Shattered Reality has released Kaos War, a multi-player game with absolute transparency and social network design functionality which allows the players – not a bunch of overpaid and overfed game designers – create future expansion packs and levels based on player requests.

Because of the low overhead, Shattered Realms can build multiple MMO games without much difficulty and build out the environments dynamically rather than building the entire thing – a la World of WarCraft – and releasing it. The game starts out small and players then request special features and maps as the game expands, ensuring that folks can always have something new and cool to play. The game starts out free and they will sell add-ons and new content on-line.

Don Dodge pointed out that it took Red Octane nine tries to create Guitar Hero and that this model, the process of incremental creation and multiple games launched at once, could speed up that process considerably.

Click here to watch the demo SRI gave when it launched at TechCrunch50.