How Crypto and Gaming Are Shaping the New Decentralized Internet
Crypto is entering the world of gaming, and with the rising adoption of NFTs, it brings us closer to the new era of the internet.
This January, Microsoft acquired Activision — a company that releases Call of Duty, Warcraft, and Candy Crush, the games with hundreds of millions monthly users. In the meantime, Facebook rebrands to Meta, getting ready for the age of a new virtual reality.
Is this a coincidence? Why has the software giant Microsoft decided to purchase gaming platforms worth $78 billion? The bargain took place as blockchain-based games and play-to-earn (P2E) metaverses are flourishing.
The still-popular cohort of games including Call of Duty, Among Us, and Grand Theft Auto, is based on a centralized model where developers control the content and all users’ data on their servers. The next-gen blockchain games allow players to own their digital identities, assets, and in-game items. As the market cap and the popularity of such games skyrocket, we may be witnessing the formation of a new decentralized internet.
New Internet: the Prerequisites
We can see the emergence of the new Internet at the intersection of cryptocurrency and gaming. Why those two, though?
The term that describes the new era of the internet is Web3 — a decentralized version of its predecessor, the internet as we know it today. In its new variant, users will control data and access to information bypassing centralized servers hosted by tech giants. Some enthusiasts dub Web3 as a breath of fresh air for an environment that is currently controlled by corporations.
Web1 — the “read-only” era — was a version of the internet where users could only consume content. In Web2, people could create their online identities — user profiles on Facebook, other social media, Google accounts, and more.
It has been 16 years since Facebook was created and 24 years since Google was conceived. During this time, we saw how data violations and monopolies undermined trust in corporations and how users demanded more freedom to benefit from the internet (instead of letting big players benefit from them).
The monopoly of tech giants reflects the fact that they control huge amounts of data. However, as the concerns of skeptics regarding privacy control arise, it’s only a matter of time when Web3 comes. Its emergence accelerates at the junction of cryptocurrency, DeFi, and games. This is where GameFi comes on stage.
What Does GameFi Have to Do with the Metaverse and Web3?
GameFi is an industry where games are enriched with a financial aspect. Although it’s a relatively new thing in crypto, it has already evolved into a diverse landscape. Some GameFi solutions incentivize users to complete in-game tasks to earn rewards, while others encourage players to earn from the assets that they already own. There are accusations that GameFi is about gambling — but in fact, you have to apply special skills and strategic thinking to gain enough revenue.
The term GameFi was coined in 2019 when the founders of Mix Marvel, one of the first crypto play-to-earn games, pitched at a blockchain conference in China. They talked about how games and cryptocurrency put together are to revolutionize players’ experiences. This was a starting point where the first decentralized games and metaverses started to emerge.
Soon, the interest in digital universes hit Microsoft, and the company decided to get rights for some of the world’s largest games. In the meantime, Ubisoft (Assassin’s Creed, Far Cry, etc.) embraced NFTs — not without pushback from some of the users.
Sebastien Borget, the COO of a top crypto game and metaverse Sandbox, supposes that most gaming studios will be involved in blockchain and NFTs by 2023.
“Every single studio I know of — from the largest, top company to the smallest — will have a product, if not many, involving blockchain. This will create the fastest and most adopted business model transition that we’ve ever seen,” — says Borget.
Sandbox COO predicts that the adoption of blockchain and NFT will reinforce the growth of metaverses. Among other things, it has already inspired Facebook to rebrand into Meta and begin its research in virtual reality. GameFi is a valid and stand-alone industry despite being young. As it gets more diverse, its influence on metaverses and Web3 continues to grow.
How does GameFi work?
Avatars, weapons, land, gold, characters, and many other items are present in GameFi mechanics just like in regular games. Here, however, users truly own them as they are put on the blockchain. Players can trade those items on NFT marketplaces, which also includes the possibility to convert them into fiat.
The NFT nature of in-game objects changes the user’s perception of a game. It brings personalization and allows players to profit from their activity. Owning an NFT means you can improve your item, keep its history, and monetize it. As these objects are interoperable, they can be transferred from one crypto game to another, allowing users to resell in-game purchases and maximize profit. This turns games into a vibrant ecosystem where everyone is fully engaged and financially incentivized.
How GameFi Impacts Metaverse and Web3
The metaverse is a relatively new thing, and many struggle to imagine what it looks like. To this day, we already have some examples — Axie Infinity, CryptoVoxels, or Sandbox. All these are games built on Ethereum, so we can say, to some extent, that today’s decentralized metaverses are financialized Web3 games.
Judging by how fast P2E metaverse games are adopted, we can say that blockchain-based games might now be the strongest catalyst to the metaverse and Web3 development. The progress of crypto games and Web3 is co-dependent — the GameFi industry needs a decentralized internet, while the latter needs games to gain momentum. Metaverse needs both for faster adoption.
The ideal metaverses of the future run on decentralized networks, they are free from monopolies and operate based on users’ consensus. There won’t be centralized servers where corporations are able to store data and rule the game. The infrastructure will be spread across distributed networks, which will provide transparency and security.
Web3 is in the essence of such an approach. And given that there are already quite many games that meet these criteria, we can conclude that Web3 is now upon us.
Why is Gaming Perfect for Web3 and Metaverse Adoption?
The world of gaming is gripping. One of the reasons for this is because for years, games have included some core components of a metaverse mechanic. In The Sims, you can build families and cities; in Fortnite, you can create entire worlds.
Online games introduce their own variants of virtual reality. They are so immersive that like in everyday life, strong social connections can be built here. That’s why the evolving games may become the backbone for metaverses — environments where social interactions play a central role.
What matters is that games are ubiquitous. About 68% of the U.S. population were playing during the pandemic. The pre-COVID number was 54%. There are 226 million video gamers in America while the country’s population is 330 million. Close numbers were demonstrated in France and the UK — about 58%.
These figures clearly show that gaming is for everyone, not just geeks like it may have been before. The industry is appealing and is sought-after by people of all ages. Just think what role these games could play in the future if they turn into metaverses. Seems like Microsoft and Facebook have realized this in advance and taken action.
The principles of the metaverse (meant to facilitate the adoption of Web3) are best shown in game-like worlds. If a metaverse is a user’s alternative life, then the best implementation of it is a game with a social scenario. Another report demonstrates that 36% of players find friends among those who they play with, and 8% even end up with partnerships and marriages. If a social component in games increased, these numbers would only be higher.
Metaverses with a social mechanic can fast-track Web3 as many things have already been simulated in online games. An example of this is Fortnite — the platform hosted concerts that attracted millions of live listeners, so organizing such events has become a global trend.
The demand for crypto games has surged during the pandemic. In April 2020 alone, $10.5 billion were spent in blockchain games by American users — a record for games played at home. As the pandemic ends, these numbers seem not to go down. In July 2021, Axie Infinity executed over 600 million transactions with a trading volume of over $1 billion.
Top Crypto Games
CoinMarketCap has listed at least 160 game tokens with a total market cap of $13 billion. In July 2021, this number was $7.9B, and 2 years ago, it barely reached $1B. Such growth proves the rising interest in crypto games.
Earlier, we were fans of free flash games, later, we enjoyed Fortnite and Warzone, and today, we can take advantage of P2E games whose graphics and gameplay are at the same level as the best non-crypto counterparts.
A great example here is Axie — a game that resembles Pokémon where you can raise monsters, battle with them, and sell for cryptocurrency. As Axie’s success became evident, more actors were pushed to enter the market.
Here are some blockchain-based games that have gained huge traction in the crypto world:
A virtual world where you can own land, organize events and build on it, sell content, and take part in social activities. Decentraland leverages blockchain so that gamers own their digital identities as well as their land parcels and assets.
Decentraland is one of the most well-known games based on Ethereum. The in-game economy is powered by the MANA token (you can buy it on ChangeNOW anonymously without registration), and LAND is an NFT for virtual real estate.
The Sandbox is a virtual universe where players are provided with the tools to create their own gameplay. The SAND token fuels the local economy and allows you to establish avatars, create your own in-game assets, and turn them into NFTs — the gold standard of the crypto P2E mechanic. Another pillar of the local economy is land — parcels already cost thousands of dollars as of 2022, and many consider it a good investment. Sandbox land allows you to run events and digital experiences like in Atari and Walking Dead.
Axie Infinity was created to show how fun blockchain games can be. Users here breed, collect, and battle with digital monsters called axies. Unique axies can be sold at a good price, while monsters who win in fights grow in price — these are the two key components of the local P2E model.
The AXS (Axie Infinity Shards) and SLP (Smooth Love Potion) tokens are the backbone of the Axie economy. The game boasts a strong community and a scholarship program for newcomers.
NFTs, metaverses, and crypto games evolve hand in hand — this billion-dollar-worth industry called GameFi attracts such giants as Microsoft and Facebook (Meta). Its success is striking and hints that we are at the beginning of the decentralized internet era — Web3, where users will finally be able to control their data, in-game assets, and digital identities.