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Pacman, Mario, Call of Duty, Madden, and League of Legends are all iconic games that have shaped the landscape of gaming. Gaming has been steadily rising to the mainstream and the gaming industry is projected to reach 339 billion dollars by 2027. It is suspected that with the emergence of the pandemic, gaming has become more popular than ever before. The crypto industry, particularly DeFi and NFTs, has also grown in popularity over the last couple of years. This is where an intersection of gaming and crypto comes to play.
Gaming and digital currencies have been married for a long time. Today, Web3 assets such as NFTs are becoming very prevalent in the games that are being newly developed. Although Web3 games are nascent, the market capitalization for gaming tokens at the time of writing was over 20 billion dollars according to CoinMarketCap. These games are being developed as dApps on layer one protocols such as Ethereum. Developers are interested in using blockchain technology for providing a more immersive gaming experience. While these games provide familiar gaming user experiences, they feature the ability to have customized control over in-game assets such as skins, characters, weapons, and more. In-game assets are commonly made as unique NFTs and are unchangeable. Some of these NFTs are rarer than others, which can increase their value. Launching these games on the blockchain is what makes it possible to have digital-asset-powered economies.
Many layer one protocols like Ethereum, Solana, and Avalanche are being used to develop games on the blockchain and they are competing to bring the best projects to their respective platforms. Some protocols are offering incentives to encourage developers to build on their blockchain. For example, Avalanche created a 290 million dollar incentive fund to bring projects onto their protocol. Within this specially created fund, Avalanche set aside 15 million dollars worth of incentives for the game DeFi Kingdoms. Other games, such as Illuvium are building on top of the Ethereum blockchain. However, building on Ethereum in its current state, isn’t always the most scalable solution as the network can be not as effective with too much dapp volume. With that being said, the emergence of other layer 2 solutions are becoming more prevalent to help Ethereum become more scalable for the use of NFTs and NFT games.
One of these solutions is the Immutable protocol. According to the project’s whitepaper, “Immutable X is the first layer two scaling solution for non-fungible tokens (NFTs) on Ethereum, with instant trading, massive scalability, and zero gas fees for minting and trading, all without compromising user or asset security”. Immutable as a scaling tool is very beneficial for the Ethereum blockchain as it will add comfort to developers, users, and investors that the games can function on a reliable network. Specifically, Immutable claims that it can perform over 9,000 NFT transfers, trades, and mints per second. If these metrics are indeed correct, they show the ability of Immutable to help their customers to meet and exceed the scale required by mainstream NFT projects. Games such as Illuvium have already trusted Immutable to provide their gamer’s the ability to gain and sell the NFTs since that is where the future of the industry is headed.
Immutable may also have use cases outside of gaming with regards to scaling projects on Ethereum. For example, after the crash of Ethereum due to Bored Ape Yacht Club’s “Otherside” metaverse, Immutable’s founder, Robbie Ferguson, offered some solutions in the below tweet;
The main innovation in GameFi is the play-to-earn function. The play to earn market is worth over 11 billion dollars according to CoinMarketCap. One of the top play-to-earn games was called Axie Infinity. According to Reuters, the interest around NFTs in the metaverse is not only attracting millions of players but is also bringing billions of dollars from investors. Investor interest in these play-to-earn games stems from the ability these games can introduce more people to cryptocurrency. In Thailand, certain players were making $2,000 a month last year due to the value of their pets within the game. Additionally, guilds were being formed to capitalize on these assets. Essentially, those who owned Axie NFT would rent them to other players and would receive a percentage of the winnings. Unfortunately, Axie Infinity was hacked and had over 600 million dollars stolen from the game. Although Axie Infinity struggled with their security practices, they led the way for other play-to-earn games like Stepn which has grown in popularity.
Ultimately, Web3 gaming is not going away as the appetite from gamers and investors is only increasing. With this being said, it will be up to the discretion of developers to determine which protocol to build their NFT game on, as well as how to make their game very secure. Even for non Web3 games, it is very difficult for them to have longevity. There are more options for the gamer’s attention than ever before. Thus, investors should look at investing in studios that have a roadmap of games to be launched and evaluate the viability of multiple games hitting the mainstream and gaining mass-market traction. Investors may also want to evaluate if there is a partnership component to these games that exist outside of the gameplay that will not only provide the game ecosystem with more revenue but also keep the game’s audience engaged and excited. Lastly, these games must be community-centered and have an audience that is invested in the success of not only the games themselves but the developers.
NFT games is a nascent space but it has the potential to futurize the gaming economy by providing unprecedented value to gamers, developers, investors, brands, and communities. Only time will tell how valuable and impactful they will be on the economies of the future.
Thank you for reading this piece. If you LOVE this article, you can send a tip to Cryptojeter.eth (my ETH address)! Follow me on Twitter @CryptoJeter and retweet this post! Feel free to shoot me a DM as I love meeting new folks!
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