While Web3 game developers are coming up with new and exciting projects, the space has been observing the devastating effects of the bear market. During our last twitter space conversation with Delphi Digital economist @0xRyze, KCC Guilds founder Kyle, and Ledger Prime's head of VC investments Joel John, we discussed guilds, early Web3 gaming models as well as solutions that can help the space move forward.
Here's a recap for ya.
The State of Web3 Guilds
One of the most radical things the bear market did was reveal the unsustainability of the play-to-earn model.
Early P2E games had a really high barrier to entry, which gave rise to guilds that helped players by providing resources in exchange for a predetermined commission. These players are called "scholars" in guild-speak. But now, as the P2E model has proved to be unsustainable and games are pivoting to new gaming models, guilds are facing a steady decline in the number of scholars.
Kyle tells us that their strategy to aid the declining scholar population is to collaborate with esports organizations from the Web2 gaming space. He explains that although the number of people playing Web3 games is increasing exponentially, it’s still a very niche group. By partnering with Web2 guilds, they’ll onboard a lot more gamers into the Web3 space.
According to Footprint Analytics, over 800,000 people have interacted with Web3 games in 2022 so far. That may appear to be a large number of people, but consider this: the total addressable market for gaming is estimated to be 3 billion people worldwide. The decision to onboard traditional gamers to Web3 is likely the next move of many guilds across the space.
It’s common for the status quo to reject any new advances in their field. We have seen this previously in almost every industry. Similarly, many traditional gamers and publishers vehemently oppose the Web3 revolution. However, this might change soon.
Traditional gaming companies are also interested in this growing market. Recently, Epic Games(creators of Fortnite) released Blankos Block Party on its official store. In other news, Faze Clan, a popular Web2 esports organization, announced a partnership with the Web3 metaverse platform, Sandbox. It looks like Web3 guilds won’t face heavy resistance in converting Web2 players if the trend continues.
Kyle believes that the Web2 gaming stakeholders oppose technologies like NFTs and digital currencies because they don’t understand them. Web3 gaming evangelists should focus on educating Web2 stakeholders about these technologies and their value proposition.
Web3 Players are Built Different
In the last segment we discussed that Web3 games and guilds are struggling to hold onto their audiences. Why is that? Let’s explore:
To understand why many Web3 players are abandoning ship as the market goes sideways, we need to understand who these players are. Web3 gamers are fundamentally different from traditional gamers. Unlike Web2 gamers, players of Web3 games don’t interact with the game just for the escapism or enjoyment of gaming; they are also looking to gain financial value. A popular quip in the space is that Web3 gamers care more about their asset spreadsheet than the state of their gaming machine. Web3 players are not just gamers; they are investors and traders too!
Before the bear market, the primary criticism about Web3 games was that they lacked engaging gameplay. Many game developers took this criticism to heart, and are now producing AAA-style games. Some examples would be Big Time, Mirandus, Star Atlas, Superior, etc. However, these creators must understand that by focusing solely on gameplay and ignoring the game's economics, they will alienate an important segment of their audience, namely investors and traders.
Apart from the market-wide crash and rising inflation, poorly designed game economies are another reason why we are in this mess right now. Most people know that crypto is a volatile investment class, but the tokens of early Web3 games took this to a whole new level. To give you some context, tokens from superstar games like Axie, Alien Worlds, and Splinterlands have lost over 90% of their value since January 2022. That’s akin to BTC and ETH dropping 90%. Can we really blame these games for the collapse? I don’t think we can as we saw this coming. What we can do instead is build epic games, create more robust economies, and build enough asset utility that both casual players and investors feel comfortable staying in the ecosystem for the long run.
Economies in Web3 Games
Let’s look at some of the ways to create sustainable game economies:
The way to maintain liquidity in the game economy is to have more fungible assets in the ecosystem. Fungible tokens are characteristically more liquid than non-fungible tokens. This doesn't mean that we totally eliminate NFTs from the game economy; they can co-exist with fungible tokens and be used for more valuable in-game items.
Another important rule of thumb to ensure the longevity of a game economy is to have a predictable supply of in-game tokens. Having a predictable supply prevents your token from getting inflated into infinity, and it gives investors confidence in the project because they know that there will be no unexpected emissions. The predictability of its supply is one of the key reasons that gives bitcoin, the biggest digital currency in the world, its value.
According to Joel, most early Web3 games are built only for desktops, which is not the way to move ahead. He thinks that as soon as Web3 game developers start building games for mobile, we’ll start seeing some rapid adoption.
The base commodity that game developers should optimize for is not asset ownership but user attention. This is because a player would only invest in an asset and spend hours playing the game if it captured their attention. Some of the ways to command attention are through engaging storytelling on different mediums, stunning artwork, and community building.
Listening to these amazing takes by our speakers taught us that building Web3 games is a delicate dance between developing engaging gameplay and designing a sustainable economy for it. Another salient point from this conversation that we noticed was that despite the worst meltdown we have ever seen in this space, builders are constantly innovating, trying new experiments, and figuring out ways to make this new paradigm of gaming work. This alone should be enough to convince anyone that Web3 is the future of gaming.