Web3 games don’t need to lure players with profits – TechCrunch

Top crypto VCs are consistently touting the potential of video games as one of the most compelling use cases for blockchain technology. Andreessen Horowitz partner Ariana Simpson, for example, who led the firm’s investment in crypto game Axe Infinity. Countless interviews Citing the play-to-earn model as a key motivator to attract “hundreds of millions“People on the Web 3.

Axie, the highest-profile play-to-earn video game, suffered the largest crypto theft to date by the North Korean hacker organization Lazarus Group this past March. ~$625 million wasted From the game’s Ethereum-based Ronin sidechain. Since then, the crypto markets as a whole have gone through a severe price drop and subsequent recovery over the past month. So where does this leave Web3 Gaming and the play-to-earn business model?

TechCrunch spoke with Twitch co-founder Justin Kahn and recently, Solana-based Gaming NFT Market Breakdown, to get his thoughts on what this subsector of web3 will take to live up to the hype. Kahn said that Web3 gaming has a long way to go – while there are 3 billion players in the worldIncluding those who play mobile games, he notes, very few have bought or interacted with any kind of blockchain-based gaming assets.

Kahn sees this gap as an opportunity for blockchain technology to fundamentally change the way video game studios operate.

“I think a good model is to create digital assets, and then tax everyone for all the transactions around them,” Kahn said.

In some ways, Web3 Gaming was built in response to the success of games like Fortnite that were able to unlock a lucrative monetization path for gaming studios through micro-transactions from users purchasing custom items such as outfits and weapons. Web3 game developers hope to take that approach a step further by enabling players to take those custom digital assets between different games, turning gaming into an interactive, immersive ecosystem, Kahn explained.

Kahn has made about 10 angel investments in web3 gaming startups, including the studio behind NFT-based shooter game BR1: Infinite Royale, he said. Still, he admits that building this interactive ecosystem, which he sees as the future of video games, doesn’t technically require blockchain technology.

“Blockchain is just the way it’s going to happen, I think, because there’s a lot of cultural momentum around people equating blockchain with openness and believing things are decentralized on the blockchain.”

The vision of interoperability has yet to be realized in the traditional gaming world because many current studios are loathe to encourage third-parties to build on top of their APIs, Kahn said. He attributes his reticence to the “innovator’s dilemma,” where large gaming companies with business models that already work are reluctant to take new risks.

Gamers, however, seem to appreciate the openness and economic participation offered by blockchain-based startups, Kahn said. Still, he added, the appeal of an open gaming ecosystem is more about the theory than about the lifestyle.

“I actually think people equate NFTs and games with this play-to-earn model where people are making money and doing their job. [by gaming]And I think it’s completely unnecessary,” Kahn said.

“Having digital assets in your game can work and be valuable, even if no one is making money and your assets have no speculative appreciation or value appreciation,” he added.

It is common for popular games to attract new development on top of their existing intellectual property. Kahn shared the example of Counter-Strike: Global Offensive (CSGO), a video game in which custom “skins” sold for $150,000 each.

“I funded a company to build on top of CSGO skins,” he said. “CSGO changed the rules about what was allowed and actually confiscated a million dollars from this company – so yeah, I don’t want to build on top of these non-open platforms anymore.”

Many prominent studios disagree with Kahn’s thesis that an open gaming ecosystem monetized through blockchain technology is the future of the video game industry. Minecraft, one of the most popular games of all time, Made waves last month When it announced it would no longer support NFTs on its platform, citing concerns around “speculative pricing and investment mentality” on Web3 and arguing that it runs counter to fostering an inclusive environment for NFTs players.

Although it drew the line at NFTs, Minecraft currently makes money from micro-transactions in its in-game marketplace. The decision leaves flux to existing companies that were already selling Minecraft-based NFTs and developing play-to-earn games using its open source code.

Kahn sees blockchain-based games as a “more financially immersive” version of the marketplaces that already exist in video games. He doesn’t think users will come to blockchain gaming just to make money.

“Play-to-Earn was connected to people who are doing this kind of rote, menial work in third-world countries or developing countries,” Kahn said. “I don’t particularly think this model is sustainable, so I think interest will kind of wane.”

Instead, he thinks Web3 Gaming’s growth will be driven by developers building truly fun games on the blockchain, rather than focusing on creating financial incentives under the play-to-earn paradigm.

“I think Web 3 games are just being more open and saying, instead of this being a black market, we’re going to make it a real market and people’s economic participation is going to vary on different levels. There’s going to be people who just play games and never buy things with money. There will be some people who are making some side money because they are really good at the game, and they are getting some things in the game that they are selling. [or trading].”

Kahn predicts that the space will evolve like that of mobile gaming, as a handful of startups initially operated. Their success will prompt big gaming companies to enter the fray “after five years” to use their existing IP, despite their initial misgivings about the technology, he added.

Still, the nascent field of blockchain gaming has a long way to go to gain widespread attention.

“For this market to be really big, these games need ordinary people who want to play games for fun. That doesn’t exist yet. I think most of the market today is crypto-native people,” Kahn said.

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