Beyond being just a buzzword, Web3 is supposed to be a reimagined Internet that offers users gaming, social media and financial services through decentralized applications, or dApps, running on a blockchain and controlled by a user’s own wallet.
Gaming-related companies, such as Australian-based Immutable, reckon they will be the breakthrough industry for blockchain-based Web3 services and point to the interest of venture capital funds and the money flowing into the sector as evidence.
Much is at stake. The current global video gaming market was valued at US$195.65 billion in 2021 and is expected to grow about 13% every year from 2022 to 2030, according to market researcher Grand View Research. It also has large stakeholders. The gaming industry accounted for more than 70% of South Korea’s content production exports in 2020, according to its cultural ministry.
“The majority of the venture capital talent, the money and the actual people talent, is going towards the gaming sector, because we realize that it’s going to be the first breakout application,” Robbie Ferguson, co-founder of Immutable, said in an interview with Forkast at Korea Blockchain Week.
“It’s one of the strongest product market fits for a lot of Web3 and a real world use case,” said Ferguson, who helped start Immutable in 2018. The company now comprises Immutable X – a minting and trading platform for non-fungible tokens (NFTs) used in games such as Gods Unchained – and game developer Immutable Studios.
“If you look at the leading indicators of what will be happening in 12, 24 months, US$8 billion has been poured by VCs into Web3 gaming. It’s more than any other Web3 division,” said Ferguson.
Electronics-based gaming burst onto the scene in the 1970 and 1980s with so-called arcade games made by Japan’s Nintendo and Atari, and then moving from arcade to console to computer and mobile platforms.
The quest has been to provide players with unique experiences and blockchain offers another spin on that, said Henry Chang, chief executive officer of South Korean game developer Wemade.
“Blockchain technology is fundamentally separate from the game,” said Chang, using his company’s MIR4 fantasy warrior game as an example.
“If an NFT is minted in MIR4, the NFT doesn’t belong to MIR4,” Chang told Forkast, highlighting that blockchain-based games give users full ownership of the rewards they receive for the time and effort spent in the game.
Blockchain specialists at the conference in Korea also argued that gaming can help drive Web3, because the activity is resilient to economic ups and downs.
“Gaming has traditionally been a pretty recession-proof business, even in [market] downturns, gaming does very well,” said John Linden, chief executive officer of Mythical Games, at the conference.
“I think gaming is a great area to be in because it hasn’t really followed the economic patterns as much as other businesses have.”
Ganesh Swami, head of Canada-based Web3 data aggregator Covalent, said Web3 adoption will come through the current major players in the gaming industry rather than up-and-coming blockchain game developers.
“If you look at the biggest games in the blockchain space, they have maybe five, ten thousand daily active users. So they’re still very tiny, still very nascent in terms of the user bases,” Swami said.
“But triple A studios have millions of users. And so if they were to add a crypto experience that suddenly introduces millions of players to the Web3 space, that’s pretty exciting.”
Swami added that this could happen sooner than expected.
Apple’s decision to tweak its advertising model citing privacy issues has trimmed that revenue channel for game developers and publishers, so they’re looking at blockchain gaming as another revenue stream, said Swami.
However, he said for blockchain games to lead Web3 will mean a focus on the game experience, not just a means for players to earn rewards.
Play-to-earn (P2E) is a gaming element adopted by many blockchain-based games and has grown popular in recent years where players receive rewards that have real-world value, often in cryptocurrencies or NFTs.
“What needs to change is the play-to-earn kind of economy. It’s just not sustainable. The games don’t really have a gaming element, it’s more of a gambling element, so that needs to change,” said Swami.
Wemade’s Chang and Mythical’s Linden both brought up the term play-and-earn, rather than play-to-earn.
“We need to make sure we’re building real actual games with worlds and stories and gameplay,” said Linden. “When it’s built for speculation, it’s not as fun.”