What we have today in terms of Web3 gaming is not working. Play to Earn has not worked and will not play to Earn or X-to/and-Earn. In addition, traditional gamers view nonfungible tokens (NFTs) with suspicion. They immerse themselves in expensive monkeys and are skeptical of major game publishers using NFT’s lipstick for further revenue.
No one knows yet what a successful Web3 game will look like. To get there, we need more developers to experiment with more models. We need an infrastructure that lowers the barriers to Web3 game development and makes it easy for developers to experiment. That is why it is necessary to invest in developing the underlying infrastructure instead of getting carried away by the speculative hype.
The Web3 gaming infrastructure can be divided into two phases:
- Pre-release: infrastructure for pre-game launch
- Post-release: Infrastructure for post-game launch.
In both stages of development, Web3 gaming needs technical infrastructure (blockchains, analytics and toolings), financial infrastructure (marketplaces and launch pads) and a third category that crosses both types of infrastructure such as metaverse platforms and guilds.
Navigating the coin in pre-release development
Game developers have a wide variety of options to choose from when deciding where and how to mint the game’s NFTs. Specialized gaming blockchains like ImmutableX and Klaytn offer low to no gas costs and high throughput.
Many games also set up their own blockchains to enjoy maximum flexibility and scalability. Axie Infinity launched the Ronin side chain and DeFi Kingdoms has an Avalanche subnet called DFK Chain. However, launching an independent chain is not technically easy.
Emerging players like Saga are trying to meet this new demand by offering a simplified experience for developers looking to launch their own chains.
In the future, in addition to building their own chains, Web3 game developers will opt for the easiest experience with full-stack Web2.5 integrators that easily provide SDK and API toolkits. Forte, Stardust, and Particle Network are examples of full-stack infrastructure providers that capitalize on the developer experience.
Inflationary tokenomics are heading out
Web3 games have the option to fund initial development by pre-selling in-game tokens and game assets. We have witnessed the rise and fall of the inflationary symbolic economic model.
Going forward, the sale of tokens and game assets, especially those with equity-like governance and ownership functions, will become more selective. Projects will whitelist or prioritize buyers who are players or meaningful contributors, such as content creators, infrastructure providers, and community managers.
Social engagement mechanisms must increase
Web3 gaming growth and engagement infrastructure is in a tricky chicken-and-egg situation as traction is still relatively low due to the lack of engaging games.
But once a few Web3 games reach critical mass, the network effects of identity data will enable these platforms to launch faster and innovate collaboratively.
Related: GameFi developers could face heavy fines and hard times
Apart from the lack of engaging games, familiar aspects such as reviews and social features are missing in Web3 games. There is huge scope for competition and innovation as users can easily transition to new entrants without losing their assets.
Unlock Asset Utility (NFT)
Web3 games generally share value capture with their players and community. Instead of buying everything from the game’s creators, players can earn or buy in-game assets and currency from each other, creating a player economy.
For mature Web3 gaming economies, productive digital assets are becoming an attractive source of revenue through rentals, loans or staking. Successful games may even decide to conquer their own financial stratum by creating in-house replacements, given how lucrative it can be, as in the case of Axie Infinity’s marketplace or StepN’s new decentralized exchange.
Guilds and Metaverse Platforms
Finally, there are guilds and metaverse platforms that offer the games funding, integrations, and partnerships. They are well positioned to become focal points for Web3 gaming, such as major publishers and distributors in traditional gaming. The crucial difference is that the players and creators can own significant interests and contribute through governance through decentralized autonomous organizations.
The Sandbox and Decentraland are the leading metaverse platforms. But both require creators to buy land up front, so a lot of land has been sold to speculators who don’t contribute anything meaningful to the ecosystem. Another approach is Mona, which is free to creators upfront until a space is minted and sold.
Related: Get ready for the FBI to sue NFT traders
Meanwhile, Web3 gaming guilds like Yield Guild Games and Merit Circle have thousands of players on board to help support upcoming games, most notably Axie Infinity.
The guilds are forced to stand out in the midst of growing competition. Snack Club, for example, leverages Brazil’s largest esports and gaming lifestyle group Loud, with 300 million followers. Jambo is building an African super app that includes telecom services and decentralized finance in addition to gaming.
Games play an essential role in our lives and have long been a frontier for human experimentation. What we’ve seen so far in Web3 gaming is part of those experiments. The pitfalls are undoubtedly many.
Most iterations of Web3 game economics today are problematic because everyone assumes that they will make money playing games. That’s not how economies work. So let’s not confuse speculative hype, which is volatile and fickle, with actual adoption and retention.
Shi Khai Weis is the general partner and chief operations officer of LongHash Ventures, a Web3-focused venture fund and accelerator. In 2021, Shi Khai was awarded Forbes 30 Under 30 in recognition of his achievements. Before that, he was a management consultant at McKinsey & Company, with a focus on digital transformation and analytics in the financial and telecommunications sector in Southeast Asia.
Saga, Particle Network, Mona and Jumbo – mentioned in this piece – are LongHash portfolio companies. This article is for general information purposes only and is not intended and should not be construed as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author only and do not necessarily reflect or represent the views and opinions of Cointelegraph.