Games and the Metaverse—and their three-pronged problem

The computer gaming industry is over US$90 billion a year in size. But it is dying; or rather, it is evolving to something less player-centric, from something you buy and play towards a way to monetize player engagement. Since the advent of computer games, starting with Pong, the early TV entertainment systems of Atari, and the arcade games of the 80s, the model of gaming has been about pay-to-play, which is a simple economic transaction, you pay a fee whether per play or one-time, and you could play. This is changing. Currently, we find ourselves on the cusp of the end of the old era of gaming and fast approaching a new and vastly different model: pay-to-win or play-to-earn. The first was introduced through the advent of online gaming, and the latter with the introduction of non-fungible tokens (NFTs).

Both have serious downsides and reprocussions for gamers, as we will explain. But first…

What is it that we are trying to solve?

1) Game monetization that is positive achievement based as opposed to addiction engagement-based
2) NFTs that actually have value and existence, instead of gimmicks or thinly veiled get-rich-quick schemes
3) Fix play-to-earn to play-to-learn (and earn)

Part 1

In the early days, the gaming monetization model was simple: you go to an arcade, put in a quarter, and play a game. Usually, the games were progress based with a set number of lives, and in order to progress further, you needed to put more quarters into the machine. The exchange was obvious; you paid per play. In the 1990s, when games started showing up on home computers, game designers were given the freedom to develop more ‘long form’ story-driven games (think movies) with an arching storyline, starting with RPGs and strategy games. Notable games of this era are Wing Commander, Baldur’s Gate, and of course, Warcraft. This format had a monetization model where you paid $40-60 upfront for the whole game, and you could pay all you liked. Once again, the player knew exactly what they were paying for. But this would all start to change with the advent of the internet and online games.

With the drastic drop in cost for internet access and bandwidth availability, game designers could develop games that allowed players to collaboratively play together or against each other. This started the genre of real-time strategy games led by such titles as Red Alert and MMORPGs such as Ultima Online. With the ability to compete against other players over the network, a new form of online gaming was born, which culminated into the zenith of the online gaming industry with masterpieces such as Blizzard’s World of Warcraft, StarCraft, Call of Duty, which eventually lead to the creation of the genre: ‘E-Sports.’

Though for all the good that real-time first-person shooters and other forms of online gaming brought to the industry, it did present a problem for game developers—if games were becoming more of an ‘ongoing’ ‘open-ended’ activity without any in-built storyline—how could they get paid for the ongoing upkeep and updates to the game? Does it even mean the same thing to release a final copy? Also pressing was the fact that once you have seen a movie once, people tend not to rewatch it.

If game designers weren’t telling a story, but instead providing an online “arena” for players to engage with each other, then the “pay once for all you can play” monetization model didn’t make much sense anymore. After all, maintaining the game platform has constant ongoing costs, so the monetization model must adapt to reflect this reality. A move to a subscription model was only natural. If players treated gaming more like watching TV, then they should go with the revenue model of a TV network or service.

But with this small, benign change, the whole industry would eventually unravel…Designers are no longer incentivized to give the players a good out-of-the-box experience, well-written game storylines, or even a final product turned first to Downloadable Content or DLCs, which were add-ons to the game and added more gameplay at a cost. This evolved into game elements that were not designed with good player experience as the goal, but intended to be addictive and habit-forming. Treasure loot boxes, power-packs, “gems,” “coins,” and “mana” upgrades were all meant to keep the player addicted to the game. Thus the micropayment monetization model was born. In-game currencies were created, and ‘power packs’ can be bought to give players an edge. Pay-to-win (where those who can afford to pay more have an advantage in the game) and play-to-earn (where players play the game only to grind out a daily wage) models were created, gameplay suffered, and players became exploited.

Games stopped being fun, and some started to be more of a grift. With crowdfunding platforms such as Kickstarter, games are no longer required to deliver a final finished product to earn revenue. Instead, they started just developing open-ended ‘universes’ and sold their ideas to thousands of people. Star Citizen, Chronicles of Elyria, The Day After were all games that promised high expectations, but constantly failed to deliver, either missing deadlines or having bait and switch on deliverables. In previous decades this would not have been possible, but in the last ten years, it is possible to continue to make money from crowdfunding donations even without a finished product.

So the number of games that may never get delivered, yet raised (in the case of Star Citizen) over $400 million in funding, is frankly astounding.

Clearly, game monetization, as it is today, is broken.

So this is the first prong of what we are trying to solve: The broken game monetization model. We want to be able to create games that are not just grinding sweatshops or speculative gambling in a thin game veneer. We want some element of educational, creative, or entertainment value in the game, whether in the form of a good inspirational story that teaches some wholesome morals, which makes the player curious or smarter, or games that teaches the player useful real-world skills. But if the player is more of a ‘student’ than a gamer, then that won’t work as well, so we need to incentivize the players to engage with the game, not out of a sense of habit or the ‘falling behind’ negative reinforcement loop for which they need to get a daily ‘addictive hit’ but as a positive feedback loop of personal achievement.

One approach is one that we are doing with the frobots.io project. It is currently a game under development that seeks to address these three major gaming problems on a web3 platform. Frobots seeks to allow the players to build and code their own frobots, which are just programs that battle each other for dominance in a virtual arena. The primary objective we wish to address with Frobots is the issue of games becoming anti-player in pursuit of their monetization models.

In order to achieve this, we took the micropayment model and turned it around. Instead of players making micropayments to the platform for ‘boosts’ or items that help them win, we want players to risk and win their own rewards from defeating other players, much like in a real competitive sport. Players are invested because they have their own skin in the game.

With Frobots, a prototype game that is currently in development, we are trying to tackle this problem.

Unlike Pay-to-Earn games which exploit players by getting them addicted to grinding for scarce tokens to sell, we will have the following ways for players to earn:

1) develop and build better Frobots to win
2) buy Frobots and pit them against others to earn
3) improve someone else’s Frobot code for commission
4) run an arena for commission
5) offer compute host for running Frobots or arenas for commission
6) trade Frobots or Frobots equipment for profit

Players can engage in different areas of the economy to earn in at what they do best. Much like real-world competitive sports, where you have players, trainers, coaches, sponsors, owners, and fans, we aim to represent all these roles in our game economy. Frobots win in-game currency, but what they earn can be shared via a smart contract with other participants in the economy. For instance, a developer who helped improve a frobot’s brain code may earn a commission from all winnings from a Frobot for a certain period of time for their efforts. An owner can earn a direct income stream from entering their Frobots fighters into the right matches. A trader can earn by buying undervalued Frobots and selling them to others, perhaps enlisting a coder to improve their brain code in the interim as a fixer-upper. Note that none of these behaviors are geared to be negatively habit-forming. There is no ‘grind,’ no exploitation. Everyone can have fun.

These are real economic actors, providing real economic value to the game economy. Thus they are all positive ways to earn.

This hopefully addresses the first issue, which is how games will be paid for in the future. The answer is with their own in-game economies, and people engaging with that economy must pay covert economic value into it. With many interconnected game economies, this will be the foundation of the Metaverse.

Next week we will address prong #2, how to develop NFTs that need a blockchain, not just as a vehicle of speculation.

Jerry Chan
WallStreetTechnologist

Watch: Blockchain Data Power-Ups and NFTs for eSports & Online Games