Scalability, investment and gaming: the GamesBeat 2018 roundtable

“Blockchain in gaming – is that a solution to a problem that nobody had?” A fascinating conversation between industry experts

Earlier this month, we attended GamesBeat Summit 2018, two days of exclusive games and tech talks at The Seminary in Strawberry, a short drive north of San Francisco. On the second day, attendees ducked into side rooms for tiny breakout sessions. They were a chance to spend quality time with industry experts and, naturally, BlockchainGamer.biz joined the session on “Games And Blockchain: Sorting The Hype And Reality”.

It was a fascinating insight into some of the concerns of the field's top creators

It was a fascinating insight into some of the concerns of the field’s top creators. Japheth Dillman, moderating, is best known for the gaming accelerator YetiZen. He became involved in virtual currency in gaming in 2002, “Before the days of Facebook – really early web, virtual currency gaming” and as of the last year-and-a-half, is working in hedge funds and ICO investments.

There were four panellists. Gabby Dizon from Manila in the Philippines is a game developer. His work at Altitude Games has been spun out as a storefront called Alto, “That helps game developers put their game items and assets on the blockchain”. Nathan Ginnever has been in the cryptocurrency development space since 2012 contributing to open-source projects like Ethereum and the Zcash blockchain. He’s currently working with porn-related project SpankChain in Los Angeles but, “During that process, came to the conclusion that the system may be useful for gaming” and has been working on a battle system for CryptoKitties that enables people to pitch their collectables against each other. Benny Giang is one of the co-founders of CryptoKitties. He very humbly says, “It just so happened that our blockchain experiment kind of took off.” Now he’s working with building the “Kittie-verse” with Ginnever and others. The final member of the group was Peter Relan, an entrepreneur who runs an incubator, called YouWeb, and the CEO of Got-It.ai. He’s best known for projects like OpenFeint and activities like Spaceport, which was acquired by Facebook, and Discord.

It was a fascinating talk and here are some key excerpts on the hottest topics:

 

On blockchain for gaming

Japeth Dillman: Let’s dive into the most painful question right off the bat. Blockchain in gaming – is that a solution to a problem that nobody had?

Gabby Dizon: Let’s go back to the database. Before databases, you could have a single-player game, and you had your items there, and no one really cared about how those items are stored. And now, you go into multiplayer gaming, and these databases are extremely important because it tracks who has what, and what kind of items are possible in the game.

How can I make my item work inside your game? How can I be an item-creator that has items that work in different games? How can you have a character that goes to different games? I think that’s a very interesting possibility

Now, with blockchain, you have the possibility of cross-game interoperability between games, characters and items. We’re just starting to see how this is happening, but there’s a big community now in crypto games. How can I make my item work inside your game? How can I be an item-creator that has items that work in different games? How can you have a character that goes to different games? I think that’s a very interesting possibility.

Nathan Ginnever: Particularly with Bitcoin, we found a way to do decentralisation in a way that had not been done before. So we found a way to coordinate people in a new way. And that’s kind of the hammer that we’re applying to everything. We don’t know exactly what’s different about decentralisation. So we’re supporting that with gaming. I certainly think that there are reasons to apply decentralisation to the gaming industry.

Peter Relan: To me, it’s very clear that small groups self-coordinate very well, and large groups don’t. We see that on Discord all the time. If you join a server on Discord with 30,000 people, it’s impossible to get anything done! To date, clans and guilds have been small-scale, because it’s too difficult to coordinate.

I’ve always fantasised, for example, about a Hunger Games style situation with 50,000 people floating in those little gifts to the participants

With massively multiplayer online role-playing games, the word ‘massive’ actually doesn’t refer to the size of the clans. It refers to the size of the concurrent users, which might all be of different clans. But I’ve always fantasised, for example, about a Hunger Games style situation with 50,000 people floating in those little gifts to the participants. Like a crowd in Hunger Games that was watching and sponsoring. That would be an exciting game. And that’s impossible with the current clan and guild structures. So to me, that’s where the excitement will be. I’m not saying it will definitely happen, but that’s where the opportunity is: a new genre.

 

On blockchain scalability

Nathan Ginnever: Everything requires verification. That makes things slow. That’s what I’ve been working on and researching for the past six months with SpankChain: how can we alleviate the responsibility of verification on the main chain?

There are a few approaches to do this. Lightning was the very first idea out of Bitcoin, to do this, where you break consensus – which is what we’re all trying to achieve on this main chain. What’re the final balances of all of these ledgers? You take two of those balances and just remove them from the chain. You only care about the two people involved in those balances. So you get unanimous consensus on these two people. That is very cheap. So you can find systems where you can take the consensus away from the majority of things. You can run a very fast, cheap consensus, almost to the same speed as a centralised system. And then you just use some verifiable way to bring it back into the main chain if you need to.

Now, these things are nuanced, and there are immediate uses for this scalability in gaming. And then things that are coming later this year. And things that may just not be possible at all. The different levels of degrees, we would probably need to speak here for a couple of hours, but it really hits you.

The fundamental idea of what is called a layer-two blockchain is: let’s treat the main blockchain as a Supreme Court, and treat it with respect. Let’s take all of our trusted decisions off-chain, and then let’s come back and use it as a court to settle a dispute

Peter Relan: I think it’a compelling idea, in terms of how societies work. If every argument that we had needed to be settled by a court, society wouldn’t scale. Correct? So the fundamental idea of what is called a layer-two blockchain is: let’s treat the main blockchain as a Supreme Court, and treat it with respect. Let’s take all of our trusted decisions off-chain, and then let’s come back and use it as a court to settle a dispute (versus a court to record every darn thing).

That is the fundamental statement behind scalability. If you don’t have that, it’d mean society itself wouldn’t scale. If [everything] was recorded by the United States’ Supreme Court, we’d be screwed, right? That’s central. What is unknown is: how well will that work? What is the ratio of fraud-proof that will be needed, and how frequently to go back to the court system?

Japeth Dillman: If anything, blockchain has three areas that define it right now. I believe that’s transparency, the open ledger; security, it’s very secure; and it’s slow. It’s not a very fast technology. So how do we adapt something like this to gaming? Does it restrict the ability to apply this technology to gaming?

Nathan Ginnever: Yes, of course, I think is the answer. You have to be careful with how you’re using blockchains. And as I was saying, I want the scalability to be where it’s not going to affect the game. So I chose a simple game where it should be able to run on regular hardware that isn’t mining hardware.

So it should be fast. We should see a centralised database speed. As long as you’re OK with cutting off a lot of the usability. So you just have to think very carefully when you’re dealing with the slow part, right? So maybe just use it where it can be used.

But that being said, there are a lot of scalability solutions that are in the works this year. And we are really unsure – maybe it is possible to get FPS-type state updates. But we won’t have to do that for a while.

Benny Giang: The way we’re dealing with scale is, when we reach the maximum – which is like 20%, 25% of the Ethereum total transactions – we formed a scaling team to explore the solutions, and look at side chain state channels and a bunch of these other things.

The blockchain cannot handle hundreds of millions of players making transactions into the blockchain

As Nathan said, there is no hard fix. There’s nothing you can do in the next week. It’s going to take some time. And some of these initial explorations with the game that Nathan is building, using general state channels, is going to be one of the first times where we have a huge amount of players. And frankly, the blockchain cannot handle hundreds of millions of players making transactions into the blockchain.

So for us, that’s something that we are looking into. We get asked a tonne of times, from our users, [for new features]. Typically, for a game, it’s pretty straightforward. You just build it. But we have to sit back and really think deeply about whether or not this action should be on-chain of off-chain. If it’s on-chain, is it in the main chain, or are we using some other solution? So there’s the reason why we take a long time to build new features, and we have to be very careful of being able to handle that load.

Right now, Ethereum is like 15 transactions per second. And my belief is that it’s going to get better throughout time with Plasma, with sharding, and some of these initial explorations.

Peter Relan: I started my career as an ARPANET engineer. If I showed you the table of internet connectivity speed from 1983, [we saw] 20 times improvement in six years. I think what’s going to happen is you’re going to see a curve like this, where there’s this long period of incubation of the blockchains. And then there’ll be these breakthroughs where it’ll start to rise steeply.

Look at the internet; if every packet sent through email or whatever application went over the backbone? It would never work. There are these notions of subnets. That’s the sharding idea

If you look at just the throughput of the internet, if every packet that every single human being sent to every single other human being through email or whatever application literally went over the backbone? It would never work. There are these notions of subnets. Right? That’s the sharding idea.

So the fundamental scalability of the internet is based on a very simple idea that only certain packets need to go into the internet backbone. So whether it’s the Supreme Court, whether it’s the internet architecture – you can take any example. But if every transaction is recorded on a blockchain… which unfortunately today is where we are… But if you wait five years, these guys will sort it all out. It’s a matter of, I think, five years. I’d say Plasma.

 

On ICOs and investment

Japheth Dillman: In 2017, we saw 30 times the amount of capital raised in ICOs from 2016. We’re projecting another 40 times raised from 2017. The Telegram deal alone is $1.6 billion. Can the crypto market handle this load of ICO investments?

Benny Giang: We didn’t do an ICO.

Japheth Dillman: You didn’t. I know. That’s really fascinating.

Last year, there were like three big headlines. I’ve said this: the bitcoin price, the hacks and scams that are happening, and ICOs

Benny Giang: Last year, there were like three big headlines. I’ve said this: the bitcoin price, the hacks and scams that are happening, and ICOs. So an answer to that was to put cats onto the blockchain; make it accessible; make it fun; and don’t do an ICO. That was kind of our strategy going forward. We still kind of do it. We think ICOs are a great funding mechanism, but we wanted to prove that is possible to build a game with an interesting mechanic that could be profitable.

… Our cats, they live without a server, right? They can live for thousands of years. Even if we go bankrupt or we all die of old age, the kitties will continue to exist. Hopefully, there’s no forking. There are people still running Ethereum but the cats will live forever!

What we’ve done is just put 10,000 cats onto the blockchain and with more to come. The really cool thing is actually looking back at history. In 1,000 years in the future, if you go back and be like, “Wow, 900 years ago, someone walked this cat.” Or “800 years ago, someone fed this cat.” As technology gets better – like AR, VR – these tokens that you hold in your wallet, which is a cat, you can visualise it using virtual reality.

We have six or seven people who have paid $1,000 USD for cats, and people are like, “It’s a 2D image. I can make this 2D image!” But if you look at the fundamentals, it’s a token that’s unique to you. The metadata is there. The actions of these, in terms of breeding and selling and buying, are all on the blockchain.

As technologies progress, we’ll have games like this. We’ll have other games. And then you start recording all of that to the history.

Do I want a 'pump and dump' community? Or do I want a community that cares about this project?

Nathan Ginnever: If you’re the person doing the ICO, you have to ask, “What kind of community do I want to build? Do I want a ‘pump and dump’ community? Or do I want a community that cares about this project?” A lot of ICOs are ending up with ‘pump and dump’ communities. I feel bad for them. I’ve seen what that looks like to the core developers of a project, and it’s not good. it reduces morale incredibly. And they end up being washed out.

So there’s a lot of new money coming in with ICOs. Is it all worth it? I don’t know. Some things might be worth that much money, coming in here to exploit these things. You’ve certainly heard here that we have issues that we still don’t know answers to. We’re still scaling. We still have problems. Maybe we don’t need a trillion dollars in this space right now. But at the same time, maybe we do. Maybe that brings on the type of research and development that we really need. If it’s applied correctly – of course, an ICO might not be the best way to apply it.

Benny Giang: It’s been a really important thing for a community like our Discord servers of 24,000 people. So there’s quite a lot of people in it. One of the things that we talked about this week is that we’ve seen the metrics of it, going up and down, through the markets. That’s huge, because if you guys are building blockchain games, and if you’re focused on pushing it towards the crypto crowd, they may not actually care about the game mechanics you’re building, or even how it looks. They’re just in it to make a buck.

So your game can really be pumped and dumped in a way that is not good because that’s not what you want. Games are more than just pumping and dumping. It’s really just a visual aspect of a token.
We’ve really pushed for education and mass adoption. So we’re looking to educational initiatives to broaden the scope for us. What we really do care about is when we have emails sent to us: “My boyfriend didn’t understand crypto… but now he can understand it because it’s a cat.” It’s easy to understand.

So I think it’s very important that you diversify. For us, we’re looking into the gaming space. We have crypto people who also play the game. But the other one that is very interesting is art. We have people who are in the art space, looking at these CryptoKitties as collectables. We’re setting up an art exhibit in Berlin and a couple of places where they’ll be in a gallery where you can buy it or have an auction. It’s really interesting because it goes beyond gaming, it goes beyond crypto and art.

Japheth Dillman: I want to talk a little about a traditional venture versus ICO really quickly. You’ve got a lot of experience in the traditional venture world. There have been numerous barriers in the past to raising from traditional venture. Some of them good, some of them bad. Barriers such as you have to have a certain number of users or a certain amount of engagement. Or you have to be white or male. My point is, ICOs just took all those barriers and just knocked them all aside.

You can raise (investment) with a white paper. It doesn’t matter if you’re a person of colour or a woman or whatever

You can raise with a white paper. It doesn’t matter if you’re a person of colour or a woman or whatever. Some of those barriers needed to be discarded and some of them were probably good to keep up to protect investors. I guess the question comes to: where is the balance in finding which barriers should stay, and which ones can just be knocked aside?

Gabby Dizon: I’m coming from the Philippines where there’s not a lot of venture funding. Even in South-East Asia, I would say the VC community there would be looking at regionalised applications of successful Silicon Valley concepts. Especially for games, it’s hard to get funding in South-East Asia.

So an ICO, I think, is a great way for you to not only get funding for a project but to also rally a community around the world towards what you’re building. For me, the token that you have, and the community, are really tied together. And of course, you’re going to sell your token to crypto hedge funds, ICO investors, people that are looking for token appreciation.

But at the end of the day, those tokens are really meant for how you’re going to incentivise your community to grow your network. And doing that via ICO really allows you to transcend borders. That has not been possible before, especially in areas that are under-served by VC funding.

Everybody’s talking about utility token versus security token. My answer is: you should have both

Peter Relan: So one thing that I think is a flaw in ICOs today is, everybody’s talking about utility token versus security token. My answer is: you should have both. Why don’t we have a one-way, non-two-way redeemable, non-traded currency for our user base, and a separate currency for investors? Which is a non-utility security, right? And then you can have this notion of pre-sold revenue to your users, and speculative shares in your community to your investors.

So a two-tier token would solve that. It still comes down to: is the retail investor, or the average person, good enough at curating the idea of the team? I would say that the last year has demonstrated: no. Right? Because there are too many crappy ICOs. It’s staring at us, right?

I just think that we’ve merged two ideas: utility and security. They need to be separated. The community needs a utility needs a token. It’s sort of like, if somebody invests in a mobile gaming company, it would be absurd: let’s say, the virtual currency in that mobile game was gold. It would be absurd to go to [an investor] and say, “Okay, I’ll sell you 20% of my gold.” That would be crazy, but that’s what we’re doing. We’re merging the two ideas. Just like with scalability, there are solutions. But we need to take some time to implement them. It’s this fundamental notion of separating the two types of tokens. One is not tradable. It’s for the community.

The other is a security. And then you have a very similar structure to investing in a mobile gaming company. You get shares if you invest, and the community gets arms and gold or whatever if they invest.

Whenever I issue you a token to my company, I’m not just giving you something you expect to appreciate in value. I’m giving you something that is a voting right to my company. You’re supposed to be dedicated. You’re not supposed to just want the profit

Nathan Ginnever: That’s a very interesting thing when it comes to token models, and something that I am heavily exploring. It’s governances. It’s these things that Aragon is also exploring in the Ethereum space. So whenever I issue you a token to my company, I’m not just giving you something you expect to appreciate in value. I’m giving you something that is a voting right to my company. You’re supposed to be dedicated. You’re not supposed to just want the profit.

So I build very careful protocols to hopefully incentivise a community to build a community and not to dump on a community, so to speak. The ways of doing this, I think, are: don’t sell your token. Let the community earn the token. So that way they feel like they put time into it, and invested in something to get it. That’s basically the majority of what we’re exploring.

 

You can meet some of these experts – such as Gabby Dizon and Benny Giang – as well as many others at our own event, Blockchain Gamer Connects, which takes place in San Francisco on May 14-15.

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