Tracing the Evolution of Web3 Games

The Evolution of Web3 Games

Research from DFC Intelligence shows that more than 40% of the global population, amounting to nearly 3.2 billion individuals, engage in gaming activities. This statistic is on a steady upward trend year on year.

The transition from Web2 to Web3 has reverberated through the gaming industry as well. Web3 games are increasingly paving the way for a burgeoning industry, drawing a growing pool of players and investments. Owing to the decentralization and incorporation of blockchain technology, players have gained the opportunity to push their boundaries within the gaming realms.

Web3 games are founded on a decentralized, peer-to-peer blockchain framework. These games not only offer players a chance to earn cryptocurrency but also provide full ownership of all in-game artifacts they collect. The blockchain records information on game achievements, ensuring that the right of ownership resides with the player rather than the game developer. This feature has introduced new interactive possibilities in the gaming process. Gamers can now trade in-game items on approved marketplaces, converting them into real-world currency.

The Dawn of GameFi: The Fusion of DeFi and the Gaming Sphere

GameFi is the product of a unique blend of decentralized finance (DeFi) and game mechanics. Unlike conventional games, where the core motivation lies within the gaming experience itself, GameFi ventures are largely aimed at revenue generation.

Players have the opportunity to accumulate gaming assets like tokens or NFTs by accomplishing missions and rivaling other players or the AI. It is this very capacity to earn that has become the key driver in attracting users. However, a drawback of these games is their lack of focus on providing a deep and quality immersion into the gaming world, which may potentially lead to a lack of sustained player interest.

Ventures that weave financial incentives for players into their fabric are known as Play-to-Earn games. Axie Infinity shines as a quintessential example of such games. The Axie Infinity ecosystem encompasses a comprehensive tokenomics system that empowers players to earn income through AXS tokens (governance tokens) and SLP (the local currency).

The Axie Infinity Game

The apex of activity for the game arrived towards the end of 2021. From that point onward, the count of active users has continually diminished. However, the frenetic buzz surrounding Axie Infinity has reverberated throughout the entire industry: it spurred the formation of new infrastructure for developers, which in turn led to a swell in the number of games and a surge of investments.

Axie Infinity’s user activity, the price of AXS, and the price of SLP. Source: Footprint Analytics

A central hurdle for nascent GameFi projects is crafting a successful ecosystem. It is crucial to imaginatively and engagingly weave the fundamental principles of DeFi into the gaming process. This requires developing memorable design elements, crafting a unique in-game economy, and implementing sophisticated gaming mechanics. Despite their restrictions when contrasted with traditional games, P2E projects have ushered in novel innovations that offer a glimpse into the future of Web3 games.

The Next Stage: X2E

X-to-Earn, or X2E, is a concept where the ‘X' stands for any human action that can be performed to earn rewards, serving as a cornerstone mechanism in gameplay. This could be anything from physical exercise to studying, shopping, gaming, creating content, or even watching videos. Unlike games that are solely profit-driven, X2E platforms value societal culture and norms. For instance, M2E projects encourage users to lead an active lifestyle, while ‘Learn-to-Earn' ones foster the acquisition of new skills and knowledge.

Stepn, an M2E game, is a prime example of this concept. It offers users rewards for physical activity, thus integrating real-world actions into the gaming experience.

Within the Stepn ecosystem, two assets exist: GMT (a governance token) and GST, which users can earn as rewards for their activities.

The Stepn Game

Stepn's popularity spiked in early 2022. However, an overly high price for digital sneakers, the exodus of Chinese players, and a bearish market have caused a decline in token prices, thereby lowering the potential earnings for its users. 

Stepn's user activity, the GMT price, and the GST price. Source: Footprint Analytics

AAA Games

When we talk about AAA games, we're referring to large-scale, high-budget productions lauded for their superior graphics and immersive gameplay experiences.

A pioneering example in the realm of AAA blockchain games is Illuvium. This top-tier project sets the stage in an open world where every game asset exists as a Non-Fungible Token (NFT). The team at Illuvium has invested considerable effort to develop spectacular 3D models that cater to various player demographics. They've also fine-tuned a plethora of gameplay modalities, including Player vs Environment (PvE) and Player vs Player (PvP) settings.

The Illuvium Game

Yet, dazzling graphics alone aren't enough to keep players engaged. Even though Illuvium is weathering the bear market better than its counterparts, it still maintains a relatively low count of active users.

Illuvium’s user activity, the ILV price. Source: Footprint Analytics

Metaverses

The concept of metaverses brings together the tangible and the virtual worlds into one seamless, expansive virtual space. Here, individuals can engage in an array of activities – from gaming and working to learning and much more.

While digital realms like Decentraland and Sandbox have made their mark and have been in operation for some time now, the notion of a “metaverse” is still taking shape and is largely in its conceptual stages.

The Decentraland Game

According to a study by Precedence Research, the metaverse's global market value was $68.49 billion in 2022. This figure is projected to climb over $1.3 trillion by 2030, with a predicted compound annual growth rate of 44.5%. Factors driving this substantial growth include wider internet accessibility, increasing smartphone usage, the proliferation of mobile gaming, and the escalating interest in virtual and augmented realities.

The Metaverse Market Size. Source: Precedence Research

Major gaming studios such as Rockstar and Blizzard, known for their traditional computer games, understand the psychology of their users and how to retain them. They realize that the main reason a player launches a game should be the unique gaming world it offers. Although some users may be financially motivated, gameplay should always take precedence.

On the other hand, Web3 games have yet to deliver an engaging gaming experience. Currently, the primary, often sole, incentive for players is financial gain. However, such a model faces long-term challenges. If the increase in player numbers slows down and newcomers stop joining the ecosystem, the in-game economy will likely collapse.

Striking a balance between continuously rewarding players while keeping games accessible is a complex issue that game developers have yet to resolve. Furthermore, most GameFi projects still need to improve their gameplay.
Another significant hurdle for the broad acceptance and deployment of Web3 games is the limited understanding of the fundamental blockchain technology. Awareness of blockchain needs to increase before a wider player base will be drawn to these kinds of games.

Web3 games hold a distinct advantage: players possess the assets used within the games themselves. This creates an opportunity to harness the potential of blockchain and decentralization by merging them with conventional gaming values. As we look to the future, it's expected that many games will integrate Web3 elements into their infrastructure, offering new avenues for the gaming industry's expansion.