Web3 Games In 2023
Breaking down the future of Web3 games...
In today's edition of The Ground Floor, we will be focusing on Web3 games, and how they can potentially onboard 100+ million people to NFTs.
Web3 Games In 2023
Can video games onboard the next 100+ million people to NFTs?
In the last year alone, we have seen Reddit onboard millions of new people to NFTs, with companies such as Starbucks actively working to incorporate NFTs into their hugely popular rewards system that boasts 27.4 million members in the U.S.
In 2023, profile pictures and loyalty programs remain exciting areas to watch when it comes to onboarding millions of people to NFTs, however, arguably the most exciting area of all to onboard the next 100+ million people to NFTs is video games.
In 2023, much of the attention and capital NFT collectors are allocating has shifted from profile picture projects who's value proposition relies on there ability to become digital status goods to projects focused on the gaming industry.
Before diving into the present, or seeking to predict the future, it's valuable to review the past, and more specifically — one of the motivations that led to the creation of Ethereum.
Back in 2010, Vitalik Buterin, the co-creator of Ethereum was given a rude awakening after the developers of World of Warcraft decided to weaken his in game character.
This experience awakened him to the 'horrors centralized services can bring' — which served as one of the main motivations for him to explore decentralized services like Bitcoin, before embarking to build Ethereum in 2015.
Why is this relevant?
While this story has become a key component of the history of creating Ethereum, it's very possible that this story is foreshadowing one of the most popular future use cases for NFTs — in game assets being minted on decentralized services such as Ethereum.
There are more than 2.7 billion gamers worldwide who collectively contributed to videogames generating over $180 billion of revenue in 2022.
Mobile games accounted for 50% of this worldwide revenue, with 49% of Americans playing mobile games one or more times a day.
Looking at the list of the most popular mobile games, a clear trend emerges — the top 10 games offer their games free of charge, to in turn monetize their audience through micro-transactions such as buying upgrades & in game skins / digital clothing.
To cover the cost of developing these games and to produce profits, the game developer effectively enforces a one sided market whereby users can purchase in game assets, however users aren't permitted to sell these digital assets.
Fortnite has also adopted this business model; generating $5.5+ billion in revenue in 2022, however, this business model has created an opportunity for Web3 creators to capitalize on by adding the extra element of monetizable in game assets.
Building Better Games
It's highly unlikely we will see Web3 games compete with Fortnite anytime soon, as they simply haven't had enough time to catch up and develop the expertise required to create games enjoyed by hundreds of millions of people.
The good news, however, is that the Web3 World continues to attract both the capital and the talent needed to develop these expertise ~ exemplified by Yuga Labs hiring the current President & COO Activision Blizzard, a billion dollar gaming giant.
In the short term, there also remains an opportunity for Web3 creators to create much simpler social games akin to FarmVille ~ the popular farming focused app that took Facebook by storm back in 2009, reaching 30+ million users.
How would NFTs improve this game?
By allowing users to re-sell in game assets ~ it's likely many more consumers would be willing to purchase in game assets, however, it's imperative that these game can gain adoption without the need for the in game assets (NFTs) to increase in price.
This model will undoubtedly impact the revenue companies can generate, however, having an existing supply of inventory doesn't prevent successful clothing brands from selling new inventory, and it shouldn't prevent good game developers from doing the same.
💸 Pricing Models
Inclusivity is essential for these games to gain mass adoption
While many of the most successful NFTs in 2023 are veblen goods (status goods) — the Web3 videogames that succeed will consistently create new digital goods as they expand.
When such games are brought to market, we will likely see a significant shift in the pricing of NFTs as companies seek to obtain a small amount of money from a large number of customers vs obtaining a large amount of money from a small number of customers — as is the industry standard in the Web3 World today.
📡 Looking Forward
We might be in a bear market, however, with a growing group of companies working to develop video games that incorporate NFTs into their game design — there's good reason to remain bullish on NFTs, and the sustainability of NFTs adoption curve.
In 2023, we can certainly expect to see examples of such video games brought to market as creators seek out competitive advantages to increase their odds of succeeding, however, we shouldn't expect these games to compete with industry giants such as Fortnite or Fifa.
It's certainly possible this will happen given enough time, however, in 2023 these games will likely take the shape of simple social games that offer lost cost NFTs.
💡 Web3 Roundup
1) Azuki Holders New Home ⛰️
P.S. What did you think of today's newsletter?
See you next time! — OB1👋
This newsletter is for informational purposes only and does not constitute financial or business advice to any person or entity.