The upcoming Web3 revolution has sparked an incredible wave of innovation. However, as with anything, sudden changes and evolution invite criticism and debate. Any technological innovation needs time to perfect itself. Web3 gaming is not without its problems, but these aren’t without their solutions.
This essay will attempt to classify and evaluate the problems plaguing Web3 gaming’s current landscape, and where relevant, will attempt to provide solutions. It’s worth noting that, like Web3 gaming, this piece is also a work in progress.
Utopia Is Far Away
It would be worthwhile to identify the key problem areas of Web3 gaming in its current state. While Web3 games have been around since 2018, it wasn’t until mid-2021 did we see a surge in interest and adoption. Such was the hype that, as of today, close to 50% of unique active wallets have engaged with Web3 game smart contracts over the past 30 days as evidenced on DappRadar.
Broadly, the problems could be broken down into a few key areas:
Ecosystem Problems
- Barriers to entry
- Suboptimal Performance
Game Design
- Shallow Gameplay
- Cookie-cutter Approach
Unsustainable Economics
- Over-reliance on NFTs
- Unbalanced Incentives
- Ignoring History and Real World Learnings
We’ll deep dive into each of these issues, remaining objective in our approach.
At Tegro, we’re committed to growing the Web3 gaming ecosystem. The first step in that direction is to identify the flaws instead of plastering over. The next would be to take an unbiased approach to solutioning through collaboration with all the stakeholders in the ecosystem - developers, players, investors, traders.
Having built games for close to a decade and, amassing 250M+ downloads across multiple genres, our team brings a wealth of experience in designing games that are played for their entertainment value. Combining this know-how with the added experience of operating India’s largest crypto exchange, we are well positioned to approach this problem by going back to fundamentals.
All right then. Let’s address the elephants in the room.
Problem #1: Ecosystem Problems
Barriers To Entry
Let’s start with the most obvious one. This is not just a “Web3 gaming” problem but a Web3 problem. The entire ecosystem, including the applications and the community, can be overwhelming to new users. Try getting your mom to set up a wallet.
Many Web3 and crypto applications, in general, have a laughably bad UX. The chances are that most DeFi (decentralized finance) applications you have ever used are needlessly complicated to grasp. Furthermore, these apps are usually created to appeal to a niche crowd. We believe that these apps tend to go all out in perfecting the tech, forgetting that without a proper UX, they will not be attracting anyone outside their closed community. The irony here is that crypto apps like DeFi were primarily built with the lofty ambitions of banking the unbanked. Can we seriously state that the current state of these crypto apps is open to people from all strata?
Now, let’s look at the community aspect. Unfortunately, the Web3/crypto community can be pretty intimidating. This is why developers building these multi-billion dollar protocols tend to just build without doing the necessary marketing and education. There is a considerable education vacuum in space due to this complexity in transferring knowledge.
Application design and usability are both fundamental requirements of a great product. Unfortunately, it seems like Web3 game developers and decentralized application creators have forgotten this basic lesson.
It’s not all doom and gloom though. A number of protocols, media outlets, DAOs, and companies are starting to focus on education content. Solana, Near, Polygon come to mind with a clear focus on helping bring the next wave of users onto the crypto train. Questbook, Coursera, edX and many others are bringing a new wave of developers and non-tech folks into the ecosystem. Interestingly, DAOs such as SuperteamDAO have also been doing their bit.
Suboptimal Performance
Most of the Web3 games run on top of Ethereum. Ethereum is one of the most important protocols in the world. It is responsible for popularizing smart contracts and creating multi-billion dollar DeFi and NFT economies. It is a driving force in the Web3 revolution.
It also happens to be one of the slowest and underperforming blockchain protocols in the world; an opinion not ours, but one highlighted by numerous instances of network clogging - BAYC land sale anyone? Imagine running the latest GTA game on Windows 95. That’s the state that we are in right now. Because of the lack of high-performance in the base layer itself, Web3 lacks genuinely good games. Throw in high gas fees and it’s a wonder how the wheels keep turning.
Thankfully, there are a number of protocols that are trying to solve this problem through L1 & L2 solutions. But it’s to be seen if these protocols can not just solve problems of Ethereum, but also bring more developers into their ecosystem and solve for the friction in mass adoption.
Problem #2: Game Design ️
Shallow Gameplay
This is definitely a transitional problem, but one that we believe should be called out.
A large number of Web3 games are just DeFi apps masquerading as games. They lack the depth and sophistication required to attract gamers in the long run. Many of them seem to be art pieces that promise gameplay, but have very poor tokenomics, a non-existent economy and little to no gameplay.
When these games launch, they do exceedingly well for a few days to weeks due to hype, before they end up crashing and burning due to a lack of sustainable economics. The Web3 games graveyard is littered with several examples of this. Each failure is another project where the community has spent its money only to bid goodbye to it after a short period.
There’s a reason building successful games is extremely difficult. As Roby John, Co Founder & CEO of SuperGaming, puts it, building games is the pinnacle of software development. A good game is greater than the sum of its parts. Above all, a great game is one that keeps the user captivated for hundreds of hours. There are very few products for which users pay a premium in terms of money and time, to get nothing other than joy in return.
If we’re to be honest, the first wave of games were poor because they weren’t built by folks in gaming. The good news is that more game developers are entering the space, drawn to the possibilities that Web3 opens up.
Cookie-cutter Approach
Another transitional problem that will reduce and then disappear over time.
Several Web3 developers and Web2 studios building Web3 games are taking a cookie-cutter Web2 game (typically an F2P game) and slapping on a crypto angle to it, where some items can be purchased with a cryptocurrency.
This has two key issues. First, the only thing most Web2 studios can come up with to sell are NFTs. Second, most Web2 games have a SINGLE player economy and the ONLY source of new assets are the developers themselves. This changes completely in Web3 games, where there is an expectation of a solid player driven market.
These factors require developers to think differently. Without a paradigm shift in the thought process of building, these products are doomed to fail.
Problem #3: Unsustainable Economics
Over-reliance on NFTs
NFTs are an essential part of the modern Web3 games ecosystem. However, NFT trading has multiple issues. Some of the key problems:
- They aren’t scalable
- There’s a lack of liquidity
- They are difficult to value
Other issues not part of our analysis are that of wash-trading and whales bringing down prices so as to accumulate more, and in-turn affect the economy.
Let’s illustrate this argument with an example.
Consider a driving simulator with 50 possible car models. Most games today would treat player ownership of these cars as an NFT. Let us make some assumptions.
- each car model will have 4 parameters - acceleration, top speed, handling, braking
- each car model will have a range for each parameter
- the minting algo for a car NFT populates the parameters at random within the defined range for that car model
- there is a very low probability of there being another NFT with the exact same parameters; essentially, NFTs are meant to be unique
NFTs, by design, aren’t ideal for high volume and high-frequency trading. Every single NFT asset is unique, and they are not meant to store large amounts of the same asset. In the example above, the developers need to map the ID of each NFT to the corresponding player. At 100,000 or 1,000,000 players, this is going to result in a suboptimal experience due to non-performant code.
NFTs are unique by design and need to be listed individually on a marketplace. Not only is this a very time-consuming process, but it also leads to a lack of liquidity that can make trading very frustrating and tiresome.
Here is a live example from Axie Infinity. In the first screenshot, there is one part named
“Anemone” being used in the filter. This results in over 20k Axies for sale, for a variety of prices.
As a player, this leads to extreme friction in procuring an asset needed for gameplay. As a trader or investor, there is very little information to accurately value the asset. How much is an Axie worth? How does one decide which one to buy?
Avid gamers love a complex game, but NFTs unnecessarily complicate things beyond the point of enjoyment. Which is why we’re developing a framework for Fungible Tokens to help create game economics that reduce the friction and make it a rewarding experience for all stakeholders - players, traders, investors.
Unbalanced Incentives
Thanks to play-2-earn (P2E), gamers now have a solid and reliable way to monetize their time. On paper, this could be one of the best ways to increase Web3 adoption. Unfortunately, however, the mechanics of most P2E games aren’t very well thought through.
Let us explain.
Modern P2E gaming is more of an “invest and earn” thing than an “earn” thing. Players must buy or rent an NFT, spending a significant chunk of their hard-earned money. They can earn good money only if the other players also spend enough money. This is not the most sustainable model since the players’ earnings are greatly impacted by the number of newer users entering the ecosystem and market fluctuations.
A fair P2E model should decouple itself from a “pay-to-win” formula. Your performance in-game shouldn’t be dependent on how much money you have put into the game. We are not saying that you should take out the investing and spending part of the game altogether, but there shouldn’t be an in-game advantage for rich players instead of players from other economic backgrounds.
Ignoring History and Real World Learnings
While there is a lot to learn from the past failures of other games, and the problems economies face in the real world, it’s beyond the scope of this article to talk about all of them. Instead, we’ll point to one very pertinent example to illustrate this point.
Digital Land Recession
The Sandbox got a lot of attention when hip-hop legend Snoop Dogg purchased a significant amount of land in the app. “Buying land in the metaverse” has become one of the buzzwords for crypto folks, with the price of digital land escalating considerably. Games like Decentraland, The Sandbox, and Axie Infinity allow users to buy land and rent it out or create some content to increase its value.
This isn’t a new concept, of course. MMO vets will tell you that they have dealt with digital real estate for years. The problem comes when digital life begins mirroring real life. Because these games incentivize users to hold on to rare assets for no cost whatsoever, it encourages speculators to hoard land. With supply going down and demand going up, anyone who wants to own digital land will either have to burn a hole through their pocket or pay extravagant rents.
This could be a major problem.
One of the selling points of these metaverse games is the idea of creating a completely digital economy, where everyone can own digital lands and bring in their own creativity to build the in-game world. All this goes right out the window when you have digital land speculators hoarding land and doing absolutely nothing with it, just to sell it to someone for a lofty price tag.
MMOs like Ultima Online, Final Fantasy XIV, and EVE Online have all suffered from these digital land shortages. EVE was able to fix this issue by introducing a digital land tax. What will be the measures that Web3 games take to combat this problem? We will have to wait and see.
And lest we forget, this isn’t just a problem in games. This is a problem seen in real estate globally. A very interesting piece on land speculation in digital worlds, by Lars Doucet, sheds light on the issue.
Conclusion
Web3 gaming is the next great evolution for the gaming world. We’re not saying it will upend the entire industry and emerge as the dominant model; to do that would be naive. No one knows how things will evolve over the next few years. However, we’ve spent time developing our thesis on how to build better, more robust economies that could rescue Web3 games from the inevitable spiral of death due their inherent design issues.
Over the next few weeks, we’ll unveil this new economics framework and open source it so that the ecosystem benefits from it.
To bring Web3 games to the masses will not be a smooth ride, and the community will need to come together to fix the obvious flaws listed above. Nevertheless, despite these shortcomings, Web3 games are here to stay, and they are going to play a significant role in the digital economy in the future.
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Tegro For Developers
At Tegro, we’re excited to be a contributor to making it a reality. We believe Web3 games need a larger focus on economics. Unfortunately, there isn’t too much out there for game developers. Until Tegronomics, of course.
Tegronomics is an economic framework for Web3 games developed by experts in crypto, gaming, and economics. It proposes the use of fungible tokens as a core element of economy design. The framework helps Web3 game designers think of sustainability of economy above everything else.
In addition, we’ve launched the $1M Tegro grant for Web3 game developers with upto $25,000 per project, no strings attached. You can apply for the Tegro grant here.
Have some thoughts on building better Web3 games. We’d love to talk.
