Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.
Blockchain Adoption For AAA Studios
As we wrote about last week, blockchain gaming has become a hot topic for gamers and investors this year. Even with this increased adoption, one thing has been clear: AAA developers and publishers are hesitant. Depending on the communities you find yourself in, the opinions around blockchain games can be polarizing. If you’re in the blockchain community, you see the technology as being the foundation of true digital ownership for gamers. If you’re in game communities, you probably view the implementation of blockchain technology in games as a cash grab.
From an objective point of view, these polarizing views are why most developers and publishers do not want to move into the space. There is a legitimate argument that mixing these communities could be detrimental to a game's success. Mixing speculators with players is a risky bet. Just this week Ubisoft announced that they were launching Quartz, a blockchain-powered NFT cosmetics system, and only a day later delisted their YouTube video announcement after only 4% of viewers “liked” the announcement.
It is possible that only one side is going to be right. In this case, either legacy developers and publishers will fall behind new developers building blockchain games, or blockchain games will continue to push away traditional gamers and never hit mass adoption. At Konvoy, we believe both of these scenarios are wrong and that there are solutions that allow for the best of both worlds.
Publisher-specific protocols (sometimes referred to as a sidechain) allow for an experience that could merge the two communities efficiently. An example of this is the Ronin sidechain that Axie Infinity uses for their ecosystem. It will support all future games and only be available to approved partners. To dive into this we wanted to go over the pros and cons of this option:
Pro #1: Efficiency - One of the biggest issues with protocols is that they have limitations that do not always scale efficiently. As traffic for a specific chain increases, transaction speed decreases and transaction costs increase. For games, this is a problem because there are ~3b gamers globally. When using a standard layer 1 or layer 2 solution, there will be increased congestion due to multiple platforms leveraging the same technology. By having a publisher-specific protocol, traffic can be limited to only players playing a specific game or portfolio of games. This greatly reduces network congestion and allows for a more efficient process.
Pro #2: Control - This may seem like a con to some people, but when the goal is to introduce blockchain technologies through AAA games, control (or centralization) is important. By having your own protocol, publishers can focus on creating an ecosystem that works for their user base. Whether that is just tokenizing their in-game currency, creating NFT in-game assets, or building an economy, the publishers have control on what they want to introduce and can balance as needed.
Pro #3: Cross-Pollination - By having your own protocol, you can more easily cross-pollinate users across games by sharing a similar token or having a central marketplace for all game assets that gives players exposure to other games within a publisher’s portfolio. It also makes it easier to interact with players of different games through their wallet by doing airdrops or token drops that are for other games.
Con #1: Fragmentation - If every publisher has their own protocol or chain, users may be overwhelmed trying to interact with different ecosystems. In the long run, this is eventually a consumer tools problem that will be solved by cross-chain functionality. However, for now, blockchain technology is already confusing and adding more complexity is only going to make it worse.
Con #2: Speculators - Introducing a publisher-specific protocol would undoubtedly bring speculators into the ecosystem which could make for a worse experience as speculators are financially motivated, rather than being there for the games. This could hurt the experience of traditional players and potentially push the core community away.
Con #3: Walking the Line - This will always be one of the main problems because a publisher-specific blockchain actually affects both communities (blockchain enthusiasts and traditional gamers). For the blockchain community, they want fully decentralized ecosystems and community ownership. For the core gamers, they already scoff at the idea of layering in blockchain and will have a massive learning curve if they’re not already knowledgeable about blockchain. Publishers need to approach the messaging of blockchain adoption delicately.