Web3 Gaming Crossroads: Traditional IP or Something Else?

AUTHOR: TENG YAN; Compilation: Deep Tide TechFlow

People often ask me what I think about Web3 gaming. Therefore, I would like to outline my current thoughts in writing.

Let me start by clarifying: I’m not an expert. This is not a comprehensive analysis that delves into the game’s fine-grained metrics like MAU or D14. Please think of this as a reflection of my focus in the gaming space based on my personal communication and research.

Why choose the game?

Recently, I’ve come to realize that gaming is one of the few areas in cryptocurrency that has game-changing.

What I mean by that is that over the next two years, the game will attract between 10 million and more than 100 million daily active blockchain users. Games have the potential to achieve this because (1) they are inherently social – not only multiplayer, even single-player games like Elden Ring and God of War have become social through online communities and content, but (2) they have a real tendency to spread (remember Flappy Birds?). ) .

• The financial sector is undoubtedly crucial – it will integrate with our financial infrastructure backend and bring benefits to everyone – but most people are not interested in finance.
• Art has found a good product-market fit through NFTs. But art is ultimately a niche market that serves a wealthy audience. Its market growth and path to wider acceptance is likely to be a slow process.

And the game… It’s fun, engaging, and most importantly, everybody’s got it. The numbers don’t lie:

• In 2023, there are more than 3 billion active video game players worldwide. Mobile gaming is the most popular gaming platform, with over 1.7 billion mobile players worldwide.
• The global gaming market is valued at approximately $385 billion.
• Asia-Pacific is the largest gaming market, accounting for nearly half of global gaming revenue, followed by the United States and China.
• In 2023, the average age of gamers is 36 years old, and most have been playing the game for 15 years.

A killer Web3 game is enough to lead the way.

Is it to build a Toyota Camry or a spaceship?

I’ve seen two different approaches to Web3 gaming.

1. Make a Toyota Camry – Start by making a fun game, then add blockchain and NFTs;
2. Build a spaceship – Fully support NFTs and blockchain from the very beginning of the game design process.

I will elaborate on these metaphors in the following explanations.

Toyota Camry – Traditional Game Studio

Legendary venture capitalist Vinod Khosla once said, “Startups dominate the vast majority of innovation, not institutionalized incumbents.” ”

But my observation from Kiet, a good friend of thecoreloop, said: Making good games is more of an art than a science. To be successful, you need a deep understanding of the complexities of this industry. It’s a skill honed over the years in a traditional studio.

So, I follow what the giants of the gaming industry are doing in the Web3 space because they have managed to make great games.

Building a car is a straightforward thing to do, we know how to do it, and we’ve done it many times. With its reliability and performance, the Toyota Camry has been carefully designed to stand out in the crowded automotive market. It debuted in 1980 and has so far launched 8 generations of the Camry. Each new generation of Camry models requires approximately 3-5 years of research, design, testing, and manufacturing coordination from start to finish. It is the fifth-best-selling car in the United States, with more than 300,000 units sold annually.

Like making Camry, gaming giants focus on what they’ve been good at for years – making engaging games – before adding blockchain and NFTs as value-added features. Crypto isn’t the main selling point here, but it’s like adding a turbocharger to your Camry. It improves performance and provides a boost.

Some major game studios are actively venturing into the Web3 gaming world, often through adaptations of their existing successful titles. This approach makes sense: developing Web3 games requires studios to master two key elements at the same time. (1) they have to create an engaging and enjoyable gaming experience, and (2) they need to get the in-game digital economy right.

By leveraging established IPs that already have a strong player base and a track record of engaging gaming experiences, these studios effectively mitigate the risk of (1). This allows them to focus primarily on (2), optimizing the economy gaming experience.

Let me give you 4 examples of traditional game studios making inroads into Web3:

• Take-Two/Zynga → Sugartown (this is the new IP);
• Square Enix → Symbiogenesis;
• Nexon → Maple Story N;
• CCP Games → EVE online.

In contrast, Square Enix’s foray into blockchain Symbiogenesis, feels a bit stuck in the past, as if it was conceived during the NFT bull run, when royalties were still important, and not much has changed since then. I’ve been a Final Fantasy fan since I was a kid. Well, I bought a PS5 to play the recent FF16.

Maple Story N is an interesting example. It reinforces ownership, where in-game items are NFTs, making them inherently scarce and composable. In addition, they are driving user-generated content that allows players to make their own in-game items and bring them to the market,

Introducing blockchain assets or circuits into games that already have a large active player base, such as Maple Story N or CSGO, can add value through a more meaningful player loop or additional revenue streams…

… NEXON is in the best position to continue developing the Maple Story Universe and set the benchmark for how to better leverage blockchain, not just cash opportunities. - Delphi Digital/JACL, “Why Asia Will Lead Web3 Gaming”

As more and more experiments unfold, the first studio to successfully find the right formula may find itself in possession of a pot of gold.

Spaceship: Fully on-chain gameplay

A friend who manages a huge gaming guild once said to me, “If you’re only lightly integrating NFTs or tokens into Web3 games, you’re not tapping into the full potential.” You might as well go make a normal game. The successful ones will be those who are fully committed to the blockchain. ”

As a result, we have fully blockchain-based gaming, or “autonomous worlds” (AWs), which are the gaming industry’s equivalent of SpaceX’s space travel in the early 2000s.

Building a rocket/spaceship is a complex project that requires years of research, development, and testing. The Falcon 1 rocket, which was developed for more than 7 years before its successful launch and cost more than $100 million, nearly bankrupted SpaceX.

From fuel to life support systems, every element is critical to the journey, requiring complex engineering and precision. They need to be thoroughly tested and refined to withstand the rigors of space. Developing a propulsion system is one of the most challenging aspects of the process. It requires innovative solutions to generate the necessary thrust to break free from the gravitational pull of the Earth.

Similarly, AWs is doing something we’ve never done before. It is fully committed to the blockchain stack. It uses the blockchain to store all the data, and the smart contract executes the game logic and rules in a client-agnostic manner.

Why do we put these games on the blockchain? I can think of 3 reasons:

• Eliminate platform risk: A friend of mine used to be one of the top Overwatch players in China. She has been playing for 7 years and is familiar with the whole game. However, her gaming career came to an abrupt end when Blizzard terminated her 14-year licensing deal with NetEase. AWS can mitigate this risk. As long as the blockchain network is functioning properly, the game will continue to exist from the pranks of the central authorities. That friend? She later switched careers and founded her own full-fledged blockchain game studio.
• Endless User Generated Content: UGC is the buzzword of the day and for good reason. People like to be involved in the creative process. The game also benefits from having new content all the time. In AWs, communities aren’t just passive consumers; It is an active participant. Players can create tools and enhancements – modifications that require permissions – effectively blurring the lines between players and developers. This collaborative ecosystem enriches the gaming experience.
• Skyscraping (composability): The modular nature of AWS is another highlight. Developers can focus on building new things without having to reinvent the wheel, using modules that were previously created and used in on-chain games (e.g., upgrading modules or task modules on-chain). Imagine the possibility of integrating different universes – like Marvel and DC Comics – into a single game environment. Although there may be licensing issues, the technology itself will not be an obstacle.

Games still need to engage their audience with engaging gameplay. However, when these three elements are combined, it heralds a new original form of the game with great future potential.

apix seems to hold a similar view:

The addressable market for this new form of gaming is still unknown (as uncertain as SpaceX’s early space market). Does it only appeal to today’s crypto-native users, or does it have the potential to reach the mainstream market? Only time will tell. And it may take a while.

One thing is for sure: I love the new raw form of crypto. While the road ahead is uncertain, early adopters are likely to capture a lot of value if the space thrives.

Pro tip: I’m keeping an eye on Pirate Nation.

In between

What about Illuvium, Parallel, and other crypto-native game studios? Making Web3 games is difficult. Two very different sets of skills are required:

1. Crypto expertise: Not only technical knowledge of blockchain, but also crypto-native behavior, tokenomics, and economic design is required
2. Game design and distribution: This field is largely dominated by the practice of Web2. The complexities include designing engaging incentive loops, optimizing player spend, and mastering performance marketing.

Today, many Web3-native gaming teams are very strong in (1) but have questionable competitive advantages in (2). Especially considering that they face powerful, well-capitalized Web2 studios with strong existing IPs. Teams that have a lot of experience in the Web2 gaming space and raise enough money are likely to succeed.

Crypto-native Web3 game studios often need to build new IPs from scratch, which is a challenging task. Some of them have already launched tokens with 8- to 9-figure market caps, which already contains a lot of user adoption.

In conclusion, Web3 gaming is at a critical crossroads. We have current giants with mature IP and a deep understanding of game design and publishing. We also have a crypto-native team that is pushing the frontier of on-chain gaming. One thing is clear, those who can master the combination of old and new will be the ones who will be hugely successful in the future.

Source: Golden Finance