The gaming field is always one of the hottest lands in the metaverse. Some people think that on-chain games would become one of the highest volume market segments in the Web3 space, while others doubt the long-term economic viability of the most common Play To Earn (P2E) business model.
Including Axie Infinity and STEPN, the reason why most blockchain gaming projects are unsustainable is that their P2E models lead to an inability to withstand huge sell-offs, and all players have to either actively or passively participate in the death spiral that eventually cannot avoid falling into the ponzinomics.
However, the dilemma that most blockchain games are currently facing is not insurmountable. Since 2022, while the flaws of traditional P2E games are gradually being revealed, there have been some projects that have made innovations in business models to try to solve sustainability problems. Some promoting themselves as F2O (free to own), PAE (play and earn), etc. have emerged in the market, transforming and enhancing the traditional P2E model, thus extending the life cycle of the game. Such transformation cannot fundamentally solve the impact of the marginal diminishing effect of the Web3 decentralised profit-sharing model on post-entry players.
So does this mean it’s impossible for blockchain games to get rid of this death spiral? The answer is not unqualified. Looking back at the traditional game industry, from the initial time-killing single-player games to the complete eSports industry today, it has gone through several iterations. Today a brand new web3 game operation model built on the esports ecosystem is about to bring a revolution to the whole on-chain game market – it’s time to get into Gamefi 2.0.
Why should we focus on Web3 game development?
The gaming industry, which is currently around $200 billion, is expected to see robust growth in the years ahead. Accenture’s 2021 estimate of the direct and indirect value of the gaming industry stood at $300 billion. As one group of the earliest inhabitants of the virtual world, game users are more familiar with creating their own virtual profiles than many others.
Yat Siu, the co-founder and chairman of Animoca Brands, pointed to the 3.2 billion people who play video games on a regular basis, which he says are already operating in an “enclosed metaverses.” The people playing those games have created virtual identities and acquired digital goods that many players think they own, but in reality they don’t. The gaming industry is effectively renting out those virtual goods to its players.
Web3 is essentially a decentralised version of the Internet. It shifts digital ownership from tech companies to users so that they can move freely across platforms in an open meta-world. For gaming users in general, the most immediate change that the Web3 reform in the gaming industry has brought about for them is the ownership of their digital assets. With the support of blockchain technology, all game data held by players' NFTs will be permanently recorded, this data will also increase the value of the NFT itself. As a result, the value of the digital assets of quality players will continue to increase as the number of plays increases.
From another perspective, blockchain technology offers more possibilities for gamers to stretch their assets. In traditional online games, the use of players' in-game assets is limited to in-game scenarios only. These assets are difficult to transfer. Even if a few players trade their game accounts with others, such transactions have significant limitations. Most of the time the price of the asset during the P2P transactions is much lower than the cost invested by the player.
In the metaverse, players' tokens and NFT assets have more liquidity. Gamefi's inherent financial properties can help investors sell, rent out their gaming assets or place their passes in the pool as liquidity providers (LPs), thus maximising capital efficiency.
In the metaverse, people are free to travel through the gaming, social, and artistic worlds unhindered by their digital assets as independent individuals. As the use of NFT expands, the cross-disciplinary NFT will provide more possibilities for people's metaverse lives. So the significance of the construction of web3 games is not only on a technical level but also as a bridge between the future entertainment life and social interaction.
How can Esport change the Gamefi ecosystem?
Before we talk about Game 2.0, let's go back to the p2e economic model that is now most common in web3 games. The fundamental reason why the P2E economic model is not sustainable in the long term is that the single-structured economic model is plagued by "ponzinomics". P2E projects need a constant stream of new investors to consume the output of the previous investors. When the number of "new" entrants does not cover the number necessary to sustain the existing number, it will collapse instantly.
As the shortcomings of P2E became apparent, attempts were made to reverse or ameliorate the difficulty of matching supply with demand in the long term by adding structural pillars to the ecosystem. Stepn, for example, introduces a non-monetary benefit output to the model, which is the health improvement. This makes the return on investment not the only consideration for users, but also an important incentive to improve their health after using Stepn consistently. This non-monetary benefit makes this GameFi ecosystem not a zero-sum game, it generates additional positive benefits within the game framework and makes people more willing to be part of the whole ecosystem.
Stepn is just one example. There are many elements that can be added to the gamefi ecosystem beyond health, such as social attributes, merchandise, platform-based advertising revenue, etc. But what we must realise is that without a fundamental change in the economic model of P2E's infinite inflation, all attempts will only slow down the project's death spiral.
From this perspective, building a new economic system that can be self-circulating becomes the key to gamefi's breakthrough. Esport, as a complete ecosystem, can meet the needs of its audience for competition, education, social interaction and entertainment. For people who like the esport culture, video games are just not a mode of entertainment but are a preferred choice of interaction. In terms of the economic model, esports satisfies the conditions required for a deflationary model, namely the winner-takes-all principle. When a gamefi team set up an e-sports system, their own role changes from that of project operator to that of event organiser, while their revenue changes from a single project fee income to a diversified revenue structure.
What should projects be aware of when they want to get into gamefi 2.0?
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Esport does not apply to all projects
Unfortunately, not all commercially available P2E projects can introduce esport; on the contrary, only a very small number of projects are suitable for esport. It is a well-known fact that most gamefi projects are currently not favoured by traditional gamers because the games are not interesting enough and not well made. To meet the requirements of esport, gamefi projects need to be competitive and require a certain level of skill in addition to the two points mentioned above.
Even though, esport is not the only way forward for the gamefi project. For some well-known p2e projects, there are many transformative directions that can be taken when they have already accumulated a large amount of user base and high traffic. They can go ahead to build a launchpad or platform, or just add more social functions to the project to support more users’ needs. On another hand, the gamefi teams can also change the revenue model by adding revenue pillars, for example advertising revenue, title revenue, etc.
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A good tokenomic system is essential
In order to support the proper functioning of the gaming system, gamefi teams may refer to the following recommendations when setting up their tokenomic.
Regular destruction of tokens is necessary. Whether it is a single-coin model or a two-coin model, the treasury should regularly recycle and destroy tokens in different ways, thus making the supply of tokens inherently deflationary.
Increasing the number of scenarios in which tokens are used will prevent the game economy from bubbling. Project owners should consider adding different scenarios when designing their token consumption system so that tokens are well circulated.
When valuing in-game NFTs, play records are used as one of the evaluation criteria. This can have several positive effects, as follows.
- OG players are rewarded for their playing time, and good players can permanently increase the value of their NFT through their superior playing skills
- Players who buy directly on the secondary market save time and effort The team earn a percentage of royalties
Reference:
Why play-to-earn gaming is losing steam and where GameFi must go next, RIAZ LALANI https://forkast.news/why-is-p2e-axie-infinity-declining-gamefi/
Animoca Brands: Blockchain Gaming Giant Says Web3 Future Isn’t Far Off, Robert Olsen https://www.forbes.com/sites/robertolsen/2022/09/02/animoca-brands-blockchain-gaming-giant-says-web3-future-isnt-far-off/?sh=6689799d1e09
An Overview of the Gaming Industry and Ways to Invest in It, Prableen Bajpai https://www.nasdaq.com/articles/an-overview-of-the-gaming-industry-and-ways-to-invest-in-it
Originally posted here.