Blockchain and games have an enticing future. Companies are setting up $100 million fund to entice developers to make games with blockchain, the secure and transparent decentralized ledger technology that powers Bitcoin and other cryptocurrencies.
But plenty of game industry people are skeptical, considering the slide in the value of cryptocurrencies in the past year. A handful are jumping into it and testing the waters. At Tron’s recent summit in January, I moderated a panel with three of these experimenters: Taehoon Kim, CEO of Power Rangers mobile game maker nWay; Dan Chao, head of startup Rogue Nations Games and maker of Crypto Assault; and Jared Psigoda, CEO of BitGuild.
“Our biggest problem right now, to be frank, is that most of the blockchain games that are being made suck,” Psigoda said.
Then again, there was a day when most of the mobile games out there sucked, yet entrepreneurs like Chao made out nicely when they sold their startups to larger game companies. Ubisoft has become active in blockchain games, but a lot of big companies are sitting on sidelines. If they sit too long, they may have to pay a lot to acquire the blockchain game startups. Or those startups will acquire them, Psigoda said, tongue in cheek.
I’ll be moderating a fireside chat with Tron CEO Justin Sun next week at Pocket Gamer’s Blockchain Games Next event on March 19 at 2 p.m. at Bespoke in San Francisco. I’ll also be moderating a panel with Taehoon Kim at PAX East in Boston on March 28. Tron’s Roy Liu will also speak at our upcoming GamesBeat Summit 2019 event in Los Angeles on April 23-24.
Here’s an edited transcript of our panel.
Taehoon Kim: My name is Taehoon Kim. People call me TK. I’m the CEO of nWay. We make real games for emerging platforms, and the emerging platform now is blockchain, so that’s where we’re going now.
Dan Chao: I have a small team just half a block from here. We’ve been working on a blockchain game called Crypto Assault, which is a kind of strategy MMO, where hundreds of thousands of players all live in a world together deploying tanks and jets and killing each other.
Jared Psigoda: I’m the CEO of BitGuild. We’re a blockchain gaming company. We originally started building games on Ethereum, and later migrated to Tron. We also have Guild Chat, our social messenger, which allows you to trade crypto, get crypto coin drops. We have a bunch of other projects that we’re working on.
GamesBeat: Could you tell us what you’re doing in the realm of blockchain and games and crypto? Why are you here? What got your interested in blockchain?
Kim: I’ll step back and talk about the blockchain gaming ecosystem right now. Currently, the way I look at it, it’s mainly people who are already crypto holders. It’s people who have all these cryptocurrencies and they’re all trying to make money. It’s not necessarily the gamer crowd yet. Naturally, you see games that are more gambling-focused, pyramid scheme games, games that feel like lotteries. Real games haven’t yet arrived on blockchain.
We’re working closely with Tron to figure out how we can get more mass-market adoption. How do we get gamers into games that have blockchain elements for trading and real-world value in game items? We’re doing some R&D right now, and we’re also working on a separate game that brings a whole new experience for this type of genre.
Chao: Like a lot of people, CryptoKitties popped up on the radar for me and I was really interested. I’ve always loved hopping to a new platform to see if something relevant is there. When Facebook games, and subsequently mobile games, came out, that was very interesting. I love solving new problems and seeing–what is the value add for blockchain in games? Is there really something there? It was maybe last April that we started looking into making blockchain games, seeing if we could bring something a bit different from what we were seeing already.
Psigoda: I’ve been a hardcore gamer for as long as I can remember. Pretty much all the MMOs you can think of, I played them, from Ultima Online to EverQuest to World of Warcraft. All of the Diablos, everything like that. One of the interesting things I saw in those games was the one of the most fun things to do was to trade items with other players. If I’m playing Diablo as a mage and you’re a barbarian, if I pick up a really cool barbarian item—those games were all built around being able to trade items and trade currencies. Also, one of my first businesses was a World of Warcraft gold farm in China. The concept of virtual currencies being worth real money has been an obvious concept to me since I was 12 years old.
Once I saw blockchain come out, with the ability for these virtual tokens to have real value and for you to trade them frictionlessly through the blockchain, there was this eureka moment. Hey, we can make some really cool games that make us feel like we did in the ‘90s, when there was trading. It’s not like the mobile games there are now, where you just keep spending money yourself, but you can never trade your items with another player. It’s a pretty fascinating industry, and it’s just getting started. We wanted to be a part of it.
GamesBeat: Three to five years from now, the definition of success here might be that we get the CEOs of Electronic Arts and Activision and Ubisoft sitting up here talking about blockchain games. What’s going to get us to that kind of outcome, to that kind of future, where this meets its full potential?
Kim: It reminds me of the free-to-play business model. A long time ago the big publishers were laughing at it, saying it would never work, and now they’re all over it. It’s just a matter of time before they understand this.
Chao: What really gets us there is cracking the game design that actually works with blockchain. I’m not convinced we’ve seen it yet. What I always say to people is that my depressing outlook on blockchain in the future—if it’s just used to tokenize cosmetic skins in Fortnite, then that’s probably not the most exciting thing it can do. But also, finding a game design that’s not just gambling or a CCG, something like that, that’s going to be the real thing that breaks it wide open. Whether it’s something that looks like Roblox—there are a lot of things to think about. It’s going to have to be that game design that really cracks it open.
Psigoda: I agree. Our biggest problem right now, to be frank, is that most of the blockchain games that are being made suck. 2018 wasn’t too great of a year for blockchain games. It’s going to require time. As you mentioned, 10 years ago, when we were at the Game Developers Conference talking about this new thing called free-to-play games, where instead of going to Best Buy and spending $60 to buy a game, the game would be completely free, and you could just buy these items in the game for 99 cents or a couple of dollars—if you talked to Blizzard or Activision or EA or any of those companies back then, they’d say “That’s the stupidest thing I ever heard. We’ll never do anything like that.”
But if you look now at the entire mobile game industry, and a lot of the PC game industry, pretty much all of the most popular games are free to play with microtransactions. We found out that it’s more profitable to make a game free than to make people spend money for it up front. Fortnite does $10 million a day in revenue, something like that? When EA and those guys come back to talk in three years, new generations of game design are always done by the scraggly startups. They’re not done by the big guys. The big guys, if we’re lucky, will come in and buy us in a few years. Or we’ll buy them. [laughs]
Kim: The term “blockchain games” is going to disappear. Once we reach mass-market adoption, it’s just going to be games, and they’re going to have blockchain elements to them.
GamesBeat: What do you think of the choices you have to make now? Which platform do you choose, whether it’s Tron or EOS or others? What are some important things that you have to decide at the beginning? What decisions do you have to make right now about what to support?
Kim: If you’re making an app or game that’s exactly like what’s out there, obviously you go to Ethereum. But the reason we’re working with Tron is because they’re very forward-thinking. They’re working closely with us to make changes to the platform and create new experiences, lowering the barrier to entry for regular gamers. That’s the main reason we’re working with Tron.
Chao: When we were first getting started, it came down to market cap and users. You wanted to pick the blockchain with the most users. But now that’s changing a bit. Obviously there are Tron and EOS, which support games in a great way. They’re really helping out with marketing and visibility. On the technical side, transactions per second is a big deal, as well as gas prices. Really optimizing for lower gas prices is super important.
But you have to weigh that with how much the users actually care about having the entire game on chain. For example, our game is actually mostly—99 percent is off chain. It’s like playing a normal game, with a centralized server. The units, the map, all the commands, all that stuff is on the server when they’re moving around. But the purchase of the units is all done on chain. Whenever a new unit is created, that’s also done on chain.
At first I was a bit nervous about users not being okay with that, but ultimately it doesn’t really seem like they care. They just want to play a fun game, and then they want to get some amount of their investment out of it. That’s a kind of long-winded way of saying, does transaction speed matter? Once transaction speed gets down to under a second, can you start to do everything on chain, and is that really still the right choice? Obviously there’s the gas cost there. There’s also a lot to do with seed funding. Some of the other ecosystems like Tron are helping out in that manner too. That can be very important when you’re starting a new business.
Psigoda: For us, I’ll summarize it in two points. The first point, as mentioned, is the question of centralization versus decentralization. I think it was CryptoKitties that had an interesting data point, that 99 percent of their traffic or something like that left their website when they saw they needed to install MetaMask to play the game. I’m not of the opinion that absolutely everything needs to be decentralized, because in the long run what players care about is playing a good game. It’s not about our grand vision of decentralized products.
Number two, again, is the choice of your blockchain. As I mentioned, we started out on Ethereum. We launched seven or eight games on Ethereum. To us, it was not acceptable to spend a dollar in transaction fees to buy an item that cost 50 cents, and then wait five minutes for the transaction to go through. The decision came down to which blockchain was really going to be able to support games. EOS was one of them. Tron was one of them. We thought very hard about both of them. They’re both fast. They both have little to no transaction fee.
The main deciding factor in why we chose to move to Tron was the community. There are many blockchains now where you can say they’re technically able to run a blockchain game. They have fast transaction speeds and so on. But the bigger question is, who is going to play those games? Those games are being played with the token of that blockchain. Tron games are being played with TRX. If you have another blockchain that technically solves your problem, but they have 200 holders of their token, then you don’t have a community to play your game.
We found out, with Tron—we’ve had the greatest support from the Tron foundation as well as the community, and there are a lot of people in the Tron community who really want to figure out more ways to use their tokens. Gaming has been one of the most obvious ways for them to do that.
GamesBeat: We all remember how important whales were in the free-to-play space, for mobile games and social games. The community with a lot of whales, maybe, is the one you want to be attracted to.
Psigoda: Tron has some whales, yeah.
GamesBeat: If you apply your imagination to it, what could happen with blockchain games? I didn’t think that much about blockchain and crypto until I talked to Tim Sweeney of Epic Games. He said that this could be the way we get to the metaverse, the virtual world of virtual worlds that comes up in stories like Snow Crash or Ready Player One. Is that one of the end goals that you think is possible?
Psigoda: Again, most people have probably seen Ready Player One. If you haven’t, I’d recommend it. When we talk about the metaverse, we’re almost thinking of a life in the future where we spend a significant amount of our time inside of virtual worlds. I’d almost argue that we’re partially there. The reason I say that is, sometimes, if we stop and think and look around at how many of us are glued to our screens every day, whether that’s your mobile phone or your computer or a tablet—just get on a subway sometime and look around you. When 99 percent of the people in a room are staring at a mobile phone screen, are they really here, or are they somewhere out there?
Adding on to that, in the future—we talk about things like how artificial intelligence is going to lead to far fewer jobs in certain industries like manufacturing. Even doctors, in the future, could be replaced by AI. Adding virtual reality to that, how virtual reality has evolved over the years, we’re looking at a possible picture some time in the future where all of us, or a significant portion of the population, spends a lot of time inside of virtual reality, or inside of these virtual worlds.
What will happen is that there are going to be people who earn their livings inside virtual spaces. People have done this in games like Second Life or Entropia Universe or EVE Online for years. In my opinion, blockchain is going to enable assets you acquire in these video games or virtual worlds—you’ll be able to convert those directly into a hamburger at your local McDonald’s. Items you acquire in these metaverses or virtual worlds, through the power of blockchain, are going to be translatable into real money in the real world. Nothing else other than blockchain can make that happen.
Chao: I’d say maybe don’t watch Ready Player One. Maybe save yourself two hours there. [laughs] But that’s not my point. My point is, I’m a gamer first. I’m not a blockchain utopian thinker. I don’t think it’s going to solve everything. My thing that I really wonder about—blockchain items, in order for them to have value, we can’t give them away for free. There has to be some initial cost in order to acquire these items.
Currently we have games—whether you’re sitting there in ARK or Minecraft or whatever, punching a tree getting wood out of it, that wood comes for free, right? If that eventually gets crafted up into an item, it’s going to be hard for that item to be worth something, because all that wood comes out of a non-zero-sum economy. That’s where I think, whether it’s the metaverse or whatever—that’s going to be the hard part to crack. Are we all going to be okay with an economy where we get nickeled and dimed for every single resource and item we create?That’s why I think this works really well with cosmetic items, but it has a hard time working with functional items, at least from a business standpoint.