Mobile blockchain gaming: the next big investment opportunity?

Blockchain technology offers the potential to revolutionize the way we play games. NFTs mean that players can now own the in-game assets (characters, weapon skins, etc.) that they have worked hard to earn. The play-to-earn (P2E) paradigm means that players can get monetarily rewarded for improving their skills and performing in-game. DAOs allow players to control the direction of the game — player involvement in game development has had resounding success in games like Skyrim and Day Z.

For investors, gaming should be an appealing subsector of Web3 because it has incredible potential to bridge Web3 into the mainstream. There are about 3.1 billion gamers globally. As blockchain gaming becomes more popular — with new indie games emerging and established studios adapting their titles to have Web3 elements — it has the chance to overtake a large portion of those 3.1 billion gamers. Not only investors, but anyone who is passionate about the Web3 space should be looking into blockchain gaming for its potential to onboard the next billion people into the Web3 world.

Gaming is a fast-growing subsector of Web3. The blockchain gaming industry grew 2000% in the past year. Growth is exponential, with $2.5 billion in investments coming in Q1 of 2022, compared to $4 billion raised total in 2021. While mobile gaming is the largest category in the global gaming industry — contributing to 45% of revenue, compared to 29% console gaming and 20% PC gaming — most of the blockchain games are built for PC. Is mobile gaming the next big opportunity within the blockchain gaming sector?

Current state of blockchain games

It’s still very early in the blockchain gaming space. The current leading titles in blockchain gaming include play-to-earn games like Axie Infinity, Crabada, and Crypto Unicorns. This first generation of blockchain games has gained a lot of buzz over the past year — with Axie’s peak fully diluted market cap reaching soaring heights of $37 billion.

While these games were important in introducing much of the crypto world to the potential of blockchain games, they are frankly not that fun to play. Gameplay takes a side seat to the novelty of play-to-earn mechanics. You could argue these games are just gamified yield farming. The future of blockchain games is in the concept of play-and-earn, where gameplay is paramount.

Mobile blockchain is an even less developed category of blockchain gaming, compared to PC blockchain gaming. One notable title is Bitcoin Pop, which has a 4.7 rating and over a 1 million downloads on the Google Play Store. The gameplay is very simple: players tap Bitcoin clusters to earn in game currency. The conversion rate is low, for a notable 3,000 points, players can earn 0.00000003 BTC or .001 USD. Another title that has garnered attention is Atlas World, where players buy in-game real estate and collect passive income. Like Bitcoin Pop, the game is able to pay out players through ads. Both of these games are low skill, boring, and time-consuming, but their growing popularity despite these drawbacks is an optimistic indicator for the mobile blockchain gaming space.

The mobile blockchain gaming space is growing. Exciting titles like Illuvium and The Battle of Sotiras have future mobile releases scheduled. These are games that adapt some of the leading game categories that have enthralled players for years — RPG, open world, battle royale — and have the potential to be fun to play. Furthermore, established companies like Voodoo (largest mobile gaming studio and creator of Farmville) have committed to investing in emerging gaming studios, offering their years of experience and industry-leading talent to facilitate the development of enticing mobile blockchain games.

Tailwinds

Developer incentives: Web2 game developers are being incentivized to apply their talents to Web3 game development. Ready Studios, for example, has their “Dev to Earn Program” where they offer Web2 studios live operations tools to adapt their existing games on-chain. Developers get immediate access to their turnkey Web3 Ready API and Unity SDK. Programs like these lower the barrier to entry for Web2 game developers who otherwise might be dissuaded from learning a new tech stack that’s needed to develop a blockchain game.

App-store payments ruling: In the recent lawsuit with Epic Games, a federal judge stated that Apple could not prohibit developers from using payment acceptance methods other than in-app purchases. Though Epic Games largely lost the lawsuit, this single ruling could prove to be incredibly consequential to mobile blockchain gaming. Allowing alternative payment solutions opens the door for blockchain, where payments can be sent directly between players and the game, without being complicated by fiat conversions. Furthermore, Apple takes a cut of 15–30% from in-app purchases. Removing this requirement lowers opportunity cost for talented developers who are considering applying their talents to mobile development.

5G: As 5G networks expand globally, the capabilities and range of mobile games will expand drastically. 5G will increase the processing power of smartphones, allowing for graphics-heavy games to emerge. Not only will a slew of new titles with engaging graphics enter the market, existing titles could see more seamless adaptations from their PC or console origins. Furthermore, 5G will decrease latency speeds, allowing a smoother multiplayer experience. The next generation of blockchain games need to be fun, and 5G is widening the potential of games that can be developed for mobile.

Burgeoning mobile competitive scene: Competitive gaming is so important to the growth of the mobile blockchain gaming sector primarily because it helps spread the word about games. Pro gamers have their own followings, so if they are playing a game, it is likely that their fans will try it.

The mobile esports scene — led by South East Asia — is quickly breaking the PC-console duopoly. In SEA, MOONTON’s Mobile Legends: Bang Bang operates 8 professional leagues. The mobile game, Arena of Valor, recorded a peak viewership of over 3 million for its world championship in 2021. Mobile blockchain tournaments are emerging, too, with mobile esports company, Megafans, hosting a P2E tournament at the Coin Bureau Cryptocurrency Conference on May 7th.

Investment opportunities

Games that are fun: As I have emphasized, the next development in mobile blockchain gaming and blockchain gaming is games that are fun to play independent of the Web3 features. There are a few ways to identify whether a game is fun. The first is to play the game — but this option isn’t always available for early stage investors who are looking at games that are often pre-release. So a second option is to look at the team behind building the game. Do they have game development experience for successful titles and relevant blockchain development experience? Being a game developer is most important because you will understand what goes into an enjoyable playing experience. Finally, there should be a devoted community backing the game. A strong community is a good sign for success because the community will play the game and help do the work of growing the game’s reach.

A caveat to this point is that games that are fun on mobile aren’t necessarily fun on PC/console. Many mobile games are played in passing — during a commute, waiting in line, etc. These types of games are called “snackable” by Hugo Furneaux, the CEO of PlayEmber. Candycrush might be too boring for console, but as a low-engagement game on mobile it is wildly successful. When considering investments in mobile blockchain games its important to understand the uniqueness of mobile, compared to PC or console.

Emerging Markets: Axie Infinity’s popularity in emerging markets — most notably the Philippines — highlights the potential for blockchain gaming in countries where the earnings from games can supplement or fully replace local wages. There is growing infrastructure for blockchain game development within emerging markets to match players’ demand. Vietnam, for example, has become a blockchain gaming startup hub with the success of Axie. Investing in game studios coming from emerging market countries could be attractive because these studios would have the knowledge to tap into local markets. Games that have a go-to-market strategy for emerging markets are likely to find success because they are tapping into a player base that is familiar with Web3 gaming concepts. One large market that presents great opportunity is India, where mobile gaming is growing faster than social media.

AR/VR: Augmented and virtual reality have been trending areas of mobile gaming for the past few years. Mobile devices can power AR experiences by providing real-time data; Pokemon Go using location data is a good example. Mobile devices paired with headsets can provide immersive virtual reality gaming experiences. While these trends were exciting on their own, they have a whole new level of significance when paired with the metaverse. Mobile blockchain games that are helping bridge the physical and digital experience could be a huge investment opportunity.

Resistances and risks

Gamers have been reluctant to embrace NFTs and other Web3 concepts. Many see NFTs as another opportunity for them to get burned by big gaming studios. They fear economically motivated games that have devolved into being able to buy your way to success, such as NBA 2K. As such, it’s important that in-game NFTs have very limited — if any — in-game benefits. NFTs can give players varying values based on rarity, but they should be mostly cosmetic.

Security could be an issue when it comes to mobile blockchain games because you’re dealing with a user base that is not entirely crypto-native. For example, the casual player who ventures into a blockchain game might not understand how wallets and sending tokens work. They could fall victim to a phishing scam and lose all their game currency. To combat this, there are a growing number of white-label wallet solutions that limit withdrawals to specified addresses.

Video games, especially mobile games have been accused of taking advantage of psychological concepts to be more addicting. As play-to-earn concepts with real money become more prevalent in games, players and developers need to be cognizant of money adding to the already addictiveness of games. If a game is designed so that players need to be putting in their own money to play, we could see drastic consequences for people, which could lead to bad PR. For long-term success, it is important that games aren’t designed with predatory tokenomics and express concern for the wellbeing of their players.

Games/studios to watch

Realm — combining art, music, and AR to create a compelling metaverse game, currently in private alpha

Gods Unchained — blockchain trading card game with NFT cards, releasing mobile alpha in 2022

InfiniGods — web and mobile blockchain studio creating puzzle, strategy and city building games

Zynga — leading studio responsible for titles like Words with Friends and 1010! that has expressed plans to develop crypto games in 2022

Conclusion

It’s still very early in the mobile blockchain gaming space — and there’s a lot of opportunity to be found. As the infrastructure around blockchain gaming continues to grow, we will see titles that are fun to play and eat a large portion of the incredibly large, global mobile gaming market. While blockchain gaming in general faces risks, the opportunity to bring Web3 into the mainstream should outweigh any concerns.

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