Hello, hi everyone,
welcome to the seventh week of the University of Nicosia's free MOOC on NFTs and the Metaverse,
this is George Giaglis and today our topic of discussion is going to be gaming NFTs,
so we're going to be discussing gaming today.
So today's session, I would dare say is sort of a bridging session because as you know,
this is a 12-week course we've done, we've covered the first six weeks which were about
NFTs,
so we did an introduction and we saw the various use cases and application areas of non-fungible
tokens.
As of next week, we're going to move to the second part of the course which is more about
Web3 and the Metaverse.
And today's session is sort of transit or sort of trying to bridge these two areas in
the sense that it is my personal feeling that many people will first experience the metaverse
through some sort of a game,
so I'd like to spend some time today discussing the various types of games, the history of
gaming, how do NFTs fit with a future of gaming and how these could facilitate the transition
to a more immersive, more persistent digital experience for everyone, what we usually define
as the metaverse.
So we will start by going through a short history of video games, and how it all started,
and I'm not going to, it's totally impossible to cover everything of course, but I'll try
to go through the major milestones trying to give you a perspective in the sense that
where we are today and where we're probably heading tomorrow in terms of our gaming experiences
is something that is very compatible with what has happened so far and although we might
sometimes tend to think of blockchains and NFTs as a hugely disruptive experiences, I think
it's somehow the natural next step in the evolution of gaming.
We'll discuss a little bit the process of creating games, not because I'm going to turn
any of you into gaming designer production experts, again, we cannot do this in the short
time of one session, but because I think it is important to understand the various dimensions
so that we can see why existing blockchain-based games and why existing gaming NFTs have still
not managed to live up to their expectations,
so the complexities and intricacies of the process of creating games make it quite difficult.
We will discuss the main types of benefits that blockchains bring into gaming, namely
the ability to facilitate real ownership of game assets for the players, the ability
to transfer assets between games and to create an interoperable in-game or across-game economy.
We'll discuss it a little bit later again, not trying to do an exhaustive review.
This is everything that we're discussing are still phenomenal that is under development,
so we're just going to see where we are today and what the potential next steps might be
and maybe talk a little bit about the size of the market in-game.
As usual, our disclaimer, this is educational material only, so although I will be referencing
a number of projects in this presentation, none of them is included for anything else
apart from as an indicative example for educational purposes.
So please do your own research if you decide to delve more in-depth into any of the projects
that are mentioned in this course.
So, let's start with the first argument that I'd like to make.
The argument, as I've said, is that games can be thought of as very early examples of
Metaverses,
so those of you in the audience that are already gamers know what I'm talking about
because you know that many of the MMORPGs that exist out there look and feel like what
most of us think about as the Metaverse.
Obviously, with a very specific setting of the virtual world and a very specific objective
and gameplay and the types of things that are happening are not like a virtual world
as a whole is a very specific, narrow virtual world, but a virtual world nevertheless,
so I think as I've said that games can be thought of as proton Metaverse, so very
early examples of a Metaverse and I think many of us are going to experience the Metaverse
through games.
I like this definition of what a game is,
I'm not really sure that we need the definition, but nevertheless, it's always good to start
with a common perspective.
A game is an interactive experience, so it's something that is between players or between
a player and a computer and is an experience that provides a player with an increasingly
the challenging sequence of patterns which the player learns and eventually masters,
so most of the games will make the player go through a series of steps, tasks, challenges
or whatever that are of increasing difficulty until either the player loses or the game
concludes with some successful and some games have an objective, others you still continue
playing for as long as you can and there's never a natural finish and successful finish
to the game.
So according to this definition, you can think of video games as having three main components.
One is a user interface, so the player needs to somehow interact with the game, and usually
this would happen through a console, a joystick, a controller, or some sort of motion sensing
device or what have you.
There needs to be a video display device early on, it might be our TV, now a computer monitor,
tomorrow maybe a virtual reality headset, but there needs to be something that shows
us the virtual world through which we traverse while we're playing the game and there needs
to be a storyline, there needs to be a setting, there needs to be a context, there needs to
be a virtual world in which the action of the game takes place and if you think about
it, the combination of these three things, so having a virtual world out there, a virtual
the world that is displayed in some sort of output device which could be immersive, it could be
a virtual reality headset.
The last ability to interact, live and do things within this world sounds a bit like what the
metaverse would be about, I mean we'll formally define the metaverse next week, but I think
most of us would agree that a virtual world in which we exist as a character and do things
and receive feedback and interact with other players or with the virtual world is what
a metaverse is all about, that's why I'm saying that video games can be thought
of as sort of metaverse type of experiences.
The history of video games is quite old, I mean beginning of the 70s with things like
Zolk, for those of you that are into text-based, a bunch of games or with arcades like punk
which was the first ping pong-themed arcade game and you see here on the right the type
of the game that I'm talking about, but remember this is 1972, we're 10 years before the introduction
of the personal computer, so this is a very, very proto type of experience in an arcade
type of interface where you have very simple two-dimensional graphics effectively, two
players or one player and the computer, is controlling a dash that moves up and down
the screen and there's a ball moving in between if you might not cut the ball and throw
it to your opponent, then the game continues, if you don't then you lose a point and this
is how it all goes.
Pong was developed by Atari, one of the very famous gaming computer developers of the 70s
and the 80s, Atari has a very special place in my heart along with the Commodore and the
ZX Spectrum and all these computers because these were the first types of computers that
I interacted with, so Atari is a legend in the early computer gaming era, Pong was a
very interesting game, it was created by a guy called Allan Alcorn and it was not created
to be a commercial game, it was created as a training exercise given to Allan by his boss,
one of the Atari's co-founder Nolan Bushnell, so Allan did such a great job that Atari thought,
wow, we gave this as an exercise but there's probably an opportunity here to commercialize
this, so they did and they commercialized it like this, when we're talking about games
in the 70s, this is the setting that we're talking about, stand-alone, special made,
you know, whole 'cupboards' that included a screen and they, and some controls as you can see
here on the left there are two controls for the two players that are playing Pong and
there's a coin-inserting machine, so you would go to a mall, to a supermarket, to a shop that
had arcade games and you would play this game for money, there were no computers, there were
no, there was no way in which you could do this at home, the big revolution and the big
advancement in gaming was when we made the transition from arcade consoles, so when computer
games started the kind of home entertainment again from the 1970s, you can see on the right
a picture of two kids playing the same game, this is Pong now, but now they're playing
it at home in a console that is connected to the home computer.
This, the fact that games entered our homes created an explosion in the types of games,
so there are, I mean, nearly countless genres of the game today, games would most typically
be categorized according to the interaction and the game place will have adventure games
or fighting games or puzzle games or shooter games or sports and so on.
And another big distinction is whether we're talking about first-person or third person
games, so like the picture that you see there on your left, you are the character holding
the machine gun but you never see your actual avatar, you never see your character, the
the whole world revolves around your own point of view.
In the third person games like the example we see on the right, you control a character
that you can see in front of you and you see how he or she might interact with their environment.
Another way of classifying games could be according to their dimensionality, so we'll
have 2D games, the early examples of games where we like have very crude graphics both
for the avatars and for the surrounding world, so Super Mario as you can see there on the
left is an example of such a game and I'm not trying here to make an argument that says
that two-dimensional games are worse than 3D games, they are just older and there's
a different type of modality of interacting with a virtual world and I'm saying this
because I might be proven wrong here but contrary to what most people expect or predict, I think
there's going to be a sizable market for metaverses in the beginning at least of the commercial
era of the metaverse where the world around us would be deliberately simple, so everything
in a computer is a model of reality and we can decide what type of abstraction we want
to have against that reality, so many designers and producers and providers and then users
I think would choose to go to simpler models where they can focus more on the social interaction
rather than be consumed by the elaborate details of the worlds around them but that's one possible
direction and some people will take that path, others might choose to go to a more realistic,
photorealistic I mean games, so we have 3D games now like the most you see on your right
where your view of the world is essentially a 3D camera perspective, either first person
or third person as we discussed and there are some games in between these two like the
payments from the middle from Wolfenstein which was the first game that popularized the shooting
games, a genre where there was a sort of a pseudo 3D environment in the sense that everything
was in reality 2D, there were no 3D models there but the use of two-dimensional sprites
creating the impression to users that they were seeing a 3-dimensional world. Now the
most important distinction of games and most important for the purposes of this lecture
because again trying to make a point that would lead us to NFTs and Web3 is that most
video games would be classified as what we call RPGs like Role Playing Games in the sense
that when you play the game you assume the role of a character and you take control of
the actions of that character, so most of video games are RPGs. One sub-gender of
RPGs that became popular especially in the 80s and beginning of 90s, was what we would
call multi-user dimension, originally it was called multi-user dungeon or multi-user domain
games, it became popular with the art from the MUD anyway. Dungeon because it started
from adventure games that used to take place in the worlds characterised by dungeons
and the distinguishing characteristic of these games was that they were typically text-based
or storyboarded. So there were no elaborate graphics, and sometimes there were no graphics
at all, a player would enter a world that was usually fantasy or science fiction inspired
world and they would receive text-based descriptions. So you are now in the forest you see you know
housing front of you, this was typical like the introduction to Zork, one of the first text
based adventure games but the distinguishing characteristic of MUDs was that they were
multi-player, there were many players that could play the game at the same time and they could
have either an adversarial or a collaborative relationship between them depending on the
game and how it works, so sometimes you would know be there to kill other players or
to cooperate with them in order to achieve some objective and this sounds sort of like,
you know, trivial today but it was far from trivial back then, the ability to create worlds
that would accommodate many users. So MUD types of games were the first games
that created an internet type of experience for the users back then in the early 90s, many
people back then discovered what we call today the internet so a worldwide connected network
of computers through playing such kinds of games but because of you know bandwidth or
technology limitations these games were usually very limited in terms of their graphical interfaces.
Now, RPGs and MUDs came together and evolved into what today we would call MMORPGs or massively
multiplayer online the wrong playing games which are video games here we're talking now
about virtual worlds that have you know a very significant graphical interface sometimes
with a very high degree of photorealism and allow a massive number of players I mean I'm
talking in the range of even millions of players to play the game at the same time. Another
distinguishing characteristic of these games and this characteristic that is very important
for us is that these games feature what we would call persistent worlds, in other words
we're talking about games where if you as a player stop playing the game the game still
continues to exist, other players are there, the world evolves, things happen, so next time
you go back online you might find a very different environment because things have happened while
you were away and this is something that, okay for the younger people here that you know the
first types of games that they got used to were MMORPGs might sound like a natural thing but
for us it's a total revolution it was a total revolution because previous types of games
existed only as far as long as I was playing them the moment that I stopped playing the
game when you know I got offline or when I got the game over sign the game didn't exist
there the world stopped existing it came into existence and it stopped being there when
I entered and when I stopped playing the game. MMORPGs are the first example of persistent
worlds and as we will be discussing next week because persistence is a very important defining
characteristic of the metaverse, I would say that you know most early metaverses
is that we will say enjoying some type of real commercial success in the sense of having
many users in them will feature some sort of game-like persistence in the experience of
the users. Now these games have become hugely popular those of you that play such games
know that already for those of you that you know all these are new there are games like
World of Warcraft where the total player count of people that have accounts play that game are,
like you know, in the in the hundreds of millions and there might be more than a million people
playing the game at the same time around the world so we're talking about really really
popular really successful and mass-adopted games in the respective communities
and this has resulted naturally in gaming being a huge industry, I mean I come
from a blockchain and crypto type of background into this course so for me, the fact
that the whole crypto industry is worth around a trillion is, mind-blowingly
hugely successful but we're talking here about an industry in which the
number of cryptocurrency users are measured in the hundreds of thousands of millions
around the world, here we're talking about an industry in which almost half the world more
than 3.2 billion people worldwide play some sort of computer game, many of these people
play MMORPGs but not only that and there's a very aggressively growing e-sport industry
where the audiences have grown to more than half a billion people in 2022 so you think
about it, almost one in every two persons in the whole world are playing games and around one
in sixteen people are watching video games being played competitively by other players so this is
a huge industry and if it somehow makes the transition to Web3 it's going to be
a killer app for blockchains, for Web3 and for NFTs in general. The global gaming
market is projected to be worth more than 250 billion dollars by 2025 so we're talking about a huge
industry, there's console based marketplaces where you can get games like Nintendo,
PlayStation or Microsoft Xbox and stuff like that, a whole industry of course in mobile games, iOS,
Google Play for Andriod and so on, a huge number of websites and a huge number of platforms
that provide access to gaming to desktop computers of which I think Steam is the largest, they support
around 70,000 gaming titles. The industry is huge and being dominated by players that come from all
backgrounds so you see technology companies like Microsoft, you see consumer electronics
companies like Sony, you see game studios like electronic cards and games like Rob
Blocks being in the top 10 of the gaming industry and you see the top 10 companies have
market caps that range from tens of billions of dollars to, okay Microsoft has a huge market
cap but it's not only gaming, so we're talking about a very very big industry that might make
the transition towards Web3 in the coming years. Now this was a very quick introduction
to the history of gaming and how we have arrived where we are today with NFT games but before
discussing this I'd like to spend just a few minutes discussing game development. So
the games that you saw a couple of static images from in the previous slides like
world of Warcraft or Minecraft or similar types of games are very very complex competitive
projects to develop, they need huge teams of engineers, of artists, of designers and of
producers to be coordinated and to be able to create something that is not a one off thing,
it's not like a Hollywood movie where you might also need a similar type of
array of people coming together and coordinating themselves for a limited amount of time until
the movie gets out to theaters and then that's it, here we're talking about an ongoing process
of always improving, developing and evolving the game while the game is being played
and especially in the case of MMORPGs you need to be able to deploy
upgrades in real time while millions of people are using the product so we're talking about a very
complex and there go and I'm saying this because I want you and I want people like me
also to be a bit lenient when it comes to judging the gameplay, the design and the general
complexity and sophistication of blockchain-based games that we see around us because we're
trying to compare what huge companies with billions of dollars of market cap and thousands of employees
are able to produce after 10 or 15 years in the industry, with what a team of five
or ten start-upers might be doing in a whole new technology with whole new types of assets like
fans of the lot non-fungible tokens and sometimes I see reports saying, yeah but none of
these games are fun to play or sophisticated enough or whatever what do you expect did you
expect that you know a team of people that have just released a game that there's no
trodden path and there's no prior learning or whatever would be able to achieve anything close
to what a very sophisticated professional public company making billions of dollars is
producing, I mean, it's sort of expected that you would see the types of games that we see in the
in the blockchain and the crypto world today. So anyway, coming back to the team you would need
engineers obviously and not only people that would actually code and program the software but
especially when we're talking about console-based games, also people that would design and
manufacture and integrate the hardware on which the software will be running, you would need a huge
array of artists because you would need people that would define the concept, what is the game
vision of the storyline and everything, you would need people that would do the 3D modeling
of everything within the virtual world, the environment, the characters, the assets you would
need texture artists that would add textures and details to the 3D models created by the
modulus, you would need people that would spend their time working on lighting and motion capture
and sound and all these things. If you attended and watched the discussion of (Punk) 6529
with Beeple the other day you might remember how much time and energy Beeple was
telling us that he was he's spending when he's creating his digital art, not in actual
modeling or customizing the models that he started working from but actually is sculpting or
photographing or playing with the lighting around these objects that he creates. So you will
need designers, you will need people to design the mechanics of the gameplay, to design the modalities
of player interaction and so forth and you need a production team that would actually bring
everything together would deal with this as a project with specific milestones and
deadlines and phases and what have you, and they was they would liaise with the business units
that would commercialize or market or sell the game, so we're talking about very big teams and
that's why sometimes we make distinctions between what we call indie and AAA games so there are
publishers that can afford having all these things and they are like they're the Hollywood type of
of actors in the gaming industry and there are indies so an indie game would be produced by an
independent studio or a small number of individuals and this is all the games in the blockchain
world, I guess. I spoke about mechanics so the mechanics of the gameplay is a very very important
thing because it defines all the rules and procedures that guide the player and they also dictate what
the game responses to the player's moves or actions can be; an interesting thought here is that
many/most of the games that we have today, in order to not confuse the player or not
create a steep learning curve for a new player, try to adhere to the laws of physics so you
know when you leave an object in the game it will fall down you know pulled by gravity as it would
in the physical world however, you understand of course that there is no reason for this to happen
in the digital world, we are free from all these constraints so in the metaverse sphere I would
expect that we would see some very original or experimental modalities regarding game mechanics
or world function mechanics where the world would not necessarily work as it does in the physical
world, so we might you know free ourselves from the limitations of the physical world in these environments.
Another important aspect is creating assets and here you would need to have access to
quite sophisticated software for 3D modeling either to create characters as you see in the picture
in the top of the screen which is I think from blender one of
the open source types of software for 3D modeling all creating the details like the last
and best practices in the machine gun that you see in the image below which is from
a map software I think is from 3D Studio Mark so you would need to have all these things to create
assets and here I'm still talking about design and creating the assets you would need to enrich the
assets that come from your 3D modeling software and you usually start from some sort of mathematical
polygonal type of structure to create and add texture and details and lightning and stuff like
that on top of this and all this work is still to create the asset itself which could be part
of the virtual world, could be a playing character, it could be a non-playing character within a game,
it could be a weapon or a shield or a uniform or you name it, and has nothing to do with the actual
gameplay and ownership and transferability and where you would be able to find and how you would
be able to sell or swap or trade these types of assets, so the learning outcome here is that
creating a sophisticated competitive game is a very very competitive process. There are there
a number of game engines so there are a number of software environments that can be used to
allow game designers to bring everything together so 3D modeling gameplay mechanics as a creation
interaction between players and non-playing characters and so on, examples are the unreal engine
or unity or cryogen that you see here in this slide and there is also a huge body of work in
developing standardized libraries for APIs and software interfaces for either 3D graphics
processing hardware like your GPUs in your computer, like OpenGL and WebGL or more proprietary types
of APIs like DirectX by Microsoft for those that are programming games on Microsoft platforms.
Now having said all this and I understand that this is a very very
quick and shallow introduction to the technologies and processes around game creation
I would like to focus the remainder of our time on what we're interested in today, like
what happens when the technology of blockchain when cryptocurrency when fungible tokens and non-fungiable tokens (NFTs)
meet gaming, how might we see the future of gaming through this
this lens and as I've said in the beginning I think that there are three major
types of implications that blockchain will have in gaming, blockchain being a technology that allows
for value creation storage and transfer over computer networks, I think it will have a substantial
effect on gaming because it will provide a much-needed layer for storing and transferring value
in gaming and I think there are three things there, one is asset ownership so who owns the assets
in a game, there's this famous story that Vitalik Butterin thought of a non-centralized Ethereum
when I don't remember which game he was playing but they deprived him of one of the weapons
or sheilds that he had managed to earn by playing the game and he realized that although
he thought that because this was in his inventory it was his it was actually not there was not, there's
no real ownership of your character, your avatar, your asset, your weaponry or whatever when you're
playing a game, everything is being controlled centrally by the game provider so if they want
they can throw you out of the game they can,
block your account or they can
deprive you of any asset that you might have had so blockchain will change all that
because it would allow people to actually really own their assets that they use in the games and
when I say really own I mean they would have the ability to not only trade them with other users
but also do that and many other things outside of the game, so when you are when you have the asset
in your wallet as an NFT, you might use it in this particular game but the asset becomes also interoperable,
it can be used in other things so for example many of you have minted the course access token
for UNIC, this is a token that give you access to some of the material for the course and certainly
the exams so it's a token that helps utility within the ecosystem of this course but nothing
stops someone from creating some other experience which could be educational, a game or what have
you and have this experience token gated controlled and affected by the ownership of this token
so have created something that is accessible only by people who happen to have this asset on their
wallet so assets become more important than the games themselves, I don't know how many of you
are familiar with projects like Loot (for Adventurers) or the N Project in the NFT
space but both these projects and many others have flipped the idea of a game
on its head and they said why should we create a game and have assets only within this game
and not create the assets first, so create a set of weaponry and
shields and shoes and helmets and so on with different powers and different degrees of rarity
and aesthetics and so on and let everyone use the collection of these, this becomes an NFT
collection of assets in the games or arts or experiences that they create, so we're talking
about a wholly different perspective on how we view games if we have blockchain-enabled NFTs as
assets in them. And the final the effect of blockchain into gaming is the ability to create
in-game and sometimes (hopefully in the future) across game economies, so create whole economic
structures with supply and demand dynamics in which value is distributed to users and controlled
by the users within the game and not monopolized by the platform creating the game itself. So again
NFTs allow for true digital ownership for game assets so if you hold your character or
avatar as an NFT you are the real owner it cannot be taken away from you any asset that you buy
or you collect while playing the game can also be an NFT and then you can swap or trade with other
players without any intermediaries and without any possible censorship by the game owner and they
can also exist as I've said outside the game as independent entities that might have other
users or internal values so the collection of these four properties that you see in this slide
create a revolutionary, I would dare say, environment on how assets in games can be thought of that
was simply not possible in the pre-blockchain world even in the MMORPG era.
This has created a number of experiments, one of them that I'd like to spend a few minutes
discussing because it has received quite some attention by the community (at least the blockchain
community) is the so-called played-win games so as the names suggest these are games in which
the economics go to the next level because they allow their players to play the game for some sort
of a financial gain. Not in the sense of gaining from other players so like betting and battling
and whoever wins takes the money and wins the bet but in the sense of creating adding value,
creating new value that is created by playing the game itself. There are typically two broad
categories, those that are called "free-to-play" games, so you you can start playing the
game for free although if you do that you most probably will be limited in your ability to
to gain money from playing it, or, the so-called "pay-to-play" games in the sense that users will need to be
equipped by some sort of NFT so you would need to get an avatar or weapons or your shoes or whatever
so you need to buy NFTs you need to invest in the game in the beginning and once you've made
that investment, depending on how good you are in the game and how powerful or rare the properties
of your NFTs are, you might earn money usually in the form of some digital tokens which has fluctuating
value so whether these games would be able to create sustaining economies is a different
question that we're going to see in a while. Typically in such games players will be able to create
or breed new characters so you would be able to you know literally breed your characters and create
new ones that you can either use for playing or sell in the marketplace, you would be able to purchase
items either within the game or in third-party marketplaces and you would typically be able to
unlock or earn additional digital assets or tokens by playing the game depending on how long
you played or how good you are at it and so on. The archetypal example here is actually infinity,
I'm not going to spend so much time on it because I think it's old news now but I don't
think any discussion about "play-to-earn" would be complete without discussing. Actually because it
was the first game that became hugely successful I mean at some point a year or a year and a half
ago there were lots of people, especially in countries like the Philippines where it was
extremely popular but were actually doing it as their job, they were making money by
playing the game. What is typical about Axie is that they pioneered this dual token structure so
these games usually have more than one type of tokens so they have both fungible and non-fungible
tokens and the fungible tokens usually are split between a governance token in the case of Axie
Infinity it's the Axie Infinity Shard and the AXS token and a utility token in the case of Axie Gold Smooth
(I thought the small anyway smooth or small) love potion the SLP token which is the
reward token or the utility token that people would earn and there's also NFT tokens in the
the case of Axie the playing characters are NFTs the Axie themselves as well as tokenized lots of
land that act as forms or basis of operation for the activity. The game is about battling
with with other opponents your Axie against them so it's mostly a card-based game in which
players playing Terrence is not very interactive. There are a number of games that have been developed
following on the same or similar ideas. I have just some indicators examples here so Alien
Worlds or Galaxy Fight Club or Gods Unchained they are I would dare say and forgive me because it's a
very simplistic type of description and maybe unfair to them they are advanced versions of Axie
infinity in the sense that they follow a similar trajectory in terms of creating environments in
which characters fight or battle each other and players might make money if they
win against their opponents. A different Sam Zendre is the one in the bottom,
projects like Stepping or Genopets which are what we would call "move-to-earn"
games in the sense that they would reward users for their daily movements so the more that you
walk or run or in the case of Genopets is much more complicated because you have
this virtual pet so on top of banking steps you might do other things it's
more move-to-earm and plat-to-earm type of game but all of them (or most of them) have the same
basic underlying economic structure in the sense that there are a number of NFTs so in the Galaxy
Fight Club you have your fighter and you have weapons that this fighter is equipped to
and depending on you know what type of fighter or what type of weapon you might have different
abilities in battle and so the outcome of the game would be a combination of your skills combined with
the types of assets that you own. In the case of Stepping how much money you would make
would depend on a combination of factors like you what type of shoe you have (so this is an
NFT) what type of added properties you have equipped these shoe with and different shoes have different
properties and these properties have different values so for different uses there are different
optimal configurations of your shoes so quite complicated but at the same time this
complication might increase the joy or the satisfaction that users get
by playing the game. So these types of games exist today but I would like to emphasize that we are
still extremely early in the NFT gaming phenomenon not only played one games but generally and
I said earlier that we sometimes tend to be unfair to the people that are creating these games
because we compare them with huge conglomerates that have been hugely successful
in monetizing Web2 types of games but these people are startups that are trying to redefine an industry
and it has proven to be very challenging to create a self-sustaining in-game economy. So as I've said
most of the projects are using a dual layer structure so both fudgeable tokens and NFTs
and a multi-tokens structure within its layer so you might have a governance and a utility token
and multiple NFTs but I have yet to see a successful token economics mechanism so if you
if you witness most of the projects they follow a trajectory in which at least if their utility
token doesn't have enough utility it tends to fall in value because people would sell
it if they have nothing to do with it within the game and this of course creates a selling pressure
that combined with the infinite supply utility tokens that most projects would follow
will result a in a death spiral for the price of the token. It is interesting because
some analysts go as far as claiming that the play-to-earn movement itself is not sustainable
because giving monetary rewards may prove to be bad for player retention because it weakens the
the internal motivation that players would have at playing the game, I'm not sure I subscribe to this
line of thought I think there's a very huge incentive for people to play games for some
monitary gain and if we are true believers in our conviction that Web3
is about taking value from the platforms and giving it to the users then all these
billions that we discussed earlier, being made today by the gaming industry and being shared by a
small group of companies that control it, we will flow through to the end
users if and when we start finding self-sustainable economic models for that. A more
fair criticism is that most games today seem to emphasize the tokenomics that I discussed
earlier more than game design but we have to understand that for game design on blockchain we have
huge technical challenges which at the moment prevent us from creating 100% decentralized
games, remember the metaphor I used earlier, we are in the early days of the internet so as the first
popular games in the internet era where months there were games that allowed many people to play
together but they were text-based or storyboarded because you couldn't have sophisticated graphics
in the primitive internet infrastructure we have the same thing here, we have blockchains that are
very slow, transactions are public so you cannot have a real-time game, you cannot have game in
which if I do something and this something creates a transaction on the blockchain and this
is published you know 12 seconds later in Ethereum then my character will wait for 12
seconds before it fires a bullet out of their weapon, this is a very bad user experience
so we need to solve these technical problems but I'm not worried about technical problems like it
happened in the early days of the internet and many people thought back then that this would be
the lack of speed or security or whatever would be something that would
condemn internet to oblivion and of course, it didn't happen, I am sure that the technical
challenges will be solved. In the meantime we will be looking at games that are only partially
decentralized and when I say partially I mean the characters, the avatars and the assets are
decentralized they exist on public blockchains and they are truly owned by the players but the
gameplay mechanics are still centralized and they happen on centralized servers. So concluding
this session I would like to just emphasize four points: Number one is that gaming is huge
and if gaming moves to blockchain and mass this will prove to be a killer application for
NFTs I know that with (Punk) 6529 you've discussed a lot about art and generative art and PFPs and
all these things and these are all fine applications but I think gaming is going to prove to be one
of the killer application of NFTs and of course PFP collections and even generative and stuff like
that has a huge role to play in gaming. The second takeaway is, I think that blockchain
will act as the value layer in games providing three things, one is true ownership of assets by users,
number two interoperability of assets so the ability to move assets across games and, number
three, creating sustainable in-game and across-game economics. Take away number three, there are still
significant challenges to be overcome many of them are technological and design oriented, we still
haven't figured out ways in which we can move game mechanics to the blockchain and some challenges
are economic we still haven't managed to find the perfect balance between governance,
utility and non-fungible tokens to create a self-sustaining economy within a game.
Finally, keep in mind and we'll discuss this next week with (Punk) 6529 in more detail that games
can be thought of as early examples of metaverses and may
yet prove to be the application type through which most people will have their first
work-free exposure. As always we have some further reading for you and this concludes
the slides for this week. If you have questions let me move to Discord. I mean as usual, you can
see in the screen you can ask your questions in the OM Chat or on Twitter using the #NFTQnA
hashtag my colleagues will have probably already started feeding questions on Discord for me so
let me switch and see if I can find them there and I have my colleague Chris Christou from
the UNIC Virtual Reality Lab with me in case there are questions that are more technical
because as I said I don't come from a gaming background I might call him to join me in
answering them so let me see. So there's one question that says "is it actually sustainable
to release a token for a game that can be exchanged for fiat?" well that's a
million dollar question. It's certainly this is the case we have it is proven by the gaming
industry that people there's lots of people out there there's a big market for gaming so there's
lots of people that would actually be able to open their wallet and pay money to play a game,
they pay literally billions every year to play games. Whether this could translate into a sustainable
mechanism through which money flows into an in-game economy in blockchain and allows that value
to be multiplied between the users of that economy and somehow shared between those that
create the game, those that play the game and those that provide the foundational infrastructure for
security and scalability so the underlying blockchain is something we
need to see how this could happen. I have to say that out of the examples that I showed you earlier
and all the others that I've seen in the NFT gaming space this hasn't happened yet and I think it
has happened for two reasons. One is that there hasn't been a game yet that would attract people
for the intrinsic motivation, there have not been games like Minecraft or Roblox or
the World of Warcraft or all the other games that have managed to create communities of millions of
people that want to play the game for the shear pleasure of playing the game and even pay to play
that game. Here we have mostly seen people that come in like "Kamikazes", getting into the game to
make a quick gain out of it and this mentality does not help the community of a very particular game
to create a lasting
with real life with games
games
option that is more organic and less important people that play the game because they like it and
they're not ready to leave it to go to the next game because they would make more money in the short term
out of it. I'm not saying it's not
I see myself
some sort of internet
let me know
okay sweet okay I will continue saying that
you know they will not do it
maybe it's a process some of the games that we've seen become useful for a
community or a longer amount of time like Axie Infinity or Stepping might make it
but go through you know so what happened they went down now they will go up and find you know an
equilibrium but I think to answer your question that we will see games and we will see games very soon
that people would be willing to use their tokens inside the game and sell it outside the game for fiat
and there will be a thriving demand
and this is becoming the speed of blockchain transactions
I mean
yeah
question
blockchain scalability is a challenging thing I mean
I've been in blockchain since the very beginning. Satoshi chose a 10-minute interval between
blocks in the Bitcoin blockchain because it wasn't possible to propagate transactions in the network
in a less amount of time so that all miners would know of the latest block
and we'll be able to start working on the next one when the previous one was mineg so
the Bitcoin blockchain had and still has a 10-minute interval between
between blocks
now moved to
my 12 intervals between blocks so in 10 years time because Bitcoin started in 2009, we're not
2022 so 13 years time we have gone from 10 minutes to 12 seconds and there are all sorts of solutions for
scaling that further and new technologies are coming all the time either for Layer 2s like optimistic roll-ups or
zero-knowledge snarks or other ways all for Layer 1s that have much much less demands in terms of
space or computing power or synchronization of nodes and so on so I'm sure that in the future
this problem will be solved but for the time being because games need near-instantaneous
type of reactions, when I have a shooting game and you fire the weapon it's the bullet to go
watch it its target of not hit it's targeting and do whatever it will do instantaneously I cannot
wait 12 seconds I cannot even wait two seconds for the experience would be detrimental so
my personal six times of game the first types of games will be becoming not going to be like
huge requirements in terms of speed that's why we're seeing you know card-based games in which players
play in terms so there's no real-time interaction we see the move to earn type of
standard you get
free for or stepping or whatever because these things do not have with and and real-time interaction
requirements it will probably be a few years before we start seeing the migration of
interactive games to the blockchain today. I have to wait until the holographic technology comes out and
then games will be the ultimate experience, that's very interesting and I think I will answer
this question then we can probably wrap this up. In the reader science world there have been two
technologies that (how can I say) invited radical of researchers at
indifferent points in time one was artificial intelligence that started in the late 60s with
lots of unfair and expectations never managed to deliver much until the
the discovery of Neural Networks and Deep Learning a few years ago and suddenly we have a
solution. The other technology is virtually everything that has to do with the virtualization of the reality
around us, either pure virtual reality or of managed reality has up to nowbeen more hype
than reality so to address the students comment I will say yes, I agree, if and when we see a holographic
technology come out or be too heavy and difficult to use and we'll not have
a huge latency and I will not get dizzy after using them for 10 minutes or whatever,
yes, there's huge potential for virtual long-term reality and also to be extremely
uh and this happened we'll discuss all these in a couple of weeks because we have a dedicated
session in transiting visualization technology, I think Chris would have a lot to say then but
until the time that these technologies become really
let's say, come to go to standard in which they can be commercially deployed for the mass market
need some time so we'll see. Another question is "what incentive do current game designers have
to explore or adopt blockchain in their games, don't they currently benefit from their centralized
approach?" The answer is a clear yes but that has never stopped the world from progressing it's you know
heard this argument time and again and says "what incentive does Kodak have to
invest in digital photography, don't they profit from analog photography?" The answer is yes
they did profit but some competitors will disrupt them and will if they do not adapt to the new
technologies they will die so for the studios and the game designers and the big technology companies
that decide now it should be more to have a centralized approach I'm not looking at
blockchain as an alternative they might be lucky and blockchain never makes it but if it does
you know in 10 years' time many of the household names that we know today will be in history like
Kodak or Fuji in the analog for those businesses and they will be substituted by others.
So, i think this concludes today's lecture, thank you very much for being with us, next week we'll
have a (Punk)6529 discussing the Metaverse, thank you very much for being here and see you next week. Bye bye
you