The Unstoppable Rise of Web3 Gaming

Since the creation of the world’s first video game (which was invented by a physicist, by the way), the video game industry has gone through several evolutions — each improving upon the preceding generation of gaming.

While there were other video games that hit the market before the 1970s, it was Atari Games and their release of Pong, which truly introduced the arrival of video games to the masses. The late 1970s and early 1980s saw the release of cultural icons such as Space Invaders, Pac-Man, and Donkey Kong.

Entering the mid-1980s, Nintendo released their NES (Nintendo Entertainment System) console, which elevated gaming to a whole other level within the home. From there, the world met the Super Mario Brothers, Zelda, Mega Man, and more.

Through the mid-90s to early 2000s, the world saw a rapid changing landscape of games and consoles. From Sega Genesis to the first Sony Playstation, and all the way to the introduction of the Microsoft Xbox and Nintendo Wii — the gaming experience evolved significantly. From 2D worlds to 3D worlds, from minimal storylines to entering virtual universes within the games themselves, gameplay had truly evolved from the days of Pong.

Entering the late 2000s, Apple brought the world the iPhone, and introduced the app store and mobile device gaming. In the years to come, Angry Birds, Clash of Clans, Pokemon GO, and more, would takeover the screens of mobile phones around the world.

Now, as we enter the era of Web3, gaming is set to transform once again. Unlike prior evolutions, where games changed by:

• How they were played (e.g. arcade vs computer vs console),
• Graphics (2D, 3D, and quality), or
• Experience (storylines)

This time, games are changing in terms of what people can actually take away from the game.

From depositing coins into the arcade machine to spending countless hours swatting the controller pad in front of the television — the person to game relationship has generally stayed the same through the years. Players give their time and money — and are rewarded with an experience.

With Web3 games, players continue to give their time and money — but can now be rewarded with not just an experience, but also with digital assets which could possibly net them more money than what they initially put into the game.

Made possible via blockchain technologies, cryptocurrencies, and NFTs, gaming projects and studios from around the world have begun their quest in creating the first AAA Web3 game. With some initial hits that have already been extremely significant and impactful (Axie Infinity, Gods Unchained, Splinterlands, amongst others), players far and wide have taken note. And this attention has brought an astonishing amount of new interest and players into the space — which looks poised to grow significantly more in the years and decade to come.

The Growth of Web3 Gaming

According to a recent Dapp Radar report, blockchain gaming activity has grown 2,000 percent from the previous year (2021). The overall reported statistics are impressive. More than half (52%) of all blockchain activity appears to come from game dapps, and during Q1 2022, more than 1.1 million unique active wallets (UAW) were connecting daily to blockchain games.

One of the most popular chains continue to be BNB, with Polygon’s Matic beginning to build momentum off the backs of popular Play2Earn games such as Pegaxy, Crazy Defense Heroes, and more.

For those who may continue to be unimpressed with the infancy or lack of maturity of Web3 games, it may be helpful to know that $2.5 billion USD was raised by games and metaverse projects during Q1 2022. Representing more than half of the total amount raised in the same category during 2021 ($4 billion USD), massive funding is now in the pockets of various gaming projects globally to incubate, create, develop, and eventually release a world-class offering for the masses.

The Allure of Web3 Gaming — Earning Crypto, NFTs

As laid out previously, Web3 gaming offers a completely novel new experience for the players — one which has never been possible before. The rise of blockchain technologies and the potential of cryptocurrencies and Non-Fungible Tokens (NFTs) has completely changed the value proposition of the games that are being played. Whereas in the past, players could principally could “just” derive fun from the playing experience, Web3 games allow players to derive financial value and financial assets out of the game — completely negating what parents have been saying for years “You can’t make a living playing video games.”

With new economic models like Play2Earn, users from around the world can literally play video games to earn cryptocurrencies or digital assets — which in turn can be exchanged for real world currencies and real-world value.

During the summer of 2021, this is exactly what the world saw with the rising popularity of the first blockchain game hit — Axie Infinity. At the height of its popularity, players from Southeast Asia were able to earn significantly more from playing the game than in their real-world jobs. While the game has cooled off significantly since then, other Play2Earn games are vying to take its place — and players who now have a taste of what Web3 games make possible, are coming back for more experiences like what they saw with Axie.

Leveraging NFTs for Additional Earnings

Another revolutionary update to gaming made possible by Web3 is the promise of putting digital assets to work. In addition to Play2Earn, a new sub-industry is rising from the many digital assets that players are collecting in the marketplace and within the game.

Because Web3 games often require players to hold specific game NFTs before they can start playing (e.g. a player character), those who are able to acquire NFTs also have the possibility to rent out those same NFTs to players who otherwise don’t have them.

As an example, if a player who is required to spend 0.1 ETH to acquire a character before playing — and this player may not have this kind of capital at their disposal, the same player can explore renting solutions instead.

Under a renting model, the interested player would go to a renting platform and search for game character NFTs that they could rent to play the game. Once rented, earnings from the game could be allocated to the renter — allowing them to earn while using someone else’s asset, but also allowing for the lender of the asset to make rental income on the asset while it is being used by the renter.

There are already platforms today which are offering this kind of promise. In particular, the IQ Protocol, which is a rental platform for digital assets, allows for lenders to deposit their digital assets into the protocol, and potential renters to rent wrapped, expirable versions of those assets for limited time periods.

An economic model which simply does not exist in the current gaming world, NFT renting of game assets will further augment the changes that Web3 gaming is bringing to the game industry via cryptocurrencies and NFTs.

Looking Ahead

Web3 gaming is just getting started. With daily active wallets only in the single digit millions at the moment, and with a video gaming population measured in the billions, there is significant runway for the industry to grow in the coming years and decade.

Like the changes which came before (most recently with mobile device games), the evolution will be gradual. The heavy investment into the space signals a high confidence that some of the world’s best talent are now working on the next iteration of Web3 games. As these titles begin to come out, players will begin to experience an increasingly higher quality of Web3 gaming experience.

Coupled with the change in value proposition made possible by the earning of cryptocurrencies, digital assets, and passive income streams from the lending of NFTs — the industry is poised to continue its rise as it enters a new era of gaming.