Video games are one of the most compelling use cases for the technology, according to top VCs. The play-to-earn model has been cited as a key catalyst to attracting hundreds of millions of people into web3.
Axie, the highest-profile play-to-earn video game, suffered one of the largest heists to date when North Korean hacker organization Lazarus Group drained $625 million from the game. Since then, the market has gone through a price downturn and a recovery. Web3 gaming and the play-to-earn business model are left out.
In order to get his thoughts on what it will take for this subsector of web3 to live up to the hype, we spoke to the co-founder of Twitch. Kan said that web3 gaming has a long way to go, even though there are 3 billion people in the world who play games.
This gap is an opportunity to fundamentally change how video game studios operate, according to Kan.
The idea of taxing everyone for all the transactions around them is a good model.
In some ways, web3 gaming was built in response to the success of games that allowed users to purchase items such as outfits and weapons in order to make money in the game. Web3 game developers hope to take that vision a step further by allowing players to take custom digital assets between games.
Kan invested in the studio behind the NFT-based shooter game BR1: Infinite Royale. He admitted that the future of video games, which he sees as the future of video games overall, doesn't technically requireBlockchain technology at all
The way that it is going to happen is that there will be a lot of trust and openness in the way that it is done on the block.
The vision of interoperability has yet to be realized in the traditional gaming world because many incumbent studios have been loathe to encourage third-parties to build on top of theirAPI. Large gaming companies with existing business models are hesitant to take new risks.
Kan said that game players seem to value openness and economic participation. He said that the appeal of an open gaming environment is more about principle than it is about making money.
The play-to-earn model where people are making money and doing their job by gaming is completely unnecessary.
Even if nobody is making money and there's no speculative appreciation or price appreciation on your assets, digital assets can be valuable.
It is common for popular games to have new developments on top of their intellectual property. Kan shared an example of Counter-Strike: Global offensive, a video game in which skins have been sold for as much as $150,000 each.
He funded a company that builds on the skins of the game. I don't want to build on top of these non-open platforms anymore becauseCSGO changed the rules about what was allowed and they took over a million dollars from this company.
There are a lot of prominent studios that don't agree with Kan's thesis about the future of the video game industry. One of the most popular games of all time made waves last month when it announced it would not support NFTs on its platform, citing concerns around the "speculative pricing and investment mentality" in web3
The game makes money off of micro-transactions on its in-game marketplace. Existing companies that were selling NFTs and developing play-to-earn games using its open source code were left out of the decision.
Kan believes that the marketplaces that already exist in video games are just a more economicallyImmersive version of theBlockchain-based games. He doesn't believe users will flock to games just to make money.
Play-to-earn was associated with people working in third world countries or developing countries. I don't think the model is sustainable.
He thinks the growth of web3 gaming will be driven by developers building genuinely fun games on the block rather than creating economic incentives under the play-to-earn paradigm.
Instead of being a black market, web3 games are going to make this a real market and people's economic participation is going to vary to different levels. People who only play the game and never buy things with money are going to be the ones. Some people will make side money because they are good at the game and they are getting things in the game they are selling.
The space will evolve in a similar way to how mobile gaming did, with a few startup taking off initially. Big gaming companies will use their existing intellectual property to enter the market five years later despite their initial reservations about the technology.
There is still a long way to go before the sector of gaming can be seen as mainstream.
Normal people will need to play games for fun in order for this market to be large. That isn't something that exists yet. Most of the market today is made up of people who are native to the area.
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