Why Put Games on the Blockchain?

A booming sector

Play-to-earn (P2E) is the latest, highly promising generation of blockchain applications that have come to dominate the industry quickly. In 2021, interactions with P2E games represented 49% of blockchain transactions, and venture capital firms invested over $4 billion in P2E projects.

P2E games also solve the problem of how to offer utility for non-fungible token (NFT) projects. Sure, some NFT projects are only about the art, but they are usually attached to a famous artist who already has a following, and then there are so-called Profile Picture (PFP) projects, whose holders expect to receive perks and services with their NFT. These are usually detailed in a more or less realistic roadmap for the project, which can be a very big deal. In 2022, The US Department of Justice charged two NFT projects on accusations of fraud and money laundering for not delivering on their roadmap.

This is good news because it sets a legal precedent that protects consumers against rug pulls. Gone are the days when NFT projects could make millions on empty promises of perks “to be announced.” This means that NFT roadmaps are now considered binding contracts, which makes P2E developers a great way to offer such utility for holders. That's why P2E development skills are very highly sought after by NFT projects.

So, on a pecuniary level, there is definitely a huge P2E wave to ride, a lot of capital flowing in the sector, and huge demand for P2E development skills.

But at the core of this hype, there is a real technical added value to deploying games on the blockchain, as well as the promise that P2E could be a prototype for much more important types of blockchain applications.

The future of work

If we extend the P2E concept a bit and find ways to make the “play” part consist of verifiable, useful tasks, P2E could also very well be the future of work! Many startups are currently working on this problem, so the next Uber or Upwork could very well be blockchain-based.

We have seen early signs of this transformation at scale when many people in the Philippines, who had lost their jobs because of the COVID-19 pandemic, relied on Axie Infinity (a blockchain-based P2E game) as a source of income.

There is no fundamental technical difference between developing a smart contract for a play-to-earn versus a work-to-earn (a job) platform. The technical advantages described below are valuable in this context, and P2E development skills would be highly transferable.

Technical advantages

Trustworthy vs. trustless

Of course, government lotteries and legal casinos represent a huge improvement over suspicious gambling dens, but there's one problem with even the most trustworthy traditional “play-to-earn” systems, which is the fact that we even have to trust someone.

Let's say that we enter a coin toss game in the most trustworthy online casino, or purchase a magic bean in an MMORPG, with a 50% chance of winning the grand prize.

We would submit our entry through a frontend or an API (which would be the only ways to access the game), a back-end algorithm would then determine if we have won, and a (typically third-party) payment processor would send us our gains. Sounds simple, but this solution requires a lot of blind trust from the users of the platform.

First, they need to trust that the software and its human operators will behave as advertised and really give them a 50% likelihood of winning without a way to verify it, and also that they would not be arbitrarily locked out of the platform. Even if the software is open sourced, there is no way to verify that the shared code is what is actually deployed or that it will not be arbitrarily changed or interrupted by a human operator. Moreover, they need to trust that the payment processor would behave and pay the promised prizes to winners, again without a way to verify it.

If a system depends on trusting people, given enough time, it will fail. There is, for instance, a whole Wikipedia page listing acts of fraud in government lotteries, countless reports of very official casinos, both online and off, illegally refusing to pay prizes to winners by claiming system malfunctions, and we hear about payment processor horror stories every other day on social media. One good example is with PayPal; they routinely block honest users from accessing their funds, and once had to pay some users tens of millions of dollars in compensation.

The blockchain solves the question of trust by making access control and payment processing decentralized, yet ultra-secure, so users don't have to trust anybody.

On the blockchain, both the deployed source code and data in storage are completely transparent and accessible by anyone, independent of any centralized frontend or API. Users can verify the precise source code of the software they interact with, with the guarantee that it's what's actually deployed on the blockchain. Code deployed on the blockchain is also immutable, which ensures that no one can change the rules in the middle of the game. This, of course, is on top of the original function of the blockchain, which is to offer permissionless, programmable payment processing.

No free lunch

As the popular adage goes, “There is no such thing as a free lunch,” meaning that advantages likely have to be balanced with disadvantages. This is a hard rule in computing in general and is particularly true in blockchain development. It's all about making the right trade-offs.

The previous technical advantages of the blockchain are nuanced, and they come at a cost: the literal cost of computation and storage, which is much higher than in centralized software, and also the increased care we need to put into writing our code as a consequence of its transparency and immutability. When anyone can see the code and storage of a smart contract potentially holding millions in value, and we cannot correct bugs, we really need to make sure to get it right the first time!

Moreover, decentralization is more of a spectrum than an absolute principle. It often has to be balanced with cost and security considerations. Due to the high cost of computation and storage on the blockchain, as well as its transparency, some components of our games may have to be stored or computed off-chain, making them more or less centralized. The question of what to store and compute on-chain vs. off-chain is in fact a crucial architecture question for developing any smart contract.