The gaming space has always sat on the cutting edge of technology. And now, as we move into a new era of innovation, the term Web3 gaming keeps appearing. But what is Web3 gaming, and what opportunities can it afford gamers and the ever-growing industry?
Web3 gaming is the current gaming sector looking towards emerging technologies to remain on that cutting edge. But instead of simply using more powerful hardware or upgrading graphics, Web3 gaming is looking to use things like the Metaverse, NFTs and blockchain technology.
Using these new and emerging technologies is not simply advancing the gaming space but entirely revolutionising it. Blockchain has the potential to bring gaming into the Web3 space and offer opportunities and benefits to gamers and players that were previously inconceivable.
The basis of blockchain technology lends itself well to a new era of gaming, with components such as decentralisation, security, tokenisation and ownership all able to play a big role in changing gaming as we know it.
Integrating NFTs and the digital ownership that can be brought to gaming has huge implications for gamers who value their in-game items. However, it also can provide the gaming industry with a new revenue stream.
GameFi, P2E & Gaming Economies also come into play with blockchain-enabled Web3 gaming. This new dynamic fits in with what gamers want but also is a huge boon for game creators and developers.
Finally, decentralised platforms and gaming DAOs are being explored all the time. These mechanisms put the power back into the hands of the gamers and allow for much greater control and ownership over the games that people love.
Because Web3 gaming is a revolution and one that is predicated on the blockchain, there are ample opportunities that are still to emerge. Foundations are being laid, but the future of Web3 gaming is still being built and felt out.
With that in mind, it is worth diving into the key components that blockchain can bring to Web3 gaming and why it is necessary, as well as a look at three major use cases.
The Key Components
It is unsurprising that much investment has already flowed into blockchain gaming even in these early stages. During Q1 of 2022, an estimated $2.5 billion was invested into blockchain gaming, according to Dapp Radar.
However, it is estimated that the market size of blockchain gaming could reach as high as $50 billion in the next three years. Much of this has to do with the key components of blockchain that can assist with Web3 gaming, but also because of the general current components of the blockchain.
For example, it is predicted that the economic potential of a decentralised Metaverse could be as high as $8 trillion — according to Morgan Stanley. Meanwhile, 2021 NFT sales related to gaming assets accounted for 20% overall.
The Metaverse, NFTs, and even Gaming DAOs are all components that work on blockchain for gaming, but it is the Web3 aspects of decentralisation, security, tokenisation and ownership that are sucking blockchain into Web3 gaming and providing these opportunities.
Blockchain is well heralded for its decentralisation and ability to empower users to act online without the need for intermediaries. Bitcoin, as the first major decentralised cryptocurrency, showed how people could transact without the need for banks and other centralised entities.
Since then, Ethereum and other smart contract platforms have expanded the possibilities of decentralisation. With powerful smart contracts and other platforms, decentralisation can be utilised in various ways and within gaming.
Putting people in charge of their online decisions and protecting their information and data through decentralised platforms makes a lot of sense for gamers who want to immerse themselves in a game but not necessarily be beholden to the game creator.
Along with decentralisation, blockchain is known for its security. The power of a decentralised network of nodes to ensure transactions means gamers can feel protected when using a Web3 game with blockchain-enabled security.
The security of blockchains has been seen across financial transactions. It can easily be moved to the gaming space to secure in-game transactions and to keep personal data private and secure.
The proliferation of cryptocurrency in the financial sector is well known, but tokens secured on blockchain have much more utility that simple monetary transactions.
Within the gaming space again, there is a need for in-game purchases — but the current method of buying in-game tokens is plagued with issues. There is a real lack of security with these tokens, and this economy’s control lies fully in the game creator’s hands.
Tokenisation also powers NFT functionality and DAOs meaning a new economy can form – one that is secure, decentralised and empowers the gaming community.
Aspects like NFTs showcase how important and powerful individual, verifiable ownership is for people. NFTs have taken the art world by storm, but the very reason they are so popular there also translates into gaming with in-game assets.
Skins and weapons or tools in-game are important to gamers, and they want full ownership and control — as well as verifiable rarity and information on their items. Ownership of assets can impact gaming on a huge level if done right with blockchain.
Opportunity #1: NFTs & Digital Asset Ownership
NFTs, thanks to blockchain’s core components, can represent real-world items or digital items in a true and fully verifiable way. This is massive for gamers as in-game assets can be backed by NFTs.
In-game items are not only highly prized by gamers, they can also form the basis of an entirely new off-game market. Gamers can collect skins, ammo, weapons, or any other in-game usable assets, but as an NFT they will have true and fully transparent ownership they can take off the game.
Having desirable in-game assets with the ability to be bought and sold on secondary NFT marketplaces will bring a new dynamic to games, and for gamers. With NFT in-game assets, there is the opportunity for them to accrue real value and be collected for their resale value as well as the prestige of ownership.
NFTs protect gamers from centralised failure and hacking as their assets benefit from blockchain security. Recently, it was seen that a CS:GO trading site was hacked to steal $6 million worth of skins.
Opportunity #2: GameFi, P2E & Gaming Economies
Gaming economies are already in play with the current crop of games. However, they are basic and have little usability outside the game. Yet, if Web3 gaming did embrace blockchain, a new world of GameFi and Play-to-Earn (P2E) could be awoken.
Gamers are already known to grind out tasks for better skins and in-game benefits. But, those benefits could be cryptocurrency based, meaning the reward for their hard work has tangible benefits and value outside of the game.
Earning tokens in a new crypto-based gaming economy through GameFi means the tokens players earn can be easily sold on crypto exchanges and traded for other cryptocurrency (such as ETH/BTC) or fiat money (such as USD/EUR). This Web3 gaming world where Play-to-Earn is ingrained means that the gaming space can be much more viable, lucrative and desirable for players.
Opportunity #3: Decentralized Platforms & Gaming DAOs
To grow the gaming space further, Web3 can invite and open opportunities for next-level participation. Maintaining decentralised power for games means those who are closest to the game can have an input into its development and evolution thanks to gaming DAOs.
Adding a decentralised edge means there is no centralised head at the top of the gaming pile making decisions that impact gamers — it can be the gamers that shape their own game.
By using DAOs and voting mechanisms, players are the ones that influence the in-game evolution.
Challenges of Web3 gaming
The desire and drive to change gaming to match the technological growth are certainly present in the users; it is now about meeting those demands. However, it is not a simple task to shift gears so drastically and evolve the gaming space with emerging technologies as challenges exist.
With blockchain and the decentralised nature of the technology, there will always be concerns about regulation. It has been seen with cryptocurrencies that there is a need for a new regulatory framework to be developed due to their financial nature, but also because of their decentralised make-up.
In gaming, where transactions and financial implications do come into play, there will be regulatory concerns that need to be addressed. However, ensuring blockchain is well regulated yet still innovative is well underway.
Blockchain technology itself also requires growth. Scalability has been a long-standing challenge to some of the larger public networks. This limitation on the ability to handle many smart contract executions at once has curtailed blockchain use in certain areas. However, some chains are actively addressing this and aiming for massive scalability solutions.
Essentially, the move towards Web3 gaming is inevitable. Gaming is a growing sector and one that looks to be at the cutting edge of technological advancement. With a new host of technologies emerging in this shift to Web3, gaming will certainly be at the forefront.
Furthermore, the desire from end-users, or players, is prevalent and clear, and studios and developers also understand their own deliverables and need to keep up with the changing scene.
It is an ideal time to enter the world of Web3 and blockchain gaming as the opportunities are already vast, and they will only continue to grow as the shift towards Web3 is entrenched in the coming years.