If you have been in Web3 games long enough, you are likely to have read comments like these below
Most gamers do not want blockchain in their games. Web3 will not make its way into mainstream gaming. It’s just a buzzword with no real value to gaming.
If you have, then, like a few other gamers, investors, or enthusiasts, you’re not so sure how this will play out. However, you should know this: Web3 gaming is on the cusp of a revolution. In Q1 2024, web3 games captured a 30% market share of the web3 industry with an average of 2.1 million daily unique active wallets.
In the same period, about $300 million was invested in the Web3 gaming sector. The number of active wallets in Web3 games rose to $2.8 million in Q2 from $2.1 million in the previous quarter.
One of the reasons behind the increased demand for Web3 games is cross-chain compatibility. Think of it as a system that allows your in-game items, currencies, or characters to be used in multiple games. Even if those games are built on different systems. It’s like being able to take your favorite weapon in COD and then bring it into BattleField.
As of now, 70% of Web3 gamers have already expressed a desire to use their in-game assets across multiple platforms. And this feature has increasingly become a possibility in Web3 games. These games represent the next frontier in the gaming industry by introducing blockchain technology into the heart of game design. And unlike traditional gaming models. Web3 games give players true ownership over in-game assets in the form of NFTs.
Fast forward to Q2 2024; blockchain gaming saw $1.1 billion in global investments. That is about a 314% increase compared to the previous quarter. Positioning it as one of the most active sectors in Web3. According to a DappRadar report, blockchain gaming now accounts for 28% of all decentralized application (dapp) activity. While having 2.8 million daily active wallets—this is a clear indicator of the growing demand for decentralized gaming experiences.
In essence, Web3 gaming is not just a buzzword with no value; it’s on the cusp of creating new economies, new opportunities, and new ways for players to engage in their virtual worlds.
And the question about Web3 games revolutionizing the gaming industry? It is a valid one. However, despite its potential to transform the gaming landscape, Web3 games face several key challenges that hinder their mass adoption.
In this article, we will talk about these challenges, the adoption rate of these games, and why they will revolutionize the gaming industry.
Challenges Facing Web3 Games
Like many other technologies you have probably used, Web3 games have their bottlenecks. And each of these challenges has in some way limited the growth and adoption of Web3 games.
Scalability Issues
Scalability is an issue with certain blockchain technologies, like Ethereum. With increased user activity and transactions, transaction fees get expensive and the blockchain gets congested, making it limited in scalability.
The Ethereum Foundation has done a lot of work in recent times to ensure the blockchain is relatively cheaper. By moving from a Proof of Work Consensus to a Proof of Stake Consensus and then the infamous “Merge.” Regardless, blockchain congestion might present a serious obstacle for games that require real-time interactions and frequent transactions.
Other solutions, such as Layer 2 scaling protocols (e.g., Polygon and Optimism and Immutable X). And faster L1 blockchains like Ronin, Solana, and Aptos, are built to be more robust and handle more transactions without fee spikes and congestion.
The newer solutions offer higher throughput and lower latency. Ensuring the games are built with fewer problems and making microtransactions even more possible.
Regulatory concerns
Legal and regulatory frameworks surrounding Web3 gaming are another big issue in certain countries. And this adds another layer of complexity for web3 games looking to launch. Different countries are grappling with how to regulate blockchain-based games. Particularly those with financial aspects like play-to-earn models and in-game cryptocurrencies.
Some governments are concerned with preventing money laundering, ensuring consumer protection, and enforcing tax compliance. However, the lack of clear and uniform regulations worldwide can deter both developers and players from entering the space.
Games are played across multiple domains and countries. With regulatory concerns in a few countries, this creates a challenge for Web3 games. The future growth of Web3 gaming will depend heavily on how regulators strike a balance between fostering innovation and ensuring compliance.
User Experience and Accessibility
General user experience is also one of the most significant barriers to Web3 gaming.
Because it can be quite technical, sorting through wallets and understanding tokens, the learning curve can be quite steep.
Unlike traditional gaming, Web3 games often require users to set up digital wallets, purchase cryptocurrencies, and navigate decentralized platforms. This complexity creates friction, especially for casual gamers unfamiliar with blockchain technology.
Moreover, many current Web3 games struggle to offer the seamless, user-friendly experiences players expect from mainstream titles.
Many games have dedicated a lot of resources and efforts to simplify their onboarding processes. Including integrating familiar Web2 elements and improving wallet interfaces. But there’s still a long way to go to make these games super intuitive.
However, sustained growth will depend on continued technological innovation, regulatory clarity, and improved user experience. Major gaming studios are already exploring partnerships, and this gives a good signal to the adoption of Web3 games.
Adoption by Major Gaming Studios
There’s been a growing interest from major gaming studios that understand the possibility of revolutionizing player experiences through true digital ownership, player-driven economies, and new revenue streams via NFTs and tokenized assets.
Leading traditional gaming giants such as Ubisoft, EA, and Square Enix have already ventured into the Web3 space in the past couple of months.
Ubisoft’s partnership with Immutable is a standout example, showcasing how the company is experimenting with decentralization and blockchain gaming through its Strategic Innovation Lab.
This collaboration aims to integrate blockchain tech seamlessly into future games, enabling players to own and trade in-game assets, thus enhancing gameplay and engagement.
Similarly, Square Enix has doubled down on its commitment to Web3 by launching NFT projects like Symbiogenesis, which enhances digital asset ownership in its popular game franchises.
EA has also been quietly exploring blockchain technology to integrate it into their future projects, further pushing the boundaries of player engagement.
But what does this mean for Web3 games? Is there potential for adoption?
Potential for mainstream adoption
The factors driving mainstream adoption of Web3 by major studios include market demand for more immersive experiences and the profitability of blockchain’s tokenized economy.
Players are increasingly drawn to the idea of having actual ownership over their in-game assets, which they can transfer across different platforms and monetize. This shift in user preference is creating a new market dynamic that major studios can’t ignore.
As you’d imagine, industry enthusiasts already predict that as the technology matures and the user experience becomes more seamless, we will see even more big players entering the space.
This means it’ll not only be Ubisoft or EA Sports, but there’ll be more Web3 games that could redefine the future of gaming, making it inevitable that major studios will embrace Web3 fully.
The Promise of Web3 Games
There’s no doubt about it: Web3 gaming has emerged as a disruptive force, promising players not only entertainment but tangible financial rewards through Play-to-Earn (P2E) models and the true ownership of in-game assets via blockchain technology.
These two technologies, among others in gaming, are the promise of Web3 games; they are some of the biggest talking points, and without any doubt, they make these Web3 games stand out.
Play-to-Earn (P2E) Models
At the heart of the Web3 gaming revolution is the P2E model, which allows players to earn cryptocurrency or NFTs through gameplay. P2E offers players rewards for completing in-game tasks, battling, or trading digital assets.
Unlike traditional games, where players invest money and time without any financial returns, P2E games reward time and skill with real-world value.
Axie Infinity, one of the most successful P2E games, exemplifies this model. Players breed, battle, and trade NFT creatures called Axies. Earning tokens like Smooth Love Potion (SLP) and Axie Infinity Shards (AXS), which can be exchanged for real money.
With over 2.8 million daily active users and billions of dollars in sales, Axie Infinity has proven the financial potential of P2E.
Other notable games, such as The Sandbox and Illuvium, also show the versatility of this model by allowing players to build virtual worlds, collect digital assets, and participate in strategic battles.
True Ownership of In-game Assets
Another transformative element of Web3 gaming is the concept of true ownership through non-fungible tokens (NFTs). In traditional gaming, players have no real ownership of in-game assets; these assets belong to the game developer.
In contrast, Web3 gaming uses NFTs to grant players actual ownership of items, such as characters, weapons, or even land. These assets can be sold, traded, or even used across different games, giving them real-world value and utility.
This shift in ownership democratizes the gaming experience, empowering players with the ability to capitalize on their in-game achievements. The interoperability and potential resale value of NFTs further drive the attractiveness of Web3 games, positioning them as a superior alternative to traditional gaming models.
In summary, Web3 gaming, through its P2E models and NFT-driven asset ownership, offers both financial opportunities and more control to players, setting the stage for a new era in gaming.
Role of Decentralized Autonomous Organizations (DAOs)
DAOs are transforming how players interact with games by giving them a direct voice in game development and governance. Through decentralized voting systems, players can propose changes, vote on updates, and even have a say in tokenomics.
This form of governance empowers the player base, making them active stakeholders in the game’s future. One notable example is Illuvium, where the DAO oversees decisions about game development, fund allocations, and ecosystem changes.
This approach not only enhances player engagement but also fosters a strong sense of community, as gamers are no longer mere consumers but decision-makers.
Building Stronger Communities
Web3 games emphasize player ownership, allowing users to genuinely own in-game assets through NFTs. This level of ownership builds more engaged communities, as players feel invested in both their assets and the game’s ecosystem.
A great example is Axie Infinity, which has cultivated a loyal community through its “Scholarship Program.” This initiative allows players to lend out their Axies to other users, sharing rewards and creating opportunities for economic benefits.
By aligning financial incentives with gameplay, Web3 gaming nurtures thriving, self-sustaining communities that are integral to the game’s longevity.
Web3 games are more than just the next trend;
Web3 gaming is poised to reshape the gaming industry through innovative models like play-to-earn, true digital ownership, and player empowerment via DAOs. Despite its immense potential, challenges such as scalability, regulatory hurdles, and onboarding complexities must be addressed for mainstream adoption to thrive.
While Web3 gaming is still evolving, it represents a revolutionary shift towards more equitable and immersive experiences. Overcoming technical and regulatory obstacles will be crucial, but with continued innovation and community-driven growth, Web3 gaming could define the future of the industry.