Is there still hope for ChainGames? Cryptocurrency venture capital Paradigm analyzes the current situation and challenges of GameFi in a lengthy article.

The cryptocurrency venture capital firm Paradigm released an article on the 14th titled "The Open Issues of On-Chain Games," addressing the current problems and challenges facing GameFi while providing some suggestions to current blockchain game developers. Meanwhile, the foreign media Cointelegraph also analyzed the reasons behind the gradual decline of the blockchain game Illuvium. Here is a summary of these developments.

Paradigm's View on the Current State of GameFi

The Importance of UCG in Games

The article first mentions a key focus in game design, which is to empower players to create new content through User-generated content (UCG) rights, achieving lasting engagement. This can mainly be achieved through "Modular Mod" and "Open Economy," which will be detailed below.

On-chain Games

Paradigm also indicates a focus on various forms of current crypto games, particularly emphasizing "fully on-chain games" built on completely open smart contract platforms due to their primary audience being crypto-native users.

They also mentioned the advantages of fully on-chain games:

Composable Modules

Players can add modules or upload code to on-chain games without permission, creating content beyond the game itself or unique to them. Traditional games mostly allow horizontal fragmented expansions that cannot integrate with the main game, such as "Minecraft."

Permissionless Open Economy

Players can use smart contracts to create game economies, not restricted by internal rules defined by traditional game developers. Additionally, players' sovereignty over game assets allows them to freely trade in-game items and even exchange them for cryptocurrencies.

Paradigm explains that the combination of these two advantages will foster a large on-chain gaming world. Interested module creators and players will progressively structure the game and rapidly expand its scale. They will also acquire funds and interact with the DeFi ecosystem, generating a highly complex and free economic market, thus continuously accumulating game content, achieving a positive cycle effect.

Issues and Challenges

Technical Limitations in Game Design

Currently, the infrastructure and development tools for on-chain games are very limited, and issues such as the slow nature of EVM, low scalability of native programs, and high development costs pose obstacles to game development.

However, thanks to some teams' advancements in Rollup technology and Solidity-compatible tools, these issues are expected to be resolved soon.

Additionally, blockchain characteristics may be a concern for on-chain games, including issues like bots and witch problems threatening game mechanisms.

Difficulty in Economic and Incentive Mechanism Design

The economic structure and incentive mechanisms of on-chain games have always been core challenges and will impact game design and player experience.

Paradigm believes the biggest difference between on-chain games and traditional game developers is the need to address the real and risky cryptocurrency market while designing MEV incentive measures and curbing malicious economic behavior, which is as challenging as designing a secure DeFi protocol. This is not an easy task for ordinary game developers.

They suggest that designing with partial player permission could prevent the disruption or exploitation of financial incentive structures. Additionally, introducing order book mechanisms for trading game currencies and items could ensure market stability.

Stagnation of Game Content

On-chain games face significant bottlenecks in game content updates. Game developers need to continually provide new gameplay and products to retain players. However, each update requires a complex auditing process, and frequent major updates may decrease player interest.

Developers often find themselves balancing between "no updates" and "very few updates" for games, some even targeting "single-use no-update games."

Paradigm suggests emulating "World of Warcraft" for seasonal updates, removing inactive modules, and introducing new items. They also propose introducing internal automated mechanisms similar to Bitcoin to periodically adjust specific content.

Conclusion

Paradigm points out that the GameFi ecosystem is still in the experimental stage, unlike DeFi. However, due to its aforementioned advantages, it is likely to continue to advance and thrive. The ultimate outcome, whether it will be fully on-chain games or only partial adoption of smart contracts, remains to be seen.

The Potential Disappearance of Highly Anticipated On-chain Games

Reports, such as on Cointelegraph, show that despite being one of the highly anticipated crypto games, Illuvium has already lost its appeal, with an average of only around 130 daily active players this year, and its ILV token price has dropped by 97% since 2021.

The issues include:

1. Slow pace of substantial game content updates leading to dull player experiences
2. 45% of the total token supply controlled by the team, with only 10% contributed to game rewards, causing insufficient player motivation

It is clear that even immersive gameplay and profound visual experiences cannot prevent the sharp decline in game tokens and player attrition. This aligns with the typical lifecycle of most GameFi games today. Therefore, without a comprehensive structure in various fields, most on-chain games are likely to decline.