Web3 Games - My talk @ IGDC Blockchain Gaming Event on May 5th, 2022
Explaining web3 games in simple language
Edit [17th June, 2022]: Below is the full video from my talk at IGDC
I had a talk on 5th May at the Indian Game Developer’s (IGDC) Blockchain Gaming Event explaining “Web3 games, Why they make sense & How they’ve been done before.” That was literally my topic since a lot of people from all walks of life, whether it be VCs, investors, gamers, or game designers themselves, they’re all still trying to figure out what all of this web3 gaming is about and where all of it’s going. I believe much simpler narrative / explanations need to go out regarding this new vertical of the gaming industry that in my understanding enables new revenue model for games that incorporate the idea of ownership of digital assets within and outside of these compatible games. Think CS:GO.
I’ll be sharing everything I talked about on 5th in this article and also elaborate on a few points I might have missed out at my session.
First of all, you can download the PDF I made for the session here -
Digital Assets, Ownership & Video Games
The idea why web3 games would be successful in the long term has been pretty simple for me since I’ve always had a suspicion that web3 games look an awful lot like games that Valve already put out, such as CS:GO, Dota 2 and Team Fortress 2, primarily because you could earn cosmetic items or “digital assets” by playing these games, and then selling them in the secondary market or trading them with another player, (something I personally wanted in other games as well since I was already spending quite a bit on cosmetic items anyway and would’ve loved the idea of trading them.) This suspicion kinda set in even further once I read this particular article from PCGamer. This concept isn’t new, but building these types of games on public blockchains allow for a lot of advantages that centralized systems/entities cannot, and perhaps even, don’t want to offer.
Digital assets have honestly also been an idea far longer than the above mentioned games. The earliest I can imagine of such things would be the original Axie Infinity, which is the Pokemon game from 1996. (Ok I said that mostly to annoy people.)
In Pokemon Red, you could already trade your Pokemon with someone else using physical cables connecting two Nintendo Game Boys’ together in order to initiate the trade. Quite a few people were ready to line up for your Pokemon and pay some cash if you had a particular rare Pokemon to give them. This was already a thing back in 1996. Admittedly we’ve come a long way from that but a lot of problems that existing back then, still exist today. For example, software & duplication glitches that’d just let you have any pokemons you desire.
Let’s take a few steps forward and go with a more modern example - CS:GO. In 2021, January 15th, a CSGO “Case Hardened Ak-47 (ST MW 661)” sold for about $150,000. As you can see, “digital assets” as a concept already had traction long before the crypto world brought it to us, however, these assets are still traded within the Valve / Steam ecosystem and hence in a centralized manner with much less transparency than the crypto alternatives that we have today.
In June of 2021, one of the largest transactions in CSGO history was made when a player bought 2 of these “digital assets” for about $780,000. One thing I’d like to point out is that these “digital assets” didn’t require volatile cryptocurrencies to artificially inflate their prices overnight, but rather probably happened due to the fact that the product, i.e. CSGO, is genuinely good and hence the items attached to said product, are highly prized by the community. CS:GO has had an all time peak CCU of 1.3+ Million and easily has about 800,000 people playing at any given time these days.
Valorant gun packs cost about 100$ each pack, with individual guns / knives costing of lesser value, but generally it’s best to buy the pack as a whole since buying the items individually tend to cost more. I would know because I recently bought the “RGX 11Z PRO” gun pack for research purposes. Classic microtransaction economy that’s currently on-going in web2 games like Valorant and others that are designed to lure gullible people in purchasing virtual items that have no value.
Also something very important to keep in mind is that none of these cosmetic items or “digital assets” infringe in the competitive gameplay of the game. So they’re mostly bought for vanity purposes. Similarly how a shoe can cost $3000 IRL and people will buy them as a status symbol.
However, in these games, there’s no ownership other than through the account that purchases these items. Account selling of Valorant is a thing but is also against the Terms and Agreements that you agree to before starting the game. Similarly, it is also against the Terms and Agreements to cash out of your CS:GO gun skins; people still do it anyway through third party websites and in person trades etc. Point to note: the CS:GO system has also been found of having huge amounts of money laundering going on in 2019 where Valve had to step in to fix things. A problem I think should be easier to solve with the inbuilt transparency that public blockchains like Ethereum have.
Revenue for Web2 Games & How Ownership Doesn’t Exist
It is estimated that 5% to 20% of game communities take part in microtransactions. This figure isn’t very surprising since every other game seems to have microtransactions these days. However, these assets that we buy via microtransactions or say currencies like “gems” etc in multiple mobile games, are not actually trackable or tradable, hence devoid of any sense of ownership other than being tied to the account of the owner. The only legitimate secondary marketplace in the entire gaming industry is probably Steam. As far as I’m aware of, every other third party secondary marketplace where one can trade digital assets of various games, come under grey legal areas given the nature of most web2 games today and the Terms and Agreements we sign before we begin to play them.
Given that most assets today are tied to accounts, they’re also effectively lost if you get banned either temporarily or permanently. Getting banned in video games can happen for multiple reasons and not just for things like cheating. For example, in GTA online, you can get banned for modding the game. In India, frequent disconnections of your internet in competitive play can get you suspended from Valorant for over a year. These are pretty common problems a lot of people are aware of, probably have faced it themselves or know someone who did.
Web3 games can solve these things.
CS:GO - A “Case” Study
Before we go there though, let’s talk about the successes of existing web2 games with similar infrastructure - a look back again at CS:GO. (Dota 2 can also be a similar example)
CS:GO’s 2018 revenue for $400+ Million. In 2018 Dec, the game went free-to-play. Earlier, it was a 15$ purchase that still exists if you want to avoid playing with hackers etc. since it matches you up against people who have purchased the same thing. Majority of said $400+ million revenue is believed to come from the secondary market of the cosmetic items in the game. Like I had said earlier, the assets inflated in value almost purely based on demand due to them being attached to a good game.
Future NFT games do not have to have a complex economy for them to be viable. Assets could be traded via stable coins like USDC similar to how an IndiGG partnered game Skyweaver does it, and overtime if the game is good and gathers a good community the secondary market will last longer than others. Currently Axie Infinity is trying to entirely redefine the wheel whereas I believe viable structures already exist in the industry via web2 games that can easily work better on web3 infrastructure.
Now let’s talk about how Web3 can be better than Web2 for games.
The Limitations of a Centralized Secondary Marketplace
- 30% Fee
Let’s get straight to the point. Steam takes a straight 30% cut off of your games and digital assets when you’re transacting from the store. They justify it saying that the infrastructure is hard to maintain.
- Security & one point of attack
This is pretty simple to understand. It’s going to be very hard to hack Ethereum in it’s current stage given how decentralized it is. Users also have to rely on Valve’s goodwill in order to ensure that they don’t just duplicate a skin and sell it in their own marketplace (or a third party website) since there’s no transparency as to where these “digital assets” are coming from or whom they’re being sold to. Only Valve themselves know what’s happening behind the scenes and that means they could easily manipulate the system if they wanted to and do things without anyone else ever knowing what’s happening. I’m not saying that they’re doing this, I’m saying that under the current structure, it is very much possible for them to do so and get away with it without anyone noticing what happened.
- Game design limitations set by Valve
If you’re building on Steam and using the secondary marketplace for whatever “Digital assets” you want to keep in the game, you’ve to play by Valve’s rules. In this case, they’re the judge, jury and executioner. Not an ideal setting.
- Game becomes tied to the Steam Store
PUBG PC uses Steam’s secondary marketplace to trade it’s assets within people who want to buy or sell them. It’s hard to imagine how they’ll sustain the same system outside of Steam if they ever chose to migrate to say Epic Games store etc. Once a game is built on Steam, it stays in the Steam’s ecosystem and under it’s centralized structure if they decide to use the secondary marketplace.
- Hard to maintain
This is self explanatory. If a secondary marketplace like Steam was easy to maintain and execute, I believe other publishers or gaming companies would’ve done so by now. Getting products into said marketplaces and driving adoption is also a key reason why it’s hard to maintain such entities. Getting the tech right might not necessarily be the most difficult part.
Generally, all of the problems that have been discussed till now get solved with games that are built on the blockchain.
NFT assets can have their transaction fee % get sent directly to the parties required.
Security is arguably much better in chains like Ethereum, Polygon etc. than in centralized entities. They’re also transparent and duplicated NFT is easy to detect if you know how to dig in and do your research. Collections can’t be manipulated by centralized entities according to their whims.
No centralized entity to tell you how you can or cannot design your game around digital assets.
Game assets don’t need to be tied to any particular store when it’s on a public blockchain.
Anyone can use public blockchains to build web3 games on top of them.
This is where my pitch for India comes in. Every gamer and game designer in the country can help achieve this.
Web3 Games - The Starting Line
I hope over the course of this article I was able to explain to you a little about why web3 games are in a lot of ways inevitable. Mostly because gamers are already spending millions of $ in microtransactions inside video games already, with almost no ownership to show for it. Web3 games in the simplest ways in my eyes are about digital asset ownership. The games themselves won’t look much different than the current games today, though I believe overtime even that idea will be challenged, however I do not think we’re quite there yet.
If you see the current web3 gaming ecosystem, most people have very little idea about what’s happening to be honest, and that’s partly due to the fact that most people who are leading the web3 gaming ecosystem don’t actually know much about video games… or even the tech involved. A lot of the current leaders of the web3 gaming ecosystem are people who got rich via crypto in the last 5 - odd years; not because they’ve extensive knowledge about the gaming industry and are creating (or have created) immense value for the ecosystem in the form of a good product - in fact, I think we’re still quite some ways off before we see really good web3 games mostly because of infrastructural issues - but even that should be solved in the next 3-5 years.
My pitch therefore is very simple
The Indian gaming consumer industry is approximately 5 odd years behind the rest of the world.
The Indian game development industry is 15-20 years behind rest of the world. We do not have the necessary talent, infrastructure, support, mentors etc to build games like Genshin Impact, Valorant or CSGO which are some of the most popular titles in the country today.
In web3 games, everyone is in the starting line. It gives India and it’s citizen the opportunity to lead this new vertical of the gaming industry instead of just follow.
In plain words, I believe web3 games are…
The Opportunity of a Lifetime
As a friend put it, it’s like someone pressed the reset button and the race has just restarted.
If we as a country nurture the right talent and do things right, India has the opportunity to create a hub for web3 gaming, not just for gamers (consumers) but also for game developers (suppliers). IndiGG for example is a web3 gaming guild, but we also provide incubation and funding to early stage web3 games & studios - we not only support them with raising funds in order to develop a good web3 gaming product, but we’ll also help advise you on your game in order to make sure it’s a long lasting gaming product rather than being a short term cash grab. If you’re from an Indian or international gaming studio that wants to get into web3 gaming and are looking for any of these things, get in touch!
Games in my eyes that make the most sense with web3 elements are multiplayer games and/or GAAS - games as a service. There doesn’t seem to be much reason for single player games to have such elements involved but given that Ubisoft has put microtransactions in single player games like Assassins’s Creed, I think things like that will be inevitable. However, a good product is what matters at the end of the day and if that requirement is met and the game attached to said digital assets is engaging enough to form a community around it, the revenue will come in the form of NFT sales and secondary market trading.
I also mentioned that at IndiGG, we’re planning to host game jams + crypto hackathons in association with our ecosystem partners at various cities in the country in order to grow grass roots level talent of web3 game developers. More on that later.
I also want to end with the fact that the benefits of web3 games are already pretty evident without me going into the concept of a metaverse, interoperable NFTs or what a creator economy in this setting would look like. Because TBH, all of that require their own individual articles.
That’s generally it when it comes to whatever I talked about and I took a few questions that I answered at the session which I forgot haha.
I hope this article helped in understanding what the future of web3 games might look like. I truly believe that this is an opportunity where India can shine and build a thriving gaming ecosystem out of because we’re so early in this new vertical of the gaming industry that some of the infrastructure required to run millions of transactions per second, that I believe are required for web3 games to thrive, are not even out yet. This doesn’t mean that we shouldn’t dive into this opportunity though and perhaps this article explained web3 games and their potential better than most other sources in the scene. If not, do let me know what else I should’ve included that I missed out or couldn’t explain properly.
Thanks for reading. Comment, share and all that.