The runaway success of Axie Infinity y StepN has convinced a wave of entrepreneurs that web3 games, where ownership of game assets is in the hands of users through the adoption of blockchain rather than a centralized platform, it 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 win” model. While P2E games have attracted millions of players and billions of dollars of investors, gaming industry veterans argue that they are fundamentally unsustainable.
These games are the brainchild of financial engineers looking to get rich quick rather than experienced developers building time-honored worksthey say
The dramatic rise and fall of Axie Infinity it is revealing. After peaking at $754 million in November when bitcoin reached its all-time high, the game's monthly sales volume plummeted to $4,5 million in July.
“Most of the developers of game fi they are not game developers,” he says. Maciej Burno, who heads Polish game studio Reality's new metaverse business.
burno is among a number of blockchain-believing gaming veterans around the world trying to bring blockchain gaming into the mainstream. His vision is to counter the public impression that web3 games, popularized by P2E, are scams and garbage. Instead, they want to create games that are fun and sustainable, while introducing cryptocurrencies as a novel way to incentivize gamers and creators.
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 upfront to start playing.
En 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 of the NFTs then go to fund rewards for those who earn tokens by playing, and the tokens, the game's native cryptocurrency, can in turn be cashed out.
That means that for the game to be sustainable, it must have a constant influx of new users or loses its funding source. That's why critics compare P2E games to pyramid schemes.
Many of the P2E titles aren't really games by strict definition, Toong argues. They are more similar to decentralized finance, or DeFi, products with gamified features. Hardcore players discard Axie Infinity as "simple" or even "boring," not unlike the mindless, free mobile games they've been opposed to for years.
But for those living in developing countries, the prospect of making several hundred dollars a month by clicking on a computer screen can be tempting. That is largely the reason why Axie Infinity it took off in countries like the Philippines during the pandemic, when many people lost their jobs. For them, the game is more work than fun.
“I think there is a bit of elitism in this”says Simon Davis, CEO of Mighty Bear Games, a Singapore-based web3 game studio that just raised $10 million in a token sale, says of critics of Axie Infinity.
“There is a tendency in Western countries to dismiss things that are popular in other parts of the world and not be as respectful as it should be. If we look especially at the Southeast Asia and Latin America, and in countries where incomes are likely to be less high, people do not buy high-end equipment and game consoles. It is interesting to provide people with not only entertainment, but also a potential economic benefit.”
"I don't like the term play to win," continues Davis, a former design manager at Ubisoft. "I don't think it should be a primary motivation because you play a game for fun. But someone may decide that they don't want to continue playing and get some of their investment back at that point. I don't see how that's a bad thing."
While Davis recognizes the value of P2E, like many other seasoned game developers coming to web3, he is investing resources to perfect the game first and foremost. His studio had been producing mainstream games, like an official Disney and Pixar game and Butter Royale, a hit on Apple Arcade, before turning to blockchain. He will soon release his first web3 title, a third-person multiplayer battle royale incorporating token economy. It is not news that players are motivated to make money, even in the most developed parts of the world.
“Do you remember World of Warcraft? There is already a group of players in the MMO [massively multiplayer online] who hire tons of people in Vietnam and Indonesia to farm gold." observes Toong.
Burno agrees. "People want to play for fun and are willing to spend money that makes them happy, but there are also those who want to invest, so you can give them a tool to invest."
Developers are also promised higher rewards from games built on the blockchain. In free games, a monetization model Common today, developers earn revenue by pushing an update every "six to eight weeks," Davis notes. “Users are annoyed that you try to take money from them every two months.”
In web3 games, by contrast, the developers get a small percentage of each in-game transaction, which is recorded on the blockchain. "So the only thing you need to worry about is creating a game that people want to keep playing for a long time and creating value for the assets of players who want to trade with each other."Davis says.
To make a blockchain game sustainable, Toong's Red Door Digital is taking a different approach than Axie Infinity. Users do not need to buy platform tokens to start playing, unless they want to start earning or have real value on their assets.
When a game maintains a returning user base, the value of the game will increase and outside investors will join in, Toong reckons. "All of this increase in value is going to people who are playing for financial gain."
Like many web3 games, the platform for Network Door Digital offers utility tokens, which are used as in-game currency to purchase skins, items, etc., as well as government tokens. Users who contribute to the game will earn governance tokens and be able to vote on critical project decisions. Utility tokens can be traded, while governance tokens are illiquid to strip them of any speculative value.
Despite the torrent of VC money floating around web3 games, some studios and legacy publishers seem to err on the side of caution. Tencent, the world's largest game company, has no development plans for web3 games that are publicly known.
“Reputation is an important factor for the company, so if someone who creates this initiative fails, it is the end of their career. They will have to answer to the board,” says Toong. "Then, the only way is for them to invest in a crypto company or two to see how they do.”
