NEW YORK, NEW YORK - JUNE 23: People walk by a billboard that reads, "Web3 Gaming" in Times Square... [+]

Gaming has always been one of the most promising segments for Web3 technologies, offering benefits such as ownership and interoperability of assets, transparent gameplay, and token rewards. However, the road to acceptance and adoption is rarely smooth. Following the 2021 crypto hype, which sparked interest in Web3 games and particularly play-to-earn, there was abacklashfrom corners of the established gaming community who complained of issues such as low-quality gameplay and NFTNFT0.0%0.0%shills ruining the experience.

In light of that, the industry has evidently been listening. According to acomprehensive reportinto the state of the Web3 gaming market published by gaming DAO Game7 in December 2023, the last year or two have shown a marked shift in the way the industry is approaching Web3 game development. For instance, in 2021, there were 29 times more games launched than networks built to support them. By 2023, this ratio had dropped to 2.8 times. This trend indicates a strong focus on infrastructure rather than attempts to ‘replace’ existing Web2 games with Web3 equivalents.

This marks an important shift in strategy that could see Web3 carve out a more stable and successful niche within the established global mega-industry that gaming has become. The strength of Web3 developers lies in delivering the technological solutions that can enable and showcase the core benefits of Web3 games and not necessarily in trying to build a title that can directly compete with a Web2 equivalent in sales.

A Visible Shift Is Underway

The evidence of this shift isn’t something that will take several years to play out. It’s already visible in the types of projects and initiatives that are emerging — or not emerging, in the case of new Web3 game launches. The Game7 report showed that launches were down 65% between 2022 and 2023, while the activity is happening at the infrastructural level.

For instance,CronosCRO0.0%0.0%is creating a compelling offer for game developers with the integration of the two most powerful and popular gaming engines, Unity and Unreal, into its high-speed blockchain. Game developers can program their games using the same languages and tools they’re used to handling, such as C++ and Blueprint, and integrate Cronos using a few lines of code. The platform also benefits from integrations withCrypto.com, which offers access to payment services and an NFT platform, as well as the company’s vast user base via the OAuth login. While Cronos was built with use cases such as DeFi and GameFi in mind, the project’s strategy is clearly focused on delivering tools over applications, leaving the creative development to gaming natives.

Oasysis adopting a similar strategy, albeit with a different infrastructural offering. However, with backing from names like the global video game publisher Ubisoft, it’s positioning itself as a rival to projects like Web3 gaming development platform ImmutableIMX0.0%0.0%. Oasys is building a dual-layered blockchain gaming platform for game developers that can be described as the equivalent of a game console like Xbox. But unlike a console, a blockchain doesn’t require the gamer to buy a new upgrade every few years, and it’s resistant to downtime or breakage.

The Oasys base layer, called The Hub, is a public EVM-compatible Layer 1. The Layer 2, called The Verse, is the ultra-fast Layer 2, supporting Web3 game applications including Ubisoft’s upcoming fantasy RPGRPG+0.4%+0.4% Champions Tactics: Grimoria Chronicles.

Bringing Web3 Features To Web2 Gaming

Some areas of development in Web3 gaming could perhaps be better described as feature-based than infrastructural, but still reflect a broader trend of offering tools and services.

Azarus—recently acquiredby Web3 gaming leader Animoca Brands — is a streaming platform based on blockchain. Ultimately, it aims to allow players to earn rewards from their streaming broadcasts but has also teamed up with Twitch to enable an additional layer of engagement for online game viewers. Viewers can play interactive games provided by brands like Logitech and Red Bull via a simple web browser extension and earn rewards for doing so. The acquisition seems like a natural fit for Aminoca in its pursuit for a a decentralized gaming experience.

Smoothing The Path From Web2 To Web3

Even with the shift to an infrastructural offering underway, the market for Web3 games is still far from dead. However, newer titles entering the market are also learning from the feedback. Rather than selling themselves as a Web3 title, games such asMixMobandUplandoffer a more Web2-like experience for newcomers. This starts from having them accessible via mainstream channels such as Apple’sAAPL+0.4%+0.4%and Android’s App Stores, but also offering rich Web2 gameplay and the opportunity to explore Web3 features in a more leisurely way. This is in contrast to the hard landing built into first-gen games like Axie Infinity, which require users to be crypto-savvy from the outset.

For instance, in MixMob’snew strategy card game, Racer 1, players participate using an NFT which they purchase in-game without the need for an external crypto wallet. A dual-token system means that players can race, claim winnings, and buy items using the in-game currency, SUD$. However, for those ready to level up to Web3, there are secondary markets for trading NFTs and the $MXM governance token, which incentivize players to race, buy premium items, participate in the Turbo Arenas, and use various DeFi methods to win more. $MXM are distributed to early players for participation in activities such as trading NFTs or joining tournaments.

Upland is an immersive virtual real estate trading game that aims to emulate a real-world experience. Players pick a city and can begin buying and selling property, use virtual transport, and explore new areas to develop their portfolio. The first piece of property is actually free, because every new user is awarded UPX tokens to hit the ground running.

The project is also furthering engagement with Web2 and real-world audiences with initiatives such as apartnership with KABOOM!, a US non-profit that builds playgrounds in neighborhoods that haven’t previously had access to such facilities. Upland created a special NFT collection of playgrounds that could be bought by players in the game, where 90% of the proceeds were donated directly to KABOOM!.

Initiatives like this are rarely found in the world of Web2 gaming, demonstrating that Web3 is only starting to scratch the surface of real-world activations and monetization that hasn’t previously been possible or explored.

The Web3 sector is nothing if not resilient, and amid the challenging conditions of late 2022 and 2023, projects did what they do best in these markets: Build. In the case of Web3 gaming, the fruits of that labor are now being borne in the form of infrastructure with a specific purpose in mind and space for established players to enter the market.