The Future of Web3 Games - Prospects and Dangers

Web3 gaming is an exciting ecosystem that showcases the benefits of decentralization and blockchain-based economic models. In this article, we explore the current blockchain game market to understand where it’s heading.

Web3 Games Today

Gaming is a key sector for blockchain, often serving as the testing ground for Web3 innovations, such as new tokenomics or infrastructure models.

Today, gaming accounts for about 30% of blockchain activity, with an average of 2.1 million daily active wallets.

Game developers prefer Ethereum layer 2 networks or layer 1s, which offer high speed and low costs for transactions, such as Solana, BNB Chain, or Near, which has surged in activity in 2024. According to DappRadar, Polygon, an Ethereum scaling solution, attracted over 1 million daily wallets in the first three months of 2024, up 429% compared to the previous quarter.

Polygon currently has the largest Web3 gaming ecosystem due to its low costs and fast transactions, which are essential for a smooth user experience. Meanwhile, the sidechain is compatible with Ethereum, benefiting from a large audience.

At the end of 2023, Polygon processed over 16 million transactions in a single day without showing signs of failure or congestion - an impressive achievement.

The average cost per transaction on Polygon is only $0.01, compared to $7 on Ethereum, which can go as high as $30.

Thanks to layer 2s like Polygon and fast layer 1 chains like Solana and Near, game developers can focus on user experience and gameplay, achieving gaming performance similar to Web2. The diversity in infrastructure options is making the Web3 gaming sector attractive to investors.

In the first quarter of 2024, blockchain games secured almost $290 million in investments. This represents a 57% decrease from the previous quarter, with institutional investors likely entering a wait-and-see mode to anticipate the next major gaming trends. About 50% of all investments go to infrastructure development, and another half to game development.

How Does Blockchain Transform Video Gaming?

Blockchain and gaming are a great match, as the decentralized ledger technology can potentially improve many gaming aspects.

Here are some benefits and features that blockchain can bring to gaming:

• Economic models – thanks to crypto assets, including non-fungible tokens (NFTs), video games can implement new economic models revolving around incentives. For example, Play to Earn (P2E) models encourages players to spend more time in the game.
• Proof of ownership – users have control of in-game items and can prove their ownership in a transparent environment.
• Security – blockchain brings unmatched security to in-game items, assets, and data.
• Collaboration – game developers can collaborate in a decentralized and trustless environment, while projects can engage with communities in a more direct way.
• Digital ID – blockchain can be used as the infrastructure layer for digital ID. For example, Web3Games provides a Player ID system that can connect conventional login methods to digital wallets, improving gaming experience and onboarding.

• Transparency – blockchain is the epitome of transparency, as the technology records all transactions that are shared with everyone. Virtual tournaments, reward programs, and other events can become more reliable.
• Open markets – decentralized networks can be used for marketplaces listing in-game items, opening the door to cross-game interoperability and healthier game economies.

All in all, blockchain can democratize gaming economies and bring transparency and security to the gaming ecosystem.

Challenges of Web3 Game Adoption

The unique features of blockchain suggest a promising future for Web3 gaming, but several major challenges need to be addressed before paving the way for mass adoption.

To begin with, the interaction with decentralized applications (dapps) and NFTs may seem too convoluted for a smooth gaming experience, becoming an entry barrier for newcomers.

Originally, Web3 games focused on crypto-savvy audiences, putting great emphasis on incentive models while spending less effort on the gameplay, graphics, and user experience. Things have changed with a more diverse blockchain ecosystem that offers many gaming-oriented tools. Some decentralized networks, such as Immutable or Polygon, offer a wide range of gaming tools to automate and enhance the development process.

Thanks to these improvements, Web3 games feel very much closer to Web2 experiences, pay more attention to the entertainment aspect.

Traditional gaming studios are turning to blockchain to explore the benefits of decentralization and community-oriented economies. For example, Polygon Labs has worked with game publishers like Square Enix, Plai Labs, and Midnight Society. Elsewhere, Immutable partnered with gaming giant Unity to offer millions of game developers easy access to web3 gaming.

The major challenges of Web3 gaming are currently being addressed to ensure an exciting future for the sector by making games fun rather than technical.

Future of Web3 Gaming

The Web3 gaming sector is currently in a transition mode to a bright future where blockchain networks host AAA games with millions of players.

A report from Fortune Business Insights expects Web3 games to generate an astounding $614 billion in revenue by 2030, a threefold increase from current levels. Role-playing games are anticipated to become the main driving force, accounting for the largest share of the Web3 space.

According to Mark Long, CEO of Shrapnel – a blockchain-based first-person shooter game, we can already observe that top-tier gaming talent has entered the Web3 market. The future of crypto gaming is to make the gaming experience indistinguishable from quality Web2 games. He said:

“It’s very important that it’s a great game, period, whether for Web2 or Web3.”

Elsewhere, Bartosz Skwarczek, the founder and CEO of G2A Capital Group, the creator of gaming marketplace G2A, said that the Web3 space was waiting for a groundbreaking title that could ignite mass adoption.

Some of these titles may be on the horizon. There are several AAA blockchain games waiting to launch this year and in 2025. They include:

• Illuvium – a fantasy role-playing game on ImmutableX by Illuvium DAO.
• Shrapnel – the sci-fi FPS extraction game with first-person shooter elements, as mentioned earlier.
• Blocklords – developed by MetaKing Studios - represent a medieval grand strategy game.
• Start Atlas – a blockchain-based metaverse based in the year 2620.

With the rapid growth of the Web3 sector and the diversity of blockchain tools tailored to game development, we can be confident that the future of Web3 gaming is here.

My thoughts on the challenges the Web3 industry still needs to overcome

In terms of Web3, and especially games, many overlook the fact that users often do not want some super-technology but entertainment. To a large extent, developers behave like developers and lose sight of the needs of their audience. If you look globally at the crypto audience, it's its own world where imaginary millions of dollars are born and disappear every minute; all this speculation is major entertainment. The winner is the one who can capture the audience's attention. The main challenge is that the audience is not given what it wants. They are still trying to take traditional products and add NFTs at best. But this will come, and I think soon, as Web3 products are introducing new game mechanics and new possibilities for games that were not there before.

Let's take Chainers.io as an example. The combination of blockchain and classic computer games in Web3 offers a new and unprecedented layer of entertainment - ownership and a real economy. This adds transparency to transactions, distributes value among players, and establishes governance systems.

Additionally, smart tokenomics and monetization in games provide opportunities for distributing monetary value among players, adding new dimensions for player engagement. Considering all players have information about the game and can influence it, we're looking at a completely new and different type of online entertainment. The value of ownership in Web3, with the emergence of new approaches and gaming models, is only set to increase. This is what we are actively working on atChainers.io.

Thoughts on some of the challenges the industry still needs to overcome include recognizing that in the realm of Web3, particularly in gaming, many miss the point that users often seek entertainment over super-technology. Developers, focusing heavily on their craft, may overlook their audience's needs. The crypto audience inhabits a unique sphere where imaginary millions are made and lost in moments, with speculation as a significant form of entertainment. Winning over this audience's attention is crucial. The primary challenge lies in delivering what the audience truly desires, rather than merely adapting traditional products with, at best, the addition of NFTs. However, the tide is expected to turn soon, with Web3 products beginning to offer new gaming mechanics and opportunities previously unexplored.