Blockchain gaming activity hit an all-time high in April, according to the latest DappRadar and BGA Games report . Gaming dapps attracted over 1.2 million new active wallets. Despite the market downturn, 2.22 million unique active wallets (UAWs) were connected to blockchain dapps daily in May, down 5% month-on-month compared to April, but still 32% higher than in May 2021.
It has been argued that the recent cryptocurrency market crash has helped to weed out unqualified market participants from it, which may also reduce market speculation and allow crypto users to focus on the long-term value of the project.
So how will Web3 games develop in the future? Today, let’s take a look at the overview compilation of 5 Web3 game-related papers compiled by Vader Research before:
Thesis 1: Optimistic about Web3 games developed by Web2 game developers
Game production is not an easy job. It is even more arduous to make a game go from release to success. Otherwise, why do thousands of games go to death every year! Despite its popularity, the industry has long been criticized for being unscalable and difficult to venture into. Because of the transferability of mobile game technology, the development of know-how in popular game development can be transferred through design, which has greatly changed the development of the industry.
But the current wave of web3 gaming development is not designed for traditional gamers looking for fun, but for cryptocurrency and gold-mining researchers looking for Ponzi schemes. From the outset, we have expressed concerns about the sustainability of Axie Infinity’s profit model. P2E is a game-like pyramid scheme around complex token economics, and all P2E games are bound to collapse, just like every undercollateralized algorithmic stablecoin collapses.
Every game economy has cash inflows and outflows. In fact, for any game to be sustainable, cash inflows must exceed outflows. The inflow of a sustainable gaming economy should come from players who spend on sinking markets (cosmetics, VIP channels) in pursuit of entertainment without expecting financial returns.
The problem with the P2E model is that players spend money on these games but expect to double their money within 30 days. These inflows are what we call a dip in inflation. They provide a short-term cash flow boost to the gaming economy, but at the cost of larger long-term economic problems.
So the real solution is to build a fun game with an addictive hardcore looping mode, beautiful visuals. Great storyline and vibrant social elements to conquer traditional gamers spending money on virtual items without any expectation of financial return. Gamers are known to typically spend money on virtual items to satisfy emotional needs.
Designing such an addictive game is very challenging and often takes years to complete. We believe that it is easier for traditional game developers to design games than crypto-native founders with the help of experienced consultants with a background in cryptocurrency.
Because traditional gamers don’t care about NFTs, decentralization, or ownership issues. They want fun games, exciting gaming experiences. And Web3 Gaming needs to appeal to traditional gamers with fun games and a smooth onboarding experience.
Therefore, we prefer web3 games developed by experienced web2 game developers.
Thesis 2: Gaming NFTs will become a $100 billion+ financial market
Due to the way ownership is distributed on the blockchain, most web3 games will have more open economies where in-game assets can be traded permissionlessly on the secondary market. Traditional in-game virtual items are a $50 billion industry—a figure that mostly only includes primary sales, as trading in secondary game items is often expressly prohibited. In 2015, the total black market value of used game merchandise was estimated at $5 billion.
As traditional games are integrated into the web3 model, more web3 games are released, and millions of unique in-game NFTs emerge as the times require. To date, there are over 12 million unique Axie NFTs. We believe that the growth of web3 games will lead to the cumulative scale of in-game NFT secondary financial markets exceeding some financial markets.
Like every other complex financial market (stocks, bonds, commodities), after the game NFT financial market will reach a certain scale, it will also attract suppliers to solve certain complex problems for the people, such as asset management companies, Hedge funds, activist investors, quantitative traders, passive indices, derivatives brokers, guild brokers, structured NFT lenders, M&A advisors, and more.
We believe that the integration of traditional games into web3 games will accelerate the growth of the entire industry, and the open economy of web3 games will attract more speculators and financial capital, which is expected to increase the cumulative game NFT market size to more than 100 billion US dollars.
Thesis 3: Every Web3 Game Will Have a Central Bank Governor
Every Web3 game is an independent country with an open economy. Players are citizens, speculators are foreign investors, gold diggers are migrant workers, and game developers are governments and central banks.
In a real-world economic system, there is a trade-off between economic growth and development sustainability – usually governments focus on short-term growth to win elections, while central banks focus on sustainability to achieve long-term sustainable economies . To achieve both goals simultaneously, economies will strive to have both productivity and efficiency (better technology, lower costs, higher output).
Virtual world economies have different priorities—first attracting, retaining and monetizing players, and then maximizing the long-term value of gaming franchises. The sustainability of the economy has an equally important impact on player behavior. Virtual economists don’t need to address issues like poverty or unemployment. That said, having a sustainable virtual economy is important to ensure long-term player retention. The inefficiency of virtual worlds is a feature, not a bug.
The Web3 game economy has a challenging problem that we haven’t fully faced before, and that is an open virtual economy with multiple user groups (gamers, speculators, gold farmers) in an unlicensed secondary market , because of the lack of supervision, there will be many problems. Web2 MMOs such as Runescape, EVE, World of Warcraft, etc. face similar challenges to some extent, but so far, there is no secondary market that can achieve permissionless and frictionless conflicts.
Retention and monetization, while maintaining balanced growth in a sustainable open gaming economy, will be an ongoing challenge for web3 gaming virtual economists, as free market arbitrageurs will continue to look for inefficient alternatives. Game economic management is also an important user acquisition channel motivated by Token/NFT.
So every web3 game will have an internal or external central banker.
Thesis 4: Ponzi schemes will slow down Web3 gaming
Projects such as Stepn, Luna, Thetan Arena, DeFi Kingdoms, and Pegaxy use complex token economics to mask their Ponzi economic nature, which will leave web3 games several years behind in acquiring real gamers compared to web2 games year.
Influencers and VCs of these projects market as safe or non-Ponzi schemes, but at the expense of the cryptocurrency’s creditworthiness. While some users are aware of Ponzi schemes and enjoy the thrill of gambling, most users are unknowing retail investors who mostly end up losing their savings.
The negative publicity and word of mouth surrounding the collapse of these projects often leads traditional gamers and game developers to think that web3 games and NFTs are nothing more than unregulated Ponzi schemes. However, the development of Web3 games requires traditional gamers, and their participation makes web3 games developed by experienced game developers more interesting and valuable.
Fun games don’t need a 5000% APY Ponzi scheme to build and grow a player base. These incentives attract hiring investors or gold diggers, who are immediately lost as soon as another similar project offers a more attractive return. Early games dominated by mercenary users may discourage traditional gamers from participating. These projects constantly require new funding to keep the economy going and will eventually face an inevitable death spiral.
If used wisely, Ponzi Economics can be a very effective tool for cold-starting and scaling network effects as long as it is not abused. The rule of thumb to know if a game has unsustainable Ponzi economics is to look at ROI (Return On Investment). If your payback period is less than 120 days, it’s a classic Ponzi scheme – the faster the payback period, the less sustainable the economy is.
We built detailed financial models for Axie Infinity, Pegaxy, Thetan Arena, Crabada and many other web3 games, applying various simulations and stress tests to predict the economic outlook. We also warned about Axie Infinity’s economic unsustainability in August 2021.
Ponzi schemes slow web3 gaming adoption. As such, we will only work with teams looking to build long-term game franchises, and will not offer any advice on designing unsustainable Ponzi economics.
“Shipbuilding is best left to those not involved in the intentional design and marketing of the Titanic”
Paper 5: Web3 games will employ more than 100 million players by 2030
Axie Infinity helps more than 3 million gamers earn money playing video games. Even if it’s economically unsustainable – the idea of game developers sharing revenue with players in the hope that this will attract more whales to spend is a win-win case. As we see more sustainable web3 games, we believe researchers/community scholars will grow and reach over 100 million by 2030.
The open economy of the web3 game economy will enable players to trade their time for money in games where big money players/whales are happy to pay others to perform certain actions. As long as those who don’t spend make those who spend it feel good, those who spend will continue to spend, and the game economy will be sustainable. The main inspiration for this paper is Castronova’s Players For Hire white paper, which is a must-read for those who want to learn more about the subject.
“The presence of other people is valuable to high-stakes consumers for several reasons: the thrill of being richer and more powerful than others, and yes, and the simple joy of being together. Whatever the reason, those who are capable Companies that open their doors to anyone, big-ticket consumers will also be willing to pay companies more.” (Castronova)
The automation of low-skilled jobs will put more low-skilled workers out of work and lead to wider income inequality. This could lead the wealthy to spend more time on entertainment, as boredom will be their biggest problem. Therefore, they may spend more time and money on the game.
On the other hand, the poor will have difficulty finding jobs in low-skilled jobs. Gaming would be a great side-job option for the poor, as they don’t necessarily need to be highly employable. Wage income alone will likely not be enough to cover the full cost of living, but gaming will be a meaningful side income. Competitive players may be able to earn a living by playing video games, but non-competitive players may not be able to fully cover their living expenses and view video game revenue as a side income.
” Psychologically and socially, first class only exists when second class exists . So all free agents’ comparative roles are just to be second class. Their job is to sit exactly second class and let first class of passengers get on first, better food and more space .” (Castronova)
“In the for-hire game, everyone is still a hero. But some of them will pay a lot of real money to be a really great hero, while others will get a very small amount of real money to be a pretty good one Hero.” (Castronova)
In the dystopian Web3, government and private advertising will trade daily income for a specific labor force, which will gradually become the mass basic income. Therefore, we believe that by 2030 web3 games will employ over 100 million researchers.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/is-there-a-future-for-the-encryption-crash-web3-game-5-papers-for-in-depth-discussion/
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