Transitioning from web2 to web3 gaming
Since the start of last year, interest in the play-to-earn (P2E) idea has grown dramatically. According to DappRadar, the number of web3 gaming users increased 24 times, from 343,000 in January 2021 to 8.51 million in January 2022.
However, the market for blockchain gaming is still in its early stages. While some major gaming firms, including Ubisoft, EA Sports, and Zynga, have started dabbling in blockchain-based games, the majority of development has been led by crypto-native companies.
So why is web3 gaming being dubbed as the “future of gaming” and why are the big gaming companies setting their feet in this space?
Let’s begin by understanding the use case for gamers:
Play-to-earn -
Blockchain technology enables the Play-2-Earn concept, in which players are paid for their time, effort, and skills. Currently, there is no way for gamers to make money off of their skills outside of esports.
Interoperability -
It also has the potential to enable interaction across ecosystems. This is a huge breakthrough, as in traditional gaming, there is no value accrual to players, and user transactions only occur in a closed-loop ecosystem.
Think about League of Legends players sporting their Fortnite skins.
Increased financialization -
Another key benefit for users has increased financialization. In DeFi, users can use their virtual possessions as collateral in the same way they would use actual assets. For instance, by lending out their expensive weapons, a player could obtain funding for their upcoming combat pass.
Security -
Web3 gaming also stands out for its distributed nature, one of the primary attributes of anything built on blockchain.
Unlike the centralized servers in traditional games, there isn’t a single point of failure.
The use case for creators and game developers:
Larger Player Base -
Blockchain gaming offers a chance to monetize a larger player base compared to the free-to-play model, where, on average, less than 2% of gamers actually buy in-game products. Due to the advantages for players outlined in the preceding section, there is a greater propensity to spend money, which makes it possible to monetize the users.
Cross ecosystem transactions -
It also enables capturing value across ecosystems: in traditional gaming, all transactions are done in a closed ecosystem. With interoperability being possible with blockchain technology, interaction across other ecosystems/games would provide a new revenue stream through on-chain royalties.
Better economic alignment -
Gaming companies frequently run out of ideas and are unable to stay intriguing over the long term. Many times, players and game creators desire to improve the game by adding new features or levels, but they are unable to do so.
Blockchain technology has the potential to create a business model that fosters closer collaboration between developers and players, which can add value to the game, ultimately benefiting both the game and the player in the long run.
Better unit economics -
When the game shares a percentage of profits with players and creators, the customer acquisition costs are reduced and player retention is higher, which results in higher LTVs than in typical free-to-play games.
How creators or game developers can get started with web3 gaming:
Any aspiring web3 game developer should be aware of the key characteristics of web3 gaming and how they will affect their game. Verifiable ownership, immutability, decentralization, and security are a few of these. These ideas can be further simplified to instances like ownership and chain-of-custody of digital assets, immutable recordings of gameplay, or completely open game development when applied to game ecosystems.
One must not overlook the fundamental economics behind the play to earn games. The ecosystem is inherently unsustainable if more players are withdrawing money from a gaming economy than they are putting in.
The three main funding sources for the video game business have historically been angel investors, venture capitalists, and strategic investors. However, web3’s decentralized structure has created a number of brand-new financing opportunities.
At this point of development, selling NFTs has been one of the most popular methods of funding, but fungible tokens have also been used.
The space-themed strategy game Star Atlas, which is based on Solana and has a space setting, is one of the best examples of this. In the game’s marketplace, aspiring Star Atlas players can buy a variety of vessels, buildings, and souvenirs. The game raised millions of dollars this way.
Closing thoughts:
The key takeaway here is that, while functioning in web3, game economics is no longer restricted to the confines of the game itself. They are now a part of the larger IRL economy, necessitating careful thought and judgment to look at games.
Play-to-earn is here to stay and is most likely to increase dramatically over the next few years. With the evolution that is inevitable, developers that delay adopting this technology risk finding themselves rapidly falling behind.
