Anndy Lian: How ZKPs Can Revolutionize the GameFi Market

GameFi, or financialized gaming, is one of the blockchain industry’s most exciting and innovative segments. It combines elements of gaming, decentralized finance (DeFi), and non-fungible tokens (NFTs) to create immersive and rewarding experiences for players. It enables players to own, trade, and monetize their in-game assets and currencies and participate in the governance and development of the games they play. It also offers new opportunities for game developers, who can leverage blockchain technology to create more engaging, fair, and transparent gaming ecosystems.

As we all know, GameFi also faces some significant challenges and limitations, especially regarding scalability, privacy, and security. As the number of GameFi projects and users grows, so does the demand for fast, cheap, and secure transactions on the blockchain. However, most blockchain networks today suffer from low throughput, high fees, and congestion, which can negatively affect the user experience and adoption. Moreover, many GameFi applications require users to reveal their personal and financial information on the public ledger, which can expose them to various risks, such as identity theft, fraud, hacking, and censorship.

This is where zero-knowledge proofs (ZKPs) come in. ZKPs are a cryptographic technique that allows one party to prove to another that a statement is true without revealing any information beyond the validity of the statement. For example, Alice can prove to Bob that she knows the password to a website without revealing the password itself. ZKPs can be used to create more scalable, private, and secure solutions for GameFi and other blockchain applications.

How ZKPs Can Address the Limitations of Web2.5 and Web3 Gaming Models

To understand how ZKPs can benefit GameFi, comparing the current gaming models, Web2.5 and Web3 is useful.

Web2.5 gaming refers to the traditional online gaming model, where games are hosted on centralized servers controlled by game developers or publishers. In this model, players have no real ownership or control over their in-game assets and currencies, which are stored in the game databases and can be modified or deleted at any time by the game operators. Players have to trust the game operators to provide fair and secure gameplay and protect their personal and financial data. Such a model is also limited by the capacity and performance of the centralized servers, which can result in latency, downtime, and hacking.

Web3 gaming refers to the emerging blockchain-based gaming model, where games are hosted on decentralized networks powered by smart contracts and distributed nodes. In this model, players have full ownership and control over their in-game assets and currencies, represented by NFTs and crypto tokens on the blockchain. Likewise, players can verify the fairness and security of the gameplay and the authenticity and scarcity of the in-game assets by checking the transparent and immutable ledger. It also enables interoperability and composability, meaning players can use their in-game assets and currencies across different games and platforms.

There are drawbacks to Web3 gaming, mainly related to scalability, privacy, and security. As mentioned earlier, most blockchain networks today cannot handle the high volume and frequency of transactions required by GameFi applications, leading to slow, expensive, and unreliable transactions. Furthermore, most blockchain networks today cannot protect the privacy and security of the users, who have to expose their identities, balances, and activities on the public ledger, making them vulnerable to various attacks and threats.

ZKPs can help overcome these challenges by enabling more scalable, private, and secure solutions for Web3 gaming. For instance, ZKPs can be used to create layer-2 solutions, such as zk-rollups, that can process thousands of transactions off-chain while only submitting a single proof on-chain, thus reducing the load and cost on the main chain. It can also be used to create privacy-preserving solutions, such as zk-SNARKs, that can hide the details of the transactions, such as the sender, receiver, amount, and asset type, while still proving their validity on the blockchain. It can also be used to create security-enhancing solutions, such as zk-STARKs, that can resist quantum attacks and do not require trusted setup assumptions.

How ZKPs Can Influence the Development of Digital Economies and the Management of Virtual Assets in GameFi Projects

By enabling more scalable, private, and secure solutions for Web3 gaming, ZKPs can also influence the development of digital economies and the management of virtual assets in GameFi projects. Here are some of the possible implications and benefits of ZKPs for GameFi:

• ZKPs can enable more efficient and inclusive digital economies where players can access and participate in various GameFi applications regardless of location, device, or network. It can also enable more diverse and dynamic digital economies, where players can create and exchange different types of in-game assets and currencies and interact with other blockchain applications, such as DeFi, NFTs, and DAOs.
• ZKPs can enable more private and secure digital economies, where players can protect their personal and financial data, as well as their in-game assets and currencies, from unauthorized access and misuse. It can also enable more flexible and customizable digital economies, where players can choose the level of privacy and security they want for their transactions, depending on their preferences and needs.
• ZKPs can enable more innovative and competitive digital economies where game developers can leverage the power and potential of blockchain technology to create more engaging, fair, and transparent gaming ecosystems. It can also enable more collaborative and cooperative digital economies, where game developers can collaborate and share resources and best practices to improve the quality and diversity of GameFi products.

Which Sector of the GameFi Industry Could Lead the New Market Stage

The GameFi industry comprises various sectors, such as iGaming, action games, move-to-earn, and others, each with its characteristics, challenges, and opportunities. While it is hard to predict which sector will lead the new market stage, it is possible to identify some of the factors that could influence the growth and success of each sector, such as:

• The demand and popularity of the games among the players, as well as the potential to attract and retain new and existing users.
• The quality and innovation of the games and the ability to provide immersive and rewarding gameplay experiences.
• The integration and compatibility of the games with blockchain technology, as well as the ability to leverage the benefits of GameFi, such as ownership, interoperability, and governance.
• The scalability and performance of the games, as well as the ability to handle the high volume and frequency of transactions and interactions.
• The privacy and security of the games, as well as the ability to protect the users and their in-game assets and currencies from various risks and threats.

Based on these factors, one could argue that the move-to-earn sector could lead the new market stage, as it has shown strong growth and potential in the past year. Move-to-earn games reward players for moving or exercising in the real world, such as walking, running, cycling, or dancing.

Move-to-earn games have several advantages over other sectors, such as:

• They have a large and untapped market, as they appeal to a wide range of users, from casual gamers to fitness enthusiasts and people who want to improve their health and well-being.
• They have a high retention rate, incentivizing users to keep playing and moving and competing and cooperating with other players, creating a strong sense of community and loyalty.
• They have a low entry barrier, as they do not require expensive or sophisticated equipment or devices but rather use the users’ smartphones or wearable devices, which are widely available and accessible.
• They have a positive social and environmental impact, encouraging users to adopt a more active and healthy lifestyle and reduce their carbon footprint and pollution.

However, move-to-earn games also face some challenges and limitations, such as:

• They have a high dependency on the users’ physical location and condition, as well as on the weather and other external factors, which can affect the availability and quality of the gameplay.
• They have a high risk of fraud and cheating, as users can manipulate or falsify their movement data by using bots, hacks, or spoofing to gain unfair advantages or rewards.
• They have a high demand for scalability and privacy, as they need to process and verify a large amount of movement data and protect the users’ personal and biometric data, which can be sensitive and valuable.

ZKPs can help address these challenges and limitations by enabling more scalable, private, and secure solutions for move-to-earn games. For example, ZKPs can create verifiable proofs of movement, proving that the users have moved a certain distance or performed a certain activity without revealing their exact location or identity. It can also create privacy-preserving rewards that can distribute in-game assets and currencies to the users without disclosing their balances or transactions.

What Other Technology Developments Could Help for the Surge in the GameFi Market

Besides ZKPs, other technology developments could help with the surge in the GameFi market, such as:

• Layer-1 and layer-2 developments aim to improve blockchain networks’ scalability, performance, and interoperability by using different consensus mechanisms, sharding techniques, or sidechains. Some examples of layer-1 and layer-2 developments are Ethereum 2.0, Polkadot, Polygon, and Optimism.
• Account abstraction simplifies and enhances the user experience and security of blockchain applications by allowing users to interact with smart contracts without managing their private keys, addresses, or gas fees. Some of the examples of account abstraction are MetaMask Argent, and Authereum.

These technology developments could complement and synergize with ZKPs, to create more scalable, private, and secure solutions for GameFi, as well as other blockchain applications.

Conclusion

GameFi is a rapidly growing and evolving segment of the blockchain industry that offers new possibilities and opportunities for both players and game developers. However, GameFi also faces some significant challenges and limitations, especially in terms of scalability, privacy, and security.

ZKPs are a powerful and promising cryptographic technique that can help overcome these challenges and limitations by enabling more scalable, private, and secure solutions for Web3 gaming. It can also influence the development of digital economies and the management of virtual assets in GameFi projects by enabling more efficient, inclusive, diverse, dynamic, flexible, and customizable digital economies. ZKPs can also enable more innovative, competitive, collaborative, and cooperative digital economies by enabling game developers to leverage the power and potential of blockchain technology to create more engaging, fair, and transparent gaming ecosystems.

ZKPs, along with other technology developments, such as layer-1 and layer-2 developments and account abstraction, could revolutionize the GameFi market and pave the way for the future of gaming.

Source: https://za.investing.com/analysis/how-zkps-can-revolutionize-the-gamefi-market-200594928