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Earlier this year, we discussed the concept of gaming NFTs and how they may help drive Bitcoin’s adoption. In this post, we have some additional thoughts on how entrepreneurs and developers can jump into the uncharted territory of Web3 gaming today and stake a claim in this emerging new world. Let’s get into it.
Parallels Between Web3 Gaming and the Early Days of Mobile Gaming
This may be the best time to get in on Web3 gaming because there could be parallels between the mass adoption we saw in mobile gaming and what could happen in Web3.
If you rewind the clock and look back at the mobile gaming industry in 2012, the mobile gaming industry only accounted for 18% of the global gaming market. Today, mobile games control a 52% share of the global gaming market.
Over the last five years, the download numbers and revenue of mobile gaming apps significantly dwarf the numbers for all other app categories—and the trend is projected to continue for the foreseeable future.
Today, mobile gaming is a booming industry, but it didn’t look like that at the start. 5 years after the launch of CryptoKitties, the first Web3 game to gain traction, only 5.7% of Web3 apps are classified as Web3 gaming apps. The Web3 crowd has signaled strong interest in the sector, with reports that 49% of daily unique active wallets in 2021 interact with Web3 games, but the Web3 community is small enough that the Web3 gaming sector hasn’t caught the eye of the wider gaming world. And we are just at the start of Web3 gaming.
According to the 2022 Game Developers Conference (GDC)’s State of the Game Industry Report, 72% of gaming studios are not interested in cryptocurrency as a payment tool in games, and 70% expressed their disinterest in gaming NFTs as well. This lack of interest is perhaps understandable when you consider the fact that many gaming companies recorded pushback and backlash from their communities after announcing Web3 gaming plans.
The reasons for the lukewarm reception to Web3 gaming share some similarities with the initial wave of cynicism toward mobile gaming. In the first few years after mobile games were introduced, many hardcore gamers argued that mobile games couldn’t deliver comparable experiences to PC and console games. They were also uncomfortable with how mobile gaming seemed more focused on business (ads and in-game purchases) than gaming.
Web3 gaming faces familiar criticisms today, with skeptics frustrated by the financialization of in-game assets over actual fun gameplay, even going so far as to label the entire industry a ponzi scheme.
This "financialization of everything," turning everything into something that can generate returns, is prevalent in Web3, with 46% of all Web3 apps being DeFi apps as just one statistic pointing to that truth. That fixation on financial gain attracts speculators rather than long-term players. But what could the next generation of Web3 games look like as developers move away from that heavy focus on monetization and instead focus on the games themselves?
The Next 18 to 24 Months Will Herald the Gold Rush for Web3 Gaming
In the next 18-24 months, there will be a rush to create high-quality games that include Web3 technology. Innovators will step into uncharted territory to figure out how to integrate Web3 into gameplay in new and exciting ways to shift the focus of Web3 gaming away from simple earning mechanisms, that have a negative association with ponzi or multilevel marketing schemes, towards strategy and complex gameplay, which have more lasting staying power.
Today, there is a perception that Web3 gamers tend to be a small group of people who are more financially minded for short-term gains. However, that’s not how the broad gaming industry thinks about games. A report from the Entertainment Software Association (ESA) shows that 93% of gamers play because they get joy through play and 89% play for stress relief.
Until the Web3 gaming industry creates games that meet the entertainment needs of the traditional gaming audience, Web3 gaming likely won’t get mainstream adoption. Web3 gaming has grafted incentives onto gaming but forgot an important ingredient in the process: making games that are actually fun.
These challenges present an opportunity for gaming companies, entrepreneurs, and developers to solve and kickstart the adoption of Web3 gaming: how do you take what’s unique about Web3 to create a new category of gaming that couldn’t exist on any other tech stack? How do you make that game while maintaining the joy and the stress relief and every other element that brings gamers to games in the first place?
More and more entrepreneurs are starting to explore those questions alongside industry veterans. Ubisoft is making the foray into Web3 gaming with Ubisoft Quartz (using NFTs). Nintendo says it believes that Web3 gaming has great potential and is thinking about how to incorporate it into its gameplay, and Konami has started making NFT drops. The fact that industry veterans like these are taking Web3 gaming seriously means that they view the sector as a growing opportunity for business.
How Can You Win in Web3 Gaming? Play the Long Game
The next 18 to 24 months will be crucial to building up the momentum necessary for the mass adoption of Web3 gaming. During this time, the gaming companies, developers, and communities that will succeed in Web3 gaming need to think more long term on how to grow sustainably.
Focus Less on Financialization
Playing the long game includes slowing down on the financialization that prioritizes the business model over the gaming experience. The current state of the Play-to-Earn (P2E) model popularized by Web3 games such as Axie Infinity is an example of why it’s important to play the long game instead of prioritizing short-term profit over relationships with gamers.
Over the last year, the number of unique users playing Axie Infinity has declined from 267K users making more than a million transactions in October 2021 to 22K users conducting about 90K transactions today. When people play games because they find them enjoyable, they’re less likely to churn when there’s a drop in financial incentives associated with playing.
Build Community
Building relationships with gamers is a great way to get them to become stakeholders who drive word-of-mouth advertising and vocally defend your project. It also helps if you find a way to deepen the relationship with the most dedicated players by giving them recognition and media attention, similar to how the esports industry makes the best players famous. It’s a grassroots growth tactic that takes time to execute.
Tackle Hard Problems
Long term, gamers will spend time with games they believe in and enjoy, and to reach that point, Web3 gaming needs to find solutions for various challenges, including:
- Simplifying the complexity of crypto wallets to play Web3 games
- Attracting traditional gamers to secure long-term value
- Developing intuitive, user-friendly interfaces for games
- Discovering sustainable P2E models and new ways to take advantage of blockchain technology
- Steering the development of industry standards
Most of Web3 code is open source and composable, which enables developers to easily review what exists and build new games on top of it. The permissionless nature of Web3 lowers the barriers to building solutions for Web3 gaming’s challenges and testing them out in the market.
The Web3 game market isn’t going to get it right on the first try, especially as the tech stack for Web3 continues to evolve. To find success, game developers need to think long-term while remaining adaptable as the entire space continues to evolve.
Bitcoin Is the Winning Blockchain to Drive the Mainstream Adoption of Web3 Gaming
Seeing that there’s a lot of work to be done to unlock the mass-market adoption of Web3 gaming, it’s important to think about the blockchain network that gives you the best odds of success so that all of your efforts don't go to waste. That answer is the Bitcoin network.
Bitcoin is reliable and trusted—important qualities at a time when the world is facing a myriad of socio-economic uncertainty. Bitcoin is the most owned cryptocurrency in the U.S., and it has the highest search interest relative to other cryptocurrencies. We believe gamers are more likely to want to earn Bitcoin in a P2E game rather than other altcoins because of Bitcoin’s strong brand recognition.
Some may argue that it’s difficult to build Web3 apps directly on Bitcoin. While the argument used to be true, it is dated because Stacks supports fully expressive smart contracts for the Bitcoin ecosystem. While we are still very much in the early days of Web3 gaming, Bitcoin provides confidence and trust—and trust is key to unlocking the mass-market adoption of Web3 gaming.
Interested in learning more about how the Bitcoin ecosystem compares to other Web3 ecosystems? Download our free guide to Web3 ecosystems in 2022.
