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Over the past decade, blockchain has gone through several cycles of innovation, turning from a singular cryptocurrency into a multi-chain system that encompasses billions of dollars in total value. From the many industry integrations that blockchain has seen, with everything from finance to cybersecurity seeing blocking applications, one industry has continually shined. GameFi, the balance of blockchain and gaming, has allowed gaming developers to create an entirely new system of gaming, offering players the ability to generate currency while they play.
While the GameFi industry has reached a total valuation of nearly 3 billion in only six years, AAA games have failed to make the jump into utilizing this new technology. The vast majority of blockchain games have been developed by new companies that entirely focus on Play2Earn gaming.
This trend is certainly not from a lack of opportunity from AAA games. Examining Fifa’s Ultimate Team, which offers users the option to buy kits, stadiums, players, and other assets to improve their gameplay. This open marketplace system of buying packs from EA and then opening them to reveal digital assets is remarkably like many Play2Earn NFT systems, with this having strong potential for blockchain integration.
In fact, EA generated USD 1.62bn from this system in 2021, leading us to the question of why exactly AAA developers aren’t making the leap to blockchain technology and further capitalizing. In this article, we’ll take a look at some of the main limitations of layer one blockchain, demonstrating why this stops AAA from taking full advantage of this system.
We’ll then turn to layer 2 systems, demonstrating exactly how this new wave of blockchain technology could be set to revolutionize the world of blockchain gaming and bring AAA titles to the mix.
Let’s get right into it.
What Limitations Does Layer One Blockchain Technology Pose For Gaming?
The world of blockchain gaming has come a long way over recent years, with leading titles like Axie Infinity or The Sandbox generating millions of dollars over a single 24-hour trading period. While the blockchain system at present accommodates these titles, the sheer scale that AAA games deal in is almost incomparable.
While The Sandbox, a leading blockchain title, boasts an impressive 2 million total player signups, Fifa 21 attracted over 25 million individual players, demonstrating the vast difference that AAA games attract compared to blockchain titles. With this much larger player base, there is a much greater demand that blockchain systems simply cannot deal with.
There are three main limitations when it comes to blockchain technology, with the player count and need for rapid and stable transactions that AAA rely on simply not being possible on layer one. The main problems that prevent the translation of AAA games to blockchain are:
- Transactions Per Second
- Gas Fees
- Relying on Side Chains
Let’s break these down further.
Transactions Per Second on Ethereum
Ethereum is the main developer playground when it comes to creating blockchain gaming systems. With a wide developer toolkit and a flexible mainchain, Ethereum is the leading blockchain system for development. While there are many benefits of Ethereum, it has a notoriously low transaction per second ability.
In its current state, Ethereum can offer around an average of 15 transactions per second. Blockchain works by creating individual blocks of information, filled with transaction history. When a block is processed, it becomes permanent, being logged to the blockchain and documented. As this can only happen around 15 times per second, with each block having limited space to hold information, Ethereum has a problem with transactions being backed up in a long queue waiting to be processed.
While there are ways around this wait time, through paying a gas fee – which we’ll discuss shortly – this simply isn’t feasible for AAA games as millions of players all need to process data at the same time.
With the low transaction per second rate that Ethereum offers, users will pay what is known as a gas fee to push their transaction to the front of the queue. Paying this fee ensures that transaction data is pushed to the front of the queue, then being recorded onto the blockchain. For any sort of gaming asset, users want to be sure that an item they’ve received in-game isn’t suddenly going to disappear. Once recorded on the blockchain, this ensures that no changes can happen to lose this asset.
Even with its extremely low transaction fees, Ethereum has a huge base of users, being the leading blockchain in terms of decentralized application development. Yet, due to its success, the average gas price to skip the transaction queue has reached ridiculous levels, currently circling around USD 15.50 for a singular transaction.
While this figure seems high, this is down from around USD 60 just one year ago, demonstrating just how bad transaction fees can get. If we then turn back to Fifa Ultimate Team, with every single pack opening being a separate transaction, there is no way that individuals would pay for the pack and then pay USD 15 just so that the blockchain acknowledges they have, in fact, opened it and received the digital assets inside.
For this reason alone, huge-scale AAA title distribution is currently impossible within blockchain systems like Ethereum.
Relying on Side Chains
One way that many teams of blockchain developers have relied on to overcome the low transaction speeds and high gas fees of working on Ethereum is to turn to side chains. Side chains are separate blockchain projects that use interoperability (bridges) to connect to the main chain – in this case, Ethereum.
Forging this side chain link allows the main chain to use features of the former, with Ethereum using side chains like Ronin to boost transactions per second. Ronin offered a 560% increase of TPS for Ethereum, largely solving the gas fee issue for many blockchain game developers. However, the main problem with using a side chain is that they’re a completely different blockchain developer, with this leaving the side chain open to security risks.
Another leading blockchain game, Axie Infinity, was using Ronin as a bridge for their Play2Earn system. While things were going well, with Axie amassing a huge community around the project, things took a turn for the worst in March of 2022. Toward the end of the month, hackers used an exploit within the Ronin Network to steal over USD 625 million.
Even with various security features in place, like nine different validators and five required signatures, Ronin’s network was corrupted and exploited by the hacker. Events like these expose just how fragile side chains can be, with Axie Infinity suffering a major downturn due to the Ronin network exploit.
For AAA games that deal with billions of USD in transactions every year, they simply cannot risk an exploit or cybersecurity risk due to the amount of capital they deal with. With this in mind, the only viable solution to translation and gas fees was removed, closing off blockchain development for AAA titles.
How Does Layer 2 Solve These Problems within Blockchain Gaming?
Although side chains aren’t a feasible answer to the scalability issue within blockchain, Ethereum has recently announced Ethereum 2.0, which aims to increase the efficiency and speed of this network. One of the ways it’s doing this is by introducing Layer 2 systems into Ethereum, which are further deployment layers of the same blockchain, providing similar benefits as side chains without the security risk of developing distinct chains.
One of the main layer 2 ecosystems that’s gaining media attention is Boba, which offers Ethereum a range of possible benefits:
- Improve Transaction Speed – With L2 systems like Boba, Ethereum is able to speed up the total number of transactions it can handle in any given second. With this approach, the backed-up queue of transactions can be dealt with at a much higher speed. Over time, this will help to radically decrease the gas fee that is needed to work with Ethereum. Once at a very low and stable level, AAA games could migrate to blockchain, with fees up to 60x lower than currently offered making this a viable option for mainstream developers.
- Provide Security – While side chain systems like Ronin use their own security defenses to keep funds safe, a L2 ecosystem uses the same structures as Ethereum itself. With this, instead of worrying about security, every single connected app is able to make sure of the most advanced blockchain cybersecurity defenses, with Ethereum’s impressive level of defense being strong enough for even a globally played AAA title.
- Provide Stability – By extending the capabilities of smart contracts on Ethereum, Boba provides a more comprehensive system, allowing developers to rapidly create and scale games. With speed and transaction expansion at its core, the additional stability that L2 provides for Ethereum makes it a prime candidate for game development – even at a AAA standard.
From radically improving the transaction speed of Ethereum to offering a cybersecurity standard that is secured by Ethereum itself, the introduction of L2 ecosystems could solve the scalability issues that blockchain faces.
At the current moment, blockchain offers a comprehensive system that many game developers can utilize to create expansive and well-designed P2E titles. However, with the sheer scale that AAA games require, blockchain’s scalability issue prevents the movement into blockchain for mainstream developers.
However, as scaling solutions such as L2s become more prevalent, blockchains will become faster, safer, and more stable, nullifying the problems preventing AAA movement to blockchain. As Boba and other L2 ecosystems continue to innovate what is possible with Ethereum, the ability to move into blockchain will become a working reality for AAA game developers.
With these changes and developments already on the horizon, the next 5 years are going to be a thrilling time for blockchain gaming.