Abstract
Crypto x gaming has been in a discovery phase the last few years. We have seen lots of companies come and go. Most will perish into memories. And due to a risk many games in Web3 have token, it is unlikely the companies behind them will go on to become the next Supercell or Activision.
The risk they have all taken is that they have been ignorant to revenue opportunities outside of tokens and NFTs.
In this article, we will look at a few case studies to substantiate why standalone Web3 games are not commercially viable. Scroll to the bottom to understand how ENVD is approaching Web3 with PSYKO.
How should a Web3 game work?
Crypto x gaming is at a stage of maturity where it’s pretty obvious how a Web3 game should work. The industry has had enough runs at the mill and enough of an addressable market established for us to follow a playbook in Web3.
In a previous article we went into great depths on what two types of games we believe there are a market fit for.
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A left-curve, (fully) on-chain, degen game like Onchain Heroes
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Right-curve ‘web 2.5’, blockchain-on-the-backend like Off The Grid
Why a Web3 game should start as a Web2 game?
This week we’ve seen BladeofGodX blow up - not in a good way
There is a clear conflict of interest if you take a Web2 IP into Web3 prematurely. For a company that raised $6m less than a year ago, it seems bizarre that they would do NFT mints before they shipped their game. BoGX has also validated that having a segregated Web2 and Web3 team is extremely risky. The only way to avoid this is to only expand to Web3 once the shelf life of the Web2 version of the game has come to an end.
Case Study 1: RavenQuest
RavenQuest is the most exciting left-curve Web3 game we’ve played since Pixels came out. It did not come as a surprise to us that RavenQuest is a Web3 development fork of a Web2 game called Ravendawn that had been in development for years prior.
RavenQuest has set a record, having become the “most streamed Web3 game in history”. RavenQuest’s atomic network are an army of gamers coming from their Web2 game Ravendawn. Their atomic network aren’t farmers that have been bought via KOLs or co-marketing from a chain like Immutable. RavenQuest’s success can be attributed to the fact RavenQuest is not a standalone Web3 game.
Case Study 2: MapleStory U
This one hasn’t launched yet but it is an ideal case study for a commercially-driven decision to build a Web3 game. For those unfamiliar, MapleStory is a 20+ year-old IP with 250m users and $5b revenue across its lifetime (Source: GAM3S.gg). Gamalytic suggests that on Steam alone the game has grossed $78m since 2012.
The Web3 expansion is a rational decision to respond to 2 decades of inflation and create a proper player-driven economy. Even if MapleStory’s token or Web3 game does not perform very well the millions of dollars Nexon has reaped from the IP would mean it is not a complete loss.
Case Study 3: MIR4
Similar to MapleStory, The Legend of Mir is a series of games that first launched 2 decades ago. It’s not clear what the lifetime users or revenue of the Mir series are but it’s clear that there is a huge growth opportunity for the IP in blockchain.
Firstly, according to Wemix’s Q424 earnings release, gaming represented c. $75m and blockchain represented c. $700k. Taking an established IP like Mir and expanding it into a f2p Web3 game is a risk a company like WeMix can afford to take because they have already milked the IP in Web3. They must also see a growth opportunity announcing MIR5.
Another reason games should start in Web2 before moving to Web3
The decision to announce MIR5 is a sign of experience and intelligence. No one knows the players better than the people serving them. Nexon has 3 prequels to draw intelligence from as they take Mir deeper into Web3 territory. If you don’t have proper users already it makes it difficult to succeed in Web 3.
If you launch Web3 before Web2, naturally your atomic network will be DeFi primitives - they will always want to farm you dry. Whilst you might have accommodated for that with sufficient sinks, faucets - you know: “utility” or tailored your game to be as left-curve as it can, you are playing a risky game with someone’s money. In the case of Pixels, it is a great left-curve game but if it wasn’t for Ronin, it would have been a failure in Web3. Pixels got a golden ticket from Sky Mavis - the developers of Axie Infinity, and YGG - the user acquisition fund of Axie Infinity. Where Axie Infinity went wrong, Pixels was able to resolve.
The Pixel token
Pixel is a 3rd generation Sky Mavis coin. After SLP/AXS and RON came PIXEL. The first published game on Ronin has seen a downwards trend since launch - likely a result of overfarming and inflation. For the above mentioned games, the token price should not matter because they have an atomic network outside of Web3.
The Pixels Game
Pixels CEO has boasted Pixels generated $20m+ revenue in in 2024 - i.e. the year they TGE’d. He is also boasted 80% went to the community treasury. For his sake I hope he has a market maker selling those tokens OTC into their own treasury.
If the $PIXEL gameplan is the same as the company’s business plan, they might be facing trouble if Ronin and YGG drop their support.
Case Study 4: Off The Grid
I am going to call it: OTG will become the face of “why standalone Web3 games are not commercially viable” if they do not spin off their 60 hour story mode as a separate game on Steam with a $79.99 RRP. Whilst the NFTs and tokens might make / have made (OTC) a lot of people money, Off The Grid is not a commercially viable game and the only reason thing that makes it attractive is the potential token price.
Its sources of revenue include Validator NFTs and a battle pass to unlock Web3 features. Gunzilla continues to obfuscate how many paying users OTG has - all we know are transactions on their GUNZ subnet. Whilst Gunzilla have made a killing on the Validator NFTs / GUNZ / $GUN, the same cannot be said for the game. Off The Grid had the exact same GTM as Apex Legends but made nowhere near as much money. Apex generated $90m in M1 and this was without a battle pass. It is not clear how much OTG has generated from their battle pass in M1 but it cannot be higher than $10m based on what we know.
It would be lazy to blame Off The Grid’s underperformance on poor game design or unnecessary Web3 integration - the game is great and that is the problem. Off The Grid started with a $20m+ seed investment from its co-founders. Why did they start building in public so late? Why did they not launch on Steam?
What is ENVD doing with PSYKO?
That’s enough talking about other games, what are we doing?
Games that don’t establish themselves with clean revenue in Web2 before expanding into Web3 with f2p expansions will always be perceived as a crypto grift. We are the kind of development team that will put what players want first and we know what our players want.
PSYKO will be on Steam first with a $24.99 RRP. Follow Nas on X for updates.
To increase revenue, we are partnering with publishers to launch PSYKO across PC and Console, including the Switch 2.
To extend the shelf life of PSYKO, we are creating a F2P expansion on mobile with a a player-driven economy called the Bounty Network (like Off The Grid’s GUNZ) - it’s called PSYKO+
We already have negotiations pending with the top publishers and chains to distribute and expand PSYKO with them. Game devs need to think like us to maximally extract value from their IPs in Web2 and Web3.
