Behind the gold-farming craze among blockchain game guilds: the transformation from mostly miners poses multiple risks

In August this year, when Yield Guild Games followed the leading blockchain game Axie Infinity and welcomed the market's popularity, most people did not expect that "chain game guild" would become a dedicated track, or even a hot track.

In Chain Catcher’s weekly financing statistics for the past month, the frequency of blockchain game guilds obtaining financing is second only to the blockchain game projects themselves. Many leading venture capital institutions such as a16z are planning to enter this field.

In the early days of Internet games, "game guilds" originally referred to online groups of game players, with certain rules and constraints. With the rise of blockchain games "Play to Earn" (P2E, earning money while playing), emerging blockchain game guilds have clearer financial-oriented goals. In the early days of the fragile development of blockchain games, due to their natural traffic aggregation properties and market promotion functions, they have gradually become an indispensable supplementary role in the blockchain game track.

Compared with YGG and other overseas early head guilds that operate as "decentralized autonomous organizations" (DAOs), have loose personnel organization and strong mobility, the large number of blockchain game guilds emerging in China are still extensive. In the interview with Chain Catcher, most of the domestic guild groups are transformed from the original miners, and their characteristics are small scale and employment system. More importantly, do today's guilds really bring a strong traffic aggregation effect?

As blockchain game projects change, what is the future development trend of the guild track? Is the extensive model of domestic guilds competitive? Participants and analysts gave similar answers.

Miners found a place to go

In a report by Chain Catcher in July, Chinese crypto miners were counting down to the end of the game. Bitcoin miners with a certain scale chose to go overseas, while miners with limited scale and small currencies chose to wait and see. As the clock turned to the end of the year, these wait-and-see miners also found the answer.

Shen An obviously felt that he had received a lot more calls in the past half month. Shen An is a member of a crypto venture capital institution. The company originally operated and maintained Filecoin mining machines in China. This summer, due to policy supervision, its mining machines had to be stopped or shipped abroad.

Later, with the help of the company's early NFT investment business, Shen An and his colleagues discovered the blockchain game Axie Infinity. Under the dual factors of internal and external factors, his company began to focus on GameFi. In addition to "making gold" by itself, it also helped customers incubate gold-making studios. Currently, there are related community organizations in Changsha, Hangzhou, Shandong, Xi'an, Chongqing and other places.

Fernando from Shenzhen also started mining in August. He is also one of the transformation trends in the industry. Fernando has been all in on the blockchain education and training track since 2018. He has previously participated in the Difinity (ICP) public chain project and Swarm (BZZ) storage mining and other businesses. After the high-energy-consuming mining activities were regulated by energy and environmental policies, Fernando's original business was unsustainable and he did not consider going overseas. "But the funds in the mining circle are relatively large, and they have to go somewhere. Later, the blockchain game industry became popular, which caused a large amount of funds to flow in in a short period of time, and also created a wave of wealth effect." Fernando said.

Shen An and Fernando may not be isolated cases. Many industry insiders interviewed by Chain Catcher said that a large number of people currently engaged in blockchain game gold farming in China have transformed from mining teams, and they may mainly be miners of relatively secondary currencies such as Filecoin and Ethereum, and the scale of their operating mines is limited, making it inconvenient to go overseas.

King, who works for a domestic guild alliance, told Chain Catcher that the number of domestic guilds began to surge after the metaverse concept became popular at the end of October. He estimates that the total number of established guilds in the country is less than 1,000.

Unlike the way YGG online communities are connected, domestic guilds still rely on the employment system to make gold. Fernando has opened gold-making studios in Shenzhen, Xi'an, Zhuhai and other places, with a total managed fund of 100 million yuan. Among all the links in the gold-making operation, Fernando believes that manpower is the easiest to solve.

"Many college students can participate," Fernando said. The team basically does not need to "recruit from the society." For example, they can post a job advertisement in technical secondary schools and universities near Shenzhen, and dozens of people will come. According to Fernando, after the students come to the studio, "they only need to play games."

"I just need to teach them how to play and operate. They just need to finish playing the game account I assign to them in one day, and then collect the income from it. They don't have to worry about other things." Fernando said that according to the current blockchain game income, a candidate can receive 300-500 yuan in salary for one day. The salary is related to the game's conduct and the income in the game. The gold farming team will conduct a "performance evaluation" based on multiple indicators and then issue the final salary.

Unlike Fernando's team, the gold-farming studio incubated by Shen'an already has its own team (note: such as the original mining machine operation and maintenance personnel), and does not need to hire additional people. Shen'an's own company's gold-farming business, if it needs to be completed manually, usually adopts the operation method of overseas guilds, posting tasks on the Discord platform and recruiting "scholars" to operate. Similar to YGG, the revenue sharing between Shen'an team and the operator is also "30%-70%. According to staff estimates, an office worker who plays games for two hours a day can earn 1,800-2,000 yuan a month.

There are only a few cases that require a lot of manpower. According to an interview with Chain Catcher, it is common to use scripts to farm gold in the industry. "If a gold-farming studio takes on tens of millions of dollars in funds, the cost of all manual operations will also increase. It would definitely be better if it could be achieved with scripts." Fernando said.

The ratio of scripts to manual work depends on the type of gold farming game and its content design. Fernando and Shen An both said that their own gold farming business usually chooses relatively mainstream blockchain games such as Aixe Infinity, Raca, Thetan Arena, Cyber ​​Dragon, etc., and also screens other niche early blockchain game projects to experience their game economic models and gameplay. In Shen An's view, blockchain games with poor playability are essentially the same as Ponzi schemes, and the team is unlikely to invest a large amount of money to participate.

Axie Infinity has many "everyone vs. everyone" scenarios, so gold farming usually requires actual human operation. If it is just a clearance mode, Shen An said that the script can be completed. However, Shen An also revealed that because the payback period is fast, many gold farming teams choose to play "capital" games with poor playability. This type of gold farming is mainly completed by scripts, and manual labor is only auxiliary.

“Now (chain games) are in the early stages, they are actually a bit like 4399 mini games. They are all web games, very simple. If you play them seriously, it will be very boring, after all, it is very time-consuming. But if you have a script to help you do it, it will actually save time, and at the same time your efficiency will be higher, and your payback period will be faster.” said Fernando.

The return on investment is directly proportional to the risk, so choosing the right game project to earn gold becomes the key. Fernando and Shen An both believe that "investment research" is the core link of blockchain game gold earning.

According to Shen An, his colleagues in the primary market investment department will select more than ten games every day and hand them over to Shen An's team to study the overall attention of the games, the background of the project owners and investment teams, and the playability of the games. After the above three points are met, the blockchain game project will be handed over to the technical team to design the gameplay, develop scripts, and configure the scripts in the gold-making equipment (mobile phones, computers). Finally, the above technologies will be exported as a set to gold-making studios in various places.

"If you don't do investment research or corresponding preparation, many people will get hurt, because it may still be an investment in essence," Fernando also said.

Layers of risk

"The risks of blockchain games are still very high at present." Shen An said that the "addictiveness" of gold-making games and whether the economic model design is reasonable are important risk points.

Due to the popularity of the blockchain gaming sector and the good growth of most related currencies, according to Fernando’s observation of local gold farmers in Shenzhen, many participants do not do very detailed research. “They just want to get involved first and talk about it later. This situation is actually quite common.”

Yiyi, an analyst at Basics Capital, analyzed to Chain Catcher that blockchain games are currently supported by two sectors - "play for fun" and "play to earn". Due to the low performance of infrastructure such as blockchain, play for fun is usually not met in the early stages of blockchain game development. Therefore, "most of the support for the activity of blockchain games is play to earn."

When the mentality of participating in money-making and getting rich quickly meets a project with crude production and unreasonable economic system design, the risk of loss is infinitely magnified. In Shen An's view, the game projects such as Farmers World and Spaceship, which were quite popular some time ago, do not have the playability of games. They are essentially "capital pools", so their life cycle will not be too long. According to feedback from Fernando and Shen An, the life cycle of such blockchain game projects is usually within two to three months. "If you enter the market with a 15-day payback period (expectation), and it turns out to be two to three months to payback, it may cause a certain degree of damage to the principal." Fernando said.

Taking Farmers World as an example, DapprRader data shows that the average price of its NFT has fallen by nearly 60% in the past seven days.

Shen An believes that “Ponzi schemes” type of blockchain games will not disappear from the stage of history, they will always have a place, but the mainstream will return to the “value” aspect. According to his observation, some of his friends who once promoted “Ponzi schemes” are now promoting Thetan Arena and Axie Infinity.

In addition to choosing a good project, there are also risks in the actual gold farming process.

Fernando emphasized that using scripts to farm gold requires avoiding possible backdoors in the program. Fernando introduced that the scripts sold on the market may be implanted with Trojan programs during development, which can read the account private keys and important information during user use, ultimately resulting in reduced profits or even theft of account assets.

Therefore, Fernando and Shen An's team used self-developed scripts.

After the blockchain game track became popular, domestic miners have entered the gold farming guild in large numbers. Are they worried about causing new regulatory risks? When talking about legal risks, Fernando and Shen An are both optimistic. They both emphasize that traditional games also have the gold farming industry. Compared with gold farming, the source of funds and investment destination are more critical.

Lawyer Guo Yatao, head of the Chain Law team, analyzed to Chain Catcher that since the activities carried out by the Chain Game Guild itself are centered around the "virtual currency" currently defined by the regulator, it is not encouraged in the regulatory tone. Although there is a principle of "anything is allowed unless prohibited by law" in the civil field, if it involves the criminal field, it must be regulated and adjusted by the criminal law. For example, the guild's actions of helping customers solve deposit problems and issuing tokens are all considered illegal financial activities.

In addition, during the development of the guild, if its operating model involves "fraud" attributes and team compensation methods, it is likely to violate pyramid scheme-related crimes. Lawyer Guo Yatao analyzed: "The most essential feature of pyramid schemes is their fraudulent nature. The high returns promised or paid to members by pyramid schemes actually come from the "entry fees" paid by new members. Because its own activities cannot generate economic benefits or additional income, in order to maintain the operation of pyramid schemes, new members must continue to increase at a certain multiple, but since the number of pyramid schemes cannot be increased indefinitely, its capital chain will inevitably break."

In addition, he pointed out that team-based compensation mainly refers to the situation where "the number of people developed is used as the basis for compensation or rebates."

What is the future of blockchain gaming guilds?

Yiyi from Basics Capital analyzed that blockchain gaming guilds are a sector that will inevitably grow when the industry ecosystem develops to a certain stage.

He believes that according to the layout stage of the game, in the first stage, game distribution platforms and game technology service providers will appear and develop first, and in the second stage, various terminal games will emerge in the market, which is the period of terminal game competition. By the end of this year and the beginning of next year, a large number of concept games may be launched online. The most important thing for these games after they are launched is operation and development. During this period, they must rely on various "guilds" to provide a lot of support and services to the game project parties. Therefore, competitors are gradually emerging in the blockchain game guild track.

However, despite the current considerable profits from gold farming, the extent to which the business logic of the extensive operating model of domestic guilds is valid remains to be seen.

In terms of industry operation logic, the greatest value of game guilds lies in their attraction and organization of real traffic. However, according to the above-mentioned industry insiders, since the current game content is quite simple, guilds mainly rely on scripts to make money, and there are not many real players who actually invest. Therefore, in the early development stage of blockchain games, the actual "volume attraction" effect of the existing domestic guilds may be discounted.

Nevertheless, according to Fernando's observation, some of the college students who come to his offline studio to work part-time will start playing blockchain games on their own after returning to the dormitory, and "earn gold" alone. This radiation phenomenon may be the embodiment of the value effect of gold-earning studios in the market.

But due to the sensitivity of policy supervision, will domestic blockchain game guilds continue to maintain their current form?

Yiyi believes that domestic blockchain game guilds do not have the ability to "productize", and eventually these domestic organizations will be connected to overseas Guild platforms that truly have productization and data capabilities.

"The guild is positioned as YFI (Yearn Finance) in DeFi, similar to a 'machine gun pool' (Note: the machine gun pool in DeFi is also called "yield aggregation". The machine gun fires automatically, and the system automatically switches strategies through smart contracts to achieve higher returns)." Yiyi made an analogy.

Only by having the ability to productize can we control the operational data of the entire user base, understand and access those popular games, and thus connect the game's demand and supply ecosystems. Only then will there be a necessity for the market to exist. "If there are only scattered studios or a group of people doing one thing, there will be no tension for market development," said Yiyi.

Shen An also believes that in the future, more guilds will turn to the organizational form of DAO. "This is a trend and the future." He said that due to regulatory and policy risks, domestic practitioners "dare not do it blatantly (guild platforms and DAO organizations)." According to his understanding, domestic teams that intend to launch similar platforms usually choose to go overseas.

What does a mature "productized" guild look like? Yiyi gave an example, for example, after players log in to the guild platform, the platform can recommend which games have higher gold-making efficiency and what the risks are, and even complete props trading and NFT leasing on the platform.

However, Yiyi believes that domestic guilds are still a supplement to the current ecosystem. "These guilds are actually equivalent to doing market education in advance. They bring together these gold farmers. In the future, these mature products can be directly connected to these so-called Chinese guilds."

He predicted that future guild products will be oriented towards both ends: on the one hand, they will be for B-end merchants in the scattered market, who will have their own group organizations and be provided with an internal customer management system; at the same time, there will also be services for the C-end and scattered consumers in the market.

Nevertheless, the above prospects are still far away in terms of the development progress of mainstream guild platforms.

Even the leading guild Yield Games Guild, its plans in the white paper - lending function, YGG token lending contract, etc. are far from being implemented, and most of its similar competing products are still in the financing stage.

"It's not something that can be achieved overnight; it happens slowly," Yiyi said.