In 2018, the gaming industry was valued at approximately 140 billion USD. By the end of 2022, this number is predicted to rise to 200 billion USD, according to a Forbes article published on June 3, 2022. Around 3.24 billion people worldwide are part of the gaming ecosystem, which is about 50% of the global population. It's not surprising, as most people, including likely you if you're reading this article, have played games on a mobile device, PC, or console at some point.
The primary reason we get so addicted to games is because they are fun. It's not about taking responsibility for in-game characters or developing reflexes; it's simply the enjoyment factor that keeps us hooked.
Gamers often spend hours grinding in games to build a reputation. Some even create an audience that enjoys watching their gameplay as much as they enjoy playing. This dynamic creates a self-reinforcing incentive for gamers to grind even more and improve their skills, which was the focus of web2 gaming. However, by 2020, a new future for the gaming ecosystem began to emerge.
Despite this evolution, many gamers claim to "hate" the changes brought about by the shift to web3 gaming, even though it promised a play-to-earn (P2E) model. The transition has been relatively slow, and we will explore why.
Gamers Hate Miners
Firstly, gamers have harboured animosity towards miners since mid-2020. As the pandemic led to global lockdowns, many discovered the lucrative potential of mining cryptocurrencies, particularly Bitcoin and Ethereum. Prices soared from around $6,000 in March 2020 to over $55,000 a year later, significantly increasing the demand for GPUs needed for mining. This surge in demand caused GPU prices to spike, which was unfavourable for gamers who also required GPUs for their activities. This conflict over the same resource led to growing resentment between gamers and miners. The early days of blockchain technology may have sown the seeds of this discord. With Bitcoin and other cryptocurrency prices crashing, the ban on mining in China, and Ethereum's shift to Proof of Stake (PoS), GPU prices are expected to continue easing globally.
Secondly, many "play-to-earn" (P2E) games eventually become "pay-to-earn" games. For example, Axie Infinity once allowed gamers in the Philippines to earn more than the country's minimum wage. However, its popularity may have waned because revenue benefits early adopters rather than newcomers. Those with significant investments can buy high-value NFTs and dominate the game through skill and spending money. This undermines the efforts of dedicated gamers, who resent this shift towards financial advantage over hard work.
Thirdly, NFTs have gained a reputation for promoting a get-rich-quick mentality. The 2021 NFT market bull run led many to believe that trading NFTs could quickly lead to wealth. Frances Coppola, a finance and economics commentator, noted, "This is just the pure desire to get rich that drives everything in the crypto space right now. It’s another of these bubble manias." Like most people, gamers generally disdain those who appear to win purely by luck. Since web3 gaming is built on NFTs, this association further fuels gamers' dislike of crypto gaming.
Unfulfilled Promises of Web3 Gaming
The blockchain promised to shift power from centralized entities to the masses, with Web3 gaming aiming to transfer ownership to gamers via NFTs. However, this promise has not been fulfilled. Instead, NFTs in gaming have become a means for raising development funds. Companies like Animoca and Sky Mavis must recognize that gamers are not investors. They attempted to raise money by selling NFTs before the games developed. A better approach might be to build the product first and then offer monetary incentives to gamers. With the current underdeveloped graphics in these games, gamers lack a compelling reason to switch from the games they enjoy.
Another significant reason for the dislike is the perceived overvaluation of Web3 gaming. Sony, the world's largest video game company by revenue, earns around 25 billion USD annually. Activision, Ubisoft, Tencent, and Nintendo collectively generate about 30 billion USD in revenue. The combined market cap of the largest gaming companies is around 1 trillion USD. These well-known studios have produced many beloved games.
In contrast, AXS, the governance token for the blockchain game Axie Infinity, had a fully diluted valuation of around 40 billion USD at its peak. This is comparable to Activision Blizzard’s current market cap of 60 billion USD. When comparing the recognition and success of Axie Infinity to the developers behind iconic franchises like Call of Duty, Hearthstone, World of Warcraft, and Candy Crush, the difference is clear. The extensive effort invested in these established franchises is unmatched by blockchain games today. This leads to the conclusion that the Web3 gaming ecosystem may be significantly overvalued, frustrating fans of traditional gaming companies.
Potential Solutions
While I've explored several reasons why we haven't seen a significant shift from traditional games to the Play-to-Earn (P2E) economy, it doesn't imply that Web3 gaming isn't a permanent fixture. Consumers, including gamers, often don't immediately recognize what they want. Interest in the ecosystem may not be high right now, but it will grow as infrastructure matures. If you're reading this in 2024, you're among the early adopters. The infrastructure for Web3 gaming is currently under development, akin to the DeFi (Decentralized Finance) boom in 2018.
The ecosystem may take months or even years to be ready for millions of new users. Numerous projects, such as Respct. co based in Delhi is actively working on solutions. They are building infrastructure tailored for the next generation of gamers, including an NFT lending platform, a marketplace, and decentralized identity solutions for gamers. One significant hurdle to adoption is the responsibility of securely storing private keys. Still, Respct is also developing solutions for this with semi-custodial wallets that alleviate concerns about managing private keys securely.
Now is the time for building. With fewer concerns about scams and unsustainable projects, the focus is on refining sustainable solutions that will endure beyond speculative phases. As the ecosystem matures, it's an opportune moment to lay the groundwork before widespread adoption in the next growth cycle.
Final Thoughts
The play-to-earn (P2E) trend in gaming has been met with enthusiasm and scepticism. While some gamers see it as a way to monetize their gaming skills and earn real-world income, others oppose it for various reasons.
Overall, while the play-to-earn trend offers some benefits, such as the potential for financial gain and increased accessibility, it raises concerns about the gaming experience, market volatility, and potential exploitation.
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