Despite compelling numbers, commercial success is hard<\/strong><\/h2>\nMany believe the GameFi sector has a bright future. According to a\u00a0 report by consulting firm MarketsandMarkets, the global blockchain gaming market will grow from $4.6 billion in 2022 to $65.7 billion by 2027. Naavik and Bitkraft Ventures, meanwhile, predict blockchain gaming to grow to a $50 billion market by 2025.<\/p>\n
Are these projections plausible? Perhaps. GameFi accounted for 49% of all DApp activity in 2022, according to DappRadar. And there are 3 billion gamers worldwide, about half of which are in the Asia-Pacific region, and mobile gaming is a phenomenon in developing countries.\u00a0<\/p>\n
Yet, the problems facing mass onboarding for blockchain gaming are diverse and complex, including that no one seems to know how the tokenomics should actually work. Many gamers are also aggressively skeptical of crypto games, perceiving them as scams or selfish efforts to monetize gaming and increase profit margins. Moreover, there are no pin-up success stories for crypto gaming outside of relative successes like Axie Infinity and MIR4.<\/p>\n
Despite its many critics, Web3 can fit well into gaming culture. <\/em>Consider existing freemium gaming models (with paywalls). While gamers must buy or grind for the skins (clothes and accessories) and often pay at every turn in these Web2 games, the Web3 model argues that gamers should benefit from secure ownership of their in-game assets.<\/p>\nOne goal of Web3 gaming is to let gamers sell or trade unused assets with earning potential, and keep their assets if games are discontinued or go offline. Improved player experiences are also possible, such as players being rewarded for being early or loyal players, meaning they can acquire rare items as new games become popular.<\/p>\nAtari\u2019s Missile Command circa 1980. Source: Retromobe<\/em><\/figcaption><\/figure>\nAs it was for crypto\u2019s cypherpunks, open-source culture is also part of gaming history. At times, game publishers relented to fans hacking their games to make them more challenging and replayable.\u00a0<\/p>\n
As told in Netflix\u2019s docuseries High Score<\/em>, college students hacked and boosted Atari\u2019s Missile Command in the 1980s to make the game harder to beat, creating a booming black market arcade in their dorm room and booster kits for the arcade machine. Atari legally settled with the students \u2014 but only if they agreed to work for Atari. In this conception, gaming IP hacking can escape punishment if you\u2019re a true fan helping to improve the game. So, the idea of fan ownership of games makes sense in both crypto and open-source culture.<\/p>\nSimilarly, what\u2019s happening in Web3 today is an example of \u201ca decentralized remix culture where there is a utilization of assets or traits related to those assets,\u201d says Kishan Shah, chief operating officer of B+J Studios, which raised $10 million in September 2022 to bring its Raindrops Protocol NFT super app to life for blockchain-based gaming solutions.\u00a0<\/p>\n
Where will the winners come from?<\/strong><\/h2>\nSo, among all the different projects currently comprising GameFi, which games will be the most successful? With indie games, the audience is usually looking for something different, which creates an opportunity for blockchain gaming. Smaller publishers are also more likely to develop player-owned or interoperable game economies, as this is not really in the interests of a big studio currently making a fortune by owning everything.<\/p>\n
\u201cThe video games industry does about $120 billion per year in sales, a significant portion of which is virtual goods,\u201d noted a16z general partner Chris Dixon, adding that \u201cmost video games have 100% take rates [commissions for sales]. Web3 (aka crypto) games reduce the take rate dramatically.\u201d That is, Web3 gaming can change the whole economic model of the gaming industry.<\/p>\nCrypto game Illuvium. Looks a little like Axie Infinity Mark II? Source: Illuvium<\/em><\/figcaption><\/figure>\nSo, the future looks bright, but getting there won\u2019t be easy. Game-making is very hard and highly specialized, and just because crypto firms want to make games doesn\u2019t mean they should. \u201cBlockchain companies building games is stupid. Game design is a very specialized profession,\u201d David Hong, an American based in Taipei who is the gaming lead for Red Building Capital, tells Magazine.<\/p>\n
\n\u201cGames should be coming out of gaming studios recruiting blockchain experts.\u201d<\/p>\n<\/blockquote>\n
The big studios also have existing distribution mechanisms and a waterfall cycle for their release schedules. Issues like whether the game will appear on consoles or PC and third-party retail sales can be set years before release, making a newbie upstart challenger subject to numerous obstacles. Then add tokenomics as another complicating factor.\u00a0<\/p>\n
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Features<\/span><\/p>\nPowers On\u2026 Top 5 crypto legal and regulatory developments of 2021<\/p>\n<\/p><\/div>\n
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Features<\/span><\/p>\nSatoshi may have needed an alias, but can we say the same?<\/p>\n<\/p><\/div>\n<\/div>\n<\/div>\n
No one gets the in-game tokenomics<\/strong><\/h2>\nOne major problem is that sustainable crypto gaming tokenomics have yet to be proven.\u00a0<\/p>\n
\u201cEveryone just copied Axie\u2019s two-token economics,\u201d notes Hong. No one really knows yet what the best practices of in-game tokenomics are. Most now argue that \u201cpure Ponzi schemes of 99% speculators and 1% players are not sustainable. This is because game-playing enthusiasts know that game mechanics are very intricate, and degens and power gamers will always break the system,\u201d Hong says.<\/p>\n
Warwick says he \u201ccalled Axie Infinity a Ponzi a couple of years ago, as it required more users to keep entering the ecosystem. \u200b\u200bAxies were identified as having inflationary properties due to the breeding feature, which resulted in a significant decrease in the value of assets. The abundance of assets created a lack of scarcity, contributing to the devaluation of these assets.\u201d<\/p>\n
It seems unlikely that Axie\u2019s developers set out to build a Ponzi scheme, and many pay tribute to the hard work they put in to build what would become a beta test of metaverse gaming. What\u2019s more likely is that they just couldn\u2019t make the token economy work without new gamers, like any startup pivoting to find a product-market fit.<\/p>\nIlluvium\u2019s Axolotl. Cute and mysterious. Source: Illuvium<\/em><\/figcaption><\/figure>\nWarwick is keen to explain why his game, Illuvium, has learned how not to fall into those traps and how the game\u2019s story and lore create a scarcity for its NFTs. Illuvials are the game\u2019s equivalent creature to an Axie.<\/p>\n
Fusing three Illuvials of the same stage of the game means burning NFTs and creating one Stage 2 Illuvial. Creating the most powerful creature in the line requires burning nine NFTs.<\/p>\n
Sets of Illuvials are also limited. Gamers can collect Illuvials until a series ends, at which point they can no longer capture that set and are forced to purchase them on the open market. There\u2019s also a bonding curve that increases the difficulty of capturing the creatures, meaning that they gradually go up in cost over time. In the game, this means that once an Illuvial is caught, it is harder to find it in the Overworld where it lives.<\/p>\n
Furthermore, the concept of \u201creal yield,\u201d or sustainable revenue for gamers, is also emerging in blockchain gaming. Warwick says:<\/p>\n
\u201cBaked into our tokenomics is a system called revenue distributions, which means all of the in-game fees that are generated are distributed back to stakers in the protocol. We\u2019re the only game that is currently utilizing this method (to my knowledge).\u201d<\/p>\n
Finally, classes of elements such as wind, water and fire may change in popularity from series to series, so previously undesirable elements may later become desirable. \u201cLike Pokemon, you want to capture the most powerful,\u201d says Warwick.\u00a0<\/p>\n
While those things create scarcity and help the tokenomics, the game ultimately also needs to appeal to emotions. Like Hong, Warwick believes a game\u2019s success \u201cdepends on its ability to tap into the psychology of collecting and creating a connection between the characters and the audience.\u201d<\/p>\n
For example, Axie Infinity was inspired by Pokemon and Tamagotchi in creating its creatures. Elsewhere, building a universe of characters that players can connect with \u2014 like with Nintendo\u2019s Mario, for example \u2014 and contrasting them with lesser-known characters \u2014 like Bowser and Wario \u2014 who are also beloved by players for their distinct personalities helps create a compelling ecosystem. It\u2019s important to create characters that players can relate to, even for those who pick Wario because they see themselves as the villain.<\/p>\n
Then the main issue for any developer, though, is the exceedingly tricky task of making a good game.<\/p>\n
What makes a good game?<\/strong><\/h2>\nWe all have our favorite game, from retro classics like Space Invaders and Mortal Kombat to Fortnite, Grand Theft Auto and Halo, depending on our age and tastes.<\/p>\n
The story, characters and gameplay are key, as are games with enticing rewards systems that make your hard work worth it \u2014 unlocking new levels, characters, weapons, secrets and achievements. Gamers are given a reason to keep playing, and blockchain aims to give them digital ownership of the rewards for their efforts.<\/p>\nAxies do look like Tamagotchis. Source: Axie Infinity<\/em><\/figcaption><\/figure>\nGood graphics help a lot, too, say most gamers \u2014 but not always. Some arcade games still captivate new generations of players. Gaming VC Hong is currently obsessed with one very basic game, Torn, for a simple reason: He plays against his brother-in-law. \u201cThe social element is important,\u201d he says, and the community must be authentic. <\/strong>Edgy, colorful, pixelated indie games can offer something that AAA publishers with high-quality graphics cannot.<\/p>\nDifficulty beating the game is another key to a successful game. However, in online games \u2014 which are arguably the most popular these days \u2014 it\u2019s about ranking up, improving skill levels, progressing, getting better gear and cosmetics, and playing with friends.\u00a0<\/p>\n
Like many, Hong argues that Web3 gaming needs incremental changes. \u201cIt must be palatable for Web2 gamers. What makes you think anyone wants to use a new platform? I still use Word and Excel. There should be value for time spent in the game, but everything else should be the same as Web2 games.\u201d<\/p>\n\n\n
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