What is the next verb in web3? My prediction is “play”, and the precursor to “play” is “mint”. The next big opportunity area to have mass market adoption for “mint” is in the gaming and entertainment space.
Fundamentally, Web3 enables true ownership of your virtual assets, which perfectly aligns with the incentives of a creator economy. Content creators will be enabled to free their content from siloed platforms, and monetize to their own needs.
The next wave of innovation will come from tools and protocols enabling web3 and gaming to build together in a secure, compliant, and scalable way.
Let’s talk about gaming today from both sides.
Gaming → Web3
In the last 10 - 15 years, the rise of tools like Unity or Roblox game engine gave life to a plethora of game studios able to produce games with great graphics, and multiplayer hosting capabilities that scale quite well with a relatively lean team. You no longer need to be a John Carmack to create a Doom today - start by yourself, meet a friend online living in England, then add a few more you met on Discord, and bam, fast forward 5-10 years, you have yourself a game studio. It’s no surprise the number of game studios in the US alone grew linearly from 2010 - 2022 (but keep in mind all exponential growth looks linear at first), from ~2,000 in 2010 to over 20,000 in 2022. Along with that, an 11% CAGR revenue growth. Those growth numbers alone are impressive, even before discussing the evolving role of online gaming in modern society, which I will do in my next post.
In today’s landscape, a game studio’s main bottleneck is no longer improving graphics rendering, building engaging gameplay, or scaling infra for stability. It is the high cost of distribution for user acquisition.
Game studios are now faced with paying 30% to Apple to distribute through the App store to mobile users, or 30% to Steam for Desktop for the opportunity to be marketed in front of an engaged core gaming audience. Both of which provide little to no value-add in terms of game development, and are seeing pushback from studios like Epic Games, showing the first signs of discontent with an incumbent.
Enter web3. A new platform to reach your audience with virtually no distribution fee, apart from creating marketing materials and airdropping into the right wallets, which is open and available to you on the blockchain. Here you have an engaged, young audience who is already comfortable with spending money online for virtual assets —the perfect crowd for a game developer to acquire real users at low costs.
We’ve seen early success most notably with Axie Infinity, which generated US $1.3B in revenue in 2021, as well as new ideas like Step’n, paying you to walk, and The Sandbox, with a newly announced Paris Hilton partnership. There are also promising games in the works, such as Illuvium, Dark Forest, and many more in stealth and unannounced.
Web3 → Gaming
Shifting our attention to look from the other angle, existing NFT communities have their eye on gaming.
Whether it’s Cool Cats or Bored Ape Yacht Club, NFT communities have their eyes on gaming. It only makes sense - what’s the best way to engage a great audience you’ve cultivated online? Gaming is the natural answer.
While there’s interest, sadly most so far have the wrong ideas. Either by overestimating blockchain performance and bringing all transactions on-chain, or just not admitting that building a game is actually hard. Just because a game can be created by a small group of people, doesn’t mean any small group of people can create a great game. The core competency takes more than a few great marketing trailers and a visionary idea. I do not blame them though, as from Harry Potter to Kim Kardashian, the path to creating a game for an existing fan community is littered with skeletons.
However, the Absence of Evidence does not mean Evidence of Absence. While NFT communities haven’t cracked the code on an engaging NFT game, the thesis is alive and well. Many are investing in platforms, many are exploring for themselves, and there are those of us who are actively building.
Looking Forward
Regardless of which side first cracks the code on how to make a fun, engaging experience, my bet is on gaming being the next forefront of Web3 adoption, tying together decentralized community engagement. I expect to soon see an explosion of game studios turning their attention to Web3 and integrate with their games, using new tools to enable themselves in a Unity-like fashion.
The next wave of innovation will come from tooling and protocols at the intersection of web3 and gaming. Much like the last DeFi summer established the last verb as “lend”, the next verb in Web3 is “play”.
Special thanks to The Flash, Donkey Kong, Omid Ahourai, Hubert Lamela, Ran Mo, Davy Li, Niall O’Higgins, and everyone at Roblox for informing the thinking on this piece.
