Gaming vets vow to make blockchain gaming fun and sustainable – TechCrunch

The runaway success by Axie Infinity and StepN have convinced a crowd of entrepreneurs that web3 gaming, where the ownership of in-game assets is in the hands of users via blockchain adoption rather than a centralized platform, is the future.

Some of the biggest hits in the space to date reward users with tokens that can be cashed out in what is known as the “play-to-earn” model. While P2E games have attracted millions of players and billions of dollars from investors, gaming industry veterans argue that they are fundamentally unsustainable.

These games are the brainchild of financial engineers aiming to get rich quick rather than seasoned developers building venerable works, they say.

Axie Inifity’s dramatic rise and fall is telling. After peaking at $754 million in November when bitcoin reached an all-time high, the game’s monthly sales volume fell to $4.5 million in July.

“Most GameFi developers are not game developers,” says Maciej Burno, who heads the new metaverse business of Polish game studio Reality.

Burno is among a crowd of blockchain gaming veterans around the world trying to bring blockchain gaming to the mainstream. Their vision is to counter the public perception that web3 games, popularized by P2E, are all scams and crap. Instead, they want to build games that are both fun and sustainable, while introducing cryptocurrencies as a new way to incentivize players and creators alike.

Is it a game?

The problem with P2E, as seen by See Wan Toong, a former senior technical director at Electronic Arts and CTO of web3 gaming startup Red Door Digital, is that users have to spend money up front to start playing.

In Axie Infinity, users buy and breed cute blob-like creatures called Axies in the form of non-fungible tokens that are authenticated on the blockchain. Sales from the NFTs then go towards funding rewards for those who earn tokens by playing, and the tokens, the game’s native cryptocurrency, can in turn be cashed out.

This means that for the game to be sustainable, it must have a constant influx of new users, otherwise it will lose its source of funding. That’s why critics compare P2E games to pyramid schemes.

Many of the P2E titles are not really games by strict definition, argues Toong. They are more akin to decentralized finance, or DeFi, products with gamified features. Hardcore gamers dismiss Axie Infinity as “simple” or even “boring”, not unlike the free-to-play, mindless mobile games they’ve railed against for years.

But for those living in developing countries, the prospect of earning several hundred dollars per month by clicking on a computer screen can be tempting. This is largely why Axie Infinity took off in countries like the Philippines during the pandemic when many people lost their jobs. For them, the game is more like work than fun.

“I think there’s a bit of elitism in it,” Simon Davis, CEO of Mighty Bear Games, a Singapore-based web3 game studio that just raised $10 million in a token sale, says of Axie Infinity critics.

“There is a tendency in Western countries to reject things that are popular in other parts of the world and not be as respectful as you should be. If you look especially in Southeast Asia and Latin America, and countries where incomes are probably less high, people are not buying high-end gaming rigs and consoles. It is interesting to give people not only entertainment, but also potential financial benefits.”

“I don’t like the concept of play for profit,” continues Davis, former head of design at Ubisoft. “I don’t think it should be a primary motivation because you’re playing a game to have fun. But someone can then decide they don’t want to play the game anymore and get some of their investment back then. I don’t see how that’s a bad thing.”

Play and earn

While Davis recognizes the value of P2E, like many other experienced game developers entering web3, he pours resources into perfecting the gameplay first and foremost. His studio had produced conventional games, such as an official Disney and Pixar game and Butter Royale, a hit on Apple Arcade, before moving to blockchain. It will soon launch its first web3 title, a multiplayer third-person battle royale that includes the token economy.

Games can be both fun to play and lucrative, some blockchain game developers claim. It is not news that players are motivated to make money – even in more developed parts of the world.

“Remember World of Warcraft? There is already a group of players in the MMO [massively multiplayer online] games that employ tons of people in Vietnam and Indonesia to mine gold,” observes Toong.

“When you look at a traditional game, people put millions or billions of dollars into the gate, but that’s at the other extreme. They get no value back, adds Toong.

Burno agrees. “People want to play for fun, and they’re willing to spend money that makes them feel happy, but they’re also the ones who want to invest, so you can give them a tool to invest.”

Developers are also promised greater rewards from blockchain-integrated games. In free-to-play games, a common monetization model today, developers earn revenue by pushing an update every “six to eight weeks,” Davis observes. “Users get annoyed that you’re trying to squeeze money out of them every two months.”

In web3 games, on the other hand, developers get a small percentage of each in-game transaction, which is recorded on the blockchain. “So the only thing you have to worry about is making a game that people will continue to play for a very long time and creating value for those assets of the players who want to trade with each other,” says Davis.

Tokenomics

To make a blockchain game sustainable, Toong’s Red Door Digital takes a different approach than Axie Infinity. Users do not need to buy the platform’s tokens to start playing – unless they want to start earning or have real value in their assets.

When a game maintains a recurring user base, the value of the game will increase and external investors will join, Toong reckons. “All this added value then goes to those who play to get a financial return.”

Like many web3 games, Red Door Digital’s platform offers utility tokens, which are used as in-game currencies for purchasing skins, items, and so on, in addition to control tokens. Users who contribute to the game will receive governance tokens and be able to vote on critical project decisions. Utility tokens can be traded, while governance tokens have no liquidity to deprive them of any speculative value.

While developers are still working to optimize their token economy, investors are already plowing big money into their fledgling businesses. Blockchain games attracted a whopping $2.5 billion in funding in Q2, according to DappRadar, a data company that tracks decentralized apps. In H1, blockchain gaming accounted for roughly 30% of all capital raised by private gaming companies, a report from investment bank Drake Star shows.

Despite the flood of VC money flowing into web3 games, some legacy studios and publishers seem to be erring on the side of caution. Tencent, the world’s largest gaming company, has no publicly known development plans for web3 games.

“Reputation is a big thing for the company, so if someone creating this initiative fails, it’s the end of their career. They have to answer to the board,” Toong says. “So the only way is for them to invest in a crypto company or two to see how it goes.”

The web3 gold rush also presents challenges for crypto-skeptics in the gaming arena. An Asia-based gaming focused fund manager is frustrated that investors he meets these days are overwhelmingly interested in knowing if his fund has a web3 angle.

“If I say I don’t, they won’t invest.”