How to Level Up Your Knowledge of Web3 Gaming

Blockchain technology is redefining the gaming industry and giving players an opportunity to own their digital identities and assets. Here's how to get started.

AccessTimeIconDec 29, 2022 at 7:06 p.m. UTC

Video games, which were once branded the catalyst for societal ruin by concerned parents everywhere, are now being embraced as a tool for mass adoption in the crypto sector.

Investors are betting big on Web3 gaming, or games underpinned by blockchain technology, even amid an extended crypto winter that has chilled many other markets. According to a report from blockchain data firm DappRadar, $748 million was raised in August 2022 for the development of new Web3 games.

But despite excitement among industry insiders and crypto gamers, a study from game publisher Coda Labs found that only 12% of gamers surveyed had tried playing a Web3 game and only 3% owned a non-fungible token (NFT).

“I still see Web3 gaming as being very early,” said Roshni Cox, chief operating officer at Hellebore, a blockchain-based game studio. “Anyone that's involved now is helping to shape it.”

It’s clear that there is an institutional interest in building out the Web3 gaming sector, though brands will need to come up with solutions to better bring existing gamers into the fold. Today’s gamers, artists, creatives and influencers should start learning about blockchain-based gaming to stay ahead of the curve, and even taking small steps, like setting up a crypto wallet, can help interested parties become more familiar with the budding technology.

Ahead are some takes from industry experts such as Yat Siu, co-founder and executive chairman of leading blockchain game publisher Animoca Brands, about the future of Web3 gaming and how to break into the budding industry.

What is Web3 gaming?

Web3 gaming is an umbrella term to describe games that use cryptocurrency, NFTs or blockchain technology to augment the user experience. The goal of these blockchain-based projects is to empower players and offer them more control over their digital identities and assets.

In theory, Web3 games can have the same appeal as other types of video games like massively multiplayer online role-playing games (MMORPGs), puzzle games and strategy games. But blockchain technology helps to propel those games forward by offering cryptographically secured payment rails and verifiable ownership over digital in-game assets through NFTs.

“Web3 doesn’t really change the quality of the game,” Siu said. “It shouldn’t change how the game should look or why the game is exciting. All it does is open up the ability to have new financial systems in the game.”

Types of Web3 games

Web3 gaming is still nascent, but over the past few years, several popular categories of have emerged, each using blockchain technology in unique ways:

  • Play-to-earn: Also known as GameFi, Play-to-earn rewards users with cryptocurrency or NFTs for gameplay. Many games require an initial purchase of one of the game’s assets to start earning, and these assets can typically be acquired within the game or on secondary NFT marketplaces. Popular play-to-earn games include Axie Infinity, which allows players to purchase in-game virtual pets as NFTs that can battle and breed to earn in-game tokens, and Zed Run, an online horse racing game where players can buy, sell or breed horses and bet on races.
  • Move-to-earn: An offshoot of play-to-earn, move-to-earn games reward users for moving around in the real world. STEPN is a popular game where players need to buy or rent a pair of NFT sneakers to start earning rewards by performing physical activities.
  • Metaverse worlds: Metaverse worlds are immersive virtual spaces often constructed from user-generated content. Many metaverse worlds contain game-like gatherings or elements of gamification to incentivize collaboration and socialization. The Sandbox is a popular open-world platform where players can buy land and build games.
  • Fantasy sports: Riffing off of traditional fantasy sports leagues, platforms like Sorare allow users to collect digital player cards, build lineups and earn points based on players’ real-life performances. Hellebore, as another example, allows users to buy NFTs and predict the outcomes of games across professional sporting leagues.

There have also been examples of games that found creative ways to incorporate blockchain technology into their experience. In September 2021, a blockchain project called Loot launched a collection of 8,000 text-based NFTs meant to be used as items in games created by the community.

Several existing Web2 games have also recently embraced NFTs, including Ubisoft’s Ghost Recon: Breakpoint and Square Enix's Final Fantasy.

NFTs as new revenue streams for gamers

Blockchain games often offer in-game assets as NFTs that players can earn or purchase.

NFTs are cryptographic tokens that allow players to verify ownership of a particular item. For gamers, that could mean in-game skins, rare collectibles or access passes to exclusive content or future releases – concepts gamers are already familiar with. With Web3, they are made more secure on a blockchain.

“The easiest way to explain to a gamer the value that they're getting with any sort of blockchain technology is that these are digital collectibles,” Hellebore's Cox said. “Digital collectibles are never going to go away, it's just now in a digitized form for a digitally native person.”

NFTs can also be traded and sold in-game and on secondary marketplaces, opening up new revenue streams for players.

“Gamers themselves are very entrepreneurial people,” said John Linden, CEO of game technology company Mythical Games. “I think what we're going to see is players that become entrepreneurial inside the games.”

Jonathan Brun, CEO and co-founder of metaverse search engine Lighthouse, calls this aspect of Web3 gaming “a paradigm shift.” Roughly $54 billion is spent annually on virtual goods, skins and lives, according to JP Morgan’s 2022 Opportunities in the Metaverse report. Using blockchain technology, these types of assets can be traded and resold on secondary marketplaces, creating new opportunities for interaction and monetization.

“Once you know you can resell [digital assets], it makes sense to expect this activity is going to increase,” Brun said.

Web3 also demands that industry leaders revisit existing fee structures that favor traditional tech companies, Siu explained.

“The gaming industry last year generated over $20 billion in revenue, which is bigger than music and film combined,” he said. “On top of that, 30% [in fees] typically goes to platforms – whether Apple or Google or Steam. We're talking about a sum total of over $100 billion of extracted value from the gaming industry – how much of that $100 billion actually goes back [to the gamers]?”

Data ownership and identity management

Web3 gaming proposes a future in which players can have more control of their online identity and data. Crypto wallets could one day act as an alternative to existing single sign-on methods, allowing users to consolidate their logins and prevent their data from being shared with third parties.

While the technology (and its adoption) are still early, decentralized identity products like Disco are cropping up. Ideally, Web3 will allow players to travel through various gaming worlds and experiences and maintain ownership over a singular digital identity that is both secure and user owned.

Several companies, including Ubisoft, Yuga Labs and Animoca Brands, are exploring ways to bring these interoperable digital identities into the metaverse.

“Our long-term efforts led us to understand how blockchain’s decentralized approach could genuinely make players stakeholders of our games, in a way that is also sustainable for our industry, placing back into their hands the value they generate through the time they spend, the items they buy or the content they create online,” said Nicolas Pouard, vice president of Ubisoft’s Strategic Innovation Lab, when the French video-game publisher launched its NFT platform Quartz in December 2021.

Your Web3 gaming toolkit

If you are a developer or gamer and are interested in Web3 gaming, there are several steps you can take to make yourself more familiar with the sector:

Set up a crypto wallet

The first thing to do when exploring Web3 gaming is to set up a blockchain wallet, according to Brun.

Some Web3 gaming companies are simplifying this step by setting users up with what’s known as a custodial crypto wallet that is managed and secured by the platform. Users access their wallets like they would a traditional gaming account (likely a username and password), but their digital assets are stored in a wallet hosted by the platform.

In some cases, platforms that use this approach aim to help players switch to a self-custody wallet once they are ready to take full ownership of their digital assets.

For instance, Mythical Games’ Mythical Platform, a full-service blockchain integration system, is built on the company’s unique blockchain that is compatible with the Ethereum Virtual Machine (EVM). This allows players who are new to the sector to use the platform’s custodial wallet, while more advanced players have the option to link their own wallets via bridges between the Mythical Chain and the Ethereum blockchain.

“We will eventually go non-custodial or we will let players opt in to become non-custodial,” Linden said, noting that the Mythical Games sees this level of adoption as a phased rollout requiring more consumer education. Less than 5% of players were interested in self-custody as of December 2022, he estimated: “There’s a small percentage. It's growing, but very slowly. But when you go non-custodial, you have more issues around scams and things like that.”

Learn about user-generated content tools

Popular among many burgeoning Web3 gaming worlds are contests, incentives and collaborations that encourage players to contribute or design gaming experiences. This type of content is called user-generated content.

Félix Bossé, Lighthouse’s metaverse researcher, takes pride in experimenting with user-generated content throughout popular metaverse worlds like Voxels and Mona. He designed a 3D pumpkin patch on the Ethereum-based platform Hyperfy using Blender, an open-source 3D animation tool. With community input, Bossé even penned a storyline describing a witch who stole the pumpkins and then challenged his peers to "save Halloween" by playing.

“It was a really fun way for me to experiment with community-built worlds and decentralized world-building,” Bossé said.

Brush up on financial literacy

Web3 gaming requires that players enhance their understanding of cryptocurrency and blockchain payment tools. This can make some gamers “fearful,” said Siu.

“[Some gamers] don't understand financial systems,” he said. “A bank account allows you to deposit money, but that doesn't actually mean you're investing. Nor does it mean that you know anything about earning yield. I think this comes down to financial education.”

Some digital assets can be highly speculative, and so it’s important to manage your funds wisely and exercise caution when making high-risk bets.

Of course, Web3 gaming isn't necessarily about getting rich quickly. Rather, it’s about redefining the gaming industry and giving players an opportunity to own their identities and assets within gaming worlds and across platforms.

This article was originally published on Dec 29, 2022 at 7:06 p.m. UTC


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Megan  DeMatteo

Megan DeMatteo is a service journalist currently based in New York City. In 2020, she helped launch CNBC Select, and she now writes for publications like CoinDesk, NextAdvisor, MoneyMade, and others. She is a contributing writer for CoinDesk’s Crypto for Advisors newsletter.

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