On-chain data tracker DappRadar recently reported that another $600 million was poured into Web3 gaming projects in Q3 2023, making the total investments surpass $2.3 billion in the year so far. 

Another report from the blockchain gaming community, Game7, indicates a stabilization in Web3 gaming despite the market correction.

The interest in Web3 gaming — a general term used to describe the ecosystem housing blockchain-based video games — is clear and remains unfazed by the so-called “crypto winter.”

After a prolonged bear market, crypto appears to be getting ready for the next bull run, and Cointelegraph reached out to industry players to paint the current landscape of Web3 gaming.

The Web3 gaming ecosystem saw the relative quietness of the broader crypto industry as a positive thing, according to Immutable product marketing lead Michael Powell.

“In markets driven by speculation and hype, it’s often easy to get distracted and chase the shiny object,” he told Cointelegraph.

Web3 gaming companies that used the calmness to build products with real value and long-term game plans were the main drivers behind the investor interest, Powell said, adding:

“We’re also seeing a shift away from the play-to-earn approach toward more sustainable gameplay models that emphasize true digital asset ownership and create thriving economies for games.”

Omar Ghanem, the co-founder and CEO of Web3 gaming platform Gam3s.GG, said that a number of highly anticipated Web3 games are now on the horizon, and “the space has somewhat matured in comparison to the past two-three years in terms of quality and standards.”

While the numbers are not as flashy compared with 2022, Web3 gaming-focused Curator Studios co-founder Uluç Yuca told Cointelegraph that developer activity is on the rise for a number of reasons, including Web3 gaming’s potential for mass adoption, its unique value proposition, and the opportunity of portfolio diversification and strong community support. 

Investors are also keen on early-stage investment opportunities, Yuca explained, which makes the Web3 gaming space an attractive option for investors despite the relative silence of the crypto market in Q3.

Balancing the Web3 gaming

DappRadar’s report shows that the top game, Axie Infinity, saw over $90 million in transaction volume — almost twice the volume of its runner-up, Gods Unchained, at $55 million.

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The rest of the list tells a similar story, indicating a “concentration of success,” Can Azizoglu, CEO of Web3 startup incubator Coinoxs, told Cointelegraph.

Emerging trends like casual gaming studios gaining attention hint at a shifting landscape, he added. “This diversification could lead to a more balanced ecosystem over time.”

Gam3s.GG’s Ghanem explained that each team’s approach on the top 10 list makes a significant difference: “Axie Infinity has always been focused on the Southeast Asia market with countless scholarship programs to scale their user base as much as possible. Both the Web3 gaming appetite of the region and the team’s expansion strategy resulted in Axie remaining on top of these player charts.”

Gods Unchained and several others follow a different approach and are not necessarily fixated on the same growth targets or demographics, Ghanem said, adding:

“I don’t think that is a negative reflection of the industry or either of those games. If anything, it goes to show how dominant the Axie IP still is in the space. Like Steam charts, most of the players tend to be at the top of those lists, with thousands of minor titles struggling to maintain a fraction of the player activity.”

The dominance of one game can create a barrier for new players and developers to enter the market, limiting diversity and innovation in the industry, according to Yuca.

Immutable’s Powell said that as investment brings new top-tier games into the market alongside new player communities, “We’ll continue to see further innovation and more diversity among game titles with the ability to engage a broad player base.”

Oasys Games director Daiki Moriyama stressed that the global video game market is a $200 billion market, and the blockchain gaming industry has only just begun to grow. “At this point, various game developers are in the process of challenging themselves to see how they can create unique experiences that are only possible with blockchain.”

No more play-to-earn

Play-to-earn (P2E) was undoubtedly the biggest trend of Web3 gaming in 2022. Enabling users to earn in-game assets with monetary value in the real world attracted an audience beyond gamers into the space. However, it became controversial when both studios and gamers leaned too much on the “earn” side of Web3 gaming.

Players have started looking for games that focus on the actual gameplay experience. A Blockchain Game Alliance (BGA) report from early 2023 shows that the top factor in advancing blockchain gaming should be game improvements, not P2E implementations.

While Moriyama believes the P2E element will remain a driving force for blockchain games, he stressed that the P2E element has been overemphasized in Web3 gaming so far. This problem can be solved by using widely recognized IPs and massive user experience improvements, he added.

Azizoglu agrees that the Web3 gaming landscape is not just about P2E anymore: “There’s a shift toward varied gaming experiences, indicating evolving player preferences.” While P2E still remains popular, he noted the sector’s growth includes a wider range of gaming experiences.

Yuca explained that there is a shift from using tokens as a form of currency to using nonfungible tokens (NFTs) as a business model. This means that instead of game studios relying solely on in-game purchases or downloadable content, they now have the option to incorporate player-based economies through royalties and NFTs:

“NFTs provide a way for players to have a financial stake in the game, just like the game’s founders and employees. This inevitably makes the players more aligned with the game’s success, and thus more likely to become enthusiastic stewards of a game they love.”

Some founders got away with really low-quality products back in 2020 to 2021, Ghanem said, “Because the space was so new and players thought, ‘It couldn’t get any better than this.’”

This time around, Ghanem believes that even though incentives such as P2E might remain the same, the quality of each title is much better. “I think 2024 will further highlight this with titles such as Shrapnel, Off the Grid, Treeverse and Wildcard, really pushing the limit and definition of what a Web3 game is.”

When the bull run strikes

As the industry execs say, the Web3 gaming space has leveraged the calmness of the crypto market to steal the spotlight. But what would happen when the next bull season starts, and people become fixated on price tickers once again?

While it’s difficult to predict the future of the market, the interest in Web3 gaming may decrease during a bull run as investors shift their focus to other areas of the market, according to Yuca.

“However, the underlying technology and potential of Web3 gaming may continue to attract users and developers, leading to sustained interest in the long term,” he said.

“The integration of blockchain technology in traditional gaming may also drive continued interest in Web3 gaming even during a bull run. Ultimately, the success of Web3 gaming will depend on its ability to provide unique and engaging experiences for users, regardless of market conditions.”

Ghanem believes that the interest in Web3 gaming won’t fade out with a bull run. “If anything, we’re seeing more and more people enter this space from the gaming angle,” he said, adding that only a fraction of the three billion gamers worldwide are currently in the Web3 gaming space.

“We expect interest in Web3 gaming to intensify because gaming is the industry with the most near-term applications and utility for blockchain technology,” stated Powell.

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He added that Immutable expects a much broader rise in diverse game types across different ecosystems due to the active investments in Web3 gaming, an influx in interest from major gaming companies and the improvements in developer tools, adding, “​​The current upward trend in gaming tokens and strategic partnerships are strong signals that the sector is ready for significant growth in the near future.”

As the industry evolves, staying ahead of trends and continuously innovating will be key to leveraging future bull runs, Azizoglu concluded:

“We loved to play games even before Web3, so we will keep going on.”