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What does the financialization of computer gaming mean for how developers and gamers create value for each other?
TZ APAC speaks with industry stalwart Leah Callon Butler, director at Emfarsis, an advisory and investment firm focused on Web3 innovation for social impact. Leah is also a Coindesk opinion columnist and the writer and narrator of the viral mini-documentary Play-to-Earn: NFT Gaming in the Philippines.
Gaming is already a multi-billion-dollar industry across the Asia-Pacific region, and more than half of the world’s three billion gamers reside in APAC.
In-game purchases are not new, given the recent strong growth in mobile gaming across Asia, many of which embrace a ‘freemium’ model. However, blockchain is driving gaming innovation through economic incentives for players.
Blockchain-driven Web3 gaming is an innovative approach to monetizing gaming. It not only supports in-game purchases but empowers gamers through verifiable ownership of in-game assets that can be on-sold or traded on secondary markets, and the capacity to earn crypto rewards that can be exchanged for other cryptocurrencies or fiat currency.
Expert blockchain consultant Leah believes Web3 gaming play-to-earn games will increase income-earning opportunities for people in emerging nations of Southeast Asia — in the same vein as Web2 innovations like the freelance marketplace Fiverr and ride-sharing and delivery app Grab.
“Web3 will advance these concepts to ensure that the people who bring value to these platforms, communities, and economies are properly rewarded for the investment of their time, skill, and advocacy,” Leah said.
Leah said the nascent Web3 gaming sector could radically alter the socio-economic trajectory of many Asian countries and she was bullish on its long-term potential, although it has challenges to overcome — including concerns about play-to-earn being exploitative or scammy.
More than half of the decentralized app industry activity is attributable to gaming, with more than US$4.9 billion invested in blockchain gaming already in 2022.
Developers are eagerly exploring the use of blockchain and NFTs in gaming for financial gain —through transaction fees and the market value of a game’s native coin— but also as a means to engage and reward active and loyal players.
Some key considerations for successfully developing games on the blockchain include:
Web3 gaming apps may simply incorporate crypto rewards and NFT sales, or be more fully decentralized, such as being governed by a Decentralized Autonomous Organization (DAO) that gives players some control over the rules, rewards, and fees within a game.
Leah said that, like in many industries disrupted by blockchain, the decentralization of ownership and governance in gaming would encounter pushback from some traditional companies due to the threat to existing business models.
“But eventually, they get on the ‘innovate or die’ train and try to avoid their own Kodak Moment. Decentralization, at some level, is inevitable in my eyes,” she said.
In relation to blockchain infrastructure, Leah said it was important to think about reducing the friction that many users have come to expect from blockchain products and platforms, and striving towards an interconnected economy across all games.
“I want to live in a multi-chain world where the different features of different blockchains are all appreciated, while infrastructure that is built for interoperability allows us to enjoy the best of all worlds, and UX/UI makes us feel like it’s all totally seamless,” she said.
“I believe it’s Web3 gaming that will drive this forward for the rest of the industry because gamers really expect and demand this kind of simplicity, throughput, interoperability, and so on.”
She said NFT game developers had a headstart on envisioning and building an open metaverse.
NFT gaming is the most dominant category of decentralized application in terms of usage, according to data from DappRadar, with some of the most popular games attracting millions of daily active users.
Typically, players earn a game’s native token through winning battles, completing quests or doing in-game tasks and can also earn rewards through staking tokens.
Players can acquire in-game assets and resources through buying, trading, or winning non-fungible tokens (NFTs) that can represent avatars, characters, skills, weapons, and virtual real estate.
In her role as a filmmaker, Leah took an in-depth look at how NFT gaming in the Philippines helps people supplement their income, typically as a side hustle.
She said many Filipino play-to-earn gamers were skilled in using a range of Web3 technologies and took a strategic approach to optimize core gaming mechanics like creating new NFT assets (known as breeding or crafting), which can accrue transaction fees.
“So, for example, they’d get up at 2am on a Sunday to execute their breeding strategy because they’d recognized that it was the most cost-efficient time to do it.
“These players are extremely sophisticated, and I think that’s one of the most fascinating aspects of this phenomenon, given that (previously) no one had expected these rural populations within emerging nations to be able to develop these kinds of advanced web3 skills.”
Leah said that although some in the mainstream gaming community were against play-to-earn because they argue that fun should not be monetized — the truth is that all games are monetized.
“The only difference in web3 is ‘who’ is able to capture that value and become rightful part-owners in the platform.”
She said that, unlike mature, much-loved AAA games, NFT gaming was still being pioneered and would initially attract gamers who appreciate the relatively novel concept of digital property ownership.
“The people who play these games will be looking for something different than what they can get in a AAA game, that is, the ability to become part-owners in the virtual worlds and communities that they are helping to build. Which is also why the creators of blockchain games today needn’t waste too much of their time attempting to convert those who are opposed to their ideas.
“People are spending more and more of their time online, and our identities are becoming increasingly digital, so eventually, I think people will realize that there is value in being able to ‘own’ your virtual property.
“The concept of digital property ownership is fundamental to Web3 and the open metaverse, but I think today, the normie/noob realm is still mostly stuck in a “right click and save” loop.”
To benefit from blockchain games’ money incentives, players need to set up a compatible cryptocurrency wallet that connects to their chosen game — to both purchase coins or NFTs required to join a game and to manage rewards.
As well as exploring games that interest them, gamers need to weigh up the risks of their investment against each game’s earning potential. They should also consider the time and effort required to make a profit and the overall viability and security of the project.
Some trending games built on the secure and energy-efficient Tezos network include:
Joining a gaming guild also has the potential to boost earnings. Guilds bring multiple players and their digital assets together so new players can lend community assets to earn yields, based on a profit-sharing arrangement.
For developers interested in launching games on the Tezos blockchain, support is available through the Tezos India Game Launchpad, including grants valued at $10,000 and access to incubation programs with TZ APAC.
Additionally, a new decentralized marketplace for NFT games being built on the Tezos blockchain called Game Geeks is currently seeking to collaborate with individual developers or teams globally, to help them bring their games or concepts to the blockchain through its DevGeeks program.
Whether you’re a gamer or a game developer, it’s the ideal time to embrace the potential of blockchain technology in creating a virtuous circle of value and a new gamer economy.
