One of the big challenges of 2022 was to define the borders of what constitutes “Web3”. We now have a better idea of the technology stack that goes beyond the usual Web2 approach of social media profiles. While Web2 was about personal identity, Web3 will be about both identity and ownership, as well as the ability to hold and exchange value.
Web3 Draws In Gaming Companies, Former Crypto Investors
A rough estimate sees the Web3 market at around $27B for the past year. Web3 projects had a mix from a long list of features, including elements of cryptocurrency, NFT, DeFi, but also 3D graphics, voxel metaverse building, digital land, wallets, payment processing, in-game AI solutions and decentralized organizations, guilds or other community mechanisms.
New investment is also flowing in, with plans from Animoca Brands envisioning $1B for selected Web3 projects just in Q1, 2023. The other reason for an inflow into Web3 are former crypto firms that want to expand beyond the speculative market. Web3 products also promise some forms of intrinsic value, tied to game growth or real-world usage.
Biggest Challenge to Web3: How to Recruit Users
The initial stages of play-to-earn gaming and NFT trading hinged on tapping the crypto community. The moment was just right, coinciding with the biggest bull market in history. Quickly put together games gained overnight popularity, because they were promising relatively high returns.
A swarm of almost predatory products followed, aiming to capture the success of first movers. Hyped up by record auction prices of Axie creatures or 3D racing cars, there were buyers ready to pay tens of thousands of dollars for an image, with the hope that it would prove even more valuable. Bored Ape Yacht Club rode the wave of that hype, but is yet to produce the promised Otherside Meta game. And early buyers of overpriced NFT noticed that the income from the game was just a fraction of the initial investment.
Bots or Abandonment: Who is Playing the Games
Soon, play-to-earn and NFT games faced a crisis of two extremes. Either the games were overrun with bots, or nobody played them. Bots were a logical outcome of the fact that almost all early play-to-earn games relied on mindless grinding, which everyone wanted to be automated away.
This led to a shift in the types of games which reached an equilibrium of a game that was engaging enough, but also offered measurable prizes which could even get monetized.
The games that are standing out are also those that are simply playable. After a period of half-finished, buggy or non-existing games, now real studios are moving in with finished products.
This understanding led us to exploring ways of bridging Web3 technology with game development in a seamless way, ensuring that games stand out on their own while blockchain tech merely benefits users and developers alike.
Web3 Gives Infrastructure to Informal Market
Web3 is evolving at the right time to ride the expansion trend of the entire gaming market. With neary 9% annual growth, both mobile and PC games are tapping into increased demand.
Improved technology, AI and a taste for quality games is helping to elevate top projects in the Web3 space. Now, Web3 is ready to hitch its wagon to traditional gaming, leaving behind the worst of the crypto era.
With the help of investors, bad projects were left behind, and only the top ones hand-picked for further development. Some of the formerly flawed value models also had an overhaul, and games like Axie Infinity are thriving again with smaller reliance on token trading.
More Vetting is Coming to Web3
With the promise of increased investments, there is no longer a drive to give funds to all projects and wait for a unicorn to emerge. Instead, bigger funds or thriving game studios are issuing targeted investments to other promising games.
For instance, Axie Infinity is using its previous wealth to bolster small teams, which are creating mini-games with increasing success.
The other way is for established games to decide that a Web3 element will be the right fit. Complex RPG games or metaverses are very suitable for adding ownership. A wallet to hold items securely and a marketplace can create a meeting space for the game community. Informal game item trading or other markets are already a well-established tool in traditional gaming, and NFT technology is a good fit for this activity.
In 2023, we expect more games and projects to build hybrid identities for users, mixing a game profile and a wallet. Instead of speculative investment, we expect to see the value coming from quality games and the time spent by real players, with a real wish to advance in the game and own their progress.