How Web3 Is Transforming the Gaming Industry

Web3, as a concept, is less than a decade old, but it is already catching on as a framework for technological development. Web3 has found its most responsive audience and developer pool in gaming, a growth industry by its own merit. But, the Web3 decentralized approach to gaming is especially lively in the intersection of game creation and blockchain technology.

One of the signs of a gaming revival is the growth in independent gaming studios. In 2022, game building is extremely active: as many as 25 new games appear on Steam each day. There are more than 2,500 US-based game studios, but game development is no longer regionally restricted and in the hands of a few gaming giants. Instead, there is a variety of creative teams, taking up multiple avenues of development.

Web3: Create a Sandbox Experience

The concept of Web3 brings user-generated content to gaming. Modding, for instance, proved especially successful for creators and highly appealing for players. Novelty demand and building on the common game framework of Minecraft was a huge success for Microsoft. Minecraft modding led to a billion official downloads and $350M in additional income since 2017. Then, there is the free, open-source modding through informal channels.

Web3 expands the appeal of making your own world and actually owning it. This concept is already built into several metaverse games on the blockchain, which focus on providing building opportunities and then lets their players create unscripted unique digital 3D venues. The model was successful for top metaverse games like Decentraland, The Sandbox and other simulated worlds.

Web3 world-building is free creation open to almost anyone with the right skills, with no limit to potential earnings and fame. In traditional gaming, the studio would reap all the praise and income, which Web3 now releases to a whole new scene of creators.

Alexis Ohanian, the Co-Founder and Director of Reddit and serial Internet entrepreneur, has noted the value hidden in incipient Web3 projects. In a recent interview, Ohanian explained the growth of Web2 was about content – the so-called read and write part of the Internet. “All that Web3 jargon we see, it’s about the third part, ownership.” Ohanian sees gaming and NFTs as the beginnings of infrastructure that will have tremendous implications down the line.

Web3: The Key to Value Ownership

One of the concepts of Web3 is owning your own resources and value. In gaming, there are many ways in which the player can create a scarce resource. World creation and metaverse land plots, crafting, equipment upgrades or characters leveling up, are all that can be reflected in decentralized records. Even the time spent playing the game can be added to the balance of each individual player.

Gaming already produces a seemingly limitless inflow of hours spent on perfecting one’s progress. Take Elden Ring, a recent hit – almost half a million players were spending hundreds of thousands of hours exploring the game and testing out strategies.

Gaming activity increased by 14% in 2021, a recent survey reveals. Players on average spend more than eight hours and 27 minutes on games per week. Some of the gamers tried to monetize their gameplay through Web2 channels and social media, with over 8.8 billion hours of streamed games which are watched over the course of a year.

But, there are many more ways to extract the value of gaming and track one’s progress. The blockchain is the perfect tool to wrap up game achievements, so they cannot be erased or modified. Players need not become streamers in order to monetize the hours played. Rather, they can tokenize them on the blockchain, with several powerful tools to turn their gaming progress into an asset. The potential for tokenization has spread to many types of games, including simulated sports, puzzles or even chess tournaments with NFT and tokens.

What Are the Tools for Web3 Gaming in 2022

Web3 is no longer just vaporware but offers sufficient tools to take your value and achievements with you. Lightweight cryptocurrency wallets can now connect to the app you use, and almost seamlessly increase your balance in exchange for your regular digital activities. The infrastructure is already there: blockchains run 24/7, and smart contracts can listen for events and distribute value.

A blockchain can compensate users in two major ways. One, by paying out tokens, which will work like digital money and give a certain value to the gameplay. And two, by creating unique NFT items shaped by game experience. For instance, the hours spent upgrading your game hero with equipment, enchantments, skills, or other items can be translated into a rare or unique non-fungible token (NFT), which can then be resold or kept as a store of value.

What Is the Problem with the Play-to-Earn Model

Game and blockchain developers already had all the tools to turn a user into a point of value generation. This translated into the simple idea of getting paid for gaming. For a few months, the model looked very promising and sparked great enthusiasm, especially for the Axie Infinity game. At one point, playing Axies could produce a reasonably high monthly income, leading to a gold rush.

A few problems immediately arose from this. Players were paid in crypto tokens, and to spend the funds, they had to convert the tokens to fiat. But, all the selling depressed the token price and destroyed the intended economic model.

The second problem is that traditional gamers are sometimes averse to using crypto assets. Even in the best-case scenario, they can have a steep learning curve to get on board cryptocurrency usage. So, projects have to be proactive about their user cultivation process, instead of setting up their potential clients on a rather complicated path of learning crypto first and then come back for the game. Projects like EVOS.gg already have a form of seamless onboarding, with an exclusive wallet set up for the gamer to accrue any tokens and NFT prizes. There is no need to visit a crypto exchange, understand networks and fees, or buy anything in advance.

But, the most important thing to avoid is to copy a model where players strip-mine the game of value, and they play just to grind out as many tokens as possible. This is not viable for the game, and we have many examples where the P2E model is already depleted, while the game team is just starting out to improve their product. The goal of Web3 should be to add value, and not to extract all value from a game until it is no longer fun to play.

Web3 and Voting: What the DAO Changes for Gamers

Web3 can create a whole new type of community. Let’s speak of the DAO, or Decentralized Autonomous Organization. This is where the community can decide for itself where the project is going. There are already multiple examples of successful DAO where asset owners can vote and direct the project.

This is a new form of governance, replacing the opaque decision-making process of the corporation with a technological hub where each decision is visible and accessible to the whole community. The access point to this structure is, again, ownership. So, it’s double participation, once by owning a piece of the project, and again when having the right to decide on its future.

Blockchain voting somewhat resembles shareholder rights, though DAO is even more democratized, with almost no geographical limitations to ownership. And of course, shareholder votes do not happen on the blockchain and need human intermediaries. All a DAO needs is a well-built collection of smart contracts, where the code is entirely transparent and predictable.

DAO is where the question of personal participation is answered. One of the critical points for Web3 is the need to buy assets, often high-priced, with no real game in production. This has been very worrisome for Web3 investors, and it is true that some of the projects collected funds and proved to be nothing more than a money-grabbing operation. But, others offered the advantage of early access, and then went on to build a complex, stunning hub of value and entertainment. The early investors were justly rewarded for their foresight and patience and, of course, for taking an asymmetric risk with a high reward potential.

It is not always necessary to have an overpriced NFT to participate in a DAO. Sometimes, token ownership is enough. But, it raises an interesting issue, in Web3, each user has some skin in the game. Part of the curation and decision-making process hinges on dedicated fans, who are willing to offer value upfront and build their own little corner of Web3, whether it is a DAO, a metaverse location or a game economy.

When players produce NFT or tokens based on their gameplay, they can also show loyalty by staking or voting. In Web3 games, they will not only be game consumers but have partial ownership of the game.

Do Players Really Need to But In to Use Web3?

Many projects try to build themselves up as an exclusive club, requiring a significant buy-in. And for some, it worked to create a sense of exclusivity in an over-saturated information market. But there are ways to use Web3 features without requiring a big upfront investment.

Players can start achieving and building while having fun. And after that, they can wrap up the content and own it, upgrade and resell if they want. Games don't need to optimize for token operations and value, but they may become a play-to-earn combination, which takes the full gaming experience and turns it into NFTs, short term rewards and long-term voting rights.

Projects like Bored Ape Yacht Club added a 'cool' dimension to the large upfront investment. BAYC avatars trading for more than 100 ETH are one of the more influential crypto societies. ApeCoin (APE) also boosted the NFT collection's influence, tying it all together with a metaverse-based game.

It is also possible to take a game-first approach, with the value coming in as a logical extension of the game. No need to build up hype, all games have the capacity to build a dedicated community, which can then become empowered to use Web 3 elements. The blockchain gaming space has all the right tools, so it can onboard gamers that are not crypto-savvy, or are even somewhat crypto-averse.

And, while Web3 may be the future, it is highly important to have a positive onboarding experience for as many users as possible. This is the only way that users will not be overwhelmed by terminology or find the project meaningless. Our approach is to build a fun game with a rewarding progress potential, and then offer the opportunity to wrap up that progress and participate in the larger Web3 ecosystem.

Konstantin Dinev is the CEO of TimeShuffle