UGC - the next focus for games? | Skill Tree #22
The UGC Thesis by Konvoy Ventures
Konvoy expects the role of UGC to increase in significance for games and become a fundamental piece of the overall strategy. The go-to-market strategy might look similar to how many see metaverses developing, and how distribution platforms like Steam and other infrastructure were kickstarted - content first.
Content brings users, which in turn bring builders who have a direct target group and better chance at monetizing. The best example for this is Fortnite and the recent release of UEFN, which marked the start of Fortnite’s UGC platform.
4 Archetypes for UGC platforms
Tools-first Model (e.g. Roblox): Focus on tooling, monetization, and an efficient distribution channel
Platform with 1st party IP: Archetype #1 + developing 1st party IP. IP has to bring users and showcase tha platform’s features
Transitioning from launched game to plaftorm: Add tools later to retain existing players and attract new audiences
Game-centric UGC strategy (e.g. Fortnite): Tools get opened up over time, allowing creators to expand upon the core game
My thoughts: On the other side, it’s interesting to consider how UGC platforms may change game development and go-to market as they act as new distribution platforms.
Potential new go-to-market for games:
1. prototype on UGC platform to test PMF
2. full release as standalone game
3. expand game modes & become social hangout spot
4. become UGC platform
Randomness in on-chain games, a non-trivial topic
Cryptographic hashes will look random, but if one knows the seed data, they can predict the random value (hashing function is open).
Idea: blockhashes can provide unpredictability as transactions within a block that influence the hash are unpredictable (although not random).
Problem: block builders can manipulate the hash as they can make small changes to the data (e.g. include a dummy transaction) that alter the hash.
Verifiable randomness (VRF): The seed value is open (often the blockhash as it’s verifiable) while the applied function, which is used to create random value, is secret. The randomness is “verifiable” because anyone can verify that a cryptographic signature is correct using the corresponding public key.
a) Block builder might collude with the VRF provider to manipulate the randomly generated values.
b) Request-response model (need to ask VRF provider to provide randomness) which adds latency. Plusm, VRF provider could just stop providing random values.
RANDAO: Solution that is used by Ethereum to determine the block builder. Each block proposer signs a a value related to the block (like in VRF), then mix it together with the previous random value. This random value is made available on-chain via the ‘RANDOMNESS’ opcode.
Problem: Ethereum is slow and expensive
Solution: Make your own RANDAO
Each party needs to have a secret (e.g. a private key), a verifiable pseudorandom function (e.g. a signature algorithm) depending on that secret, and then take take turns mixing in a new output over a seed with the previous randomness.
Tradeoff of predictability and latency
In the RANDAO model, the randomness for the next block is known in advance, which means one can predict the outcome of the next action that uses randomness. That’s not a problem if the user doesn’t have a choice to use randomness.
If they have, the VRF solution can be used. Bringing this process off-chain adds complexity.
Unpacking the Intersection of Gaming and Web3 with Shima Capital
Mobile games nowadays make use of established templates (e.g. match-3) and differentiate mostly by IP
No super strong preference for L1s/L2s for gaming. Differences in liquidity, user activity, etc. in the short-term, but this can also quickly change
Distribution starts with leveraging highly-enaged fans (community-based). Hard to scale. Wallet profiling and highly targeted UA can help to drive ROAS
NFTs’ advantage over fungible tokens as they provide more granular distinctions vs others. Players care about their Fornite skins, not the amount of V-bucks they have. But both NFTs and fungible tokens will have use cases
What web3 brings to games
UA and engaging community before launch - extend liveops to before the game is live
Use on-chain data to segment players and specifically target early supporters
Excited about on-chain games and how to build the open economy that incentivizes the community to build on top, while value trickles down to base assets
Mods have had an incredible impact on gaming (e.g. CS, DOTA, Battle Royale genre started with H1Z1)
Challenges of investing in on-chain games: Bots that farm tokens, timing risk, blockchain scalability/UX
Timing depends on target audience and type of game. Some game concepts can be easily ported on-chain
Have to incentivize gamers to jump through hoops
Can have players require to use an NFT which can be used to track behavior on-chain and identify bots
main concern: retention (and it being mostly tied to token rewards)
here it helps to look at on-chain data and identify player behavior
Future trend Alex is interested in: NFT metadata standards to facilitate licensing of IP (e.g. bid for IP to add to your game)
Investment approach: Do deep research on market (gaps, why they exist and what opportunities they provide, then reaching out to teams building there
also helps to differentiate as an investor/have an edge
to gain an edge: research what you’re passionate about, be open about your process and share with others
Evaluating token designs/economies
Depends on the stage of investing. Shima invests in early-stage companies, doesn’t think token design should be final at these stages.
The vision of the founder is more important, with some detail about how the token is integrated into the game and the planned token utility. Why does web3 make sense for the game? How does it augment the user experience? How does it add to the gameplay experience?