IndustryOct 7, 2022
Chain Insights - The Evolution of Web3 Gaming
How Blockchain Technology Has Spread Into the World’s Most Profitable Industry
One of the most popular pastimes in modern history is playing video games. We often picture gamers as children or introverted teenage boys playing Xbox for hours a day, however this could not be farther from the truth. A recent study revealed that over 3 billion people worldwide are gamers, with the average age being 35, and almost an equal number of male and female gamers. It was even reported that the gaming industry earns more revenue than the music and film industry combined. Only a small percentage of gamers are able to earn professionally, while the rest simply use video games as an outlet to unwind or for entertainment. While the virtual world of video games is being explored through VR experiences and the metaverse, there are currently opportunities to earn real currency through online games. This currency isn't the fake money one can earn in the video game, rather it's the type of money that helps kids in developing nations create a lucrative source of income. And all the assets in the game, ranging from avatars, the outfits (skins), virtual land, and weapons, can be bought and sold with cryptocurrency. This is the world of GameFi, or as some call it, Web3 Gaming.
GameFi is a combination of “game” and “finance”, and refers to games built on the blockchain that offer economic incentives to players. Web3 games offer players in-game rewards such as crypto tokens, NFTS, and virtual land through completing levels and battling other players. The dynamic of Web3 gaming typically works under a model known as “Play-to-Earn” (P2E). Players under the P2E model essentially connect their crypto wallets to the game of their choice, and buy an NFT to use that platform. From there, as the player advances through levels, they win gaming tokens that can be converted into Bitcoin, Ethereum, or even fiat currency through an exchange, such as Coinbase. The NFT can then be sold on an NFT marketplace for profit, as it is now upgraded with new features from advancing in the game. While this seems sustainable and alluring to traditional gamers, even P2E games have their limitations.
The Rise and Decline of P2E Games
Under the P2E model, one of the major downfalls of this system is the tokenomics of the game. Since the main objective for players is to earn monetary rewards through playing the game, the token soon becomes inflationary, which causes the ecosystem to collapse. What this means is as the game becomes more popular, the token can be worth less with an influx of participants. Increased supply of the game's token can reduce demand, in turn decreasing the token’s market value. A similar situation manifested with one of Web3’s most revered P2E games, DeFi Kingdoms.
The advantage of this however, is that inflationary tokens make a game more accessible to players, and reduce the initial barrier of entry. Consequently, the reason Web3 gaming still hasn’t reached popularity in the mainstream gaming industry is because there is a deep emphasis placed on earning, rather than the gaming experience itself. This can be unappealing for seasoned gamers, as playing a game requires an enjoyable experience with rich content that ensures user retention. As a result, P2E transitioned into “Play-to-Own”, which emphasizes more than just a short-term profit.
As Web3 gaming continues to evolve into a more sustainable ecosystem, a new model was introduced: Play-to-Own. P2O still keeps the in-game mechanics of the P2E model, but is more focused on player experience and rewards sustainability. P2O games are more centered on user retention and community, which are strong factors in the traditional gaming environment. Under the P2O model, non fungible tokens (NFTs) are acquired by the player, and increase in value as the game progresses. This NFT can be traded in marketplaces and be liquidated through peer to peer transactions. The ownership aspect of P2O games gives players a sense of security, pride, and status while they are playing games, and encourages them to stay invested. This model hopes to achieve long term player loyalty, stronger feedback, more competition, and increased collaboration between players.
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With billions of people worldwide playing video games, and blockchain adoption steadily increasing, there is a massive market opportunity for Web3 games. With the proper resources available, GameFi can be a historic movement to partake in, given how it is still evolving. There are variables such as tokenomics, smart contract deployments, in-game design strategy, and user research involved to create a tangible gaming ecosystem. Blockchain infrastructure solutions such as Chain Cloud, can help ease the process of Web3 gaming development. Gaming studios and builders alike, can utilize Chain Cloud to manage the high throughput of processing various in-game transactions. With thousands of players interacting with all kinds of tokenized in-game content, there will be millions of transactions surfacing each day within the game’s ecosystem. Even if your game is still in its early stages, it’s best to be prepared for the potential traffic that your game will experience once it rises in popularity. Chain Cloud is a dedicated throughput for gaming transactions, and provides the tools gaming developers need to run their platforms smoothly. Visit our website, to learn more about scaling your Web3 platforms.
Chain is a blockchain infrastructure solution company that has been on a mission to enable a smarter and more connected economy since 2014. Chain offers builders in the Web3 industry services that help streamline the process of developing, and maintaining their blockchain infrastructures. Chain implements a SaaS model for its products that addresses the complexities of overall blockchain management. Chain offers a variety of products such as Ledger, Cloud, and NFTs as a service. Companies who choose to utilize Chain’s services will be able to free up resources for developers and cut costs so that clients can focus on their own products and customer experience. Learn more: https://chain.com.
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