The Transition of the Gaming Ecosystem into the Metaverse

**Abstract.** The purpose of this article is to highlight the critical role that decentralization and non-fungible tokens (NFTs) play in gaming’s transition to the metaverse. The structure seeks to breakdown the following: (Part 1) the significance of the creator economy in relation to gaming, (Part 2) the foundations of the metaverse, (Part 3) the current state of the gaming ecosystem, and (Part 4) the transition of gaming’s ecosystem into the metaverse through NFTs.

![Image Credit: Дмитрий Ларичев/Getty Images](https://miro.medium.com/max/1400/0\*bioWAeP46e89Q89k)

## (1) The Significance of the Creator Economy in Relation to Gaming

In 2011, Facebook was desperately trying to enter mobile as its mobile apps ran slow and felt bloated. The company needed to improve its app and pivot to mobile, where the company projected future growth to be. As Facebook struggled with mobile, Zuckerberg decided to buy Instagram for $1B when it was pre-revenue with just 13 employees.

I can make the argument that user-friendly gaming engines are akin to what made Instagram a $100B+ business. Just how similar is Instagram to some gaming companies? Well Instagram enables its users to become creators and benefits from network effects with celebrities and influencers. Users upload content for other users to view, creating a network effect and high margins because unlike other media such as studios, Instagram isn’t paying for content.

Web 3.0 is producing the next wave of the creator economy, but with key differentiators. Web 3.0 permits a future where distributed users and machines are able to interact with data, value and other counterparties via peer-to-peer networks without third party intermediaries exploiting the works of creators. This decentralization qualifies gaming to follow the same playbook as Instagram, while shifting away from Web 2.0 centralized platforms. The technological advances of Web 3.0 will rapidly accelerate the expansion of gaming into the metaverse.

![Theme Park Tycoon 2 — Roblox game | Image credit: Den_S](https://miro.medium.com/max/1400/0\*-8ZdTv8cVvwRhpyn.png)

Strong examples of the direction that gaming is moving are Roblox and Epic Games. These companies empower their users to become creators. Roblox receives high-quality games from its users, who then upload it for other users to play. Developers can make money through Roblox with its Developer Exchange program, or DevEx, which gives developers 25% of a game’s earnings. If a Roblox user (13 years of age or older) has at least 100,000 Robux in their account and is a member of Roblox Premium, they can exchange Robux for USD at the current exchange rate set by Roblox (“Cash Out”). This drives growth through network effects and generates high margins because Roblox is only paying for gaming content that is successful. Epic is doing a similar thing with Creator Mode in Fortnite and its Unreal Engine is also so popular that developers improve it just by using it. Furthermore, Roblox and Epic have both found ways to benefit from network effects with celebrities (e.g., virtual concerts and celebrity avatars — LeBron James) and influencers (i.e., Twitch). The main difference between Roblox/Epic and Web 3.0 is that these companies are still somewhat centralized platforms, more akin to what I would call Web 2.5. Nonetheless, as gaming evolves, we are beginning to see the transition to Web 3.0 and the future of gaming offers a great example to how the numerous use cases for blockchain can evolve.

## (2) Foundations of the Metaverse

The metaverse is the universe of virtual worlds that are all interconnected. In these virtual worlds, users can go to work, learn, create art, game, shop, socialize, and do dozens of other in real life (IRL) activities. The basic foundations of the metaverse include the internet (specifically 5G), open programming languages (e.g. HTML and JavaScript), open standards for media (e.g., Pixar’s USD and Nvidia’s MDL), and cloud computing (e.g., AWS