Reiterating the Case for Hybrid Games

Hybrid blockchain games play an important role in mass adoption,
but they’re not all sunshine and rainbows.

Guest Writer: Holly Atkinson – Blockchain Architect at The Sandbox.

Introduction
On-chain games are considered emergent tech by the likes of Messari and are described as the future of gaming by others. These games have their game state and logic fully on the blockchain, enabling the community itself to build out the rest of the stack in whichever way they like. There’s plenty of rationale for on-chain games. But what about hybrid games where being fully on-chain simply isn’t feasible? Let’s take a deeper look at why this may be and what the middle ground is in reality.

Fully on-chain games are characterized by transparency, immutability, decentralization, and non-custodial asset ownership, ensuring the integrity and fairness of the game. Traditional games, on the other hand, are centralized, updatable, and server-based, with the game provider having control over the game’s rules and assets. Hybrid blockchain games incorporate elements from both paradigms, such as player ownership of in-game assets, token-based economies, and interoperability with other blockchain ecosystem, while potentially retaining some centralized components.

The intersection between fully on-chain and traditional games represents the hybrid blockchain gaming model, which aims to combine the benefits of blockchain technology with the characteristics of traditional gaming experiences.

Game development

In traditional game development, software development has often followed the typical pre-production → production → release process, with game updates being shared with the public in iterations, perhaps via new downloadable content. This process allows game developers to add new features in regular phases, taking into account community feedback as they wish. Ultimately, this enables the game to evolve over time, at the developer’s whim, with new features, bug fixes, performance improvements, etc.

Image –Source: Chainlink

On-chain games

On-chain games bring the benefit of reduced platform risk, since the blockchain is used instead of a centralized game server, with all players indexing from and writing to a shared state on the blockchain. Fully on-chain games currently tend to primarily appeal to a niche user base (typically already crypto users).

“The challenge with using a blockchain is that one has to either (a) accept its immutability and trust that the programmers did not introduce a bug, or (b) permit upgradeable contracts or off-chain code that share the same trust issues as a centralized approach.”
Trail of Bits

Since on-chain games are generally immutable, they should not permit “upgradeability”: once a game has been deployed onto the blockchain it must not be alterable in any way. Instead, the community may be permitted to extend the game, but in strictly defined ways via the game stack: there may be new fun ways of extending or interacting with the smart contracts, new frontends built, plugins, and so on (we’ve seen a lot of this with the Dark Forest ecosystem). But fundamentally, once deployed, the game is fixed in perpetuity.

At a basic level, this can be achieved by:

  • One-off smart contract deployment as the basis of the game
  • No smart contract ownership assigned, nor privileged roles granted
  • Using only decentralized metadata for any tokens
  • Removing centralized points of failure to use only decentralized interfaces, eg, indexers
  • Limiting entry points for game modification, depending on the development approach selected by the game creator.

So, if entry points for modifying your game are limited, how do you, as a game developer, keep your players interested in exciting and evolving gameplay?

Game modifications may be prevented: imagine a very simple on-chain game, with no coded entry points for developers to extend. In this scenario, players might complete the game pretty quickly and move on to another game. In another scenario, modifications may be permitted, enabling longer gameplay, user retention and community growth.

Autonomous Worlds is a popular concept for on-chain games. Take MUD, a framework that allows developers to create on-chain games via ownerless data namespaces called Worlds. The ownerless part is key: such projects should not be subject to a single point of failure or control. Autonomous Worlds are on their way to providing a scalable, performant gaming experience (especially since Dencun), but we still need to see how they scale over time in production.

When it comes to expanding a game built with MUD, there is always just one World, but anyone can co-create on top of that by registering new “Component” smart contracts, as well as “Systems” that define how those components should behave in that World. This kind of approach to development can incentivize open development by the community, and offer insights into emergent game behaviors and novel network effects.

Hybrid games (also known as blockchain games)

Hybrid games simply use blockchain technology as part of their tech stack: one or more aspects of the game might be stored on the blockchain, but not all of it, as with on-chain games. This could be to enhance player security (e.g., by storing user credentials on the blockchain), to log user assets on-chain (e.g., tokenizing in-game items), and/or enable in-game crypto spending.

“Non-financial applications, like games or social media, want to be decentralized but need only a halfway-house level of security.” Vitalik Buterin on different types of layer 2s

Depending on the use case and its specific security vs scale needs, the game developer might select from any number of blockchains or layer 2 solutions.

Image: Source: Vitalik Buterin

Since blockchain is used for storing only a part of the game logic/state, it follows that game development broadly follows the traditional steps. New features can continue to be released according to the developer’s wishes.

For hybrid games, this might look like:

  • using an upgradeable smart contracts pattern
  • including privileged smart contract roles
  • allowing centralized metadata
  • partially decentralized marketplaces (listings stored wholly or partially offchain)
  • updates made by a centralized team, or by the community with “special review”

The reality of hybrid games

The play-to-earn model has drawn much criticism over the last cycle, and crypto is considered dangerous by many who do not understand it. Tokenomics designs continue to mature as game developers gain real-life learnings from web3 behavior, while User Experience remains one of the top barriers to mass adoption.

Blockchain games companies inherently operate in murky waters: crypto regulation is nascent, ambiguous or non-existent in many jurisdictions, while policy-makers appear to be self-serving and obtuse.

Companies are on the hook and decentralization is at stake: how should a gaming platform balance its on-chain priorities with its need to remain competitive (not to mention lawful)?
All these factors – and more – drive a need for development flexibility.

External factors driving flexibility

Impact of crypto/ other regulation

  • Regulatory constraints, including economic sanctions
  • Legal liability at company entity level or human level, depending on jurisdiction – rules still often ambiguous/unclear – can result in the following with the looming threat of jail time for developers and founders allegedly engaging in illicit or non-compliant behavior, as well as project termination:
  • Frontend compliance, eg legal disclaimers, different frontends for different jurisdictions, staking/airdrops blocked/unblocked. You’ll recall that U.S persons are not eligible to claim Starknet’s STRK tokens, for instance
  • Marketplace whitelists
  • Avoidance of building complex systems altogether
  • KYC for users depending on game/company setup/scope
  • User wallet screening/address whitelisting
  • Responsibilities constraints regarding moderation, especially for User Generated Content (UGC) projects where users can launch their own tokens through the gaming platform

Market

  • Historically, the goal for many game developers has been to improve shareholder value. In web3, this has often resulted in the launch of various financial incentives to attract players, especially while the game aesthetics haven’t been so great. So… much… farming…
  • Creating a business plan ahead of time, including a financial model, cannot easily be achieved ahead of iterative development since hybrid games often involve a good amount of trial and error. Moreover, how can a meaningful financial incentive be designed in an unpredictable market?
  • The industry is not yet mature, requiring projects to deliver fast to keep competitiveness. This could lead to making technical choices in favor of hybrid games, with incumbent tech which is established and well-tested.

Product vs Dev: Designing Flexibility into Smart Contracts

For all the talk of empowering users, it so happens that game developers are acutely aware how decentralized – and therefore resilient – their game really is. (And this doesn’t just relate to smart contracts; it relates to the entire tech stack. How many indexers are running the decentralized indexing service you’re using? Don’t tell me you’re still using the hosted service)

Now, let’s consider in-game NFTs. What does “True digital ownership” look like IRL?

For EVM-based hybrid games, tokens can be “owned” but, as with TradFi, may frequently remain subject to admin permissions at smart contract level, such as:

  • Admin may be able to burn a user’s token, or transfer it to another address
  • Admin may be able to change the token’s metadata, with potentially huge value implications
  • If not using IPFS or similar decentralized service, a centralized backend may be able to simply modify or delete token metadata without any on-chain action
  • Admin may be able to change the owner of the smart contract
  • Admin may be able to delegate admin role(s) to other wallets
  • Admin can change access to token functionality, eg, the marketplaces that can list the token for sale

Having so many privileged permissions surely goes against the ethos of decentralization and user empowerment; precisely why Vitalik created Ethereum in the first place. Arguably, with any centralized admin role, or even just any points of centralization, this places hybrid games at risk of regulatory interference too:

  • Owner, upgrade admin, people with privileged roles, even multi-sig signers may be targeted by regulatory enforcement. Even if there’s a DAO, community vote, or a multi-sig sitting behind important changes, hybrid games can be manipulated – it all comes down to how this is set up
  • Voting rights – how are they weighted/allocated? How many voters do you really need?
  • Who holds most of the power in the voting system; are voters objective, or do they hold a financial interest?
  • How many signers for an executable transaction via multi-sig?
  • Are signers anonymous? Spread out over different jurisdictions?
  • Let’s also not forget… is the DAO voting process itself secure? Any DAO exploit paths? I’ve tweeted about these in the past.

Everything considered

Playability is key here. Games are improving, and game devs are learning how to manage their uncertain liabilities at platform level. In general, admins can be trusted to act honestly. Smart contract audit reports can help reassure some users.

In BGA’s 2023 survey, asset ownership for players was cited – for the third year in a row – as the top benefit that blockchain can bring. As touched on above, security of data isn’t necessarily the end goal for many hybrid games, resulting in some tech backdoors that should theoretically help to keep the game safe.

“It’s inevitable that (younger) gamers will eventually demand ownership of virtual gaming items, and Web3 enables just that”, It’s All a Game.
Colleen Sullivan for Messari

People in the crypto space highly value openness and freedom: but what about everyone else? Transparency is important, but so is not overwhelming users with too much information.

Even if games aren’t fully on-chain, better alignment between games platforms and their users is likely over the long term, since growth of the platform no longer means a purely extractable model (especially with UGC games). And in a worst case scenario, hopefully the Most Important Parts of the game are stored on-chain, such that someone else can rebuild, if not fully restore game state.

User experience

Onboarding and poor gameplay continue to be cited as the top challenges plaguing blockchain games. Yet, players are already starting to build their web3 knowledge and reputation with hybrid games. Many existing hybrid game assets are already interoperable, in that they leverage standard tokens eg ERC721.

Developers can quickly iterate on new interfaces, together with new blockchain standards, to abstract away complexity for gamers.

To date, many hybrid games have provided financial incentives to their users to offset limited gaming experiences. Gameplay needs to improve to the point where being paid to interact with the game is a bonus, not the default. Hybrid games may not have found the perfect sweet spot between decentralization and flexibility, but nevertheless allow for rapid evolution and growth of games through trial and error of new mechanisms, cultivating community, controlling game direction.

Scaling technology has significantly improved and we’re now seeing some hybrid games attracting a lot of attention for their high-quality aesthetics. Onboarding will no doubt also become far easier as games continue to move away from EOA accounts to account abstraction, leveraging plugins for smart wallets and other technical solutions.

Designing for updates

It’s been a steep learning curve for early hybrid games, many of which have learned the hard way how to do dev better, especially when it comes to preparing for smart contract upgrades and extensions.

We’ve not only seen new smart contract development patterns take hold, many [larger] blockchain games companies have also had to think about how to set up development processes in new ways to support rapid iteration and organizational change. I’ve tweeted about my own experience of this at The Sandbox.

Hybrid games have significant financial resources to set up large-scale experiments from the ground up, and have been busy onboarding traditional gaming studios and franchises to web3. UGC is getting better and better as these new joiners add their skills to the web3 ecosystem.

Respondents to the BGA’s 2023 survey believed that one of the biggest industry drivers will come from traditional web2 gaming studios and franchises implementing blockchain technology into their games – driving a real powerhouse of knowledge in an innovative direction. There’s huge potential here to catalyze mass adoption.

“Some big names such as Square Enix and Ubisoft have already moved into web3, while others wait to see the results of their experiments.”
BGA 2023 State of the Industry Report

It’s all about having options

Hybrid games offer a new gaming paradigm, with potential for huge innovation and player incentives that come with tangible IRL benefits.

It’s my opinion that we’ll never see just purely on-chain games instead of traditional games, the world simply isn’t like that: different humans have different preferences. Just as we’ll see crypto alongside fiat for some time to come, at least for the most part, we’ll see many more traditional games being built, alongside those with web3 capabilities.

I wholeheartedly subscribe to Vitalik’s vision that we are not here to just create isolated tools and games, but rather build holistically toward a more free and open society and economy, where the different parts – technological, social and economic – fit into each other. The important factor for me here is that the users get to choose what suits them. In the end, surely the point is that no-one really knows whether games are hybrid or not.


Guest Writer
Holly Atkinson – Blockchain Architect at The Sandbox.
Doing core dev for the Ethereum Foundation with ephemery.dev. Scientist by background with a commercial career history in renewable energy and project finance. I like to make connections that no one else sees.
X: @haatkinson – Medium, LinkedIn, GitHub, Discord: @atkinsonholly – Farcaster @tractorprincess

References

Blockchain Game Alliance 2023 State of the Industry Report https://www.blockchaingamealliance.org/bga-2023-industry-report/
Are Blockchains Decentralized? Unintended Centralities in Distributed Ledgers – Trail of Bits, June 2022 https://www.trailofbits.com/documents/Unintended_Centralities_in_Distributed_Ledgers.pdf
Dark Forest: https://zkga.me/
MUD: https://lattice.xyz/blog/mud-an-engine-for-autonomous-worlds
DAO Exploit Paths: https://twitter.com/haatkinson/status/1582019981641850880
StarkNet claims: https://provisions.starknet.io/
Chainlink: https://chain.link/education-hub/on-chain-gaming
1kx: https://medium.com/1kxnetwork/play-to-earn-economies-as-base-layer-protocols-for-games- 87085997b6fd
https://medium.com/1kxnetwork/autonomous-worlds-the-case-for-fully-on-chain-games-3066 db695a5a
https://medium.com/1kxnetwork/multiplayer-creation-unlocking-participatory-media-e0677cb e831c
Messari: https://twitter.com/MessariCrypto/status/1690787714159771648 https://messari.io/report/it-s-all-a-game
Vitalik: https://vitalik.eth.limo/general/2023/10/31/l2types.html https://vitalik.eth.limo/general/2023/12/28/cypherpunk.html https://twitter.com/VitalikButerin/status/1743040410212053350/
Altlayer roll-up frontier day – Building Tomorrow’s Autonomous Worlds Challenges and Possibilities, Nov 2023 https://www.youtube.com/watch?v=jyhNIDu8tLI
Coindesk: https://www.coindesk.com/consensus-magazine/2023/10/31/in-cryptos-autonomous-worlds-creators-are-architects-and-users-are-stakeholders/
Bankless: https://www.bankless.com/stop-pretending-crypto-regulation-is-hard

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