Read part one: From Horse Armor to Play-to-Earn: Charting Crypto's Web3 Gaming Wager

Walled Gardens to Open Markets 

Web3 developers' pitch to gamers sounds simple enough: let us put your favorite games on the blockchain, and soon you'll be able to own and even profit from the in-game items, currencies, and characters that you spent so much time and sometimes cold. hard cash acquiring. 

"The fact that you pour all of this energy and resources into these spaces and get nothing out of them is just problematic," said Andrew Durgee, head of crypto and tokenization at Republic Crypto. "You just walk away and all the items and money and wealth that you've accrued over time and that other people would certainly want access to is just left in that environment." 

Ownership is a key concept for the crypto industry in general, and among blockchain game developers it's the closest thing to an industry philosophy. Many argue that through NFTs every in-game item has the potential to be an asset — and every asset, of course, has the potential to be bought, sold, or even used as collateral. 

But owning something is only worth it if there's a secondary market for it, and the latest generation of blockchain games are focused on the concept of "composability." This is a technical term for the ability to translate value between different games.  

"Traditionally, games are built in these walled-garden environments," said Durgee. "Say you played Zelda and you earned gold, and you used that gold to buy potions and power-ups and weapons, but all those items and money were stuck inside that game."

The goal, then, for blockchain developers is to break open the walled garden of traditional games and create an interconnected marketplace, where the time and money players spend in one game is still worth something in the next game they play. 

But what happens when a bunch of in-game economies, which on their own have dealt with rampant financial instability, fraud, and cybersecurity issues, become tethered? 

"I think the hard part in this context is building a sustainable open economy," said Richard Kim, general partner at Galaxy Interactive, a division of venture capital firm Galaxy Digital. "It's kind of like the difference between a fixed exchange rate economy and a floating exchange rate economy where you have this constant market feedback loop in the form of a price that itself has its own meta-game." 

The meta-game describes all the stuff that takes place outside the core game: the social, technological, and in this case, economic elements that take on a life of their own when communities form organically around popular video games.

In other words, the underlying assumption of the industry is that a financial meta-game involving buying, selling, and investing across different video games is an added value. However, it remains to be seen if this is something gamers even want. 

Reminder: Games should be fun

Many gamers are fundamentally opposed to bringing crypto-economics into an experience that is supposed to be about fun. Even blockchain game developers admit the current crop of games are not very fun to play, assuming you want more than the opportunity to make money. 

"The gaming and crypto communities are at loggerheads," said Sylve Chevet, a software developer who is working at the intersection of gaming and blockchain technology. "Gamers absolutely hate Web3 from the bottom of their heart."

An infamous tweet from indie game marketplace itchi.io sums up the negative sentiment among many traditional gamers. “NFTs are a scam,” it said. “If you think they are legitimately useful for anything other than the exploitation of creators, financial scams, and the destruction of the planet then we ask that you please re-evaluate your life choices."

Early blockchain games such as Huntercoin and CryptoKitties, which came out in 2014 and 2017 respectively, were basically vehicles for mining cryptocurrencies, and the current crop of games, such as Axie Infinity, hasn't helped change that reputation. 

"If you remove the crypto component from Axie Infinity, no one would play, because it's a bad game," said Martin Repetto, CEO of Mokens League, a sports-based blockchain game with the tagline "Play to Earn Done Right." 

Newer projects, such as Illuvium and Star Atlas, have tried to differentiate themselves by striving to look and feel like triple-A games, just with a blockchain component. 

"Axie Infinity was the minimum viable product of what blockchain gaming could look like, but for many people who grew up playing really cool high-graphics games, Axie doesn't really cut it," said Jerry Sun, an analyst for Messari, a crypto research group. 

'There's going to be a lot of failures'

The recognition that blockchain games need to actually be good games is just the beginning of what appears to be a period of soul-searching for the fledgling industry. 

"Crypto people feel very proud of themselves for saying things like 'you need a fun game,' but it's so trivially true that it's not even worth saying," said Kim.

For Kim, the real challenge is making blockchain games fun, while also delivering on the promise of providing real economic value to players without relying on ponzi-scheme-like economics to draw players in. 

Put another way, how do you ensure that the games are bringing economic value to players without relying on ponzi-scheme-like economics? If the only reason for putting a game on the blockchain is to jack up the price of an in-game token or currencies, investors might start looking elsewhere. 

Indeed, Kim anticipates a "funding market reckoning" in the near future, as investors get more particular about which projects they're willing to sink money into. 

Chevet said the first question he asks developers is: "Why are you putting this on a blockchain? Why couldn't this just be a server? It's a very difficult question." His answer is that blockchains should be reserved for games where there is a genuine interest in open, collaborative, and decentralized game development. 

This kind of engagement requires a level of technical ability and commitment that might not jibe with your average gamer who just wants to play the game, but it's a vision for blockchain gaming that isn't focused exclusively on financialization. 

Lars A. Doucet, the co-founder of independent game studio Level Up Labs and an outspoken critic of blockchain gaming, said the more likely outcome is that developers will turn to tried-and-true business models in the gaming ecosystem, most of which would ultimately undermine the promise of play-to-earn. "The model doesn't make sense," he said. "They've already admitted the model doesn't make sense, and they're moving toward a model where only some people cash out."

One model that is gaining traction among blockchain game developers, for instance, borrows the basic structure of online gambling games, where players have a chance to win money, rather than a guarantee. 

"A model where everybody gets rich playing a game will never work," said Repetto. "You want to have people frustrated enough that they want to keep on trying, but not so frustrated that they just want to quit the game." 

This approach is a 180-degree turn from the early days of blockchain gaming, when developers like Sky Mavis, maker of Axie Infinity, touted the ability for players to make a steady living off of its games. This model may arguably still be exploitive, but it's more transparent about what gamers can expect. 

"It's super important to have winners and losers," said Repetto. Ultimately, this logic may apply to the entire blockchain industry as well. 

"I do think there's going to be a lot of failures," he said. "There's going to be a lot of companies that are going to die. We are living through crypto 1.0 but in gaming."

The idea that blockchain gaming — and crypto in general — is still in its early stages is a common response to critics who point to the industry's volatility.  "Because you have this fever, out of these millions of s***** projects, there are a few of them that might actually get a shot," said Chevet. "You only get this during bull markets. You only get this when everyone has Web3 fever." 

As venture capitalist William Quigley pointed out, though, Web3 fever has so far meant an extraordinary amount of fraud and financial manipulation. 

"It's impossible to reliably evaluate the price of an NFT, and the reason is because it's all fraud," said Quigley, who again, founded a leading NFT marketplace. "When your home is sold, there's a change in the deed. There's a settlement of cash. There's a record of who the buyer and who the seller is. There are agents involved. People don't flip homes back and forth to pump up their average value on the block. That's exactly what they do with NFTs. They'll take an NFT, and they'll sell it 20 times to themselves." 

Quigley noted that he's working to address this pricing issue, but in the meantime, he's glad more players are jumping into blockchain gaming. "Nothing is fun when you're the only guy doing it because you cannot boil the ocean yourself," he said.  

Despite his overall support of the industry, Kim expressed reservations about the wave of financialization that could come with the rise of blockchain gaming. 

"By and the whole, retail investors have proved over the last few decades that the individual does not deal well with risk," he said. "Gaming is addictive enough without money. You throw money into the picture, it runs the risk of being all-consuming."

Share:
More In
No more stories