Burcin Oztuna, Dynasty Studios’ resident Lead Blockchain Strategist, took to pen this analysis piece offering insight into the future of Web3 games.
The year 2024 and beyond holds significant potential for the Web3 gaming industry. The integration of blockchain and cryptocurrency technologies into the gaming world offers new opportunities for game developers and players. However, it is important to recognize that this new era brings both great opportunities and significant challenges.
Here, we will share the latest developments, trends, and analyses in the blockchain and gaming worlds with you. Now, let’s take a deep dive into how Web3 games can further advance the industry at this point where the growth curve of the gaming industry has reached saturation.
Market Dynamics and Growth
Since 2020, the gaming industry has experienced a notable stagnation in sector revenues. The primary reasons for this stagnation include inflation, increasing development and marketing costs, and the demand for increasingly high-quality games in line with player expectations. Game studios are struggling with both rising costs and the demand for high-quality games. This situation has slowed down the overall growth rate of the gaming industry and led to significant workforce reductions in many companies.
As Matthew Ball noted in his article “The Tremendous Yet Troubled State of Gaming in 2024,” the gaming industry experienced record layoffs in 2023, with 10,500 game developers, artists, testers, and other game workers losing their jobs. This is a significant increase compared to the 8,500 layoffs in 2022. The year 2024 has yet to show signs of recovery. Since the beginning of the year, layoffs have already broken last year’s record, including major companies such as Sony, Riot Games, EA Games, and Unity.
Rising development costs and economic uncertainties have also made investors more cautious. In 2023, consumer spending on video games increased by only 1.1% compared to 2022, indicating a stagnation. This shows that the growth rate of the gaming industry has slowed down and that investors are taking more cautious steps.
However, there are also some promising signs for 2024. According to the Konvoy Ventures Gaming Report Q1 2024, VC funding in the gaming sector reached $594 million in the first quarter of 2024, up 94% from the previous quarter. This is the first quarterly increase in gaming investments since 2022 and 2023, giving us some hope for the remainder of 2024. This increase indicates that the gaming industry is still an attractive investment area and continues to be supported by new technologies and innovations.
The State of the Web3 Gaming Market
The Web3 gaming market saw significant growth and interest in 2021. Axie Infinity, in particular, achieved notable success with over 2 million active players and an annual revenue of $1.3 billion, ranking among the top 10 game companies. This success provided stakeholders with an important insight into the potential reach of Web3 games. Axie Infinity’s achievement demonstrated how blockchain technology could revolutionize the gaming industry.
However, developing high-budget and high-quality games that satisfy players requires unconditional creativity, years of hard work, and dedication. Additionally, ensuring that the game is fun, sustainable, and successful necessitates careful planning, testing, and iteration. Therefore, despite the three years that have passed, high-quality Web3 games have not yet reached the desired broad audience.
Nevertheless, projects like Illuvium and Star Atlas, which emerged with this vision, have garnered significant support from players and individual investors. However, in the following period, similar to other sectors, investment in Web3 games also decreased due to the withdrawal of liquidity from crypto markets and economic uncertainties.
In 2023, nearly 30% of game companies had to shut down their projects. Despite these challenges, significant projects managed to secure enough financial support to continue their operations. This support could help Web3 games reach a broader audience in the future and revitalize the industry.
Web3 Game Investments
In the first quarter of 2024, $301 million was invested in Web3 game companies. Compared to the traditional gaming sector, we observe that Web3 games are increasing their share of the pie. This reflects the interest and confidence investors have in Web3 games.
This theory can also be supported by numbers. The rate of active wallets interacting with gaming dapps (decentralized applications) reached 28% of all active wallets, with a 17% increase from the previous month, reaching 2.9 million daily active wallets. These figures show that Web3 games are being increasingly adopted and that we may be witnessing the first wave of second-generation blockchain games led by projects like Pixels. This new wave could provide innovative solutions and sustainable growth opportunities to the gaming industry, fully realizing the potential of Web3 games.
Can Second-Generation Web3 Games Expand the Market?
Do second-generation Web3 games have the potential to create a significant impact similar to the one mobile games had? Mobile games revolutionized the gaming industry with technological innovations and the ability to reach a wide audience. They expanded the market with new players, new game genres, and new revenue models. Similarly, the new generation of Web3 games could make fundamental changes in the gaming world with the innovations provided by blockchain technology.
Mobile games reached a broad player base quickly with easy access, user-friendly interfaces, and low-cost entry barriers. Web3 games could attract players to a deeper and more lasting gaming experience by offering real ownership and decentralization. Additionally, NFTs and blockchain-based economies could make the gaming experience more integrated by allowing players to realize the value of their in-game assets in the real world.
In conclusion, second-generation Web3 games have the potential to create a revolution similar to the one mobile games brought to the industry. Realizing this potential will be possible with careful planning, innovative approaches, and long-term investment strategies. We must admit that we have taken those aspects into consideration while developing Providence universe.
Sources
- Ball, Matthew. “The Tremendous Yet Troubled State of Gaming in 2024.” Matthew Ball
- Messari. “The Tremendous State of web3 Gaming in Q1 2024 & The Troubled State of web3 Gaming 30 days into Q2 2024.” Messari Report
- Jordan, Jon. Discontinued – Big Blockchain Game List