Web3 gaming is experiencing significant growth and is becoming increasingly popular. In 2021, gaming accounted for a staggering 49 percent of blockchain usage. The previous year saw over 1.4 million active wallets connected daily to blockchain-based games, making it the most utilized category, surpassing even DeFi.
The growth trend has continued into 2022, with web3 games attracting 1.22 million unique active wallets in March, representing 52% of blockchain activity. There’s a reason why Morgan Beller, my partner, believes that games serve as a gateway for introducing new users to web3.
While these numbers may still be small in comparison to web2 games, which boasted over 3 billion players in 2021, the stakes are getting higher as the growth trajectory continues.
Axie Infinity, one of the pioneers in the web3 gaming space, has garnered significant attention and criticism, particularly following a costly $620 million breach by hackers. Despite losing some traction after the hack, Axie Infinity remains hard to ignore. It currently holds the fourth position in terms of value among dApps this year, with total revenue reaching $1.3 billion. However, it has dropped to the eighth position in the last six months, and it isn’t even ranked in the most recent quarter. Interestingly, much of this decline occurred before the hack, raising the question: why did it happen?
Embracing Evolution in Web3 Gaming
To ensure the success of web3 gaming, it is crucial to build upon the best aspects of web2 gaming. The leaders in web2 games have proven themselves as exceptional entrepreneurs who excel at product development, creating engaging experiences, and understanding user psychology. Therefore, web3 game projects today would be wise to embrace the product psychology that made web2 games so meaningful and enjoyable, before earning money became the primary incentive for some users.
The current wave of web3 games primarily focuses on play-to-earn mechanics, with a strong emphasis on financial rewards rather than prioritizing fun and engaging gameplay. However, if web3 gaming continues to cater solely to those seeking financial gains instead of providing enjoyable gaming experiences, it may struggle to gain mainstream popularity, leading to the failure of many projects.
To strike the perfect balance, the winning strategy lies in evolving and improving upon what worked well in web2 games by incorporating the exciting new capabilities and concepts of web3. A new generation of games that accomplishes this is just around the corner and has the potential to revolutionize the gaming industry forever.
The Dangers of Prioritizing ‘Earning’ Over ‘Playing’ in Games
Axie Infinity has achieved remarkable success, but there are important lessons to be learned when it comes to the play-to-earn model. While the hack incident did impact its growth, there are other factors to consider for those engaging with this model. Sky Mavis, the developer behind Axie Infinity, has created an engaging gameplay experience, but the main appeal for users lies in its potential economic benefits.
- Ensuring Sustainable In-Game Economies:
While playing Axie full-time has allowed some players to earn up to $1,000 per month, resembling a decent income in many developing countries, it’s crucial for game developers to design sustainable in-game economies. They must prepare for periods where most users cannot earn within the game or when such success is short-lived. This is particularly relevant given that playing Axie has become a new job opportunity in the Philippines, where over 40% of its users reside. - Balancing Investment and Long-Term Profitability:
Instances have been observed where individuals spend significant amounts to acquire in-game assets from Axie’s NFT marketplace, with the average price of these assets being $787. Currently, the demand for these assets is driven by new users. However, as the proportion of new users compared to total users decreases (which is inevitable for any game), alternative sources of demand must be found to sustain current prices. To achieve this, developers need to prioritize increasing in-game engagement and activity among existing users. Failing to do so not only hampers users’ ability to earn a living from the game but also puts their investments at risk. - Moving Beyond Pay-to-Play:
Web3 gaming cannot solely rely on a pay-to-play revolution. It is imperative for web3 platforms to support high-quality games.
While Axie Infinity has experienced significant success with its play-to-earn model, there are risks associated with prioritizing earning over playing. Developers must strive to create sustainable in-game economies, avoid dependency on new users for demand, and focus on engaging existing players. Web3 gaming should move beyond a pay-to-play approach and prioritize the development of exceptional games that cater to user interests while maintaining fairness and longevity.
