On-chain data tracker DappRadar recently reported that an additional $600 million was poured into Web3 gaming projects in the third quarter of 2023, bringing total investments so far this year to over $2.3 billion.
Another report from blockchain gaming community Game7 indicates that Web3 games have stabilized despite market corrections.
Interest in Web3 gaming, a general term used to describe an ecosystem that embraces blockchain-based video games, is clear and unwavering despite the so-called “crypto winter.”
After a prolonged bear market, cryptocurrencies appear to be gearing up for the next bull market, and Cointelegraph reached out to industry insiders to understand the current landscape for Web3 gaming.
The Web3 gaming ecosystem has seen the relative quiet in the broader cryptocurrency industry as a positive, according to Immutable head of product marketing Michael Powell.
“In markets saturated with speculation and hype, it is often easy to get distracted and chase shiny targets,” he told Cointelegraph.
Powell added that Web3 gaming companies that have leveraged tranquility to create products with real value and long-term game plans have been a key driver of investor interest.
“We are also seeing a shift away from play-to-revenue approaches toward more sustainable gameplay models that emphasize true digital asset ownership and allow gaming economies to thrive.”
Omar Ghanem, co-founder and CEO of Web3 gaming platform Gam3s.GG, whose highly anticipated Web3 games are just around the corner, said, “The space has become somewhat more mature compared to the last two or three years. Quality and standards are important.”
Uluç Yuca, co-founder of Web3 games-focused Curator Studios, said that while the numbers may not be as flashy compared to 2022, the potential for mass adoption of Web3 games, their unique value proposition, and the opportunity for portfolio diversification and strong community support.
Investors are also keen on early-stage investment opportunities, which makes the Web3 gaming space an attractive option for investors despite the relative silence in the cryptocurrency market in the third quarter, Yuca explained.
Balancing Web3 Games
According to a report by DappRadar, the top game, Axie Infinity, had a transaction volume of over $90 million. This figure is almost double the $55 million deal size of the second-place game, Gods Unchained.
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The rest of the list tells a similar story, indicating a “concentration of success,” Can Azizoglu, CEO of Web3 startup incubator Coinoxs, told Cointelegraph.
New trends, such as casual game studios gaining traction, signal a changing environment, he added. “This diversification can lead to a more balanced ecosystem over time.”
Gam3s.GG’s Ghanem explained that each team’s approach to the top 10 list makes a significant difference. “Axie Infinity has always focused on the Southeast Asian market with numerous scholarship programs to expand our user base as much as possible. The region’s preference for Web3 gaming and the team’s expansion strategy have kept Axie at the top of the player charts.”
Gods Unchained and several other companies follow different approaches and don’t necessarily stick to the same growth goals or demographics, Ghanem said.
“I don’t think it’s a negative reflection on the industry or the games. If anything, it just shows how dominant the Axie IP still is in this space. Similar to the Steam charts, most players tend to be at the top of the list, leaving thousands of smaller titles struggling to maintain a slice of player activity.”
According to Yuca, the dominance of one game can create barriers for new players and developers to enter the market, limiting diversity and innovation in the industry.
Immutable’s Powell said that as the investment brings new top-tier games to market with new player communities, “We will continue to see more innovation and diversity across our titles through our ability to reach a broad player base.” “We’ll see,” he said.
Daiki Moriyama, Director of Oasys Games, emphasized that the global video game market is a $200 billion market and that the blockchain gaming industry is just starting to grow. “A variety of game developers are now challenging themselves to see how they can create unique experiences that are only possible on blockchain.”
No more play-to-earn required.
Play-to-Earn (P2E) was undoubtedly the biggest trend in Web3 gaming in 2022. By allowing users to earn in-game assets for monetary value in the real world, it has attracted audiences beyond gamers into the space. However, it was controversial as both studios and gamers relied too heavily on the “monetization” aspect of Web3 games.
Players are starting to look for games that focus on the actual gameplay experience. According to a report from the Blockchain Game Alliance (BGA) in early 2023, the most important factor in the development of blockchain games should be game improvement, not P2E implementation.
Moriyama believes that P2E elements will remain a driving force in blockchain games, but emphasized that they have been overemphasized in Web3 games so far. This problem can be solved through widely recognized IP and large-scale user experience improvements, he added.
Azizoglu agrees that the Web3 gaming environment is no longer about P2E. “The shift toward diverse gaming experiences is happening, and this is indicative of evolving player preferences.” He pointed out that while P2E remains popular, growth in this segment includes a wider range of gaming experiences.
Yuca explained that there is a shift from using tokens as a form of currency to using non-fungible tokens (NFTs) as a business model. This means that instead of relying solely on in-game purchases or downloadable content, game studios now have the option to integrate player-based economies through royalties and NFTs.
“NFTs provide a way for players to have a financial stake in the game, just like the game’s founders and employees. This inevitably makes players more empathetic to the game’s success, and thus more likely to become passionate stewards of the game they love.”
Some entrepreneurs got away with very low-quality products in 2020 and 2021. “Because the space was so new and the players thought, ‘It can’t get any better than this,’” Ghanem said.
This time, Ghanem believes the quality of each title will be much better, even though incentives such as P2E will remain the same. “I think 2024 will further highlight this with titles like Shrapnel, Off the Grid, Treeverse and Wildcard that will really push the boundaries and definitions of Web3 games.”
When the Bull Run Comes
As industry executives put it, the Web3 gaming space has taken advantage of the calm in the cryptocurrency market to gain traction. But what happens when the next bull season begins and people become obsessed with price indicators once again?
It’s difficult to predict the future of the market, but according to Yuca, interest in Web3 games may decline during a bull market as investors shift their focus to other areas of the market.
“But the underlying technology and potential of Web3 games will continue to attract users and developers, generating sustained interest over the long term,” he said.
“Integrating blockchain technology into existing games could also generate continued interest in Web3 games even during the uptick. Ultimately, the success of Web3 Gaming will depend on our ability to provide users with a unique and engaging experience regardless of market conditions.”
Ghanem believes that even if interest in Web3 games surges, it won’t go away. “If anything, we’re seeing more and more people coming into this space on the gaming side,” he said, adding that only a tiny fraction of the three billion gamers worldwide are currently in the Web3 gaming space.
“We expect to see even more interest in Web3 games because gaming is the industry with the most near-term application and utility for blockchain technology,” Powell said.
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He added that Immutable expects a much broader increase in the variety of game types across different ecosystems due to aggressive investment in Web3 games, an influx of interest from major gaming companies, and improved developer tools. “Game tokens and strategic partnerships are a strong signal that this sector is poised for significant growth in the near future.”
As the industry evolves, staying ahead of trends and continuously innovating will be key to capitalizing on future upside, Azizoglu concluded:
“We’ve loved gaming since before Web3, so we’ll continue to do so.”