Can we do better than past business models? How can we enable humans to build ultra-efficient businesses that scale, require minimal resources to run, and provide interesting experiences for consumers? We can. Welcome to the rise of the micro onchain gaming studios.

Early Context

Circling to the early 90s, there were obscure games created by pioneering developers like Sid Meier, John Carmack, and John Romero. It was both a glorious and challenging time to be a game developer. Under this pressure, some of the greatest game mechanics of all time were developed, their influence still evident in many of today's games (FPS, 4x etc). These early games, predating widespread internet distribution, relied on word of mouth, shareware in magazines and publishers to reach gamers. This supply chain introduced additional costs and intermediaries, reducing the developers' profit margins and limiting network effects. Industries naturally trend towards consolidation to achieve greater supply chain efficiencies, a phenomenon that will always persist.

Fast forward 30 years from the early 90s, and we see significant consolidation with large publishers and studios dominating the landscape. Despite this, fantastic indie studios are producing some of the best games, with a few notable exceptions. However, even these studios are dependent on platforms like Steam and Epic, as well as other publishing channels, all of which take a perpetual cut from their games. In this context, a duopoly is essentially a monopoly.

A Cyberpunk Dream Nears Reality

Secure, trustless micropayments have been a cyberpunk aspiration since the 1960s*, and we've nearly achieved this goal several times with Bitcoin, Ethereum, and now with L2 rollups. Yet, we've consistently encountered barriers, whether social or technological. Socially, we're not quite prepared for this future in mainstream consumer technology, except for the development I'm about to describe. Technologically, we're on the brink of crossing the Rubicon.

Gaming frequently pioneers the adoption of new technologies in consumer, such as social networks (early Facebook games), graphics, and raw compute. This trend is here to stay as every human has a gamer inside them (even grannies playing Candy Crush). I am skeptical about the potential of what is termed as 'Web 2.5' games, which blend onchain assets with off-chain computing, to take crypto mainstream. This skepticism stems from the fact that these games often fail to offer fundamentally new experiences. They typically replicate the experience and business model of their Web 2.0 counterparts, often with inferior results (exception of Sorare and Prime). There is room for improvement — both in terms of what we offer to developers and the experiences we provide for players. Enter the fully onchain games.

Emerging from a Dark Forest

In 2020, Dark Forest emerged from the metaphorical 'dark forest', demonstrating to a select group of nerds that reliance on centralized industries was no longer necessary for game distribution and play. Create a private key and dive into a game running on a distributed network. This innovation has laid the groundwork for the onchain gaming entire industry.

The Formula for Ultra-Efficient Onchain Gaming Studios

Imagine combining the skills of two anonymous full-stack developers with an onchain gaming framework, such as Mud or Dojo. Add to this mix a distributed network and existing open IP (Loot etc), topped with a multisig. What you get is a blueprint for a self-sustaining business that operates with minimal expenses — arguably the leanest business model out there. No AWS hosting bills - even the open source clients can be self hosted, making zero dependencies other than the chain itself. Literally 0 costs in perpetuity if the games gets some traction. In a landscape obsessed with finding the next big 'unicorn', it's these kinds of setups — efficient, streamlined, and innovative — that are truly groundbreaking and impressive. Please don’t show me Unreal Engine 5 graphics with NFTs and expect praise.

The importance of CCO and Open IP

When I talk to those unfamiliar with crypto and they ask about my work, I tell them I create games within an open, blockchain ecosystem. Inevitably, the follow up question is about whether I've trademarked what I do. This reaction is understandable; for over two centuries, business has largely revolved around protecting one's intellectual property.

However, we're now in 2024, in an era where information moves at the speed of light. In such a world, the most effective strategy is to let ideas flow freely and find other avenues for value creation. This approach was epitomized by Loot, which is why I continue to invest in this ecosystem. The concept of open and shared development in gaming has become an unstoppable force. The open IP model provides a unique and valuable opportunity for new developers. It allows them to dive into the existing lore without any licensing fees, enabling them to expand the plot and enrich the world, and hopefully providing them with sustainable revenue.

Micro Payments (Not talking about crappy micro transactions in AAA games lol)

With the advent of EIP4844 and the scalability of Layer 2 solutions, we can cost effectively implement split payments through contracts, enabling intriguing new payment mechanisms. These can be executed atomically at the point of play, using the blockchain as escrow, or we can immediately distribute payments to multiple entities upon playing. This capability bundled up with Account Abstraction opens up a design space that encourages game growth beyond what the original developers envisioned, providing a viable funding mechanism for those who choose to pursue this path.

Ultra-Efficiency in Action: Loot Survivor's Case Study

The future of gaming is already here, though its distribution is still evolving. Take Loot Survivor as a prime example of an ultra-efficient business model, aside from its unique framework. The game boasts an open-source client that encourages distribution, paired with fully onchain logic. This design has led to the emergence of two alternative clients, ensuring the game's survival even if the original client fails, much like the resilience seen in Uniswap. Yet, unlike Uniswap, the gaming market has a much broader appeal than Automated Market Makers (AMMs).

Loot Survivor is in the top 15 contracts of all time on Starknet at publication - having been deployed only 3 months ago. We made a prediction almost 2 two years ago that onchain games would be the biggest consumers of blockspace. Loot Survivor is the canary in the coal mine for onchain games, signalling the likely scale of resource consumption, critical to the success of a chain (L1, L2 or L3) - but that's another whole article.

Loot Survivor stands out as an extreme case of this model. It might not attract millions of players, partly because it traded some user experience features for robustness. These trade-offs, primarily technological hurdles, are actively being addressed in Loot Survivor 2 and other next-generation onchain games. (BibliothecaDAO has 10+ games being built my micro studios that are focused on small unique experiences like this).

Another fantastic example is 'Words3', developed by the talented Smolbrain team. And there are many more emerging micro studios (moving castles, engine study, zKorp, Grug’s Lair, Loot Underworld, Mississippi, and other emerging organisations like CheDAO).

History Doesn’t Repeat, it Rhymes

The video games industry has been through several seismic disruptions in its 50(ish) year lifespan. From arcades to PCs in the home, from $60 cartridges for consoles to mobile free-to-play. Review recent gaming history and you might think that a similarly sized disruption is long overdue.

We don't need fancy graphics or rehashed Web2 experiences - we need net new experiences. Just as in traditional gaming, these new experiences don't come from your AAA games; they come from your indie chad game developers. Is the next generation of ALL gaming the next generation of web3 gaming? Keep watch anon.

Want to chat about this? Find me in the Realms World or Dojo discord which is bustling hive of onchain gamers.

thanks to Lord Secretive for some thoughts on this subject

Refs

• 1. One of the works discussing micropayments is Ted Nelson's 1960s concept of "Project Xanadu," which envisioned a system where users would pay small amounts for accessing portions of text.