Report by LK Venture: In-depth analysis of the past, present, and future of Full On-chain Games.

Original author: Cynic, LK Venture Researcher

Speed Read (TL;DR)

What is a full-chain game?The challenges and solutions facing the entire chain gaming industry.

Why do we need full-chain games?

What chain is suitable for developing a full-chain game?

What game is suitable for the entire chain?

The past of the whole-chain game: decentralized, trustless, let's open a casino here.

The current state of the blockchain gaming industry: High-performance public chains make blockchain gaming a viable option.

The future of blockchain gaming: From blockchain gaming to on-chain society?

What is a full-chain game?

Full on-chain game refers to a type of game that stores game logic and data completely on the blockchain. The operation and interaction of this type of game are based on smart contracts, which can fully leverage the advantages of blockchain technology, including decentralization, zero trust, verifiability, transparency, and traceability.

Full-chain games are in contrast to partial on-chain games. Partial on-chain games only store some game elements (such as game assets, transaction records, etc.) on the blockchain, while game logic and data processing still rely on traditional centralized servers.

Some on-chain games can be divided into: core logic on-chain, asset on-chain, and achievement on-chain, depending on the content that is put on the chain.

Core logic on-chain, generally refers to storing the key data and algorithms of the game on the blockchain, which can ensure its fairness and transparency. For example, putting the random number generator (RNG) or combat result calculation logic in the game on the chain can prevent cheating and manipulation. Or, putting the economic system part of the game on the chain can design more diverse and innovative incentive mechanisms. For example, players can earn token rewards by mining, staking, or participating in in-game activities.

By putting assets on the chain, virtual items, characters, or other resources in the game are usually represented in the form of non-fungible tokens (NFTs) or fungible tokens (FTs), allowing players to own, trade, and manage these assets, providing economic benefits to players and incentivizing them to participate in the game ecosystem.

Achievement on-chain usually refers to players unlocking certain achievements in the game and choosing to register them on the blockchain as proof of their gaming level. It can also serve as a credential for future airdrops, but cannot be directly traded. Compared with asset on-chain, achievement on-chain provides much less economic incentive for players, but also allows the game to return to its essence. "After all, the most important thing about games is to have fun."

Game types defined based on the degree of on-chain activity

Challenges and Solutions for the Full-Chain Gaming Industry

The concept of full-chain gaming has been proposed but has yet to be widely adopted. LK Venture has summarized that this is due to many practical issues that exist in reality:

1. Performance and scalability issues: The processing power of blockchain networks is relatively limited, especially in terms of transaction throughput and confirmation speed. Full-chain games may cause network congestion and delays, affecting the gaming experience. To address this issue, developers need to research scaling solutions, such as sharding technology, state channels, and layer 2 scaling.

2. Transaction costs: Every operation in the entire chain game needs to be submitted to the blockchain as a transaction, which will incur corresponding fees (such as Ethereum's gas fees). If the transaction cost is too high, it may limit the participation of players and the playability of the game. Reducing transaction costs requires considering optimizing transaction structures, using more energy-efficient consensus algorithms, and other methods.

3. User experience: Compared with traditional games, the whole-chain game may face challenges in terms of user experience. For example, users need to understand and use cryptocurrency wallets, handle private keys and transactions, which may be a barrier for ordinary users.

4. Privacy issues: Due to the public and transparent nature of blockchain, player data and transaction information in the entire chain game may face the risk of privacy leakage. Protecting player privacy requires the use of technologies such as zero-knowledge proof and privacy computation, but these technologies may further increase the complexity and development cost of the system.

5. Game design limitations: Due to the performance limitations of blockchain technology, fully decentralized games may not be able to implement complex game mechanics and real-time interactions. This means that decentralized games may be limited in terms of game types and gameplay, making it difficult to adapt to high-performance requirements of games such as large-scale multiplayer games and action games.

High-performance Layer1 and the recently popular Layer2 are expected to reduce transaction costs and improve confirmation speed, effectively addressing problems 1 and 2. Account abstraction AA can lower user barriers and solve problem 3. ERC-4337 has passed the audit on March 2, 2023 and will be deployed on the mainnet, paving the way for widespread use of account abstraction. Zero-knowledge proof technology has been proven to effectively protect privacy and solve problem 4. As for problem 5, do we really need to put all types on the chain? The answer is probably no.

The main challenges and solutions for the entire chain gaming industry

Why do we need full-chain games?

There are still many questions about the full-chain game industry. Why do we need full-chain games? This question is somewhat similar to asking why we need permissionless blockchains.

The primary prerequisite for a full-chain game is excellent transaction performance. Short confirmation speeds can bring a better gaming experience, and a good ecosystem can provide supporting infrastructure for the game. Security is crucial for protecting game assets, and independence ensures that the game is not affected by other events on the chain, causing network congestion. There is no silver bullet in the real world, and each solution has its advantages and disadvantages. Game projects can choose according to their own design characteristics.

What game is suitable for the entire chain?

LK Venture believes that the full-chain game should leverage its advantages of being fully on-chain, rather than simply migrating the operating logic to the chain. In other words, full-chain should not be pursued for the sake of being full-chain, as it is a means to an end, not the end goal.

What types of games can leverage the advantages of blockchain technology? LK Venture believes that there are two types of games that are most suitable.

One approach is to use a blockchain-based Multi Party Game (MPG) that is open, transparent, and verifiable. Interestingly, "Game" can refer to both a game solution and a game theory solution.

Multi-party means that the game is not standalone, not the interaction between people and fixed game logic, but the interaction between people, and the permissionless blockchain allows everyone to have the opportunity to participate in the game.

Game theory implies that all parties are adversarial, and through the entire chain, we ensure the fairness of the game. The openness, transparency, and verifiability of the blockchain prevent game designers from tampering with the results.

The most direct form of MPG is gambling, and more broadly, various types of card games and turn-based strategy games can also be classified as within the scope of MPG. The characteristic of MPG is that the number of interactions is relatively small, and it tests the player's thinking ability rather than reaction speed. The various parties involved in the competition obtain a fair judgment through the blockchain.

Another type is the User Generated Game (UGG) that utilizes blockchain technology for openness, autonomy, and ownership.

In this type of game, the initial designer only sets a minimal core rule set, and users can use their imagination and creativity to explore various types of gameplay based on the core rule set. With the support of AI models, users can more easily put their creativity into practice and benefit from the blockchain's ownership of their creativity.

There is no centralized organization on UGG, only the union of individuals. True autonomy is to delegate governance to each person, which is the most extensive democracy. If you are not satisfied with the core rule set of the original designer, you can always modify it and deploy a new contract to become a new world.

Starting from the smallest seed, with the support of positive feedback, the game will eventually grow into a towering tree.

The Past of Full-Chain Gaming - Decentralized, Trustless Gambling Markets

On November 1, 2008, Satoshi Nakamoto released "Bitcoin: A Peer-to-Peer Electronic Cash System". On January 3, 2009, the first Bitcoin block was created. As Bitcoin transactions became more widely known, people began using it for online gambling. In 2012, the first Bitcoin-based gambling game, SatoshiDice, was introduced.

SatoshiDice is a simple Bitcoin blockchain-based gambling game. Players place bets by sending Bitcoin to the game, and the game returns winning or losing results based on pre-set odds and a random number generator. At this stage, blockchain gambling games are mainly limited to the Bitcoin ecosystem and have limited game types.

Satoshi Dice game homepage screenshot

In 2013, the Ethereum project was launched, and its smart contract functionality had a significant impact on blockchain gambling games. In 2015, the Ethereum mainnet went live, and blockchain gambling games began to shift from Bitcoin to Ethereum. Using Ethereum's smart contract technology, developers can create more complex and interactive gambling games. This stage has seen the emergence of many Ethereum-based gambling games and platforms, such as vDice and Etheroll.

In May 2014, Kevin McCoy and Anil Dash created the first known NFT. In 2017, CryptoKitties became the first successful NFT game based on Ethereum, attracting a large number of users. NFT technology has had a profound impact on the development of blockchain gambling games. NFTs can be used to represent unique assets within games, such as limited edition gambling props or virtual tokens, and more and more gambling games are beginning to use NFT technology.

In the summer of 2020, DeFi Summer broke out, and decentralized finance (DeFi) began to rise. The blockchain gambling industry entered a new stage of development. Gambling games began to integrate with DeFi projects and platforms, providing players with more diverse financial functions such as liquidity mining, staking, and borrowing.

During the same period, the public chain track experienced a huge explosion, with public chains such as BSC, Polygon, Solana, and Tron optimizing for the issue of high transaction costs on Ethereum, providing players with a faster and cheaper trading experience.

In the process of maturing in the blockchain gambling game market, some innovative game types and gameplay have also emerged. For example, prediction market platforms such as Augur and Gnosis allow players to bet on the outcome of future events. These platforms use smart contracts and blockchain technology to create a fair, transparent, and trustless gambling environment.

Gambling games are actually the first games on the blockchain. They are naturally fully linked because all the calculations involved in games like guessing numbers and comparing sizes are mathematical, and can be verified through simple hash functions. History teaches us about the rise and fall of things. Despite the negative impression that most people have of gambling, we should not forget that the entire blockchain gaming industry started from here.

The Present of Full-Chain Games - High-Performance Public Chains Make Full-Chain Games a Realistic Option

Comparison of parameters of some high-performance public chains

With the rise of various high-performance Layer1 and Ethereum Layer2 scaling solutions, the feasibility of full-chain games has gradually become a reality. People's exploration of full-chain games has also deepened, and the emergence of the Dark Forest game can be called a milestone event in the development history of full-chain games.

黑暗森林 Dark Forest Game Screenshot

Dark Forest is the first fully on-chain incomplete information game that utilizes the transparent and verifiable properties of blockchain while hiding information that affects the gaming experience through ZK-SNARKS technology. It achieves incomplete information games and restores the environment of the Dark Forest in "The Three-Body Problem" on the chain.

Dark Forest, as an open MMO strategy game, encourages players to create their own gameplay both in and out of the game, which has led to the development of a large community ecosystem. Some players have formed guild organizations and made significant contributions in plugin development, game exploration, and event planning. As a real-time strategy game that operates on the blockchain, every interaction between players is presented on the chain through contract calls and updated in real-time between different players. The "war fog" implemented through ZK-SNARKs technology achieves incomplete information games by obscuring players' vision, simulating the environment of a dark forest.

Dark Forest has proven the feasibility and playability of blockchain games, and since then, the door to blockchain games has truly opened.

Major public chains are cultivating the entire chain gaming track, but the most active one should be Starknet. On Starknet, many full-chain games have emerged, such as LootRealms, GO L2, Isaac, Unstoppable Games, etc., which are very popular. However, considering the still high Gas Fee on Starknet, the launch of games on the mainnet is still a long way off.

From the overall trend of various game projects, there are two main themes. One is strategy-based battle games similar to Dark Forest, and the other is casual games with a focus on financial attributes. Considering the still high Gas Fees, only real economic incentives may encourage people to participate in the games. From this perspective, the latter may be launched on the mainnet faster.

The Future of Full-Chain Games - From Full-Chain Games to Chain-Based Society?

Evolutionary Map of Full-Chain Gaming Ecosystem

From a short-term perspective, the role played by Ethereum scaling solutions led by Rollup is still limited, and anchoring on Ethereum will be negatively affected by other financial activities on Ethereum (such as when the price of the cryptocurrency market fluctuates greatly, attacks by MEV robots cause a sudden increase in Gas fees), and the cost is still too high for more complex blockchain games, making it difficult to attract users based solely on game experience. On high-performance Layer1, due to its incompatibility with EVM, the number of developers is limited, and there is no large user base.

Therefore, in the short term, GameFi, which may still bring higher economic incentives to players, will dominate.

Looking at the mid-term, we believe that Ethereum's monopoly position will be broken, and more high-performance Layer1s will attract a large number of users due to lower costs and better experiences. The technology of ZK-Rollup will become more mature, truly reducing gas fees to the level of traditional world transactions. More customized private chains will emerge to avoid network congestion caused by irrelevant time. On this basis, various complex full-chain games will be truly deployed on the mainnet, exploring more possibilities of full-chain games in practice.

With the development of VR and AR technology, the full-chain game may be presented more vividly in the physical world, connecting the on-chain and off-chain, recording on the chain and experiencing off the chain.

In the long run, games, starting from entertainment, may have real value. The interaction records of each player and the process of the game can be used as materials to train AI and benefit real life. The blockchain's ownership allows each user to control their own data and profit from interactions on the chain. For example, a player's reaction in a racing game can better train an autonomous driving system and provide many boundary cases that are difficult to appear in real life. The emergence of UGG will gradually bring games closer to the social ecology.

After all, human society is also gradually established through the exploration and creation between individuals under a set of core natural laws. It is entirely possible for the chain to develop a unique on-chain social ecology based on the gaming community.

About LK Venture:

Blueport Interactive (08267.HK) is a cryptocurrency investment and research institution under the Blueport Interactive Group, focusing on the Web3 field. Its predecessor was Consensus Lab, which focuses on investing in cutting-edge infrastructure, trading platforms, technical protocols, and financial tools. It has invested in more than 100 projects from North America, Asia, Europe and other regions, including FTX, Polkadot, Filecoin, Casperlabs, Coin98, etc.

Disclaimer: The information and data introduced in this article are all from public channels, and our company does not guarantee their accuracy and completeness. Descriptions or predictions regarding future situations are forward-looking statements, and any suggestions and opinions are for reference only and do not constitute investment advice or implication to anyone. The strategies that our company may adopt may be the same, opposite, or unrelated to the strategies inferred by readers based on this article.

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