What is the future of blockchain gaming?
What is crypto gaming?
Simply put crypto gaming is using the blockchain technology to reinvent gaming experiences and revolutionize in-game economics.
In-game currencies become fungible tokens with various utilities like governance, which gives players the right to vote on changes within the game and basically let the users create a game, that fits their needs. In-game assets like skins, weapons or land become NFTs, that provide users with verifiable ownership and can be easily traded on public markets and exchanges.
Applying public blockchain rails to game assets creates digital scarcity and verifiable ownership without the need for a privately maintained database. Public records of in-game items also demonstrate their rarity, providing greater transparency, further facilitating the creation of a formal secondary market and organic pricing of in-game items.
Another interesting aspect is the onboarding into existing DeFi infrastructure. Platforms like Nexo or JPEG’d give you the opportunity to collateralize your NFTs and borrow liquidity to work with without loosing the access and usability within the game. Also projects like Skill Labs give you a good overview of which games to play and where it’s most worth investing in and allocate NFTs to the best guilds and gamers to let them work for you.
The blockchain gaming space experienced a big hype in 2021 and over $8 billion were invested in blockchain gaming start-ups. Most of these are at inflated valuations vs their web 2 counterparts, mostly due to the massive potential of crypto.
Assuming at least half of this goes to hiring employees, that means there are 5,000 people right now building blockchain games. But building blockchain games and games in general takes time. That’s the reason why we’re currently in a “lag” period and we will probably see the first big games in 2023.
Furthermore it’s bear market time. In the last months we’ve seen some shocking events, which will go down in crypto history alongside a big price reduction. However, what brings hope for the crypto gaming sector is the consideration of UAW (unique active wallets). While this metric has fallen by around 26% across all sectors, the gaming sector has been relatively spared and UAW has only fallen by 5%.
The blockchain gaming sector has also developed over the past months and we have seen the rise and fall of many game economies. One of the biggest stories of 2021 and the beginning of 2022 was play-to-earn and almost every successful game during this period can be summarized under the term GameFi. Play-to-earn games managed to create a huge hype but time has shown, that play-to-earn may not be the most sustainable model and as fast as the hype was there, it was gone again, which was mainly due to three reasons.
The tokenomics of most play-to-earn games are not sustainable as almost all of them are inflationary and require new players to keep the game profitable for existing players.
Another reason is the lack of player experience and fun since the games mainly focused on earnings and are not able to retain players in the long term once the game is no longer profitable.
The last reason is the user experience, which has a big entry barrier for people who are not familiar with the crypto world. A classic path from the first point of contact to the first game looks mostly like this:
- Deposit funds into an exchange (most of the time no direct option)
- Convert that money into Ethereum for gas fees( min $50) and require game tokens ( min $100 to start playing)
- Send those tokens to Metamask
- Maybe even bridge Ethereum chain to another blockchain
- Create a profile for the game and use tokens to buy the first NFT or in-game character
- After going through all of that, you have to understand the game.
- Most of the games just have buttons for DeFi farming and you can do basic tasks that are more boring than the ones in Among Us
On the other hand, you can play a PlayStation game for infinite hours, spend less than $10 on the game and have the time of your life, which leads us to the last part of this article.
This PlayStation example shows us what should be the goal for blockchain games. Then only we’ll see sustainable business models for GameFi and blockchain games will be able to compete and even surpass traditional games.
Play-to-earn games need to be repositioned as play-and-earn games, that are focusing on the entertainment of the players while having a sustainable business model, which supports the community rather than being dependent on new players.
If this approach can be successfully implemented the possible market is huge as the gaming community is growing constantly and gaming has always been a big driver for the growth of blockchain communities.
Considering billions of dollars have been invested in crypto games, it is likely that the next generation of games will produce at least some more interesting games than the current generation. Also well-funded teams are learning from the mistakes of this recent boom, and actively improving both game design and economics to shift the narrative from play-to-earn to play-and-earn.
Given the scale and quality of talent and developers entering the space, we believe that sooner or later mainstream gaming and crypto gaming will converge, and there is still plenty of opportunity to be realized in this dynamic crypto space.