Jsquare Outlines GameFi’s Essential Next Steps In New Report

During the last bull run, NFT and Play-to-Earn gaming acted as a type of El Dorado to boost crypto adoption and revenues. But in a year that has been unkind to many blockchain industries, NFT and Play-to-Earn games have fallen from grace in a major way. Former behemoths of the space, such as Axie Infinity have been mired in controversy and quite abruptly saw its value and gamer activity drop over 90%. In addition, as 2023 shapes up to be the year of hardline crypto regulations coming to fruition, the status of these kinds of blockchain games are in limbo.

To an outside spectator, such downturns would indicate that it’s time to abandon blockchain gaming, but that is not necessarily the case. While certain types of blockchain games certainly have a questionable future, it would be wrong to dispose of GameFi entirely.

Jsquare, an Asia-based research and tech-driven investment firm focused on facilitating blockchain mass adoption and Web3 empowerment has published a report analyzing the current state of GameFi and blockchain gaming infrastructure. The report follows a recent investment from Jsqaure for Oasys, a gaming-optimized blockchain built by gamers for gamers. The report dives deep into current sore spots in current blockchain-based games and the future potential of public blockchains in GameFi, which catalyzed Jsqaure’s backing of Oasys.

Find the full report available below.

Why Jsquare bets on public chains in GameFi

The bottleneck of blockchain infrastructure in GameFi

It can be said that the NFT and Play-to-Earn model blew up the last wave of the GameFi bull market. Though the concept of the metaverse remains vague, it is clear that GameFi has a strong influence on the crypto market with around $10 billion revenue in recent years. The story that blockchain games explode the metaverse sounds cool? However, the current situation is”on-chain assets and off-chain execution”. Numerical interaction and storage of most blockchain games are carried out off-chain in the centralized servers. Tokens are completely off-chain generated and usually need to be withdrawn before trading in games. 

Thus, the pain points in the technical level are: 

• High storage cost: Storage is a scarce resource on the blockchain. It is impossible for the projects to store several GB game data on-chain.
• High computing cost: Neither players nor projects are willing to afford high gas fees in game services computing on-chain.
• Unbearable response time: The blockchain has to go through a long waiting process from initiating transactions to packaging blocks, ranging from a few seconds to a few minutes. This is very unfriendly to applications such as games that require low latency and high frequency interaction.

Some projects such as Issac based on Starknet, have begun to explore completely on-chain games to figure out the bottleneck of the blockchain infrastructure. However, Issac is a lightweight numerical game with low playability. For AAA games with high-frequency interaction and 10GB huge resources at each turn, that approach is not suitable. All those mentioned have driven our attention to the Infrastructure constructions in GameFi.

Why do we necessarily need game-specific public chains?

Current scaling solutions on Ethereum are mostly designed for DeFi applications or simple on-chain assets. In 2017, the phenomenal blockchain game CryptoKitties took up too much Ethereum network and caused serious congestion. It reminded everyone that the first problem to solve for fast growth of blockchain games is the technical performance. Although there are many public chains with low fees and fast processing speeds (for example security and data availability are higher priorities than network stability and speed as for DeFi protocols) now, they are not suitable for GameFi which has high demand for transaction speed and transaction volume. 

The behavior and quantity of on-chain interactions are quite different from GameFi to traditional DeFi applications. Layer 1 solutions with slow transaction speeds and high gas fees greatly hurt the user experience. Layer 2 solutions based on Ethereum enable on-chain transactions to be completed at a speed similar to that of ordinary servers, but the gas fee is still relatively high. Those are undoubtedly unfriendly to the development of GameFi and the future Metaverse. 

Therefore, we believe high-performance public chains dedicated to GameFi must have been bet on. GameFi is regarded as the physical application with the most active transactions so far and has many positive contributions to  public chains’ ecology. Such as TPS of Ethereum can not meet the requirements of instant computing in the games, thus high-performance public chains continuously have new opportunities in the market. For example, for Layer2, there is currently a lack of cash flow business that focuses on fast delivery and high activity, and the game just fits in with it. This is our investment logic for insisting on betting on the new public chains to prepare for the next round of bull market.

What we are optimistic about is a public chain on GameFi – Oasys, which has plentiful partnership resources with huge game brands such as Bandai Namco, Ubisoft and SEGA. Oasys has rich game development experience as well as Japanese traditional IP resources in game distribution, online operations, and advertising placement.

Comparison of public chains for blockchain games

In general, the current development trend of blockchain games infrastructure is mainly divided into two categories:

As for existing public chains which want to provide better performance of game projects, some exclusive solutions have been provided. The advantages are: 

• Based on the existing users of the public chain, game projects can enjoy early demographic dividends;
• Some public chains have their own fund, which encourages more excellent R&D personnel to participate in the construction by holding various hackathons.

As for  public chains especially built for blockchain games, most of them are still in the early stages of development. The advantages are: 

• Improving the TPS of the blockchain to cope with a large number of interactions and transactions by players;
• Designing a mechanism for zero gas fees, which reduces the cost of such high-frequency interactions and transactions.

Looking back at the last round of the GameFi bull market, the public chain market is mainly occupied by WAX, Hive, BSC, and Polygon. Popular blockchain games such as DeFi Kingdoms, Splinterlands, Alien Worlds, Farmers World, Upland, Mobox come from multiple non-Ethereum public chains. However, the public chains targeted GameFi that appeared so far have no unified standards, imperfect performance, and insufficient compatibility.

Some high-ranking public chains are only supported by a single game, such as Ronin and Hive, which have not demonstrated incubation capabilities of GameFi. Axie Infinity was the biggest winner in the last wave, but after the beginning of the bear market, several games launched by Ronin performed unremarkably and most users chose to withdraw Ronin assets to the Ethereum mainnet.

Although classic public chains have actively developed blockchain games and NFT ecology, for example, BNB Chain has launched a USD 1 billion ecological fund for investment in GameFi. However, under the brutal development, capital imitation and security accidents occur frequently. Within the bear market, the trading volume of blockchain games has shrunk. WAX, which successfully incubated games such as Famers World and Alien Worlds, has also entered a ebb of subsequent weak user growth. Flow, due to not being compatible with EVM, is not friendly enough to developers to grow. During the construction period of the bear market, we believe that there is much growth space for new public chains’ fierce competitions.

Oasys is an EVM-compatible gaming chain, specifically for data storage of blockchain games and NFT transactions. It is characterized by high-speed transmission speed and zero handling fee. Oasys uses Optimistic Rollup technology, which has two layers: Hub-Layer (Layer-1) as a storage side chain of EVM, providing various transactions and cross-chain records; and Verse-Layer (Layer-2) as a calculation, as a node of the infrastructure operation, it guarantees the computing services of the blockchain.

In addition to technically lowering the user barriers for blockchain games (scalability, eco-friendly PoS blockchain, zero-gas-fee experience), Oasys also has obvious advantages in building and consolidating ecology, quickly uniting many partners, verifiers and investors from Web2 and Web3. Oasys spent much effort during the last two years convincing large video game developers to adopt blockchain technology. It has partnered with ConsenSys to produce an industry-first game-optimized wallet for players; as well as crypto-native game developer Mythical Games as its initial validator.

With the market opportunities of new public chains, as well as moat of technology, strategic partnerships and IP resources, we believe that Oasys can grow stronger during the crypto winter. It’s time to combine everyone in the blockchain industry and the traditional game industry to build a bright future for the GameFi industry.

Conclusion: Oasys is worthy of attentions due to triple advantages

Today, Japan is attracting global Web3 practitioners with its good development environment and regulatory policies. It is the most active region in the crypto industry in the Asia-Pacific region besides Singapore. Most importantly, Japan has done a good job in animation, games, IP derivative markets, and cultural empowerment worldwide. Many well-known IPs have decades-long global influence. These foundations provide a particularly good sample for the Web3 industry to do how to combine virtual reality in the next step.

Oasys, whose founding team is deeply rooted in the Japanese gaming industry, is able to develop rapidly under the dual advantages of the Japanese market and culture. From the white paper, we can find that its architecture has been relatively complete in less than half a year. Supported by large companies in Web2 such as Bandai and Sega, as well as benchmarking against Ethereum and developing their own Layer2, the ambitions of Oasys are clearly revealed. 

Although we might face a relatively long bear market in the future, GameFi will undoubtedly be an important piece of theWeb3 puzzle. With comprehensive advantages of technology, ecosystem alliance and positive support from the macro market, we firmly believe that public chains like Oasys with clear positioning, excellent innovation capabilities, strong partnerships, and low inflation have a better winning rate in GameFi 2.0.