What we have today in terms of Web3 games does not work. Play-to-earn has not worked, and neither will play-to-earn or any X-to/and-earn. On top of that, non-fungible tokens (NFTs) are viewed with suspicion by traditional players. They bang on expensive monkeys and are skeptical of big game publishers using the lipstick of NFTs for additional revenue generation.
No one knows what a successful Web3 game will look like yet. To get there, we need more developers to experiment with more models. We need infrastructure that will lower the barriers to Web3 game development and make it easy for developers to experiment. That is why it is important to invest in developing the underlying infrastructure rather than getting carried away by the speculative hype.
The Web3 gaming infrastructure can be divided into two phases:
- Pre-release: Pre-game launch infrastructure
- Post-release: Infrastructure for post-game launch.
Across both phases of development, Web3 games need technical infrastructure (blockchains, analytics, and tools), financial infrastructure (marketplaces and launchpads), and a third category that cuts across both types of infrastructure, such as metaverse platforms and guilds.
Navigate mint in pre-release development
Game developers have a wide range of options to choose from when deciding where and how to create their game’s NFTs. Specialized gaming blockchains such as ImmutableX and Klaytn offer low to no gas fees and high throughput.
Many games also set up their own blockchains to enjoy maximum flexibility and scalability. Axie Infinity launched the Ronin sidechain, and DeFi Kingdoms has an Avalanche subnet called the DFK Chain. However, launching an independent chain is not technically easy.
Emerging players like Saga are trying to capture this new demand by offering a simplified experience for developers looking to launch their own chains.
In the future, besides building out their own chains, Web3 game developers will choose the easiest experience with full-stack Web2.5 integrators that simply provide SDK and API toolkits. Forte, Stardust and Particle Network are examples of full-stack infrastructure providers that cater to the developer experience.
Inflation Tokenomics is on its way out
Web3 games have the ability to fund initial development by pre-selling tokens and in-game game resources. We have witnessed the rise and fall of the inflationary token economic model.
Going forward, the sale of tokens and game resources, especially those with equity-like management and ownership functions, will become more selective. Projects will whitelist or prioritize buyers who are players or meaningful contributors such as content creators, infrastructure providers and community managers.
The mechanisms for social involvement must increase
Infrastructure for Web3 game growth and engagement is in a difficult chicken-and-egg situation because traction is still relatively low, due to the lack of compelling games.
But when some Web3 games hit critical mass, the network effects from identity data will enable these platforms to bootstrap and collectively innovate faster.
Related: GameFi developers could face heavy fines and hard time
Aside from the lack of compelling gameplay, familiar aspects like reviews and social features are missing from Web3 games. There is a lot of room for competition and innovation as users can easily transfer to new players without losing their assets.
Unlocking asset (NFT) tool
Web3 games generally share value capture with the players and the community. Instead of buying everything from the game creators, players can earn or buy assets and in-game currency from each other, creating a player economy.
For mature Web3 game economies, productive digital assets become an attractive source of return through rental, loan or stake. In fact, successful games may even decide to capture their own economic layer by creating their own substitutes, given how lucrative it can be, as in the case of Axie Infinity’s marketplace or StepN’s new decentralized exchange.
Guilds and metaverse platforms
Finally, there are guilds and metaverse platforms that offer the games funding, integrations and partnerships. They are in a good position to become hubs for Web3 games, as major publishers and distributors in traditional gaming. The decisive difference is that the actors and creators can own significant shares and contribute via governance through decentralized autonomous organisations.
Sandbox and Decentraland are the leading metaverse platforms. But both require creators to buy land upfront, so much land was sold to speculators who contribute nothing meaningful to the ecosystem. Taking a different approach is Mona, which is free for creators up front until a space is minted and sold.
Related: Get ready for the feds to start prosecuting NFT traders
Meanwhile, Web3 gaming guilds such as Yield Guild Games and Merit Circle have brought thousands of players to help support upcoming games, especially Axie Infinity.
The guilds are forced to stand out in increasing competition. Snack Club, for example, taps into Brazil’s largest e-sports and gaming lifestyle group Loud, with 300 million followers. Jambo is building an African super app that includes telecom services and decentralized economy alongside games.
Games play an important role in our lives and have long been a frontier of human experimentation. What we’ve seen in Web3 games so far is part of the experiment. The pitfalls are undoubtedly many.
Most iterations of Web3 game economics today are problematic because everyone assumes they will make money playing games. That’s not how economies work. So let’s not confuse speculative hype, which is fleeting and fickle, with actual adoption and retention.
Shi Khai Wei is the general partner and COO of LongHash Ventures, a Web3-focused venture fund and accelerator. In 2021, Shi Khai was awarded Forbes 30 Under 30 in recognition of his achievements. He was previously a management consultant at McKinsey & Company, focusing on digital transformation and analytics across the financial and telecommunications sectors in Southeast Asia.
Saga, Particle Network, Mona and Jumbo – mentioned in this piece – are LongHash portfolio companies. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.