Runaway success from Axi Infinity as well as Step N convinced many entrepreneurs that the future is in web-3 games, where the ownership of in-game assets is in the hands of users through the implementation of the blockchain, rather than a centralized platform.
Some of the biggest hits to date are rewarding users with tokens that can be cashed out in a so-called “play to earn” model. While P2E games have attracted millions of players and billions of dollars from investors, game industry veterans argue that they are fundamentally unsustainable.
According to them, these games are the brainchild of financial engineers looking to get rich quick, not experienced developers creating time-tested works.
The dramatic ups and downs of Axie Inifity speak for themselves. After reaching a peak in $754 million in November when bitcoin hit an all-time high, the game’s monthly sales fell to $4.5 million in July.
“Most GameFi developers are not game developers,” says Maciej Burno, head of the new metaverse business at Polish game studio Reality.
Burno is among the veteran gaming believers in blockchain around the world trying to make blockchain gaming a mainstream phenomenon. Their vision is to debunk the public perception that web3 games popularized by P2E are scams and cheesy. Instead, they want to create games that are both fun and sustainable, and embrace cryptocurrencies as a new way to incentivize players and creators.
It’s a game?
The problem with P2E, according to Xi Wang Tung, former senior CTO of Electronic Arts and CTO of web gaming startup Red Door Digital, is that users have to pay money up front to start playing.
In Axie Infinity, users buy and breed cute blob-like creatures called Axies as non-fungible tokens that are authenticated on the blockchain. The sales from the NFT then go to fund rewards for those who earn tokens by playing, and tokens, the game’s native cryptocurrency, can in turn be cashed out.
This means that for a game to be sustainable, it must have a constant influx of new users or it will lose its source of funding. This is why critics compare P2E games to pyramid schemes.
Many P2E games aren’t strictly games, Tung says. They are more like decentralized finance or DeFi products with gamified features. Avid gamers dismiss Axie Infinity as “simple” or even “boring”, not unlike the free mindless mobile games they’ve been opposing for years.
But for those who live in developing countries, the prospect of earning several hundred dollars a month by clicking on the computer screen can be tempting. This is largely why the Axie Infinity became popular in countries like the Philippines during the pandemic, when many people lost their jobs. For them, the game is more like work than fun.
“I think there’s a bit of elitism about it,” says Simon Davis, CEO of Mighty Bear Games, a Singapore-based web3 game studio that just raised $10 million in a token sale, of Axie Infinity critics.
“There is a tendency in Western countries to ignore things that are popular in other parts of the world and not treat them with due respect. If you look especially in Southeast Asia and Latin America, and countries where incomes are probably lower, people are not buying high-end gaming systems and consoles. It is interesting to provide people with not only entertainment, but also potential economic growth.”
“I don’t like the term ‘play to earn’,” continues Davis, former design manager at Ubisoft. “I don’t think that should be the main motivation because you play the game to have fun. But then someone might decide they don’t want to play the game anymore and then get some of their investment back. I don’t understand what’s wrong with that.”
Play and earn
While Davis recognizes the value of P2E, like many other seasoned game developers moving to web3, he is primarily investing resources in improving the gaming experience. His studio produced regular games like the official Disney and Pixar game and Butter Royale, the Apple Arcade hit, before moving to the blockchain. Soon he will launch his first title for web3, 3rd person multiplayer battle royale which includes the economy of tokens.
Games can be fun as well as profitable, some blockchain game developers argue. It’s not news that gamers are motivated to make money – even in more developed parts of the world.
“Remember World of Warcraft? MMO already has a group of players [massively multiplayer online] who hire a lot of people in Vietnam and Indonesia to mine gold,” notes Tung.
“When you look at a traditional game, people put millions or billions of dollars into it, but it’s a whole other extreme. They don’t return any value,” adds Tung.
Strongly agrees. “People want to play for fun and are willing to spend money that makes them happy, but there are those who want to invest, so you can give them a tool to invest in.”
Developers are also promised big rewards for blockchain-integrated games. In free-to-play games, the current monetization model, developers generate revenue by releasing an update every “six to eight weeks,” Davis notes. “Users are annoyed that you are trying to squeeze money out of them every two months.”
In contrast, in web3 games, developers receive a small percentage of every in-game transaction that is recorded on the blockchain. “So the only thing you have to worry about is to create a game that people will want to play for a very long time and create value for those assets of players who want to trade among themselves,” says Davis.
To make the blockchain game sustainable, Toong’s Red Door Digital takes a different approach than Axie Infinity. Users do not need to purchase platform tokens to start playing – unless they want to start earning or have real value in their assets.
When a game maintains a consistent user base, the game’s value will rise and outside investors will join in, Tun said. “All of this value increase then goes to the people who play to make a financial profit.”
Like many web3 games, the Red Door Digital platform offers utility tokens that are used as in-game currencies to purchase skins, items, etc., as well as management tokens. Users who contribute to the game will receive governance tokens and will be able to vote on important decisions about the project. Utility tokens are tradable while governance tokens have no liquidity to strip them of any speculative value.
While developers are still working on optimizing their token economy, investors are already pouring big money into their nascent ventures. Blockchain games attracted a whopping $2.5 billion in investment in the second quarter. according to Dapp Radar, a data company that tracks decentralized applications. In the first half of the year, blockchain games accounted for about 30% of all capital raised by private gaming companies. report shows investment bank Drake Star.
Despite the flood of venture capital pouring into web3 games, some older studios and publishers seem to be cautious. Tencent, the world’s largest gaming company, has no publicly known plans for developing web3 games.
“Reputation matters a lot to a corporation, so if someone who creates this initiative fails, it’s the end of their career. They will have to answer on the board,” says Tung. “So the only way for them is to invest in a crypto company or two to see how it goes.”
The web3 gold rush is also challenging crypto skeptics in the gaming arena. A gaming focused fund manager from Asia. frustrated that the investors he meets with these days are extremely interested in seeing if his fund has a web3 angle.
“If I say I don’t want to, they won’t want to invest.”
Credit: techcrunch.com /