Rian Rabinowitz - MBA Associate
Web3 games are ushering in the next wave in gaming. Through tokenization and in-game economics, the play-to-earn model is upending the in-game experience for players, developers and the community. Now, players have the power. It remains to be seen whether traditional gamers embrace the new paradigm.
The concept of ownership in games has been on a spectrum since the first arcade game hit the American mainstream in the 1960s. Since then, consoles, computers and mobile devices have continued to redefine the gaming experience and power dynamic between creators and players. Web3, a new blockchain-based era for the Internet, is the closest that players have come to “ownership.”
Historically, gamers do not own their games, their progress, or their time. It is a myth to think otherwise. Developers hold the skeleton key, and they are the ones to profit. After years of conceptualizing, designing, and building immersive worlds–not to mention investing an immense amount of capital–developers can turn a game off at any moment.
Consider FarmVille. In late 2020, Facebook announced that it would cease to support Flash-based games. At the flip of a switch, an entire ecosystem, years of history, was deleted forever without the consent of its players.
With blockchain technology, that dynamic has shifted. Developers are no longer Lord and Master; players have the power. Through tokenization and in-game economics, gamers can extract monetary value in the form of a portable asset from the games they play. The play-to-earn model is a simple yet revolutionary concept, and one that is upending the in-game experience for players, developers, and the community. The trillion-dollar question is, will traditional gamers embrace the new paradigm?
How do these games compare?
More than a thousand blockchain games have emerged to date. Many of these games build off predecessors to unlock new forms of communities, experiences, and coordination mechanisms at scale. The breakout game, Axie Infinity, is like Pokémon in that users collect, breed and battle Beast, Plant, Aquatic and Bird characters. NBA Top Shot is a collectibles platform to trade pivotal sports moments. Illuvium will be a high-resolution MMO battle royale à la Super Smash Bros.
More importantly, compared to their traditional gaming counterparts, Web3 games are built with economics at the forefront. Developers are challenged to craft value-add experiences that benefit all stakeholders, and this is driving innovative game design that is both flexible and responsive to the in-game dynamics. Key areas of differentiation are:
- Ownership of in-game assets. Blockchain games offer a level of tangibility that has not been possible since the era of owning physical cartridges. Smart contracts and NFTs enable full ownership of in-game assets with the security and transparency backed by blockchain technology.
- Open source, permissionless code. Traditional games operate as walled gardens. Blockchain games channel mod culture and empower third-party developers to customize their own gameplay experiences through plug-ins and third-party clients. This maximizes network effects, encourages creative expansion, and builds real community via ownership–all while securing additional revenue streams.
- Tokenomic incentive structures. The virtuous circle between developers and players is tighter in Web3. Players are the ones that profit and, consequently, developers are incentivized to craft experiences and communities that align both parties’ needs. It is a nuanced dance, and those with the traditional mindset can fail to benefit if they don’t understand the dynamic.
- Interoperable, immutable transactions. The blockchain enables agency and engenders trust. Every transaction occurs on an immutable ledger–the record exists forever. Players understand that their digital items will exist outside of the game’s universe and can be traded and sold on secondary platforms, even if a game shuts down. This prevents a demise similar to that of FarmVille 1.0.
With new games come new in-game mechanics and business models. Gaming companies are struggling to understand this foreign paradigm. They argue that nothing has changed, and the ownership opportunities already exist. It is true; there are secondary markets such as eBay where gamers have been buying and selling World of Warcraft (WoW) and RuneScape items for years.
However, the user experience is poor and shady at best. There is no guarantee that a transaction is secure, let alone legitimate. Play-to-earn, on the other hand, solves this problem by optimizing a game’s baseline architecture to allow for seamless monetary transfer. Opaque markets are now transparent.
What are the hurdles for adoption?
As for companies such as Electronic Arts and Ubisoft that publicly support blockchain initiatives, backlash from traditional video gamers is rampant. For these players, buzz words like “NFT” and “Web3” have brought fair-weather followers to the forefront, tainting the massive yet often underestimated gaming industry. Misinformation about the environmental consequences of mining coupled with prolific NFT scams have further contributed to the Ponzi scheme perception. But there is one element missing from blockchain gaming, and it is the reason why most serious gamers do not think highly of these games…yet. FUN.
Where is the Fun in Web3 games? People play games to solve problems, to feel a sense of accomplishment, to achieve goals, to escape. It is not about making money, and it is not why gamers game. The true Web3 winners will be the ones that monopolize on blockchain technology with Fun gameplay.
What does the future hold?
Play-to-earn incentive structures are proof of concepts that could precede widespread adoption of blockchain technology in gaming and beyond. Now that tokens have monetary value, a game is far more than a game. The stakes are higher when real-world money is involved, and the rewards are also that much greater.
Imagine a world where Candy Crush-playing suburban moms venture into Web3 games. They log on in the carpool lane, compete against friends, earn tokens, and then exchange those tokens for their favorite Athleta leggings–all within one platform. That is a paradigm that traditional gaming cannot touch. Game on.
This post was originally published in Forbes on 01/25/2022. You can view it here.