Fully on-chain games, a new frontier in the gaming business, promise unparalleled benefits such as true asset ownership, real-world profit possibilities, and enhanced transparency and justice. However, they have several obstacles, including scalability issues, high transaction costs, and regulatory uncertainty. Despite these challenges, the question remains: “Are fully on-chain games the future of Web3 gaming?” 

Investments in Web3 gaming projects between Q3 2022 – Q3 2023. (DappRadar)

This emerging landscape isn’t just revolutionizing the gaming industry; it’s also attracting substantial financial investments. According to DappRadar data, blockchain gaming received $2.3 billion in investments during the first three quarters of 2023. A breakdown of this funding reveals a significant $739 million in the first quarter, a healthy $973 million in the second, and a still-substantial $600 million in the third. These figures underscore the considerable potential perceived by stakeholders. However, it’s important to note that these numbers account for only 30% of last year’s fundraising activities.

Defining Fully On-chain Games

Fully on-chain games are a new breed of games that operate entirely on the blockchain. Unlike traditional or hybrid blockchain games, every aspect of a fully on-chain game resides on the blockchain, from the game logic to the in-game assets. Every action taken within the game, such as moving a character, attacking an enemy, or trading an item, is recorded as a transaction on the blockchain. This provides unprecedented transparency and security, as all game data is publicly verifiable.

Hybrid model games, on the other hand, work via a hybrid architecture that leverages both on-chain code (smart contracts) and off-chain code due to speed and scalability limitations. For example, a hybrid model game might store player inventory and transaction data on the blockchain but store game world data and game logic off-chain. This approach can offer some benefits of on-chain gaming, such as asset ownership and transparency while reducing the costs and performance overhead associated with running a fully on-chain game.

Some of the games that have gained popularity due to their innovative gameplay, play-to-earn features, and use of blockchain technology include:

• Axie Infinity – Axie Infinity is a virtual world filled with creatures known as Axies. Axies can be battled, bred, collected, and even used to earn resources & collectables that can be traded on an open marketplace1. It’s built on the Ethereum blockchain and uses its native coin, AXS.
  
• Dark Forest – Dark Forest is a decentralized MMO strategy game built on Ethereum and xDAI with zero-knowledge cryptography. Players explore a massive, procedurally-generated universe, conquering planets and growing a cosmic empire.
  
• Conquest – Conquest is a game built on the Harmony Blockchain, with a whole ecosystem of features, including a Decentralized Exchange (DEX), its native $JEWEL token and Non-Fungible Tokens (NFTs) that consist of Heroes, Equipment and Kingdoms, all delivered in a pixel-based format.
  
• Topology – Topology games are infinite games of perfect information played between two players in a topological space. Players choose objects with topological properties such as points, open sets, closed sets and open coverings.
  
• DeFi Kingdoms – DeFi Kingdoms: DeFi Kingdoms is a cross-chain fantasy RPG game with beautiful pixel art, tokenized resources, and Hero NFTs integrated with DeFi protocols. It’s built on the Harmony Protocol blockchain with its native coin, One, and all transactions in-game are with the native token $JEWEL.
  
• Cometh – Cometh is a blockchain gaming studio with a mission to create next-generation blockchain games and build B2B solutions to drive the adoption of blockchain in the video game industry. Cometh Battle is a galactic free-to-play trading card game where you can own, trade and rent your NFT cards and spaceships. 

The Technology Behind Fully On-chain Games

Fully on-chain games leverage various blockchain technologies for their operation. Some of the popular options are 

1. Ethereum – Ethereum is a decentralized, open-source blockchain with smart contract functionality. It is the most commonly used blockchain for fully on-chain games like Axie Infinity
2. WAX (Worldwide Asset eXchange): WAX is a blockchain specifically made for trading virtual items such as rare and collectable items in video games and virtual worlds. The WAX blockchain serves as a decentralized marketplace and dapp platform that is hyper-focused on video gaming and virtual collectables.
3. Binance Smart Chain (BSC) – BSC is a blockchain network built for running smart contract-based applications. It aims to deliver high transaction capacity and fast decentralized trading while maintaining compatibility with Ethereum

Other blockchains such as Harmony, Flow, Polygon, Avalanche, and xDai are used for building fully on-chain games. These blockchains also provide the necessary infrastructure necessary for these games to operate in a decentralized manner. They enable high transaction capacity, smart contract functionality, and compatibility with other blockchains, making them ideal for fully on-chain games.

Role of Non-Fungible Tokens (NFTs)

Non-fungible tokens (NFTs) and decentralized finance (DeFi) are often integrated with fully on-chain games to create new and innovative game economies. The integration of NFTs and DeFi into fully on-chain games offers several benefits for both players and developers.

NFTs are used to represent ownership of in-game assets, such as characters, items, and land.  They are created using smart contracts, which are self-executing pieces of code stored on a blockchain. It also enables players to earn real-world value from their in-game assets, as NFTs can be sold for cryptocurrency or other fiat currencies.

Some examples of how NFTs are used in fully on-chain games:

• In Axie Infinity, each Axie is an NFT with unique traits and characteristics. Players can breed, battle, and trade their Axies to earn cryptocurrency.
• In CryptoKitties, each CryptoKitty is an NFT with its own unique appearance and genetic makeup. Players can collect, breed, and trade CryptoKitties to earn cryptocurrency.
• In Sorare, each player card is an NFT that represents a real-world soccer player. Players can collect, trade, and manage their player cards to compete in fantasy football leagues.

Role of Decentralized Finance (DeFi)

Decentralized Finance or DeFi components are integrated into these games to enable players to earn real-world value through their in-game actions. For example, players can earn tokens for completing quests, winning battles, or staking their NFTs. These tokens can then be traded on decentralized exchanges or used to participate in other DeFi activities.

Some examples of how DeFi is used in fully on-chain games are:

• In Axie Infinity, players can earn AXS tokens by staking their Axies. AXS tokens are the governance tokens of the Axie Infinity ecosystem and can be used to vote on changes to the game and earn rewards.
• In Gods Unchained, players can earn GODS tokens by winning battles and completing quests. GODS tokens are the utility tokens of the Gods Unchained ecosystem and can be used to purchase new cards and packs or to stake for rewards.
• In Decentraland, players can earn MANA tokens by selling land and other virtual assets. MANA tokens are the governance tokens of the Decentraland ecosystem and can be used to vote on changes to the platform and earn rewards.

Benefits for Players

Fully on-chain games offer numerous benefits for players. Some of these benefits are:

• Players have true ownership of their in-game assets, which are tokenized as NFTs on the blockchain. This means that they can trade, sell, or even rent out their assets without having to rely on a central authority.
• Players can earn cryptocurrency and other digital assets by playing fully on-chain games. These assets can then be traded on decentralized exchanges or used to participate in other DeFi activities.
• Fully on-chain games are censorship-resistant, meaning that they cannot be altered or shut down by a central authority. This provides players with a more secure and predictable gaming experience and a fair gaming environment.
• Fully on-chain games are interoperable, meaning that in-game assets and currencies can be used across different games and platforms. This opens up new possibilities for players and developers alike.
• Players have the potential to earn real-world value through their in-game actions. This is possible because fully on-chain games are integrated with DeFi protocols.

Benefits for Developers

• Developers no longer need to worry about server infrastructure and maintenance, as all game logic is executed on the blockchain. This frees up developers to focus on building and improving the game itself.
• Developers can create games that can operate autonomously without the need for central control. This enables new and innovative game designs that would not be possible with traditional gaming platforms.
• All game logic is executed on the blockchain, which is a transparent and secure environment. This can increase trust among players and reduce disputes.
• By moving all the game logic on-chain developers can build upon existing game components without needing permission from a central authority. This fosters innovation and collaboration within the gaming community.
• Fully on-chain games can scale easily to accommodate a large number of players. They also offer a superior user experience with low latency and efficient bug-fixing processes.
• Fully on-chain games open up new monetization opportunities for developers, as players can trade, sell, or rent their in-game assets. This can create a more sustainable and equitable game economy for all stakeholders.

Challenges and Concerns

While fully on-chain games offer numerous benefits, they also present several challenges and concerns.

• Fully on-chain games require a deep understanding of blockchain technology and smart contracts.
• Changes to the game state must be carefully implemented to avoid security vulnerabilities due to blockchain’s immutability.
• Blockchains can process limited transactions per second, potentially causing bottlenecks and delays.
• Every in-game action is a blockchain transaction, leading to potentially high costs.
• Current blockchain technology has limitations impacting the design and development of fully on-chain games.
• Technical limitations can lead to a less user-friendly experience for players.

Conclusion

Fully on-chain games are still in their early stages of development, but they are emerging as a potential game-changer. They promise a world where players have true ownership of their in-game assets, where every action is transparent and secure, and where gaming meets finance. Yet, they also bring forth a set of challenges – from the complexity of development to high transaction costs, security concerns, limited throughput and technical limitations. Despite these challenges, the future of fully on-chain games is indeed bright. As blockchain technology continues to evolve and mature, we can expect these games to become more scalable, secure, user-friendly, and widely adopted. The potential for revolutionizing the gaming industry is immense. As we continue to explore this fascinating intersection of gaming and blockchain technology, one thing is certain – the game has just begun. And as players and developers alike navigate this new terrain, we are left to ponder: What does the future hold for fully on-chain games? Only time will tell.