Video gaming has exploded in popularity in recent years, with people of all ages and backgrounds enjoying the interactive and immersive experiences it provides. What was once “child's play” is now a real-life, lucrative profession. This trend is only set to continue, with the global gaming market expected to reach over $300 billion in revenues by 2026, according to a new report by PwC.

Alongside this explosive growth, the rise of web3 technologies – such as blockchain, cryptocurrencies, NFTs, DeFi, and the metaverse – showed the potential to revolutionize and improve the way we play and interact with games. By offering increased security, transparency, and interoperability, this new way of gaming will likely be a major catalyst in driving mainstream adoption of these technologies.

So, whether you're a hardcore gamer or just looking for some casual fun, it's worth keeping an eye on the exciting developments in the world of web3 gaming.

Introduction of blockchain-based gaming

Where to begin? Well, let's start at the beginning with the first widely recognized blockchain game, CryptoKitties. This is regarded by most as the start of blockchain gaming. CryptoKitties was launched in 2017 on the Ethereum blockchain and is a simple game where players can buy, breed, and sell cats represented as NFTs. It quickly became a phenomenon, with some kitties selling for hundreds of thousands of dollars – one even selling for a whopping 600 ETH or $1.3 million at the time. Yes, someone paid that much money for a picture of a pale, pink cat.

This rapid success sparked a wave of copycat games, and soon there were blockchain games for just about everything. And as the industry grew, so did the complexity and potential of the games. And that brings us to today… where we have a thriving and constantly-evolving ecosystem that shows real promise. By leveraging the decentralized and secure nature of blockchain technology these games can offer players new levels of ownership, interoperability, security, and transparency.

The dangers of the current way of gaming

It’s no secret that video game creators and studios hold an enormous amount of power in the digital age. Pay-to-play (P2P) games, or video games as you know them today, typically require the player to purchase the game itself and a subscription or membership to an online service. The player may also be required to purchase additional items, such as in-game add-ons and virtual goods. However, these in-game add-ons and virtual goods are known as sunken costs. Meaning you spend money on these things but can’t take your money out. You are essentially renting these digital items as opposed to owning them.

While P2P gaming can be a viable and lucrative business model for game creators and studios, it can also lead to the abuse of power. It is important for game creators to ensure that they are not exploiting their players. As you may have heard in the news recently, Fortnite was slapped with a $520 fine for exploiting children by using design tricks, known as dark patterns, to influence millions of players to make unintentional purchases.

With the continued rise of these centralized, metaverse-like games such as Minecraft and Roblox, it’s vital that this power is not abused – whether through censorship, manipulation of in-game economies, or the collection and misuse of player data. The lack of transparency in operations can make it difficult for players to know how decisions are being made or how their data is being used. And this can lead to unfair policies or practices that favor the company over its users.

So, what’s the solution?

Decentralization, through blockchain gaming, offers the potential to disperse this power, creating a more diverse and democratic landscape for gaming. Imagine a world where players have more control over the games they enjoy, free from the constraints of a few dominant corporations – crazy thought, right? It may sound like a utopia, but decentralization could bring us one step closer to making it a reality.

A popular alternative model, such as Play to Earn or “P2E” gaming tried solving this. It offers players a unique experience without some of the negatives associated with traditional P2P.

P2E games are different from traditional games because they allow players to earn cryptoassets (cryptocurrencies or NFTs) by playing the game. The cryptoassets from these games can then be converted into real fiat money or used to buy or trade new items within the game. The idea is to encourage gamers to continue playing by giving them an incentive in cryptocurrency or NFTs so that they can redeem it for real-world goods and services.

There are already several successful blockchain-based games that are taking advantage of these benefits. Axie Infinity, for example, is a game that uses blockchain to enable players to own and breed creatures called Axies as NFTs, which can be used to battle other players.

Another project, and one of my personal favorites, is Gods Unchained. This is an online strategy trading card game based on the play-to-earn model. You can trade cards, as NFTs, with real-world value based on their native GODS token. For all you Magic: The Gathering fans… this one is for you. Other honorable mentions include Undead Blocks and Monkey Empire.

While we saw the explosive growth and decline of P2E in 2021 and 2022, I believe we have only scratched the surface of what blockchain and web3 gaming can offer. The question remains… how do we progress from here?

DeFi, GameFi, SocialFi, and the convergence in the metaverse

Ah… the metaverse, the hot new destination – and rightfully so. As per the latest industry reports by Fortune Business Insights, the global metaverse market is expected to reach $1.5 trillion by 2029 from $100.27 billion in 2022, at a CAGR of 47.6%. Some even predict that the metaverse could be valued at $30 trillion in the next decade. This growth contributes to a surge in the adoption of online video gaming based on AR/VR trends and other web3 technologies. 

Want to travel to places you never thought possible? Or earn yield farming rewards while taking down dragons and chatting with your friends? How about being able to watch the Forum being built in ancient Rome – right in front of your eyes? Well, it's only a matter of time before this will all become reality.

As the metaverse continues to advance, and with the convergence of DeFi, GameFi, and SocialFi, we will begin to experience seamless, immersive metaverses that blur the lines between work, play, and socializing. DeFi will provide the financial infrastructure, GameFi will bring fun and competition, and SocialFi will foster a sense of community and connection. Together, they form the ultimate trifecta. But without DeFi, a metaverse or game will lack the ability to scale. Without GameFi, the community will lack the motivation to want to return to it. And without the SocialFi aspect, there would be no credibility.  

In my opinion, there are a few virtual worlds leading the way such as The Sandbox and Decentraland, but newer more cutting-edge metaverses like Cornucopias, the Otherside, and Somnium Space are catching up.

To put this into perspective, The Sandbox allows players to earn their cryptocurrency (SAND) through gameplay and by participating in the platform’s governance system. SAND can be staked to earn yield and used to purchase in-game items and virtual real estate. The token can then be traded on reputable crypto exchanges to be swapped for other crypto tokens or sold for fiat currency. To keep users engaged, The Sandbox offers several games and activities, such as puzzles, action games, and social games for users to enjoy. Users can even create their own games and experiences to share with the community.  They also put a strong emphasis on community and social interaction, with several features designed to foster more meaningful connections between players.   

While we still need to make progress on the UX side, it's clear that DeFi, GameFi, and SocialFi are redefining how we interact, entertain, and earn money and it will be interesting to see how rapidly this trend continues to evolve.

Potential roadblocks to mainstream adoption

It’s obvious that blockchain and the rise of decentralized technologies have the potential to revolutionize the gaming industry and onboard millions of users to the world of web3, but there are several roadblocks that may prevent it from achieving mainstream adoption.

One of the main challenges is the limited scalability of current blockchain platforms. Because every transaction on a blockchain must be verified by multiple nodes (computers), the speed of transactions can be slow, and the amount of data that can be processed is limited. This can make it difficult for large-scale, resource-intensive games to operate on a blockchain. With that said, the emergence of next-gen blockchains and scalability solutions such as Layer-2 blockchains, and ZK & Optimistic rollups, continue to strive to solve this issue.

Another challenge is the lack of user-friendly interfaces for interacting with blockchain games and the metaverse. Quite frankly there aren’t a ton of blockchain games or metaverses that people want to actually use. Some of these games also require users to have some basic level of technical knowledge, which can be intimidating for the average person.

Additionally, there’s the interoperability issue. Interoperability refers to the ability of different systems or platforms to work together and exchange data seamlessly. In the context of blockchain gaming and the metaverse, this means that games and virtual worlds on different blockchain platforms should be able to interact and exchange data and assets with each other. For example, do you know what Transmission Control Protocol/Internet Protocol (TCP/IP) is? Unless you love computers or you're a flat-out nerd – I bet you don't. Well, it's the backbone of the Internet and it allows computers running different operating systems to communicate with each other.

The problem is that most current blockchain platforms are disconnected from one another, which can make it difficult for them to communicate with each other. This can create barriers for users who want to participate in multiple blockchain games or virtual worlds, as they may have to manage multiple accounts and wallets across different platforms. The future must be interconnected and projects like Metalinq are looking to solve this problem.

Finally, there is the issue of regulation. Because these technologies are still relatively new and unregulated, there is a lack of clear guidelines for how these types of games and virtual worlds should be governed and how in-game earnings should be taxed. This can make it difficult for developers to create and operate these systems, and it may also discourage users from participating.

The concept of computer science has been around since the late 1950s yet the birth of the internet (web1) as we know it did not come until 1983. Fast forward 13 years and the Telecommunications Act of 1996 was introduced which provided regulatory clarity. It marked the end of the telephone age and the beginning of the internet age, from a policy perspective. Regulations would continue to follow, but overall, it was a positive catalyst for the adoption of the internet. As a reminder, Bitcoin recently turned 14 years old on January 3rd. We are still very early.

As history will tell us, and for emerging technologies to achieve mainstream adoption, we must find ways to overcome interoperability and scaling issues to make for a seamless user experience. And it’s absolutely vital that people have the motive to want to use and interact with these games/metaverses in place of current platforms –and quite frankly most do not.

Wrapping it all up 

With the vast potential for in-game economies and the ability to easily earn, trade, and manage digital assets, it's clear that video gaming is poised to drive mainstream adoption of web3 technologies like NFTs, DeFi, and cryptoassets. This will shift the power from the creator's hands to the players allowing for true ownership of in-game items for the first time.

Gamers are used to sinking their time and money into the games they love in exchange for enjoyment, which is perfectly fine, but it doesn’t have to be that way. If the achievements and items you earn in-game have real-life value, it changes a lot for people. Everyday gamers can start making a fortune, an honest living, or even just some of their money back. It’s certainly better than the current way – making zero!

As always, is important to note that major risks and challenges are involved in this emerging space. These risks may include technical difficulties, regulatory challenges, and the possibility of financial loss. However, it is important to remember that with risk comes the potential for great reward. So, while caution is certainly warranted, the future looks bright for those willing to take the plunge and explore the exciting world of web3 gaming.

A quick call to all developers and investors!

If you are tired of the same old, centralized gaming experiences, I encourage you to dive into the world of web3 and its endless possibilities. The future of gaming is here, and it's time for you to get in on the action. Whether you're interested in creating the next generation of decentralized games or looking to invest in promising projects, the web3 gaming space is ripe with opportunity.

So don't miss out - join the revolution and let's make some game-changing moves together!

A quick note on the current state of the market

Let’s be real… 2022 was not a great year to be invested in cryptoassets. If you held on to your crypto or NFTs, you are likely down 90 percent or more. This year may be no different as we are still in an uncertain, inflationary, brutal bear market. The fate of 2023 very well may be in the hands of the FED. If they switch up their position and stop raising rates, it will be bullish for all markets. However, if they don’t… we may see another significant dip.

If you are hanging in there, remember one thing… opportunity will present itself in 2023. Keep your emotions aside and continue to educate yourself. Research the history of the market, top trends, narratives, and projects – your future self will thank you.

Disclaimer: This is NOT financial advice nor am I a financial advisor. This is a personal blog and the opinions expressed here represent my own and not those of any organization I am affiliated with. The information on this blog is for informational and entertainment purposes only and is not intended as financial advice. Cryptoassets are highly volatile and carry significant risks. Please do your own research and consult a financial advisor before making any investment decisions.