Web3 Gaming is an Evolution, Not a Revolution-Arcane Research

According to a new report published by Arcane Research on Web3 gaming, the current ecosystem, largely driven by venture funding is unsustainable.
image source: worldfinancialreview.com

Quick take:

  • A new Web3 gaming report by Arcane Research tries to uncover what’s wrong with blockchain games.
  • The report has identified three challenges, namely, the cost of entry, token inflation and incentives.
  • Overall, the report concludes that Web3 gaming should be seen as an evolution of Web2 games rather than a revolution.

Web3 gaming is becoming a trend in the global gaming industry. However, not everyone is on board with the idea. In fact, a majority of gamers are completely opposed to the concept of playing to earn, which is what most blockchain games promise their community.

For the newer generation of gamers, it is an acceptable trade-off for gaming for fun. However, while embracing the paradigm shift may seem to be the logical choice compared with the possibility of falling behind the evolutionary curve, some gaming companies have leveraged the naivety of some gamers to offer products unworthy of the market.

Arcane Research analyst Sofia Blikstad notes that “building a developer ecosystem takes years,” and so does “building AAA games, like Fortnite and World of Warcraft.”

But some blockchain game developers are launching new play-to-earn games months after their seed funding, which the analyst argues, in paraphrase, is like ‘the farmer who built his house on sand’.

The report identifies content and communities as critical to building a sustainable gaming ecosystem, something that some Web3 game makers seem to have neglected. Instead, these new-age game developers are utilising monetised promotional campaigns as NFT drops to onboard players to their gaming ecosystems.

This creates three main challenges for Web3 gaming.

Firstly, it makes it expensive to join the gaming community 

A monetised community onboarding ecosystem creates a steep barrier to entry. New users are required to purchase the ecosystem token to join the community. Moreover, players are also required to purchase expensive in-game assets in order to participate in various competitions.

This creates more bottlenecks in Web3 games, which have resulted in the emergence of gaming guilds. Guilds purchase in-game assets like avatars, skins and weapons and then rent them out to avid gamers that do not have the capital to finance their gaming activity.

This results in the creation of a skewed gaming ecosystem with few reaping the full benefits.

The report highlights the concept of token burning and rewards as a major issue

Ideally, when a blockchain game on boards new players, they are required to purchase the ecosystem token, which in turn results in the burning of the token. This would be a perfect mechanism for ensuring the long-term sustainability of the game.

However, a problem emerges when player rewards whose payout is pegged to the same token begin to outpace the token burn rate. Arcane Research concludes that this will likely result in token inflation, thus almost certainly, leading to a significant decline in the token price.

Incentives attract the wrong types of players

And finally, the report also zooms in on incentives offered by Web3 games to attract new players. However, this creates a problem, especially if the new players are only motivated to play the game because of the rewards they are promised.

Because the game cannot offer those rewards indefinitely, when they run out, it most certainly experiences a significant drain in the ecosystem community with players fleeing to find better rewards.

Concluding, the report notes that NFTs and blockchain game tokens are still at their nascent stage, which makes them highly speculative. Therefore, they should not be automatically seen as the future of gaming. 

Instead, they should be seen as being part of the next frontier in gaming, involving among other developments, embracing immersive gaming experiences like the metaverse.

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