The web3 gaming industry is one of the few sectors seemingly unaffected by current crypto market conditions, with capital continuing to pool into the space — and some industry players say it’s for good reason.
“The current market environment is funny,” Robby Yung, CEO of Animoca Brands, said to TechCrunch. “People have a tendency to couple crypto markets with blockchain games and content, but actually it’s only as appropriate as linking tech stocks on Nasdaq with the businesses of tech companies. There’s a certain correlation, but it’s tenuous.”
While the crypto industry was in free fall over the past few months, web3 games remained fairly stable. In May, over 1.15 million daily unique active wallets interacted with blockchain games, down just 5% from the previous month, according to a DappRadar x BGA Games report.
The number of active users “has nothing to do with the market,” Yung said. “You can argue it’s countercyclical because as we see in entertainment products, there tends to be more consumption when the economy is not so good because people will seek out entertainment,” he added.
While the future of the industry was in question amid the bear market of 2018, there has been tremendous validation and progress since then, Yung said. “The rest of the year will definitely be challenging, but I’m optimistic for the first quarter of next year.”
Last week, Immutable, an Australia-based web3 gaming firm, launched an inaugural $500 million developer and venture investment fund, Robbie Ferguson, president and co-founder of Immutable, told TechCrunch. The capital will be used to fund projects building web3 games and NFT-focused companies on its layer-2 Ethereum-focused platform, Immutable X.
“You have to build [blockchain gaming] franchises with longevity,” John Linden, CEO of Mythical Games, said to TechCrunch. “If it’s only about a marketplace or token, it’s going to be good while it’s good — and will rapidly decline when it’s not.”
Despite the generally bearish crypto market conditions, about $1.4 billion was raised for blockchain gaming since May, thanks in part to capital from Andreessen Horowitz and Dapper Labs’ mega-funds, the report stated. Since the beginning of the year, $4.9 billion has been invested in gaming and metaverse-related projects, it said.
“I’m observing now there’s a tremendous amount of investment and capital waiting on the sidelines … for the market to bottom out,” Yung commented. “They are actually viewing it now not as a fear and contagion environment, but as an investment opportunity. There are plenty of funds with strong capital resources … but they’re waiting to see when the bottom is.”
There’s also extensive interest from Web 2.0 gaming studios and video game developers alike that want to be a part of the web3 gaming world, Linden said. “They’re watching closely and starting to experiment, but the common theme with big players is not focus on speculation [but] focus on utility and what you can do and what you get out of it.”
Linden’s company, Mythical Games, has onboarded a number of former Web 2.0 executives from big firms like Electronic Arts, Warner Bros. Games and Activision Blizzard, to name a few.
The cross-collaboration between Web 2.0 traditional gaming firms and crypto-focused ones will continue to push adoption of web3, Yung said.
“We’re also seeing a variety of projects that we’re calling Web 2.5 projects, where users can coexist with slightly different experiences,” Yung said. “So we can onboard users into a game experience in a traditional mobile fashion, but users can choose to mint items as NFTs, have their own ownership [of in-game assets] and crypto wallets and everything that web3 brings with it. It’ll be an optional enhancement for those users.”
Web 2.0 isn’t going to go away, Linden said. “Over time, [Web 2.0 and web3] will collaborate more and more as Web 2.0 companies really embrace it.”
Long term, Yung thinks the growth of users will be directly proportional to how many new products — or blockchain games — are released. Similarly, Linden sees success for the industry coming from blockchain games with high functionality and quality gameplay.
“Those products are what attract users and I think you just need a couple of breakout products,” Yung said. “If you think about the scale of users in traditional mobile games or consoles, there are hundreds of millions of users and being able to onboard numbers at that scale is not unreasonable if there is compelling content.”
“I think what everyone has pointed to is that the content hasn’t been compelling enough — it’s a fair comment,” Yung said. “There are great games in web3 but there aren’t many of them because it’s a new industry, so there are games out there that have engaged lots of users, but not enough yet.”