Over the past decade, the popularity of blockchain technology has increased significantly, particularly in the realm of web3 games - the games in web3 account for 49% of all blockchain activity, followed by DeFi (Decentralized Finance). Mainly due to their potential to move beyond the 'big tech' influence inherent in web2, these web3 games enjoy tremendous potential with multiple suitors among both investors and gamers alike.
According to recent research on Global Blockchain Games, the blockchain games market is expected to experience an astounding compound annual growth rate of 70.3%, from $4.6 billion in 2022 to $65.7 billion in 2027. Nevertheless, despite the impressive growth projections for the market, like other blockchain-based projects, most web3 companies still face significant challenges in attracting and retaining users.
While many have been toying around with the play-to-earn economy model to entice the general public, I'm confident saying that the real driver to lure the masses to blockchain gaming might lie in adopting esports.
The role of eSports in driving mass-adoption of web3 games
Unlike the play-to-earn gaming model, which has proved inflated and broken, the esports market has seen impressive growth in recent years, with a value of over $1.44 billion in 2022 and projected growth to reach $5.48 billion in 2029, representing a compound annual growth rate of 21%. However, for retail players, the chances of breaking into professional esports leagues are slim. Aspiring players face demanding requirements, including extensive training, sponsorship, a strong team, and a bit of luck, among other necessities.
Yet still, the earning aspect in gaming is a strong decision-making factor among players. According to a collaborative research study by Crypto.com and Newzoo, the most common reason web2 users try out blockchain games is to ‘earn a bit extra on the side’. Thus, although accessing the professional esports league may not be feasible for retail players, competitive gaming can still serve as a gateway to attracting new players.
The growing demand for esports presents an opportunity for web3 games to meet this market need through community-organized tournaments with real prize pools and decentralization instead of earning inflated cryptocurrency for mere screen time.
Own what you win or pay for - virtual items vs NFTs
Another significant advantage of web3 games is the true ownership of NFT in-game assets, which are not exclusive to a particular game or company. This freedom allows for future monetization of virtual in-game assets, unlike the traditional 'skins' in web2 games.
As explained in a spot-on example of Diablo Immortal by QORPO Game Studio CEO Rastislav Bakala in an Hackermoon interview:
“The price of maxing your character’s attributes and inventory reached over $100,000. That’s insane for game content, but do you want to know what’s even more insane? The fact that you can’t manipulate the in-game content. There’s no way for users to sell these assets for real money, in fact, users are basically funding a black hole.”
However, despite these detrimental circumstances, in-game consumer spending accounts for the biggest share of the gaming market, with approximately $65 billion worldwide in 2022, projected to reach over $74 billion by 2025.
However, this statistic has a favorable impact on web3 gaming prospects as NFTs offer more opportunities than web2 virtual items. The ownership of in-game assets provides more freedom and potential for future monetization, creating a more equitable gaming experience for players.
In addition to genuine ownership and practical uses, players have complete control over their NFTs. They can expect a feasible return on investment due to the freedom of trading their NFTs as they see fit. With this feature, it is expected that consumer spending will increase threefold in the near future.
Yet still, while the prospects of web3 gaming may seem utopian on paper, there are still several challenges that need to be addressed in reality.
A challenge? Addressing the needs of web2 users
The major issue faced by web3 projects is the limited accessibility for traditional users. To appeal to web2 users, companies must fulfill their requirements by resolving the following challenges:
- Complex onboarding procedures that are not user-friendly.
- Limited understanding of blockchain technology among the general public.
- Concerns about potential financial losses.
- Paywalls and high entry costs.
To address the challenges associated with web3 games, companies should focus on building a user-friendly and intuitive web3 gaming ecosystem that amalgamates all their products under one roof while conforming to the user experience web2 users expect. The ecosystem should offer a seamless flow that allows users to switch between web2 and web3 with ease. In addition, companies should prioritize the quality of their games and offer free-to-play options, ample opportunities to compete and win in sponsored tournaments with generous prize pools, and a sustainable ecosystem that rewards users based on their skills rather than screen time.
Can blockchain games drive the mass adoption of web3?
Web3 games have the potential for incredible growth, despite the challenges they face. Although research by Levan Kvirkvelia indicates that web3 games did not achieve desired year-on-year growth, their user retention rates are much higher than those of web2 games. For several months, web3 games have had an average user retention rate of 10% to 30%, which is 3 to 7 times higher than web2 games.
This makes games the best-performing service among web3 products. With the potential for millions of web2 users to transition to the blockchain, web3 gaming can not only compete with the mainstream game industry but also lead the way in the upcoming paradigm shift. Several ambitious blockchain games are looming ahead, ready to spearhead this revolution and attract web2 & web3 users alike.
(When) will we finally see the mass adoption of blockchain thanks to games?
