Table of Contents

1. Introduction

2. Nexon Continues to Grow but Concerns About Sustainability and Scalability Remain

2-1. 29 Years of Growth Trajectory Through Astute Understanding of the Gaming Industry Trends

2-2. Pursuing Continued Growth Based on Stable Operation of Core Live Services and ‘Big & Little’ Strategy

2-3. Yet, Challenges in Sustainability Arise from Structural Limitations of the Existing Business Model

3. Finding a Solution via Blockchain

3-1. MapleStory Universe: Nexon's Biggest IP Challenges Blockchain Gaming 3-2. Aiming to Secure Sustainability by Maximizing User Reward Experience via UGC and MODs 3-3. Components of MapleStory Universe: MapleStoryN, World, SDK

4. Conclusion

1. Introduction

Nexon has always been at the forefront of significant shifts in the gaming industry. As will be discussed in detail, Nexon pioneered the online gaming revolution in the 1990s with Korea’s first online game, The Kingdom of the Winds, in an era dominated by single-player CD titles. Additionally, in 2000, Nexon devised the Free to Play (F2P) model, which forms the basis of today’s online game revenue models, and acquired Korea’s biggest game IPs, MapleStory and Dungeon Fighter.

Nexon has established itself as a pioneer, not just excelling in game development but also shaping culture and leading the industry with visionary foresight and innovation. Recently, Nexon announced the development of a major blockchain game using its biggest IP, MapleStory. What potential did they see in blockchain gaming? This report aims to explore the specific value blockchain technology can bring to the gaming industry.

2. Nexon Continues to Grow but Concerns About Sustainability and Scalability Remain

2-1. 29 Years of Growth Trajectory Through Astute Understanding of the Gaming Industry Trends

Since its inception in 1994, Nexon has overcome numerous challenges and continues to grow impressively. Over the past decade, Nexon has recorded a Compound Annual Growth Rate (CAGR) of 12.5%, growing its revenue from KRW 940B in 2012 to KRW 3.5T in 2022. For context, in 2022, Netmarble, NCSoft, and Krafton each achieved revenues of KRW 2.7T, 2.5T, and 1.8T respectively (77%, 71%, and 51% of Nexon’s revenue).

Source: Nexon Q3 2023 Earnings Report

As of 2022, revenue by region was 60% from Korea, 24% from China, 3% from Japan, 6% from North America and Europe, and 7% from other regions. In Korea, MapleStory and FC Online, and in China, Dungeon Fighter, were key drivers of growth. In Japan, Blue Archive, and in North America, Europe, and other regions, the newly released Dave the Diver in June contributed to revenue growth.

Over the past five years, the mobile gaming segment doubled from KRW 475B to KRW 950B, accounting for about 31% of total revenue. Considering Nexon's relatively cautious approach to entering the mobile market during the mobile gaming boom of 2013-2014, this growth is even more noteworthy. Nexon’s major mobile game lineup includes FC Online Mobile, MapleStory M, HIT2, Dungeon Fighter M, Blue Archive, and The Kingdom of the Winds: Yeon.

Source: Nexon Q3 2023 Earnings Report

Nexon’s sustained growth can be attributed to its ability to innovate and launch popular games, coupled with aggressive acquisitions of high-potential IPs. In 1996, Nexon released Korea's first online game, The Kingdom of the Winds, revolutionizing the game industry and solidifying its presence in the Korean gaming market. Following the failure of its subscription model for QuizQuiz (Qplay) in 2000, Nexon introduced the first and now foundational Free to Play (F2P) model, leading to the creation of Crazy Arcade: BnB and KartRider. In 2001, Nexon released Mabinogi, the first MMORPG using cartoon rendering technology.

In 2004, Nexon invested its entire cash reserve of KRW 40B to acquire MapleStory from Wizet. This gamble paid off handsomely, with MapleStory alone generating over 5B USD in revenue (cumulative revenue as of 2022) and continuing to set all-time high revenues in Korea. Similarly, Nexon acquired Dungeon Fighter just before Neople obtained the Chinese license in 2008 for KRW 300 B. Dungeon Fighter became a massive hit in China, surpassing 22B USD in cumulative revenue as of 2022.

2-2. Pursuing Continued Growth Based on Successful Operation of Core Live Services and ‘Big & Little’ Strategy

Nexon owns several key long-standing IPs that serve as cash cows. MapleStory, 20 years after its launch, remains a core title for Nexon, recording its highest-ever revenues. Dungeon Fighter, Sudden Attack, FC Online, and KartRider are also enduring services, still enjoying strong support from dedicated fan bases. The diversity of genres across these IPs is also notable. Nexon plans to continue this trend of stable operation of these core live services for sustained growth.

Source: Nexon Q3 2023 Earnings Report

So, what’s the secret behind Nexon’s ability to operate these live services so stably for such a long time? The answer lies in understanding the community. While there are numerous strengths to highlight about Nexon – excellent IPs, development capabilities, and experienced service operation – the fundamental reason for developing these capabilities is believed to be Nexon’s deep understanding of its community.

Nexon considers its community as the cornerstone of its IP and network effect. The company views games as community services and has invested accordingly. Nexon’s focus extends beyond just incorporating user feedback and producing new in-game content; they also hold showcases for major updates, establish pop-up stores using IP merchandise, and perform orchestra concerts featuring game BGMs, all indicative of their commitment to user ecosystem management. Similarly, leveraging a deep understanding of the community to evolve games in line with user preferences and needs is also seen as a key to Nexon’s longevity.

MapleStory 2023 Summer Showcase ‘NEW AGE’, Source: Nexon

‘Blue Archive’ Orchestra Performance ‘Sound Archive The Orchestra’, Source: Nexon

Another contributing factor is the exceptional Reward Experience (RX) offered. Nexon defines the core of RX as the thrill of obtaining items. In other words, the success of a game hinges on the exhilaration and thrill felt during the process of overcoming numerous challenges to achieve goals and obtaining rewards.

Nexon has successfully managed item usage and rarity levels to provide ample RX. The scope of item usage depends on how diversely an item can be used, ultimately tied to the quantity of content. Over the past 20 years of operating MapleStory, Nexon has continuously updated a vast number of jobs, boss monsters, six continents, and over 60 areas, expanding the world where items are used. Hundreds of developers have produced a massive amount of content over two decades, and efforts to expand content continue. Regarding rarity, Nexon has adeptly managed item drop rates and enhancement systems.

Source: Nexon

Additionally, Nexon’s strategy for new game development distinguishes between leading the market with large-scale Big projects and focusing on creativity with innovative Small projects, thereby building a diverse pipeline for continued growth. The Q4 2023-Q4 2024 pipeline includes The Finals, ARC Raiders, Warhaven, Dungeon Fighter Mobile, and Mabinogi Mobile, among which The Finals, in particular, is considered next year's most anticipated game, securing 260,000 concurrent users and a total of 7.5 million connections during its open beta test.

2-3. Yet, Challenges in Sustainability Arise from Structural Limitations of the Existing Business Model

Despite its remarkable growth, Nexon faces persistent challenges, notably in scalability. Over the past 29 years, Nexon has successfully managed core live services and introduced successful new titles based on an exceptional understanding of community dynamics, building a robust ecosystem. However, ensuring sustainability for the next 30 years requires overcoming structural challenges inherent in the traditional gaming industry.

One significant issue is the limit to content diversity. While games in the past were about consuming provided content, modern gaming demands a constant supply of new content to the players. Despite developers' efforts in adding fresh content, the pace of content creation inevitably lags behind the rate of consumption. Even the most capable companies can only produce content at a rate limited by their development capacity, while the rate at which players consume content is beyond the control of game developers. This phenomenon is particularly pronounced in South Korea. A notable example was when a Korean player cleared the normal difficulty of Diablo 3 in just 6 hours after the server's launch, although Blizzard had claimed it would take about six months to conquer.

The second challenge is the limitation in community engagement. As mentioned earlier, community is a key element in determining a game's fate. While Nexon is renowned for its deep understanding of community dynamics, direct management or deeper engagement with communities is a challenge shared with other game developers. The structure of the traditional gaming industry limits the ways a game company can officially encourage community activities, and there's always a risk of such activities infringing on copyright (as game IPs are owned by the company, and users have no real authority over them). Finally, there's a limitation in expanding customer loyalty. Traditional games lack a mechanism to capitalize on the loyalty and bond users develop through the service.

3. Finding a Solution via Blockchain

3-1. MapleStory Universe: Nexon's Major IP Ventures into Blockchain Gaming

Nexon decided to adopt blockchain technology to address these issues and ensure sustainability. The company's first blockchain service initiative is MapleStory Universe. MapleStory, with its 180 million cumulative users and over 5 trillion KRW in revenue, stands as Nexon's flagship IP. The decision to venture into blockchain with its most significant IP indicates Nexon's high estimation of blockchain's potential. This is not the first time Nexon has explored new games using the MapleStory IP. In 2015, Nexon released MapleStory 2, a 3D MMORPG, and in September 2022, introduced MapleStory World.

The standout feature of <MapleStory Worlds> lies in its creation of a platform that enables individuals to craft, share, and immerse themselves in unique worlds (content) using MapleStory and other IPs. Creators of these worlds have the opportunity to earn a portion of the revenue generated from user purchases. Although exact figures are not specified, the revenue-sharing model is anticipated to resemble that of Roblox developers (refer to the diagram below).

Nevertheless, both services are presently grappling with unfavorable user reviews. While tens of thousands of users initially joined MapleStory Worlds on its launch day, the user base has gradually dwindled, barely sustaining 800 daily active users as of February this year. Furthermore, MapleStory 2 encountered a business setback and declared its closure on June 7, 2024. In response, Nexon, following thorough deliberation, turned to Web3 for potential solutions, ultimately giving rise to the development of MapleStory Universe.

3-2. Aiming to Secure Sustainability by Maximizing User Reward Experience via UGC and MODs

Dae-hyun Kang, recently appointed as co-CEO of Nexon Korea, has identified crucial elements for sustainability, including 1) continuous content production, 2) controlling inflation of goods, 3) fostering intrinsic play, and 4) forming a derived ecosystem. To meet these criteria, MapleStory Universe empowers users by granting them authority and offering rewards, promoting the creation of User Generated Content (UGC) and Modified (MOD) games. This strategy is designed to cultivate a community-centric, voluntarily derived ecosystem, maximizing the user's Reward Experience (RX). The ultimate goal of the MapleStory Universe project is to establish an ecosystem collaboratively created with the community, moving away from the one-sided provision of content by the game company.

In simpler terms, MapleStory Universe is the Web3 iteration of MapleStory Worlds. However, MapleStory Universe integrates blockchain technology, offering a more favorable structure compared to MapleStory Worlds in terms of creative freedom, sustainability, and scalability. To facilitate understanding, the key features of MapleStory Universe are outlined below.

*UGC denotes content (maps) directly crafted by external creators using development tools provided by the game company, akin to the structure seen in StarCraft/Warcraft custom maps or Roblox/Minecraft.

Feature 1: UGC driven ecosystem through open IP and development toolkit, fostering equitable collaboration between Nexon and the community

MapleStory Universe essentially maintains the look, feel, and gameplay of the existing MapleStory. However, it diverges by empowering users and creators to leverage MapleStory's IP for the creation of game content, including items and DApps. Users and creators are rewarded based on the consumption of the generated content, and the virtual world extends beyond the confines of the game, fostering the integration of ecosystems. In MapleStory Universe, users play dual roles as content consumers and producers (studios), broadening their engagement. From this perspective, Nexon aims for a transformation beyond its identity as a conventional game company, aspiring to be reborn as a content distributor and publisher.

Until this stage, it shares similarities with MapleStory Worlds. However, <MapleStory Universe> goes a step further by fully opening up its IP, allowing creators to freely develop content, including items, dApps, and other secondary creations. In essence, users are now exempt from copyright infringement concerns, enabling them to actively participate in creative activities and potentially leading to the emergence of numerous inventive works. Furthermore, Nexon aims to equitably distribute revenue generated from created content to incentivize creator activities. Nexon's own rewards will be based on contributions in a fair partnership with the community, representing a fundamentally different approach compared to traditional UGC-based games like Roblox and Minecraft, where only a portion of the revenue is shared with creators (see Section 3-1 diagram). However, as of now, the specific details of FT/NFT tokenomics and the exact reward distribution structure have not been disclosed.

On the other hand, if Nexon were to rely solely on external creators for content production without providing content from the outset, the likelihood of users entering the ecosystem would be nearly nonexistent. Therefore, Nexon plans to initially introduce MapleStory N, the foundational service of MapleStory Universe, to ensure ample content for user enjoyment. Nonetheless, Seon-young Hwang, the head of the project steering MapleStory Universe, expresses a desire for the Universe ecosystem to revolve around UGC, not solely MapleStory N, underscoring Nexon's top priority of nurturing the derived ecosystem. Nexon is sincerely dedicated to fostering the community's growth.

Feature 2: Ensuring transparency through open disclosure of reward processes

MapleStory Universe leverages public blockchain technology for the issuance and management of goods, providing transparent accessibility to token (FT, NFT) and item reward data. As a result, users have the potential to observe various on-chain data in real-time, including in-game transaction details, item distribution statistics, creator-specific revenue distribution, and more. Throughout this process, Nexon not only fosters trust among users but also foresees the proliferation of numerous third-party forums, data analysis tools, and information sites centered around on-chain game data. This phenomenon parallels third-party tools for games like EVE Online (for example, the EVE-SCOUT forum depicted in the captured image below is an externally created real-time wormhole status analysis site, operating solely on donations).

Eve online third-party tool, Source: EVE-SCOUT

Feature 3: Establishing a shared economy that interconnects the Ecosystem

Games with widespread popularity, such as MapleStory, often give rise to derived ecosystems driven by community contributions extending beyond live services. This encompasses forums where players share in-game experiences, strategies, and information, as well as various information sites created through open APIs. Users perceive all these contents as integral to the MapleStory experience. However, the traditional gaming industry's inherent nature poses a challenge to the seamless integration of live services and derived ecosystems. For instance, items in MapleStory cannot extend into the derived ecosystem beyond the game's boundaries, constraining the RX of MapleStory to the live service.

Yet, the emergence of NFTs and tokenized data facilitates the previously impossible 'on-chain' transformation of data. Essentially, users can now own and trade data (items) through a trusted network, thanks to tokenized data like NFTs. MapleStory Universe employs blockchain technology, allowing users to extend in-game assets beyond the game and circulate them across all derived ecosystems, creating a shared economy.

This structure presents the advantage of a significant increase in use cases, potentially leading to a substantial enhancement of the game's RX.

Conversely, the shared economy structure suggests that heavy gamers, who own a substantial amount of high-value items, may freely navigate derived ecosystems, potentially slaughtering newcomers who have recently entered the game. If this phenomenon intensifies, there is concern that the shared economy structure might disrupt ecosystem balance, transforming the game into an environment focused on veteran players.

Feature 4: Strengthening Reward Experience (RX) and managing inflation of in-game goods via Limited NFT Issuance

Online games grapple with the challenge of endless item generation driven by 1) the number of users and their evolving play styles over time, and 2) the complexity of accurately predicting currency inflation due to the dynamic player population. Anticipating the escalating quantity of items as time progresses is virtually impossible, creating difficulties in managing item rarity. In essence, traditional game systems inherently struggle to address inflation issues, and MapleStory is no exception.

To address this, Nexon has chosen to implement a structure using NFTs to restrict currency production. Specifically, items in MapleStory Universe have a total cap across the entire server, irrespective of the player count, with a predetermined amount generated at regular intervals. For instance, if Item A is limited to only 100 units across the entire server, and players can obtain only 2 units per week, whether 2 or 100 players defeat monsters, only 2 units of Item A will drop in that week. If no one defeats monsters that week, the reward accumulates, providing players defeating monsters the following week with the opportunity to obtain 4 units. After 50 weeks, all 100 units of Item A are produced, and it will no longer be generated in the field. Users will only be able to acquire Item A through peer-to-peer transactions at this point.

By meticulously restricting item quantities in this manner, the user experience will undergo a substantial transformation compared to traditional games. Item farming will no longer center solely around individual efforts; instead, situations will arise where players compete for popular items. In response, users are likely to devise novel strategies, adding a new layer to their enjoyment of the game. Users will encounter moments where they must decide whether to pursue highly sought-after and competitive items or prioritize the stability of securing items in less frequented regions. Amidst the necessity for these fresh strategies and calculations, users will relish the excitement of successful loot, amplifying the Reward Experience (RX), a distinctive form of enjoyment offered exclusively by <MapleStory Universe>. Furthermore, by managing total item quantities in this manner and maintaining rarity within a stable range, past challenges associated with addressing inflation issues can also be effectively resolved.

Source: Nexon

3-3. Components of MapleStory Universe: MapleStory N, Worlds, SDK

MapleStory Universe consists of four primary components to implement the aforementioned system: 'MapleStory N,' 'MapleStory N Mobile,' 'MapleStory N Worlds,' and 'MapleStory N SDK.'

• MapleStory N: This is a blockchain-based PC MMORPG built on the original IP. In the initial phases of service release, it functions as the main content for users. It is expected that its role and contribution will gradually diminish over time as the volume of User Generated Content (UGC) and Modified (MOD) increases.
• MapleStory N Mobile: This is the mobile version of MapleStory N.
• MapleStory N Worlds: This component is a blockchain-based UGC game platform that offers a user-friendly interface. Its notable feature is the ease of creating content (NFTs and DApps) when utilizing Worlds, making it accessible. However, its utility is comparatively lower than SDK due to limitations in the provided tools and development freedom.
• MapleStory N SDK: This is a development kit provided to developers at the API level. Creators using the SDK can construct a variety of creative DApps and community activities, offering more diversity and creativity in their projects compared to Worlds.

Source: Nexon

Closing Thoughts

Nexon has discovered the value of blockchain amidst the remnants of the P2E landscape. In this pursuit, they have devised their own solutions, actively steering the development of <MapleStory Universe>. Reflecting the significance of this initiative, Nexon promoted the Vice President in charge of this project to co-CEO, underscoring the company's commitment to the venture. Given Nexon's track record of embracing open ecosystems, it is reasonable to assume that the company encountered little resistance in embracing and comprehending the philosophy of blockchain.