Crypto gaming and Metaverse divides the industry
Google searches on the term “metaverse” have increased 50x in the last month. Microsoft have announced their metaverse vision for team collaboration. And Facebook outlined their vision for a social metaverse by literally renaming to Meta.
But what is the metaverse, and why should we care?
In the words of venture capitalist Matthew Ball, author of the extensive Metaverse Primer:
“The Metaverse is an expansive network of persistent, real-time rendered 3D worlds and simulations that support continuity of identity, objects, history, payments, and entitlements, and can be experienced synchronously by an effectively unlimited number of users, each with an individual sense of presence.”
It is a new version, or vision, of the internet, where people can communicate, create, explore, work and share with other people without the need for physical presence. If you’ve seen or read Ready Player One you’ll get the idea.
These new worlds are built upon a new digital infrastructure, powered by VR/MR, but also facilitated by new ownership mechanisms brought by non-fungible tokens (NFTs), blockchain and crypto.
This vision of the future might be hard to grasp, but there is a place where billions of people are already engaging in behaviour pretty similar to this envisioned future – in gaming.
Gaming is a global $180B dollar industry, bigger than music ($23B) and movie box office ($43B before the pandemic crash) combined. But it’s also an area that non-gamers have a huge blindspot towards, and where change is already afoot.
Play-to-earn – a new paradigm
The gaming industry, which is projected to reach a user base of 3B people in 2021, has often been a front-runner in adopting new technologies and business models.
Looking at the history of gaming we can distinguish three eras:
- Pay-to-play: monetizing from the sale of games themselves
- Free-to-play: monetizing through an in-game economy of digital goods, which are controlled by the developer and not transferable outside the game
- Play-to-earn: an entirely new paradigm, where players can participate in a digital economy which can be transferred between games and to the real world using non-fungible tokens, cryptocurrency and other blockchain technologies. Typically, the exchange is for cryptocurrency operated by the game itself. This is also often referred to as “GameFi”.
Startups such as Dapper Labs (creator of NBA top shot), Sorare (fantasy football gaming), Sky Mavis (the creator of Axie Infinity), Animoca Brands, Mythical Games, AlienWorlds and many others are pioneering this new model.
The play-to-earn model has found enthusiastic adopters in developing countries. Recently 1/3 of the player base in Axie has been based in the Philippines. People were feeding their families just by spending a couple of hours in a mobile game, and earning triple the national minimum wage. But mass adoption has yet to power up.
Get started with blockchain gaming is still quite hard
The barrier to entry for blockchain gaming remains quite high. Getting started with Axie Infinity is onerous, requiring an eight-step process (two wallets, purchase of Ethereum and Axies tokens, etc) for an estimated cost more than $1000. This is still a long way off compared to the maximum $60-100 you would pay for the most expensive console games, even if the average ROI is around 5-6 months.
Despite the blockchain gaming market becoming one of the fastest-growing segments in the game industry (gaming NFTs generated $2.3B sales in Q3 2021, up from almost nothing last year), traditional platform gatekeepers are, for now, shutting their doors to NFTs and crypto.
Right now, not even Axie Infinity is available on mobile app stores, such as Google Play and App Store. This could still change, neither Google nor Apple have explicitly banned play-to-earn games, but have not embraced them either.
The gaming industry divided on NFT gaming
Few days ago, the leading PC gaming company Valve, issued a ban on “applications built on blockchain technology that issue or allow exchange of cryptocurrencies or NFTs.” In detail, Valve kicked blockchain projects out of Steam, its video game digital distribution service, which has 75% of the global market share for PC gaming download and drives most of Valve’s revenues through a 30% revenue cut.
Valve’s strong stance sent waves through the industry, with gaming companies picking one side and blockchain gaming companies asking it to reverse its ban.
Ubisoft, Electronic Arts (EA), Sony, Roblox have already declared their support for blockchain and NFT gaming. Others are partially supportive like Epic Games (Fortnite creator), which is going to support blockchain games on its marketplace but not use blockchain in its own games. Question marks still remain about the intentions of other big names like Google, Apple and Nintendo. We expect these companies to change their public position in the next months due to the fast evolution of the field.
Blockchain and NFT gaming is a new emerging wild west, meaning for the time being it is full of both opportunities and scams. In the longer term, the NFT gaming boom is coming, one way or another.
The question now is how big the market can get without traditional platform support from companies like Apple, Google or Valve? Are they just waiting for the right time to jump onboard or might they miss this boat?
Let the games begin.