Each new computing paradigm has historically unlocked a new set of possibilities for games:

• Transistors, microprocessors, TVs — the concept of a computer game

• PCs — expansion of gaming categories to include strategy and simulation

• Internet — multiplayer

• Social-web — social-network games

• Mobile — casual games

• VR — Spatial

With each new chapter of change, we have seen new teams succeed by embracing new modalities and technologies. Not incumbents, but rather fresh thinkers — game designers who were able to invent net-new experiences by leveraging the new affordances provided by each computing medium. This has also happened in the vibrant first movers of web3 games, each of whom has innovated in their own way.

• In 2017, Crypto Kitties created the first crypto-game, allowing players to collect and breed new kitties.

• In 2018, Axie Infinity put assets on-chain as NFTs and created an open liquid SLP economy.

• In 2020, Dark Forest used zero-knowledge in conjunction with on-chain game logic to create the first on-chain game with incomplete information that was also permissionlessly extendable.

• In 2021, Loot Project dropped, becoming an icon of a base layer IP that people could permissionlessly extend, and spawned hundreds of games, derivatives that incorporated it into its gameplay, Lore…etc.

• In 2023, there is now a growing industry of new fully on-chain games / autonomous worlds.

With each successive experiment in on-chain games, we’ve uncovered net new experiences enabled by on-chain assets, game state and logic, permissionless extension and composability that point us towards the possibility of Autonomous Worlds as next generation crypto platforms. At 1kx, we believe that we are in the midst of a 0 to 1 in the development of the next generation of gaming — that of an on-chain game.

Let us borrow gubsheep’s definition of a cryptonative game (abridged).

An on-chain game is a game where:

1. All game logic, state (assets and others) are on-chain, implemented via smart contracts.

2. The source of truth for game data is the blockchain. The blockchain is not just used as an auxiliary store of data or a “mirror” of data stored in a proprietary server; all of the meaningful data (not just asset ownership) is stored on the blockchain. This allows the game to fully utilize the benefits of programmable blockchains: a transparent, permanent, and permissionlessly interoperable data stores.

3. The game is developed in accordance with open ecosystem principles.

4. The game contracts and (usually) an accessible game client are open-source.

5. Third-party developers are empowered to customize or even fork their own gameplay experiences through plugins, third-party clients, interoperable smart contracts, and even full redeployment. This, in turn, allows game developers to harness the creative output of an entire (incentive-aligned) community.

6. The game is client (front-end) agnostic.

An isomorphism to this mental model that we often see in the on-chain gaming literature is that of an “Autonomous World” or equivalently an “On-Chain Reality”. This nomenclature draws parallels between:

1. On-chain game state, where the blockchain is a source of truth for game data and the state of a “world” (think what is where at any snapshot in time).

2. On-chain game logic that defines how a player can interact with the game and real world physics that define how people can interact with reality.

3. Community and governance structures that stress open ecosystem principles and other malleable elements of the base layer and citizens and forms of government.

This world is “autonomous” because:

“Worlds with a Blockchain substrate are almost maximally autonomous: anybody can enforce the introduction rule, without damaging its objectivity. The disappearance or betrayal of any particular individual does not hurt the World: its diegetic boundary remains as hard as ever.” — “Lattice”

Two transformational unlocks make autonomous worlds extremely exciting:

1. By having game state and logic on-chain where actions have real economic stake, players will attach additional significance to their on-chain game actions and experience deeper levels of immersion and experience unbounded skin in the game. Censorship resistance of on-chain games will allow this immersion to grow without platform risk. Running on a public blockchain also means that the game can exist forever.

2. By allowing anyone to extend or change the game, on-chain games encourage mods, better align incentives between modders and game developers, and allow the players to control the canonical game experience, working towards a grounds-up vision of an interoperable metaverse.

On-chain game state and logic enables:

1. Permanence and fault tolerance as inherited properties of the underlying network. In-game actions, asset ownership and earned credentials are incorruptible, verifiably yours and permanent. The game and surrounding ecosystem are censorship resistant.

2. Something at stake. Assets inherently have monetary value as they can be made tradable (if not an NFT then a private key market). Enacting state transitions requires gas. There are real economic consequences to participation in an on-chain game, and often times real economic upside that can be unbounded.

“We must also remember that transactions cost money. Therefore, it will be most effective to make any transactional actions in the game strategic. This means you should strive to put as much of the player’s intellectual work into one transaction as possible”

- Bohdan from Mithraeum https://medium.com/mithraeum/on-chain-gaming-principles-for-building-viable-systems-2c3e522c2df3

As a consequence of the interplay of these qualities, we hypothesize that players of on-chain games will have a deeper, more immersive relationship to AWs because they have:

1. A stronger feeling of ownership of in-game assets and accomplishments. We have already observed people constructing digital identities around on-chain actions and accomplishments like the degen score, wallet profiling, game leaderboards, C4. This is something that we have also seen in web2 games with high value economies and items, where players grind thousands of hours, spend tens of thousands of dollars to obtain in-game rares and form communities around their possession. True ownership over assets and accomplishments will amplify this sentiment. As evidence, we have seen Dark Forest NFTs (NFTs awarded for winning Dark Forest rounds) have also historically sold for significant amounts despite having no functionality/utility.

2. A stronger desire for mastery of the game to obtain high value assets and high value titles. We have seen players of Dark Forest build bots, monitoring tools and custom clients in an effort to climb the leaderboard. We have also seen communities in web3 that intimately identify with their pfps, particularly pfps of high monetary value.

3. No worry of platform risk: In Web 2.0 there are many examples when game mods and auxiliary platforms are served a cease and desist from their parent IP, or digital distribution services. Regulatory arbitrage aside, on-chain censorship resistance, permissionless deployment and permissive open source licenses/cultures ensures that on-chain games and their surrounding ecosystem cannot be arbitrarily shut down.

In aggregate, we hypothesize that because of these consequences of on-chain state and logic, web3 games will have deeper immersion and longevity compared to web2 games.

The history and development of gaming has been intimately tied with modding. Many era-defining games and genres were originally born or popularized as mods of popular titles. There is a plethora of evidence that players want to take part in the development of games they love, and many times, they end up creating experiences that others love (Roblox, Minecraft).

The downside of the popularity of mods was that though hypothetically they were accretive to awareness, they could cannibalize DAU of the main product. Out of this fact and a desire to closely control IP, strong End User License Agreements (EULAs) and enforcement action was put in place that stifled mod growth and monetization in the past two decades.

Recently, User Generated Content (UGC)-based games have been touted as a solution because they capture the value created by the community. The studio could provide creator tools and a constrained set of freedom that would ease the process of creating new experiences. Web2 UGC, however, still suffers from intolerant EULAs, high take rates, inflexible monetization schemes and a limited subset of freedom.

Autonomous worlds which are permissionlessly extendable and moddable is a much stronger solution than web2 UGC because:

1. On-chain game logic by default exposes every public facet of the underlying game for modding and extension. Any developer can create a set of smart contracts that interacts with the game state and logic instead of having to ask a game studio to expose a limited subset of creative freedom (e.g. the ability to create custom maps). This can look like games that read and use the original game’s state, a game whose outcome controls inputs in the base layer game, a game that directly calls functions on the original game logic, multiple games that share state, components…etc.

2. Open source culture and the anonymity of smart contract deployments means that it is virtually impossible to enforce traditional web2 EULAs that prevent monetization and ownership of mods. Mods and extensions deployed on the blockchain have the ability to arbitrarily define value accrual parameters (fees to call functions) and the contract — if decentralized — is either owned by nobody or upgradability is controlled by a decentralized entity. This gives freedom to accrue value for produced mods and prevents EULA enforcements.

As a result of restrictive EULAs abetted by underinformed and outdated court rulings, modders cannot claim copyright to their own hard work, unable to easily monetize or control the use of their creations or easily protect against misappropriation by bad actors. Even absent the restrictions imposed by most EULAs, mods are considered derivative works that do not fall under fair use. While modders are generally allowed to create mods and distribute them for free, modders can neither assert ownership over the mods they create nor can they legally profit from their work without infringing the underlying game’s copyright.

- https://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1198&context=wmblr

1. There is better incentive alignment between mods and the original creators of the game — and even a blending of these roles. Whereas a mod of a game may be distributed as an entirely separate piece of software, value flows through an on-chain mod can route through the core game logic at the base layer. The more mods and extensions the base game state has, the larger the value of assets, accomplishments in the base layer or the more value accrual it receives from activity on applications that it supports. This is the same incentive structure as NFT IP and L1 blockchains where developers are encouraged to provide new experiences for holders of the NFT for value accrual to the IP, or to create dapps that increase blockspace demand.

2. With on-chain games, every content addition results in a multi-factor expansion of playable content. Economic players and resource accumulators have new financial opportunities they can exploit from the disequilibrium introduced by new content. For players who want to play the game itself there is more content and for players who want to build/mod the game there is another aspect they can incorporate, build on top of.

With regards to permissionless extension of on-chain games, we hypothesize that:

• We will see an explosion of game mods and extended modules (on-chain downloadable content or DLCs).

• Each expansion creates much more opportunities for “fun” for different player archetypes.

• This loop goes on for as long as there is an active, engaged community. Within the community, there will always be a subgroup of builders.

• This results in games with real longevity of its player base.

• Over time some extensions of extensions, mods of mods, will become prevalent. The game ecosystem itself will become an ever evolving entity.

In order for the player’s actions in the world to matter, there need to be consequences, both positive and negative. The perception of having meaningful skin in game is more immersive than any VR headset. In The Citadel, we want there to be something at stake, something to fight for, and the means by which to fight. We envision a world driven by economic, political, and military conflict over scarce resources. The initial game loop centers around economic competition, but over time new forms of risk and rivalry will be introduced.

- https://library.citadel.game/articles/endgame

As one can see there are many teams that’re building out on-chain IP, infrastructure to make the development of AWs easier, publishing houses for AWs and other on-chain experiments.

There are many similarities between the very early stages nascent base layer systems — current vibrant ecosystems (like Ethereum), and on-chain games today:

• Technological differentiation from existing platforms that enable new types of applications that previously did not exist.

• An extremely strong community that is rallied around a vision or philosophy — often one that is congruent to the differentiating characteristics of the technology.

• A strong initial developer ecosystem of builders attracted to the base layer by 1 and 2 building new applications.

• A prevailing doubt over the commercial potential, viability, or UX friendliness of these new experiments.

Over and over again, we have observed the same flywheel:

1. Initial community builds very cool and innovative protocols utilizing compute characteristics of the base layer.

2. Other builders that see these products come and join the community.

3. Critically successful applications emerge over the course of thousands of experiments.

Autonomous worlds are at the very beginning of this cycle.

Here’s what we see happening in the next few years:

• An explosion in the number of playable on-chain games and consequently an explosion in community-led development building on top of popular titles. The games with the strongest communities will see development of multiple alternative clients, bots, plugins but also the first experiments in game modules, extensions, mods that are not forks but rather extend and interoperate with the base layer game. At least one of these mods will become more popular than the base layer game.

• Experiments in permissionless UGC, including games whose output is the input into another game, games with shared state across multiple different games (which are as a consequence natively interoperable), custom front-ends that index different subsets of game components, systems. We will see the rapid development of these fueled by the availability of open source implementations of game elements (components and systems).

We believe that on-chain gaming is the beginning of a new paradigm that will permeate mainstream consciousness. We see in it qualities of previously successful networks: complete differentiation from the status quo, a unique value proposition, a concentration of energy, and a community of amazing builders.

We are extremely excited about on-chain games and would love to support, invest in, playtest and learn in this space with all of you.

If you are building or interested in on-chain games please reach out @0xtaetaehoho on Twitter! Would love to chat.

Special thank you to the @MithraeumIO team, @damor_eth, @zomglings, the @0xCitadel team, @guiltygyoza, @pet3rpan_, @dberenzon, @accel_capital, for reviewing, giving feedback on the piece!