The evolution of Web3 gamingWeb2 games are based on a one-sided relationship where value generation is captured in a centralized model of ownership controlled by game publishers and developers. Regardless of how much money, time, or effort players put into a game, they don’t own the assets they purchase, their progress, or the time they spend playing the game. Take the traditional game The Sims, where a player can buy in-game assets with the in-game currency. However, the currency and assets lack real-world value because there is no infrastructure or liquidity to convert in-game value to real-world value in the game.Unlike the traditional gaming industry, blockchain games deliver monetary value back to gamers. That’s not saying that you can motherlode yourself through life now, but receiving some real-world value in return for your time and money is enticing. The blockchain gaming model embraces the idea of an open economy and financially rewards users who add value to the ecosystem with their time and effort. NFTs allow players to own the virtual game assets they purchase and to sell them outside the game at their discretion. In other words, the virtual value created by players in-game becomes real-world value. Anyone, anywhere, can potentially earn a living simply by playing games they enjoy.Critics argue that gaming should be an escapist pursuit, not monetized. But "play-to-earn" doesn't necessarily mean "I'm just gaming for money now...". Games can be entertaining and have an enormous earning potential for the player; these aren't mutually exclusive. Many have therefore transitioned to "play-and-earn" to ease the confusion. And the name is not the only thing that's maturing; the landscape is expanding rapidly.
From top left to right: RPG (role-playing games), MMORPG (massively multiplayer online role-playing game), Farming games, MMO (massively multiplayer online), MOBA (Multiplayer online battle arena), Derivative gaming (NFTs linked to real-world), Trading Card Games, Buiding games, Metaverse (virtual worlds), Creature battle (breeding and battling), Poker, Move-to-earn, Sports, Racing, Battle Royale, Tower defense games, E-sport, Strategy, Sing-to-earn, Consumables (in-game utility), Action, Puzzle games, and Arcade games.The two bottom rows are a small representation of the service layer: Gaming platforms, Providers, Developer studios, Marketplaces, Gaming guilds, Guild management, Launchpads, and distribution.Despite its infancy, numerous blockchain gaming projects have emerged across multiple genres with mass-market appeal. As a result, interest in blockchain gaming and NFTs has surged. However, as so eloquently illustrated by the chart below, this interest seems to be fuelled by speculation rather than enjoyment.
The rapidly developing blockchain gaming landscape
The purpose of this chart is to illustrate a general trend. Had we based the activity on Ronin (an Ethereum-linked sidechain made specifically for Axie Infinity) instead of Ethereum, the number of Axie users would be significantly higher. However, regardless of metric or chain, activity is decreasing.
Source: Dune Analytics, TradingView
Building sustainable blockchain gamesWhile Web3 gaming holds a lot of promise, this is not how it’s currently playing out. Building a developer ecosystem takes years. Building AAA games, like Fortnite and World of Warcraft, takes years. But the NFT space has an attention span of months, and gaming platforms are rapidly launching with no clear product vision and no pre-existing content. Meanwhile, they rely heavily on a continuous stream of outside investments to propel momentum. This is unsustainable and requires a major realignment, with games supporting DeFi - not the other way around. For blockchain gaming ecosystems to prosper long term, there are three areas that require special attention:
- The cost of entry
- Token inflation