottest narratives that have all it take to hit the mainstream and onboard millions of new users to our crypto world. However, will we see new projects repeating the same old mistakes from the previous GameFi hype in 2021 or novel solutions will take over and bring GameFi hype we’ve never seen before?
Let’s dive in and see for ourselves…
GameFi V2 or Same Old Story?
“Mistakes are the portals of discovery.” - James Joyce
Foreword
Fusionist, Heroes of Mavia, Big Time, Illuvium... With each passing month, the on-chain gaming market receives another dose of interest and excitement with a new airdrop, new game, and new ideas. So, are we truly witnessing innovative solutions along with new games being released, or are these still the same old designs we know from 2021?
Let's see why GameFi during 2021 hype suffered such a spectacular failure and explore whether the on-chain games released today are doomed to share the same fate.
Intro
The last few weeks have seen multiple announcements of new on-chain games, price of GameFi tokens going up, and, of course, the release of one of the most anticipated games in recent months - Heroes of Mavia.
Btw. It’s not goin to be a posh article about Heroes of Mavia, I can assure you. ;)
I'll try to show you certain mechanics and designs that had a huge impact on the failure of 2021 GameFi projects, and although 2021 games failed epically, some new projects still try to employ the same mechanisms with only one future awaiting if they do so… a potential pump and the obligatory dump.
One more thing... if you think that every on-chain game doesn't make sense and is just a cash grab, I suspect you would have said the same about E-sports a few years ago. And where is E-sports today? It's a market valued at $1.73 billion, that grows bigger every year and is building an incredible network effect.
Not every web3 game is a synonym for a cash grab. However, the fact remains that the majority of these so called “games” are worthless for traditional gamers - and I say this from the perspective of someone who has spent quite a bit of time in various game genres. ;)
Alright, let's dive into it.
Why did GameFi fall?
Let's start with the fact that there were many reasons for the downfall of GameFi in 2021/22, and those reasons varied depending on the project. Some were built hastily, others were created by teams that didn't understand gaming at all, and some only had high ROIs to offer due to the GameFi hype.
During the first wave of on-chain gaming hype in 2021, most on-chain games were games only in name. Underneath, they were just another form of crypto farms similar to those we see on daily basis in DeFi protocols. The only difference was the farming method, requiring more involvement than just depositing funds into liquidity pools and withdrawing them on time. In GameFi we had to do more clicking but the final result was the same.
The entire Play-to-Earn model was based on the idea of rewarding players for their in-game activity - i.e “you just gotta play to earn, nothing more… you don’t have to be good at it”. This led to projects that were highly inflationary by nature as such economies needed to print more tokens to keep users engaged. And if we combine this fact with poorly designed - or non-existent, utilities for tokens - also called “token sinks”, we'll end up with game economy that’s bound to fail. The only question being how long will it take…
Looking at games from 2021, the majority relied on this mechanism and that should be no surprise to you. However, after Play-to-Earn lost its significance as a model - or maybe after some P2E game blew up, we saw a wave of projects announcing new and groundbreaking economic models, such as Walk-to-Earn by StepN. However, it turned out to be nothing more than another form of Play-to-Earn with Pay-to-Win mechanisms disguised as something else.
Also, when we see crypto ecosystems like Solana or Avalanche promoting its games, it not only limits their potential userbase, but also creates an entry threshold that too high for the average user. Imagine being a traditional gamer who knows little or nothing about the world of crypto. How possible is it that he will learn about the new game built on blockchain, and even if he learns about it, what’s the probability he’ll go through all the crypto onboarding process to play it? Spoiler… it’s unlikely he’ll play it eventually.
Based on all this you could argue that those on-chain games from 2021 weren't exactly targeting gamers but the mercenary capital – i.e. those who come to farm project’s tokens, boosting their Total Value Locked (TVL), and, in turn, blowing up project’s stats and hype that’s more than welcome. With this setup, game creators can easily cash in on the rising excitement, mercenary capital make millions from farming tokens, and unfortunately, the average player is left with nothing at the end.
Hopefully, now you've got a clearer picture of what on-chain games were all about back in 2021, which should make it easier to spot similar mechanisms in new games that might choose go the same way – unfortunately, quite a few probably will.
However, there's something we haven't seen before… something that holds the potential to be the first on-chain game to break into the mainstream. Sure, I'm using Heroes of Mavia as an example here, but that's because you've likely heard a lot about HoM already so it’ll be easier for you to see my point.
Skill-based Gaming
Just like the name suggests, Skill-based Gaming operates on different principles compared to Play-to-Earn model (P2E), which causes a significant shift in the in-game economy and introduces a wave of changes to the world of on-chain games.
The key change involves blocking or significantly limiting the involvement of speculative capital, often called "mercenary capital." In Skill-based Gaming, this capital either can’t find its way into farming tokens or valuable assets or such possibilities are greatly limited. This in turn allows to keep in-game economy balanced and resistant to manipulations.
Let’s take Axie Infinity as an example. Here, the amount of invested capital directly influenced the financial outcomes - there’s no doubt about it. Players could purchase better Axies which in turn granted them better boosts and higher ROIs compared to the average user. A similar scenario played out in StepN, where more expensive "sneakers" - in-game NFTs, earned more points for covering the same distance. This left little to no room for players to come up with novel strategies as every one of them fell short compared to paying the game with having deep pockets.
Now, let's look at Mavia. Is it strictly a Skill-based game?
Honestly, I'd place Mavia between Skill-Based Gaming and the same old GameFi model from 2021. Why? While it introduces strictly Skill-based elements like the upcoming PvP arena, there's some debate about its core gameplay mechanisms involving the use of RUBY and SAPPHIRE. It doesn’t mean Mavia will share the same fate as Axie, but the question is whether it can be called a “novel game with novel design”?
On one side, we have a game where player skill and base management play a significant role. Confront an experienced Clash of Clans player against a newcomer, and the contrast will be evident.
On the other hand, we have mechanisms that involve earning more RUBY by players who choose to invest capital or using RUBY to get various boosts, such as:
Passive income: Generate passive income by owning and staking Mavia Lands NFTs.
Land lending: Earn profits in RUBY by lending your Lands to other players.
Investing in units and base: Improve your units and base by investing earned $RUBY.
Ah, here we go – mechanisms that make gameplay accessible for players with capital. Indeed, we can use $RUBY to build Legendary Statues that boosts our Base. However, $RUBY also can be used for cosmetic upgrades, like skins for units and buildings. This brings up the question of how much will $RUBY impact the in-game economy and whether it’s going to create imbalances in the gameplay. Also… given Mavia is still being developed, it could take a sharp turn in either direction so it’s worth watching what usecases RUBY will we see being added over time.
If there’s one thing we should acknowledge Mavia for, it’s introducing new mechanics that can significantly ease attracting new players - not only crypto degens, but traditional gamers as well. This isn't just about altering or eradicating "Pay-to-Win" model; it's also about lowering the entry barrier to the point Heroes of Mavia is a accessible to new users as any other web2 mobile game as it’s available on Google Play and AppStore.
So, Mavia finds itself at the crossroads of Skill-based Gaming, old models from 2021 GameFi hype, and borrowing tactics from successful web2 gaming hits. The key now is striking a balance between these approaches because, let's be real, pioneering web3 games need both to draw in two groups: traditional gamers and crypto enthusiasts - or degens , who have enough capital to make hype the reality.
Summary
So, as you can see, even in the modern GameFi scene we'll see new projects popping up that would pretend to be games while in fact all we’ll get will be another crypto projects. However, we’re also goin to see new models and mechanisms being tried and implemented.
The big question is, will we see games that don’t lose their spark when the crypto hype dies down along with the end of the bull market?
When checking out new projects in the GameFi trend, keep an eye on whether they're more about giving advantages to those with money or those with skills. If games keep favoring the money, regular gamers will soon see who'll end up with useless tokens in their wallets, wasting time on a game that's not even close to giving the satisfaction you get from games on places like Steam or GOG.
And now, I'm off to train my reflexes in Sekiro. See ya! ;)
That’s all for today, thank you all for reading this week’s Deep Dive and see you in two weeks time! To access more content find us here on Twitter. See you there!
~ ModernEremite & Crypto o’Clock Team
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