Where is the Killer App in Web3 Gaming?

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It can seem like crypto gaming has been poised to blow up for, what in the crypto world at least, an eternity. Axie Infinity, the first successful crypto game by many measures, at least initially, has now been deemed by many to be something of a false positive. Recent months have watched the player base drop dramatically, from a high of 2.7 million per week in November of 2021 to now only several hundred thousand. The fundamental gameplay loop, most gaming industry experts seem to now agree, is simply not fun. The most bearish industry watchers believe that if the only reason people are playing a game is as a means of making money then that, in turn, means it is little better than a ponzi scheme. A more even handed verdict might be that it has served as a roadmap of what could be possible in the web3 gaming world but is far from the killer app that some for a short time believed it to be. Even the most optimistic acknowledge that Axie is probably not going to be the web3 game that brings it web3 gaming mainstream.

Colin Darretta
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Photo credit: Colin Darretta, with permission

“The first truly successful web3 game is going to have to include some of the more unique aspects of crypto, NFT’s, metaverse and the like without making the casual gamer feel like they have to know anything about crypto,” says Colin Darretta, a web2 founder now investing in the web3 space and self described ‘recovering gaming addict’ who has been devoting his time to investing in and researching these businesses. “The fact that anyone can log onto Battle.net and be playing a AAA game like Diablo Immortal in mere minutes without any hoops to jump through is a huge advantage when it comes to customer acquisition. It’s impressive that Axie had as many users as they did when you consider how hard it was to even get your first Axie.”

This highlights another important challenge crypto gaming has done a thus far poor job of overcoming – none of the crypto games have felt seamless to boot up and play. To the average gamer, generally people with well above average tech fluency, these barriers are often still onerous. Then there is the other, perhaps even larger issue, that the only advocates and defenders of web3 gaming seem to be members of the web3 community. The gaming community at large has proven skeptical and at times even dismissive of these games. Popular gaming website Kotaku has made their belief that web3 and crypto are all one big sham abundantly clear. When Ubisoft made public its plans to incorporate NFT’s the scorn was immediate and deafening and only went downhill from there when the process went poorly. Even when beloved voice actor Troy Baker (best known for playing Joel in the Last of Us amongst many, many other roles) threw his hat into the NFT ring he was aggressively rebuffed by his own fans.

How a gaming company bridges the gap between the web3 community that is excited and supportive of these games and the broader gaming community remains to be seen. For his part, Darretta thinks the answer is simple, “They just need to build a fundamentally fun game. If the gameplay loop is great and people are having fun playing the core game then the game will be a success. The web3 aspects both can’t be shoehorned in illogically nor can they override the core reason most people play games which is to have fun. There will always be purist critics who hate to see the sanctity of gaming defiled. Those same people hated free to play, loot boxes, mobile games and everything in between. For better or worse all of those innovations are here to stay and represent important pieces of the gaming industry.” 

So who is apt to actually build the first mega-hit in web3 gaming? Two of the largest and most hyped studios – Mythical Games and Animoca – are leading the charge. Neither has yet built what could be considered a killer app, though in their defense neither has built a AAA game on the scale that really could be. Others, perhaps most notably Illuvium, are building more complex and ambitious projects that combine elements of MMO’s, MOBA’s and Autobattlers. If all those terms make your eyes glaze over, the translation is that they’re trying to build games that combine aspects of hugely successful games from the past two decades in a Frankenstein’s monster of sorts. Some of these studios number less than a hundred people, still a fairly modest size by gaming industry standards where AAA games can be made by thousands, which calls into question how realizable these ambitions ultimately might be. 

That likely has something to do with why many gaming industry insiders are oftentimes so vocally skeptical of the ability of these web3 gaming companies to realize their visions. “If someone with no experience in your industry and having built zero games came in and said they were going to build the next World of Warcraft – one of the biggest gaming successes ever, that took the better part of a decade to develop – you wouldn’t only be dubious but you’d also find it almost insulting that they even suggest it possible,” says Darretta. “That being said, it’s been almost two decades since the release of World of Warcraft and no one has really innovated in a big way on their model. At some point someone is going to come along and successfully do so, and doing it in web3 rather than the old subscription model or free to play seems not just likely but probable.”

Already enormous sums of capital have poured into web3 gaming by venture investors sniffing the next big thing. In the midst of the crypto winter this funding has slowed but far from dried up, particularly relative to other places within web3. And it’s easy to see why – many of the core aspects of web3 seem to naturally fit gaming – persistent online worlds, digital assets, digital economies and myriad more. Truly, the first big web3 game might just open the floodgates for even greater sums of venture funding into the space meaning more successes would follow soon thereafter. And right now, with the number of big projects being worked on, it seems a question of when and not if one will finally hit.

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