game theory
Pacman to Play-to-Own: Gaming through the Ages

Pacman to Play-to-Own: Gaming through the Ages

Web3 gaming needs to be demystified, starting with how gaming got to this point in the first place.

Mathew Paul
Feb 4, 2023
min read

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Web3 gaming needs to be demystified. If Web3 gaming (blockchain gaming to some) is to go mainstream, it needs to be understood, and we don’t just mean the jargon. Concepts like decentralization and ownership of one’s assets are so different from the norm they’ve practically factionalized gaming. 

For some in the gaming industry, these concepts represent a necessary shift in gaming, a positive step forward, while others are equally passionate that they actively hurt gaming. Clearly, the team at unix gaming have bet heavily on the former, but not without admitting that crucial pieces to the puzzle are still missing. 

In this part one of our two-part exploration into understanding web3 gaming, we look at how we got here in the first place.

The Age of Arcades

Consumer gaming took off during the 70’s arcade boom, the birthplace of modern gaming. It was a time when games were extremely competitive, demanding skill and determination. Players had to make the most of their limited lives or risk permanent death and another quarter spent, which meant it cost you to fail. There were no cheat codes, saves or paid upgrades, and if players hesitated or wanted to start over, it meant waiting their turn at the back of the line. Continuous improvement meant improving your chances of success with every subsequent quarter spent. The goal: get your name on a game’s high score list and earn bragging rights among your friends. 

Relative to gaming today, the hurdles back then seem unbearable – waiting your turn to play, limited operating hours, downtime for maintenance, carrying pockets full of coins, etc. But arcade revenues adjusted for inflation would have been approximately $64B in 2021 - compared to global revenue across all gaming platforms in 2021 of $180B. Today you have consoles, PCs, mobile, all of which run 24/7 and have a global audience. For arcade revenues to come close to this is no small feat. Think about that. This first golden era in gaming captured something genuine and raw – skill-based competition with real risk. 

The Age of Consoles

At the conclusion of the arcade era, the home console rose to the top. Gamers opted for the convenience of their own home. Cheat codes, pause buttons and walkthroughs were introduced, allowing players to take breaks and to breeze through difficult levels. Privacy and reduced risk ushered in a new era of gaming. That’s not to say games weren’t difficult. Early console gamers are legendary for their difficulty, but the only risk to the gamer now was a bruised thumb and angered parents. 

Developers moved to a model where cranking out new titles with improved graphics and features became the business model. Studios worked ridiculous hours and spent ever-increasing budgets to churn out new titles for this new generation of gamers. And, this model continued to dominate the market until the innovation of Free-to-Play (F2P).

F2P is today’s predominant business model for studios and gamers. This allowed for greater access to games and exponential user growth – almost 3 billion gamers, and your average gamer today is a 35-year-old woman. This change is now impacting the way studios are designing games and how users can expect to interact with a title. While the F2P movement has certainly allowed for more people to enjoy gaming, it has also led to a change in focus from quality graphics and immersive gameplay to maximizing value extraction from users via microtransactions and intentionally grindy gameplay loops. 

This model is creating a backlash within the gaming community, as studios are viewed as exploiting their users under the guise of ‘free gaming’. Terms like Pay-to-Win have become synonymous with this innovation. This business model makes fair competition difficult, especially given the revenue potential that comes with F2P psychological manipulation. 

The Age of Web3 Gaming

We’re currently in an experimental phase with the addition of blockchain to the current gaming ecosystem. With P2E (Play-to-Earn), peer-to-peer (P2P) technology and tokenization makes it possible to eliminate middlemen and create in-game market economies. This allows gamers to profit immensely from the levers that crypto economics introduced. As a side note, I would argue the term Play-to-Earn applies to much earlier ecosystems because outsourcing gaming labor has existed for many years (gold farming in WoW, for example). The point of this article is not to get caught up in semantics, though. 

The glaring issue with adding the blockchain layer has nothing to do with the theoretical value it brings to the gaming ecosystem. Instead, it is the lack of foresight and experience of a studio to properly implement fiscal policy with this technology. 

Yes, Axie Infinity grew to 2.5M users (about twice the population of Hawaii) in one year and generated an all-time high of $364M in monthly revenue (August 2021) while allowing a demographic of gamers from developing countries to earn a living wage from these games. Yet, it also crashed dramatically because the incentive structures created stakeholders and business models that were hard to predict (hindsight is always 20/20). This is true of any innovative technology, though. It’s essential to focus on where we may end up if we get this right, instead of focusing only on the current problems. 

The arbitrage and ponzinomics that currently underlie many of these Web3 games have created a bit of a false start. The concept is fantastic, but the foresight required for proper implementation is something we need to fine-tune. At unix gaming, we believe the next iteration, when implemented correctly, is called Play-to-Own (P2O); it’s F2P with game mechanics and gameplay at the forefront, while utilizing blockchain to enable true asset ownership, which we'll describe in more detail in part two!

So, that’s the short notes on how we got to where we are, and we're bullish on what Web3 infrastructure can bring to the gaming industry. That does not mean we are blind to the potential negative effects of blockchain implementation in gaming. With most attempts so far being failures, we aim to create dialogue and highlight the potential of getting this right. Let's learn from our past mistakes and get better. The positives are extraordinary in theory; stay tuned for more updates in part two!