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Both cases required markedly less work to update its version than competing engines.

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The release of Half-Life 2: Episode One and The Orange Box both introduced new versions of the engine that could not be used to run older games or mods without the developers performing upgrades to code and, in some cases, content. In practice, however, there have been occasional breaks in this chain of compatibility. With Steam, Valve can distribute these updates automatically among its many users. Different systems within Source are represented by separate modules which can be updated independently. Source was created to evolve incrementally with new technology, as opposed to the backward compatibility-breaking 'version jumps' of its competitors.

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Older versions of Source use Bink Video for video playback, however more recent releases of the Source engine use WebM videos for menu backgrounds, Full Motion Videos, and splash screens. Valve's development of Source since has been a mixture of licensed middleware and in-house-developed code. Source was developed part-by-part from this fork onwards, slowly replacing GoldSrc in Valve's internal projects and, in part, explaining the reasons behind its unusually modular nature. the 'Goldsource' engine, and the name stuck.

When it came down to show Half-Life 2 for the first time at E3, it was part of our internal communication to refer to the 'Source' engine vs. At least initially, the Goldsrc branch of code referred to the codebase that was currently released, and Src referred to the next set of more risky technology that we were working on. Over the next few years, we used these terms internally as 'Goldsource' and 'Source'. At that point we forked off the code in VSS to be both /$Goldsrc and /$Src. When we were getting very close to releasing Half-Life (less than a week or so), we found there were already some projects that we needed to start working on, but we couldn't risk checking in code to the shipping version of the game. Valve employee Erik Johnson explained the engine's nomenclature on the Valve Developer Community: Carmack commented on his blog in 2004 that 'there are still bits of early Quake code in Half-Life 2'. Source distantly originates from the GoldSrc engine, itself a heavily modified version of John Carmack's Quake engine with some code from the Quake II engine.

The Source engine is most well-known for its advancements in physics, AI, and graphics. In the late 2010s, Valve created the Source 2 engine to replace Source, with it publicly debuting alongside Half-Life: Alyx. Valve continued to create incremental updates to the Source engine after its 2004 release, most of which coincided with games created by Valve. It is most well-known for its usage by Valve, but the engine has been used both by small teams and individuals to create modifications of Valve games, and other studios creating distinct games, notably Troika Games title Vampire: The Masquerade – Bloodlines. It debuted as the successor to GoldSrc in 2004 with the releases of Half-Life: Source, Counter-Strike: Source, and Half-Life 2. Source is a 3D game engine developed by Valve.