Blockchain’s Mobile Moment

How far or close are we to the “mobile moment” for crypto? There is a large group of blockchain users and others whose main access to the internet is through their smartphones, but which relies on centralized infrastructure — which is convenient, but also risky. Users have traditionally solved this problem by running their own nodes — a time- and resource-intensive endeavor that, at the very least, requires a constantly-online machine, hundreds of gigabytes of storage, and around a day to sync from scratch… not to mention special skills.

But more people are now starting to care about decentralizing access to blockchains for all users — even those who cannot run a node themselves. With the introduction of “light” clients that provide similar functionality to running a full node — such as Helios (released by a16z crypto), Kevlar, and Nimbus — users can now verify blockchain data directly from their devices. I’m hoping to see similar trust and decentralization improvements in other parts of the stack, such as event indexing and user data storage. Taken together, all of these can help achieve true decentralization for mobile frontends.

—Noah Citron, engineering partner, crypto team (@noahcitron, @ncitron on Farcaster)

Zero Knowledge, Multi-Party Computation, and Post-Quantum Crypto

Zero knowledge systems are powerful, foundational technologies that hold the keys to blockchain scalability, privacy-preserving applications, and much more. But there are a lot of tradeoffs between prover efficiency, proof succinctness, and the need for a trusted setup. It would be fantastic to see more constructions for zk-proofs that fill the gaps in the multidimensional space of these tradeoffs. For me, it would be most interesting to see whether trusted setups are required for constant-size proofs (and constant-time verification), which would further justify the need for more transparent trusted setup ceremonies.

We also need better constructions for threshold ECDSA (elliptic curve digital signature algorithm) signatures. Attaining thresholds removes the need to trust a single signer, which is why threshold signatures are important for multi-party, distributed computation on private data and have several applications in web3. The most interesting threshold ECDSA signatures would be those that minimize the overall number of rounds — including the pre-signing rounds where the message is not known yet. Finally: As new post-quantum signatures near the end of standardization, per NIST, it would be great to explore which of these could be made friendly to aggregation or thresholdization.

—Valeria Nikolaenko, research partner, crypto team (@lera_banda)

Developer Onboarding for Zero Knowledge

Zero knowledge systems have been a long time coming. In recent years, they moved from theory to practice, but in 2022 it felt like we turned the corner on developer onboarding for ZK. Specifically, we saw the proliferation of educational materials and the maturation of high-level programming languages (such as Noir and Leo) that made it easier than ever for engineers to start writing ZK applications. I expect these developments, along with continued theoretical advances, will lead to an influx of application developers, given how significant zero knowledge is to so many use cases. Putting things into the hands of developers often leads to unexpected new use cases; I’m excited to see what comes next.

—Michael Zhu, engineering partner, crypto team (@moodlezoup)

VDF Hardware

Verifiable Delay Functions (VDFs) are an exciting cryptographic tool with many applications, from verifiable lotteries to leader election to preventing front-running. But the biggest catch has long been hardware implementations, which are needed to have confidence that attackers can’t compute the VDF faster. I’m excited for the first generation of VDF hardware to be available, paving the way for practical deployment.

—Joseph Bonneau, research partner, crypto team (@josephbonneau)

Fully On-Chain Games and Autonomous Worlds

What if you could create a game world that could not be taken down or censored, had no need for servers, and could live far beyond any of our individual (or even organizational) lifetimes? For the first time ever, we can. We are at the very beginning of crypto-native, fully “on-chain games,” or — as others prefer to call its superset — “autonomous worlds,” built on top of blockchain technology.

Whatever you call it (and the lexicon is still forming!), the nascent movement toward maximally decentralized games offers new affordances that make it possible to actually build these games online. Specifically, the ability to put a game’s entire state and logic on a publicly verifiable, censorship-resistant, and decentralized blockchain… as well as advances in on-chain procedural generation, which not only overcome constraints like storage, but are essentially “a trick to compress a complex world into an executable.” What new games, and gameplay, become possible that were never possible before? Are such games still… games?

—Carra Wu, investing partner, crypto team (@carrawu, @carra on Farcaster)

Non-Transferable Tokens

I much prefer the term “non-transferable tokens” over “soulbound” tokens (a term borrowed from gaming by Vitalik Buterin for NFTs); these tokens are for cases where it doesn’t make sense to transfer NFTs. I’m excited to see the various web3 applications that will be built on top of not just this primitive, but also with decentralized identifiers and verifiable credentials. While the discussion of these primitives usually revolves around decentralized identity, there are many other applications to be explored as well: For instance, tickets, digital <> physical, reputation… and much more ahead.

—Michael Blau, investing partner, crypto team (@blauyourmind, @michaelblau on Farcaster)

Decentralized Energy

How can we apply the decentralization ethos to energy? For instance, power grids are dated, centralized, and face several other issues like high upfront capital expenditures and misaligned incentives. There are great opportunities to build microgrids and storage and transmissions networks, by solving issues such as high capital expenditures and disparate incentives solved through tokens. There are also burgeoning markets for renewable energy certificates (REC), and carbon credits on-chain. I’m excited to see builders continue to expand what’s possible in this category of decentralized energy coordinated by blockchains.

—Guy Wuollet, investing partner, crypto team (@guywuolletjr, @guy on Farcaster)

Web3 Games Persist — and Thrive

We’re on the cusp of unlocking a new generation of web3 native games that will be fun, broadly appealing, and uniquely enabled by blockchain technologies.

It usually takes a few tries for developers to learn to build on new platforms. Take mobile games: Pokémon Go was one of the first true mobile-native games, enabled through features unique to smartphones, such as GPS and the integrated camera. Yet its prototype, Ingress, didn’t launch until five years after the release of the iPhone in 2007. We can’t rush the product cycle. I believe we’ll see the first web3-native games emerge in the coming years, perhaps sooner than we think.

In the near term, there are also opportunities to extend existing game genres with open economies. In the past, the next big game often rose from player “mods” like DOTA (League of Legends) or DayZ (PUBG). Game modding is turbocharged with web3 composability, in which creators can leverage each other’s assets freely with ownership and financial rewards automated by code.

—Jonathan Lai, general partner, games team (@tocelot)

Production-Ready Generative AI for Every Type of Game Asset

The biggest revolution to hit gaming in 2023 will be the creation of production-ready generative AI models for all asset types needed to produce a modern game.

Games are currently the most complex form of entertainment, involving dozens of different types of creative assets combined in complex production pipelines. Asset types include 2D art, 3D models, textures, sound effects, music, characters, animations, level designs, cinematics, and more. And each of these asset types has its own highly specialized production process, with dedicated tools and artists.

Generative AI today is getting the most attention for creating 2D images. But there’s a quiet revolution happening: scientists are working on AI models for all asset types. 3D models. Music. Sound FX. Much of this work is still at the research stage, but we’re seeing startups quickly forming around each model type with an aim of productizing the work.

By the end of 2023, it’ll be possible to use a text prompt to generate virtually any asset needed to produce a game. “Sound effect of footsteps for a heavy woman in heels on gravel,” “3D model of a futuristic battle tank with a laser gun.” The effect of this will be to unlock creativity like we’ve never seen.

—James Gwertzman, general partner, games team (@gwetz)

Entertainment Franchise Games Will Explode

We are not past the days of entertainment franchise games (e.g., Kim Kardashian or the K-pop supergroup BTS and its many mobile games). In fact, I expect they’ll become even more popular in 2023.

First, as generative AI decreases the cost of producing art and game assets (see Stable Diffusion Tutorial), franchises can transfer their IP into games. Second, as the economy continues to place pressure on businesses, franchises will monetize their core users (games always monetize deeper player experiences). Lastly, games will not just be limited to a simple casual mobile experience; we will see more complex games combined with different properties, like Disney x MOBA or Kpop x Wattpad. Multiple genres of games will be commonplace. A single game with thousands of users won’t be enough to be a franchise. Instead, thousands of different games will create a franchise.

As games proliferate, game infrastructure will need a way to exchange assets seamlessly into a game. A decade ago, this was the animations and sprites made in Flash editor and dropped into games like FarmVille using ActionScript3. Whoever creates that system will be a core layer of the game infra stack and will allow developers to create more (and better?) games.

—Andrew Lee, entrepreneur in residence, games team (@ndrewlee)

Games Developed on Mobile, for Mobile

What will the next big UGC game creation platform look like? What will be the next Roblox? I believe we’ll see more mobile-first game creation.

Say I’ve fallen in love with a racing game, but I want to swap out the car for Santa and his sleigh, add snow banks and Christmas trees along the road, and reconfigure the map. I hit “remix” and am presented with level and terrain-editing tools. I use generative AI to generate my Santa, then style transfer the game from voxel to claymation. Hit publish and share with my friend.

Seventy-two percent of Roblox sessions happen on mobile, yet creation tools are locked to a desktop client on PC, severing the flywheel from player to creator. Roblox Studio, the PC editor application, remains too technical for most users, which explains why less than 5% of players ever become creators. With AI-assisted and cloud-based tools, a new UGC mobile-first platform will emerge. This platform will have a discovery mode UX more akin to TikTok than Roblox or Netflix, delighting users immediately upon opening the app. Mobile game creation mode: unlocked.

—Troy Kirwin, partner, games team (@TKexpress11)

Games as Theater

“Red vs. Blue” was one of the earliest hits on YouTube. This 2004 web series birthed the style of “machinima” that uses manipulated in-game character models and modded camera angles to tell stories within video games.

Since these days of “hacking” in-game assets for the purpose of theater, Minecraft, Fortnite, Roblox, and GTA have all invested in tools and modes for creators. Games quickly became the canvas, the paintbrush, and the colors for young creatives.

More than a decade after its launch, Minecraft remains one of the most lasting generational games of its time, being the first identifiable IP to reach one trillion views on YouTube. This is largely due to the boundless nature of creativity of the IP, compounded by updated worlds, physics, and assets.

In the shift of the industry to F2P and Live Ops, developers have placed less of an emphasis on custom lobbies, spectator tools, and the idea of games as theater. As the concept of the metaverse evolves, I hope that developers in 2023 will shift back to this idea of launching games that focus on creative tools, features, and infrastructure as an integral part of their games’ core loop.

—Lester Chen, gaming creators partner, games team (@chen)

Games Supplant Social Networks

In 2023, I expect games to take the reins from social networks in new and meaningful ways.

Games have always been strong social networks. Facebook and World of Warcraft both launched in 2004, and by the end of 2005, Facebook had roughly six million users and WoW had roughly five million. In each, long-term retention was caused by acts of reciprocity (pokes vs. guild gifts) and competition (vacation photos vs. armor sets). The longest-lasting games are social networks because they turn players into a more sustainable source of content than generating more levels, monsters, and quest lines.

Today, games and social networks have become even more indistinguishable. Fortnite is built as a massively synchronous battle royale with a discrete winner, but it has become part of the zeitgeist not via balanced gunplay or map design, but because of self-expression via sharable/streamable avatars/emotes and team-based cooperation. This year, Ready Player Me inked thousands of partnerships with game developers to bring ultra-customizable avatars to millions of players. 2022 also saw the rise of Diablo Immortal, the first massively multiplayer online game (MMO) for millions of mobile-first gamers. In 2023, I expect players will spend even more time in games and virtual worlds hanging out and connecting with friends.

—Joshua Lu, partner, games team (@joshlu)

Games as a Neverending Turing Test

It’s not hard for a computer to deceive a human. From ELIZA to ChatGPT, computers have successfully masqueraded as humans. This phenomenon also occurs in games through the mass prevalence of “bots.” Bots have historically been scripted procedures, but are increasingly becoming true neural network-based AIs.

As AI progresses and games grow larger, more complex, and more realistic, these bots increasingly convince humans. Think of the rumored concurrency bots in Words with Friends, the close-win bots in Call of Duty Mobile’s onboarding, or the prevalence of cheaters/bots in chess.

The next generation of these bots will take “human-like” to a whole new level. Startups like InworldAI, ConvAI, or Charisma.ai are making in-game agents that understand game state and have objectives, emotions, conversations, animations, and more. Imagine walking through the wilderness not knowing whether your clan’s mage is a bot, building a town with strangers without knowing the humanity of the local farmer, playing a game of Diplomacy but not knowing if Turkey is an AI whose sole purpose is European domination.

In the year ahead, you may not know who’s who anymore — and you won’t mind. Games are good alone, but better together. Or so you think.

—Jack Soslow, partner, games team (@jacksoslow)

AI Native Games

Game development is one of the first industries to experience significant disruption due to generative AI. New tools are already allowing artists and writers to offload the initial (and mechanical) spark of creation to generative models and to refocus their efforts on editing and refinement.

But the AI innovations impacting players will be even more exciting than those that are benefiting developers. AI has continuously redefined what is possible in game design and gameplay experiences. I will always remember the initial frenetic excitement of Unreal Tournament botmatches, exploring the endless frontiers of Minecraft, and the unique thrill of a perfect Hades run — both the awe they evoked and the impact they had inspiring the next generation of games.

What will be possible with a new generation of games designed natively for AI? We’ll see emergent, procedurally generated worlds, each populated with their own rich histories, inhabitants, and mysteries. There will be Interactive fiction where the stories continuously evolve through player choice, and are told through generative images, video, and audio. The possibilities are endless, and what is merely possible today will soon be ubiquitous.

—Justin Paine, business development partner, games team (@justinspaine)

Web3 Games Redefine Fun

Given the longer development cycles of games—anywhere from two to seven years — I expect the current bear market will separate the builders from the tourists. The strong web3 studios have realized that financial rewards, great art, and tokenomics alone aren’t enough to drive a sustainable game over time. These games also need to be fun.

In the year ahead, developers will pinpoint what makes their games intrinsically fun — and why web3 is a necessary component. Speculation and trading is one form of entertainment (see Runescape or World of Warcraft or even Wall Street Bets), but the spectrum of fun in games is wide. Is your game focused on intense moment-to-moment team fights and strategic choices, like League of Legends? Or an extensive progression system, like Diablo? Simple, repetitive, yet enjoyable puzzles like Candy Crush, or a cozy decorative experience like Animal Crossing? Web3 game studios may go back to first principles as to what who game is serving, how to over-serve those players, and what role crypto has in their titles. Then they’ll test, test, test to see if they’ve found the fun.

—Robin Guo, partner, games team (@zebird0)

The Metaverse Goes Fashion Forward

Gamers know that character skins in games like League of Legends and Fortnite are an important form of self-expression as they become part of a player’s identity. That’s why character skins are big business, despite having no gameplay benefits.

Digital natives, Gen Z, and Gen Alpha demand that brands enable self-expression in the Metaverse. Of that group, 2 in 5 already believe that self-expression via fashion is more important in the digital world than the physical, and 3 in 4 say they will spend money on digital fashion.

Brands that lean in, like Gucci, will be rewarded by the hearts and wallets (both physical and digital) of consumers. And as physical brands go digital, more digital brands will go physical, creating even stronger competition and broader adoption. Brands that don’t go all in will be left behind.

Consumers will demand interoperability across experiences in the Metaverse, so over time brands will favor platforms that enable them to wear their Nike shoes in different games and virtual worlds. Gen Z and Gen Alpha move seamlessly between the physical and digital worlds. The fashion brands that embrace this will win.

—Doug McCracken, marketing partner, games team (@dougmccracken)