Maybe I'm just getting old; the crowd at Open Protocol 2022 was young.
Nothing wrong with that, of course.
But with the chaos inflicted by a bunch of crypto 20somethings in the Bahamas foremost in mind, it would be remiss not to have some scepticism about how a group of very smart, very curious, very motivated but very inexperienced kids is going to solve anything.
That stated, in total happenstance, I'm currently reading Carlo Rovelli's Helgoland, which is all about the theoretical and mathematical formation of quantum physics by a bunch of 20somethings in Northern Europe during the 1920s. They were called the physics kids.
Maybe what I'm trying to say is that thanks to a lack of preconceptions, kids are great at identifying, tackling and solving new problems. But building on top of such novelty in a way that everyone can understand or use requires a mix of experiences, including some gritty hard-won expertise.
After all, the debate about whether God does or doesn't play dice lasted for decades and involved the likes of the old guard — Einstein, Bohr, Schrödinger and Born — as much as Heisenberg, Pauli, Dirac and Jordan (no relation).
And I saw something of this tension in the opening panel at Open Protocol 2002 — the web3 pre-Slush conference from Backed, Fabric and Galaxy Digital — which was one of two panels on gaming.
In terms of web3 gaming, the panel was pretty experienced; Aleksander Larsen (Axie Infinity), Ben Heidorn (Neon District) and Aron Beierschmitt (Crypto Unicorns). They've all been around since 2018.
However, with over 25 years of gaming experience running EVE Online — the closest thing we've seen to a sustained web3 game, albeit in web2 — is CCP CEO Hilmar Petursson.
Certainly he highlighted his OG status by pointing out that it's taken CCP many years to work out what a developer needs to do in order to run a sustainable economy because there's the potential to be everything from the government to the central bank, and the primary equipment maker/seller.
However, these are all different roles with potentially contradictory and intertwined impacts.
It's not the case that building a sustainable economy in web3 is difficult, he pointed out. Building sustainable economies in web2 games is also very difficult.
And in the case of EVE Online, CCP has flexibility that because it's a web2 game populated only with soft assets, no-one expects to make money from it, although some people can via the grey market.
In this regard, all MMOGs could be viewed as somewhat web3 games because they all effectively have open economies, they're just grey economies that the developer doesn't control or directly monetize – or have legal jurisdiction.
Web3 games don't have that flexibility because using the blockchain means assets are immutable and inherently valuable in an open manner. And developers also have fewer control levers. Players will very quickly lose confidence in any project that starts fiddling with the issuance or utility of its blockchain primitives in a fundamental manner.
In this regard it's the expectation of financial value that seems to be the core issue for sustainability.
Finally, in a more abstract analogy, Petursson quoted Carl Sagan: "If you want to make an apple pie from scratch, you first have to create the universe".
I think he meant you can't just make complex things without other simpler things existing and widely being understood to exist. So most blockchain games are likely too complex to succeed in terms of the foundational layers currently available.
For me, at least, that suggests the most successful blockchain games in the medium term are going either to be very lightweight experiences, where players get just enough blockchain for it to be useful, or deep and niche onchain experiences that contain just enough game to be engaging.
Continuing the latter theme was the doyen of the low level onchain gaming, Justin Gilbert of 0xlabs, who formulated his rules for blockchain gaming.
Worlds that keep running with or without input from their creators
Anyone can build on top of the physics
Client agnostic
He was also critical of blockchain gaming's focus on ownership. 'We are building universes in which the only verb is own, but these are the primitives for DeFi, not gaming', he commented.
Best known for Ethereum mainnet RTS game Dark Forest, 0xlabs has since launched onchain Minecraft clone OPCraft, a permissionless, trustless demo world which ran for two weeks on Ethereum L2 Optimism, in which every block creation was an onchain transaction.
However, it was limited to around 1,000 transactions per second. Clearly this isn't sufficient for mass market gaming; a point discussed together with Tyler Cloutier of US developer Clockworks Labs.
Clockwork Labs is building Bitcraft, a web2 user-generated world — perhaps eventually a platform for the creation of MMORPGs too — which can handle a thousand times more throughput through its centralized architecture.
Yet it was interesting that Cloutier spoke about Bitcraft's architecture as being blockchain-like, if only in terms of it being akin to smart contracts, albeit permissioned and centralized ones.
Probably I'm reading too much into it, but in the broadest sense, it appears that the underlying concepts of decentralized architectures are permeating much wider, especially as various forms of user-generated content become more prevalent.
This Substack is sponsored by Hiro Capital: Experienced but still enthusiastic
Yet returning to the overall context for Open Protocol — which was much better attended than NFT London btw — the real stars of the show were the DeFi panellists, notably local boy Stani Kulechov, who could contrast the continued success of the Aave protocol to the successive failures of CeFi companies such as Voyager, Celsuis, FTX and BlockFi.
As an aside, the value of transparent onchain data is only going to grow given the dangers of the obscuration of assets, collateral and counterparty risk held by exchanges and their associated entities.
Of course, the entire FTX episode was triggered by Coindesk pointing out that Alameda Research's collateral was dangerously leveraged to FTX's FTT token. In that context, Nansen has just released an interesting dashboard about the known wallets of various exchanges including Binance, Huobi and Crypto.com.
For if there's been one obvious reaction to the collapse of FTX, it's been a usage spike with users taking their assets off exchanges into hardware wallets (I hope) and using DeFi products like Aave, Compound, Uniswap etc, which have been quietly generating serious traction – now $43 billion of total locked value – since the DeFi Summer of 2020.
So, maybe, just as developing countries skipped fixed telephones and went straight to mobile, so perhaps also with web3 adoption. An obvious problem for billions of people is access to trusted finance but many of them now have access to mobile phones and data connections and hence DeFi is just an app store download away.
Also, because it's a more mature technology than games and – in terms of the apple pie analogy – more of the universe has already been built, DeFi apps can now move faster and become more complex.
It also helps that they are clearly about ownership and value and take their design prompts from traditional finance, while also building better products to solve the obvious faults in traditional finance, whether in terms of general access to features or providing better money than many national governments - perhaps even in developed countries – can do.
DeFi hits mass adoption before blockchain gaming. That’s not the conclusion I expected to write at the start of the day.
Let's see if the kids agree.