What we study while building our games

May 12th, 2022

Introduction

The trend with practically every on-chain P2E game has been a bag-holding contest leaving the vast bulk of its buyers with losses: Tokens are minted, soar to wild heights as people try to get the largest factory going possible, churn out as much currency as possible, mint and dump as many tokens as possible before exiting their positions for profit. Often, within 30-60 days, these projects failed, with their token floor prices falling below gas fees on OpenSea.

There are two immediate hazards P2E on-chain games have encountered: game development difficulty, and game NFT overflow. We are going to take a look at a few of these problems, how they’ve plagued other projects, and what we’re going to do to make our projects different.

Games- More than just Dapps, and why On-Chain Gameplay Has Failed Every Time

Games are some of the most widely used applications, and games are also special in that they are often our first contact with computer software, as children. However, developing games is anything but child’s play. Games are one of the most difficult software applications that exist. They are complicated, ever changing dynamical systems, have high performance demands, and have a huge range of potential states that must all be anticipated or discovered during QA.

In 22 years of game development, the most important attribute a developer can have is experience. I have seen a range of successful games and developers, and a range of unsuccessful games and developers, and the key deciding factor there is experience.

I define experience as “The ability to recognize failure before it happens.” Most experienced game devs will:

• Leverage and utilize existing and tested technologies whenever possible, and be hyper aware of how challenging building new technology can be.

• Use existing game designs that have a track record of succeeding with players.

• Keep project scope as narrow as possible to succeed and no broader- each new feature adds an additional dimension of difficulty and time.

• Move extremely quickly to get prototypes working and tested, to see if a game resonates with players before devoting too much time to it.

• Be ready to change things drastically if they do not work.

• Be ready to fix things when they break.

100% On-chain gameplay is extremely tempting. The idea of having the game code itself stored and processed by the blockchain has a few big appeals:

• An entirely on-chain game does not require input from the developer to keep operating, and could indeed last for as long as Ethereum (or whatever blockchain), even if the developer were to disappear. In fact, no one can ever shut it down.

• An entirely on-chain game is truly decentralized. A game with 100% on-chain gameplay is truly owned by the holders, not by the developer.

Both of these, I think, make on-chain gameplay projects really valuable and interesting. However, every single P2E Staking game with on-chain gameplay has had a bad launch! They have all had to either be re-deployed, migrated, moved to other blockchains, and this is a big part of why most of these projects are currently trading for less than the gas to do the trade. Here are some of the main reasons on-chain gameplay is such a huge challenge.

• Games are incredibly complex and almost impossible to produce quickly without bugs or exploits. Although old school game developers indeed could not patch their games once the cartridges hit the stores, they would spend many months doing extensive QA to guarantee that the games did not have bugs because they had to. Most modern day game developers and players are not prepared and don’t expect to spend the time doing this kind of extensive QA.

• Updating game code in a smart contract requires contract upgrades, which many blockchains do not support, and that the contract upgrade be possible, which not all of them are. Some contract upgrades require a complete redeployment of the contract.

• If a contract needs to be redeployed, existing NFTs must be migrated to the new contract. This creates confusion on OpenSea, as people are not sure which NFTs they should buy to participate.

• Games are very complicated mathematical systems of doing large numbers of calculations and storing large amounts of data. Both of these things are very expensive to process on-chain, leading to high and ever-increasing gas costs.

  • P2E games offer a very strong incentive to exploit. Exploits will lead to having to upgrade, redeploy, or migrate contracts. Exploits can also be very expensive, as the community or developer is forced to foot the bill for the losses, or pay 5 and even 6 figure “bug bounties” to people to find them.
    

At Crypthulhu, although we took a very hard look at entirely on-chain gameplay, we have decided that the blockchain should be used in combination with a server-based API for game logic. This enables us to:

• Choose what data is saved on-chain, and what data is stored in a database. We can save on storage and data processing costs by keeping only the most important data about game NFTs on-chain.

• Keep game logic processing on our API servers. This enables us to:

  • Quickly & cheaply update the code if we find an exploit or a bug.

  • Use random number generators and hidden information, neither of which are possible on a true blockchain.

• Keep code closed to protect against exploits.

• Keep data processing costs minimal so players do not have to pay large gas fees to play the game.

• Keep the amount of code in smart contracts to a minimum and isolated only to the most important things, such as who owns which NFTs, burning NFTs, acquiring new ones, etc.

• Use databases for storage, which are tremendously less expensive and faster than on chain storage, as well as avoiding a number of technical problems with how on chain data storage works.
  

Someday, it is my hope that blockchain technology will advance to the point that we can safely build games entirely on chain, but until that time comes, let’s have fun with the best tools that are currently available.

Play to Earn without Positive Supply Shocks

The current crop of P2E game NFTs have significantly underperformed non-game art or PFP type NFTs, and positive supply shocks are entirely to blame.

A positive supply shock is when a large amount of supply of a commodity comes into the market, crashing prices. Almost every play to earn game has a component of creating new game tokens, almost every one of them has had a critical, sustained positive supply shock that sent floor prices ever spiraling downward into sub-gas costs.

This makes sense: if the prize for playing a game is more game tokens, players will either:

• Sell excess game tokens to generate profits, which will increase token supply

or

• Use the excess tokens, which will increase their token production

Abstraction methods, like creating a token and using the token to make more NFTs, don’t change this fact. Ultimately, a token’s value comes from utility, so its price is going to be based on the price of what it can buy and little else.

Author’s Note: I analyzed two other comps: EtherOrcs ZUG token, and Wolf Game’s WOOL token. Both had similar problems, but because they launched significantly (lol, 1 month) earlier than RP and WnD they both had price spikes around December which drew down similarly after those spikes. Still, different enough that I did not include their charts.

Ultimately, both of these games’ P2E method is to create new tokens and sell them. As is clear, this causes the token value to decline, along with the NFT prices as well, practically in lockstep. This means that P2E game NFTs like this fundamentally lose value over time, whereas art collections with a fixed supply have much more durable floor prices and make art projects look still safer and more reliable than games.

So the solution is to… give out a different reward? Well, it isn’t that simple. First, I think Play 2 Earn is absolutely sustainable and is a great idea. In Mobile, we used to pay Facebook and Unity millions of dollars to get players to download our games, and I would love to give that money directly to players instead.

Play 2 Earn rewards can come from three places:

• The developer, as part of their user acquisition strategy. (If you pay them, they will come!)

• Existing holders, as they pay entrance fees to tournaments, or continue to buy into the project to maintain their standing in the leaderboards and communities.

• New holders, who are interested in being a part of the game and buy meta or floor teams to get into it.

At Crypthulhu, we plan on extremely tightly controlling the release of new NFTs first and foremost. After a very rocky start of the year, we want to make sure that our players are protected against supply shocks with a very slow trickle of new NFTs into the marketplaces.

We also are working hard to create new, innovative P2E awards that will implement some of the ideas above and not put everything on the backs of existing holders.

Conclusions:

• New staking game NFT projects should be highly scrutinized by potential holders since they are more vulnerable to mismanagement than more traditional art PFP NFT Projects.

• People looking at buying staking game NFTs should be very critical of the project team’s prior game experience. Do not buy staking game NFTs from people who have never made games- look for doxxed proof of development experience, with a track record of clear success (large numbers of installs on Google Play Store, AppStore or Steam).

• New supply must be tightly controlled and double much, much more slowly than prior projects. Remember this form of P2E is coming out of holder’s pockets- they are the ones footing the bill for new players onboarding and growth. Everybody wants new players to come in, but don’t pretend the higher supply comes from thin air, it comes from dilution.

• Prizes should be offered by the development team as part of the P2E package and should not just go to top players, both RP and Axie have rewards only go to the top and it has practically no impact on overall health of the game economy. Prizes should be built into the overall strategy just the same way that tokenomics is.

• Consider having existing holders pay tournament entrance fees to help boost prizes, soak NFTs and currencies, and increase competition and not dilute those who don’t want to or can’t participate.

• Finally, these are games, not speculative investments. Successful games have long, slow growth arcs. Do not expect a 300% total return after a few months. Expect to be a part of a fun game community, enjoy playing the game and being competitive or enjoying the experience of collecting and playing over time, and have a collection of game pieces that has real lifetime value to you from their history and meaningfulness to you and you’ll be very happy with your purchase.