26 September 2023

From industry to economy: How Web3 is transforming gaming

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Roy Liu* says Web3 is changing the way that games are designed and built.


Web3 and the metaverse are two of the hottest buzzwords in tech circles right now.

The appetite among investors has precipitated a “cascade” of investment into blockchain platforms, according to Crunchbase, which cites recent funding rounds for Polygon Technologies and Alchemy worth a combined $650 million.

One vertical attracting more attention than most is gaming.

In early March, a group of heavyweight investors, including billionaire Bill Ackman and gaming giant Animoca Brands announced a new Web3 venture fund focusing on the metaverse, gaming, and social applications.

Around the same time, Griffin Gaming Partners, a gaming-focused VC fund, announced it had successfully raised $750 million.

However, this wave of investment isn’t simply about making more, bigger, better games.

Web3 is changing the way that games are designed and built, incentivizing and engaging users and developers with the promise of token-based rewards.

The shift from the established gaming model is so fundamental that within only a few short years, we’ll no longer refer to gaming as an industry but as an economy.

Crowdsourcing game development

This change is already underway, as we can see in the way game studios are evolving their development process.

In the established industry model, a small handful of game studios are responsible for the lion’s share of revenue through the carefully managed release of big-name game titles like Call of Duty or Player Unknown: Battlegrounds.

These games are generally developed in a black box, and intellectual property is understandably carefully guarded as it comprises the studio’s major intangible asset.

Studios invest significant sums in marketing games through online campaigns.

It’s also a struggle to hire game developers, as there’s a relatively small pool of people to meet the vast demand for new gaming content.

Things are changing, though.

Games like Roblox are pioneering a new model of user-generated content (UGC) effectively crowdsourcing development to legions of eager players and supporters.

There are also vibrant communities of “modders” who create modified versions of games or in-game scenarios, often hosted on private servers.

For game studios embracing this model, it’s a win-win scenario.

It keeps a steady churn of new content coming to satisfy players without requiring the firm to keep developers on the payroll.

Those who create game content are paid for their efforts, creating a new source of income.

Such an approach fosters more organic marketing through word of mouth and viral content.

UGC: A natural fit for Web3

The UGC model lends itself particularly well to the Web3 space, which is based on decentralized blockchain networks.

The Web3 model cements economics into the heart of the game, creating open, decentralized worlds where anyone can join and contribute to building or become incentivized to play.

Thanks to this model, Web3 games don’t necessarily need to engage users through CGI-type graphics and intricate plot developments.

Instead, there’s a focus on asset ownership, community building, and engagement through interaction.

Furthermore, Web3 increasingly blurs the boundaries between gaming and finance.

In traditional games, assets only exist inside the game and aren’t portable.

In contrast, assets in Web3 games can be transferred into other environments where they also have value and can be traded on the open market via decentralized exchanges.

Gamers can also leverage these assets in DeFi apps by staking them as collateral for loans.

Gaming in the gig economy

We’re only at the very beginning of this shift but ultimately, it seems most likely that gaming will come to be part of the gig economy model that now dominates almost every other online sector.

Freelance game development will move to become a monetized income stream in a similar way to how the influencer economy has evolved.

Rather than earning a salary or being paid for a particular freelance job, developers will be rewarded according to the level of gameplay and other engagement their creations receive.

From this environment, a world of other marketing and branding opportunities will emerge.

Right now, luxury brands are teaming up with game studios, such as Balenciaga’s collaboration with Fortnite.

In the new gaming economy, brands will be wooing the new generation of gaming influencers who can attract the biggest audiences for their game assets in decentralized metaverses and Web3 applications.

From esports to P2E

If this seems too far-fetched, then we only need to look at what’s happened on the player side over the last decade or so and what’s happening today.

The emergence of the MOBA (Multiplayer Online Battle Arena) genre, which pits teams against one another, gave rise to the esports industry.

What else is esports than a way for top players to monetize their gaming through tournaments and sponsorships?

By 2019, esports was worth nearly $1 billion and is forecast to reach $1.6 billion by 2024.

Last year, esports players took home over $200 million in prizes.

Now, we also see the play-to-earn (P2E) trend emerging from the blockchain space, popularized by games like Axie Infinity, The Sandbox, and Splinterlands.

Play-to-earn offers another way for gamers to generate revenue, and during the pandemic, it proved massively popular in Asian countries as a way of replacing lost income.

In 2021, investment in the game sector reached new highs — and Forbes credits this increase to an influx of funding for blockchain-based games.

One of the best things about the shift from the gaming industry to the gaming economy is that it doesn’t attempt to outdo or replace the existing game industry model.

Game studios will still release their flagship titles for eager fans who want the glossy gameplay.

In parallel, those same fans and many other gamers and developers can also participate and profit from the Web3 play-to-earn and create-to-earn gaming economy.

Ultimately, the shift will bring benefits for everyone who loves gaming.

*Roy Liu is the cofounder of Mobland and former head of business and marketing of TRON.

This article first appeared at venturebeat.com.

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