Steam for Web3 Gaming
GameFi sector nowadays not only contains thousands of games under development, but the ever-evolving landscape requires a mutually beneficial relationship between protocol, game, and player to thrive. It is developing to a point the underlying distribution platforms may start to provide a value-adding environment (soil) and help solve pertinent issues for games (growth opportunities) that will invariably succeed.
We’ve seen this through examples like alternative app stores and the globally revered Web2 gaming distribution platform, Steam. Both help developers and their apps leverage increasingly valuable commodities like time, trust, and retention of the end-users via pre-existing user acquisition or internal advertising networks.
But given the aversion of centralized gaming mammoths towards Web3 due to numerous regulatory issues, more opportunities are available for open, decentralized alternatives to capture the growing market share. Obfuscated tokenomics and superficial staking incentives aside, the models for these potential contenders to follow are not as complex as would otherwise seem. Based on internal research and interviews with industry leaders, we’ve highlighted several key aspects that mirror and improve the dynamics of traditional platforms.
Game Discovery
A common theme amongst any successful business or service (regardless of industry) is that they either create or reinforce a path of least resistance for users. We can see this evidenced through companies like Amazon, Uber, Airbnb, and more, all of which help drastically reduce time and effort for their customers compared to the models of their forebears.
While Web3 games may help democratize and strengthen the potential of gamers, the current reality of the market and solutions is far from ideal. A slew of factors like complicated and intimidating onboarding make it incredibly painful for average users to get started, yet alone extract promised financial and social value.
This isn’t to mention game discovery that often happens in isolated communities like Discord and Telegram, both overflowing with overt scams (including malware embedded in .exe files). As Web3 games are becoming more graphically intense (and easier to download), a trusted hub for users to discover and engage with the next generation of secure games is more important than ever.
Interoperability and Compatibility
Another critical component for this type of platform to reduce friction is interoperability and compatibility, especially when connecting identity and reputation across games. Whether through the exclusive nature of NFTs like CryptoPunks, or scores of followers on social media, the need to demonstrate social proof and credibility is only becoming a more prevalent factor in shaping the future of our digital economy. And the world of gaming only amplifies this further.
Outside of celebrities and influencers, stats and achievements of everyday users are typically confined to a specific game or a specific audience. Should a gamer branch out on a new platform like Reddit or Twitch, they’d have to start from scratch with fewer people aware of their accomplishments, like having logged several thousand hours of Axie play.
Moreover, as Web3 games usually design their in-game tokenomics to be insular (inclusive of assets like NFTs), connecting multiple games into a single marketplace and distribution platform would facilitate greater liquidity and ease of transactions.
In addition, as on-chain data gives users full ownership over their in-game assets, the ability to aggregate and transfer their assets across various games could also assist in creating a more customized gamer identity — one unique to and owned by the user, as opposed to the platform or parent company.
Tools and SDKs
Distribution platforms can reinforce greater degrees of interoperability through building a wide reach of tools like SDKs and fiat on-ramps.
In contrast to the highly centralized nature of Web2, and at the risk of oversimplifying, we believe the more open-source SDKs that are available, the more standardized and easier it will be to onboard games in Web3. Although this deeper integration of SDKs will affect the number of games short-term, as the industry scales, the process will not only shorten but also make it easier to connect marketplaces, gamer identity, and more into the future.
Distribution platforms could offer features like:
- Non-custodial wallets
- Social and messaging layers
- Integrated NFT marketplaces
- Fiat on and off ramps
- Integrated decentralized crypto exchanges
All of which help games streamline the onboarding experience and process for their users.
Unique Marketplace
Equally vital within this existing array of features is the ability for SDKs to offer flexible integration of marketplaces.
We can see that right now most of the transactions are happening in marketplaces such as OpenSea, Magic Eden, etc. However, for game distribution platforms, once enough volume flows through their supported games, it is possible that they can extend their value proposition by creating internal marketplaces to list all virtual items across each supported game and, in doing so, become a one-stop, multi-chain solution.
Along with providing relevant and pragmatic utility for a potential token, by creating an internal marketplace, the distribution platforms can also solve prevalent pain points that isolated marketplaces like OpenSea cannot — helping facilitate a seamless experience in listing, trading, and switching between different games across various blockchains.
Furthermore, through examples like YouTube, we can see that not only does breadth of content beget more market share, but it will also lead to greater depth of curated recommendations as it continues to grow its library. With a marketplace running across different games on the platform, it could further allow the platform to attract partners and expand its scale. Although such a model, at the early stage, largely depends on more entertaining Web3 games to emerge, the overarching focus on breadth allows a platform to become more attractive in its diversity and helps cater a personalized experience for end-users gradually.
Security
Despite being unable to retain true ownership of virtual items, as mentioned in a report by JP Morgan, an average of US$54 billion is spent on virtual goods (like skins and lives) in 2020, almost double the amount spent buying music. Conversely, blockchain games provide a way for users to verifiably own assets and, in doing so, create real-world economic value and equalizes opportunity.
That said, no gaming platform would be complete and truly trusted without robust security. To play a native blockchain game, users need to download an Executable from isolated discovery platforms like Telegram and Discord that do little to mitigate against the risk of malware. As downloading said executable files is, for the most part, one of the main supported methods to access games, an increasing number of users are either hacked or scammed. To put this in perspective, according to blockchain security company Chainalysis’ 2022 Crypto Crime Report, illicit crypto wallets worldwide received $14 billion, an 80% increase from 2020.
A distribution platform being able to model Steam in its ability to onboard vetted games and provide trusted and secured access to the games, would solve outstanding pain points for developers and users alike. Not only would this save time, but ultimately act as a trusted source for gamers worldwide and earn a reputation for providing Web3 games with a level of authenticity and social proof akin to people writing 5-star reviews on TripAdvisor, Yelp, or Google Maps.
Intent driven vs. discovery driven
Unlike the discovery-driven models of mobile app stores, where content is mostly recommended based on genres or categories, platforms like Amazon and Steam lean more toward an intent-driven approach. The distinction largely depends on the user’s ability to search and find what they want with a degree of specificity.
Ideally, the best solutions should cater to both intent and discovery models. But by optimizing for breadth, or providing consumers with a larger pool of suggested games, distribution platforms can help users find more personalized options and reinforce more robust feedback loops for the company to create the most relevant and desirable experience possible. Regardless, whether intent-driven or discovery, choice is always essential.
Conclusion
With all the above in mind, given the realities and permutations of free markets, nothing overtly prevents empires like Steam from simply acquiring fully functional Web3 iterations, should it save them resources, time and capital building a unique marketplace and SDK.
But as per the nature of Web3, ultimately solutions that continually listen to the needs of gamers and developers and weave these core tenets of security, ownership, interoperability and identity into their value proposition in a trusted manner will continue to grow with the industry in its entirety.
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About Shima Capital
Shima Capital is a leading early stage VC firm investing in disruptive blockchain companies. The fund is deeply focused on taking a hands-on approach and working closely with its portfolio companies to provide the most sweat equity per dollar invested. As teams in Web3 push the frontier of innovation, Shima helps hire talent, build community, amplify narratives, and foster the acceleration of technical research and development. Shima is composed of seasoned investors, accomplished operators, and former founders who align on a mission to support all-star teams with building and scaling generational companies. Learn more at www.shima.capital.
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