The Wolves DAO Files #29: Web3 Gaming 2023 in Review
Which projects, studios, chains, and events stood out? What was dissapointing/exicting? What do we see happening in 2024?
The Largest Plot Twist
The narrative for Web3 gaming in 2023 remained predominantly somber until the final quarter. The majority of the year was dominated by a bear market, with numerous studios grappling with financial challenges and public enthusiasm hitting a low. However, a pivotal shift in sentiment emerged in Q4, reigniting much of the initial enthusiasm and potentially steering the industry toward a bull market resurgence.
Consequently, last week we posed a question to the Wolves regarding their reflections on Web3 gaming throughout 2023. Our discussion delved into identifying standout projects, chains, and events, acknowledged areas of disappointment, and concluded with a series of predictions for what 2024 might hold.
Games that Stood Out
In 2023 new titles rose to prominence, established games continued to expand their horizons, and games from the previous bull market era staged impressive comebacks. Below is a highlight reel of the year's most remarkable games:
Parallel TCG:
Parallel truly set the bar high in Web3 gaming this year by launching impressive Alpha and Beta versions of TCG, earning widespread acclaim and the title of 'Best Web3 Game of the Year.' Their success in gaining traction is especially noteworthy in the fiercely competitive TCG genre within this industry.
Pixels:
Highlighting the strategic benefits of platform migration, Pixels' move to the Ronin blockchain stands out. This switch played a crucial role in the game's surge in popularity, largely thanks to the exposure to Ronin's substantial player base, initially cultivated by Axie Infinity. Pixels’ strategic move enabled Pixels to skyrocket its DAU from a modest 4.7K to an impressive 115K.
Another achievement is Pixels’ VIP pass sales, generating $150,000 in revenue within 7 days during its inaugural P2A event. These VIP passes offer players several exclusive benefits, including access to special areas within the game, unique in-game perks, and the capability to withdraw $BERRY to their Ronin wallets.
Players have spent ~190 K RON (150K USD) buying Pixels VIP passes since the VIP passes launched on Ronin last week. These are real paying customers and revenue for Pixels.
~ Ronin Substack
Overworld:
Jeremy Horn's active role in shaping Overworld's social media strategy was a key factor in driving their highly successful mint marketing campaign. It emerged as one of the year's standout gaming mints, generating an impressive 5,000+ ETH in trading volume within just 30 days.
However, the campaign faced its share of criticism, primarily due to technical issues that prevented many WL holders from minting and sparked an intense gas war. This led to doubts about the previously stated policies on WL overallocation.
Despite these challenges, Jeremy's strong leadership qualities shone through. He played a pivotal role in mitigating FUD surrounding the mint. His efforts paid off, as evidenced by the significant rise in mint prices to around ~2.7E within two weeks, a remarkable achievement for a gaming collection of 6,000 pieces. Additionally, it is worth noting that the floor price of Incarnas rose post-reveal, this kind of price action is rarely to be seen.
Axie Infinity:
Years after its debut, Axie Infinity continues to be a significant player in the Web3 gaming arena. In 2023, the ecosystem celebrated several notable milestones:
The introduction of the Axie ecosystem builder program catalyzed the creation of a diverse range of UGC mini-games, all revolving around its IP.
The expansion of Axie Infinity: Origins into mobile marked a significant step in accessibility and reach.
The 'Part Evolution' update introduced vertical NFT upgrades (dynamic NFTs) and enriched the game’s resource economy, adding layers of complexity and engagement.
Oh Baby Kart:
Oh Baby Kart distinguished itself as a standout newcomer. The game captured attention not only with the launch of its engaging alpha and beta versions but also made waves by securing two impressive partnerships with Nickelodeon and Paramount.
The Bornless:
Despite maintaining a low profile on Web3 social media throughout 2023, the Bornless team has been diligently progressing with their game development. Remarkably, they've managed to gather over 190,000 wishlists on Steam in just a few months, indicating a significant interest in their game.
Deadrop:
Amidst the challenging bear market, Deadrop's captivating gameplay slices made a significant impact on crypto Twitter (CT), offering a beacon of hope to players during these uncertain times in the industry.
Honestly, the Deadrop slices were a highlight for me - took over crypto Twitter in the depths of the bear, awesome tournament at 3XP, genuinely a sick game with new mechanics (first web3 extraction? vertical?), Dr. Disrespect leading the charge, etc. I genuinely think it did a lot for the space at a time of need (LOL) and will continue to do so as it goes into open beta.
Pixelmon:
Pixelmon stands out as a team that has remarkably turned its fortunes around. Following the notorious 'Kevin moment' in 2021, the game underwent a management shift in 2022, setting it on a course for recovery. 2023 marked a significant year for Pixelmon, showcasing polished gameplay slices and the release of a new minigame. Most importantly, they succeeded in regaining the trust and confidence of their community and holders.
Big Time:
For much of the past year, Big Time struggled to gain momentum, but this changed dramatically with a major update and the initiation of their token and P2A campaign in October. These developments were pivotal in catapulting the game into virality. The update's introduction of a crafting economy also stimulated substantial trading activity.
From an ICO perspective, the launch of the BIGTIME token was a standout success in the year. It reached a remarkable peak with over $500 million in 24-hour trading volume and an FDV exceeding $4 billion.
Chains that Stood Out
When it comes to blockchains, there were a few notable ones that stood out this year. Overall, gaming was a strong focus point for chains in 2023:
Ronin:
Ronin's dedicated efforts in evolving its ecosystem and attracting key games to its chain culminated in a remarkable milestone of 1 million daily active wallets (DAW) using $RON, complemented by an impressive 430% year-over-year growth in the token's value.
A significant driver of this growth was the success of Pixels, which reported a notable 1.5 million monthly transactions in September. Given that Pixel's token, $BERRY is exclusively traded against RON, the game's popularity inevitably created substantial demand for RON.
Beyond Pixels, Ronin's strategic moves included signing several promising games, such as Apeiron, Wild Forest, and the Machines Arena. Additionally, Ronin's partnership with Genkai for an exclusive NFT sale on Ronin was met with great success, further bolstering the chain's standing.
They created timeline takeovers with their exciting advancements and achievements this year.
Avalanche:
Avalanche has successfully positioned itself as a leading and highly respected name in the Web3 gaming sector this year, thanks to its strategic partnerships with the right games and creators, and a focused effort to enhance its social media presence within the industry.
Discussing Shrapnel invariably brings Avalanche to mind, demonstrating the effectiveness of their joint branding and association efforts. This synergy has been instrumental in forging a strong link between the game and the Avalanche network.
In terms of creator collaborations, Avalanche's partnership with Sam Steffanina and Gamified stands out as a particularly astute business decision. Their alliance has been key in maintaining consistent brand visibility and is associated with some of the highest-quality content in Web3 gaming.
Beyond Shrapnel, Avalanche has curated an impressive portfolio of reputable and high-quality games. The lineup includes notable titles like Off the Grid, Fableborne, Pulsar, Providence, and others. Additionally, the success of BEAM on the Avalanche platform is also noteworthy.
Arbitrum:
In the view of rapidly expanding blockchain networks in 2023, Arbitrum stands out, particularly for its addition of new games. It secured the second position by adding a net total of 33 new games, accounting for both new arrivals and deductions for discontinued games or those shifting to other blockchains. Moreover, Arbitrum experienced a 624% increase in UAWs, placing it among the top 10 blockchains for the year by this measure.
XAI, serving as a Layer 3 solution, is positioned to bridge traditional gamers with Web3, thereby augmenting the user base of the Arbitrum ecosystem. The excitement surrounding the sale of its Sentry nodes and the subsequent airdrop significantly raised the profile of the Arbitrum blockchain. Given the surge in interest surrounding XAI, it is anticipated that an increasing number of games will transition to this platform to capitalize on its rising appeal.
Third Parties that Stood Out
Moving forward, it's important to shine a spotlight on some standout third-party entities. These are the companies at the forefront of developing solutions that are pivotal for the wider adoption of Web3 gaming. Below is an overview of the year's most noteworthy third-party players in the field:
Magic Eden:
Last year, Magic Eden made a particularly noteworthy stride with its marketplace integration into Honeyland. The connection enables players to seamlessly list their Honeyland NFTs directly within the app, marking a significant step in democratizing Web3 monetization for a wider audience. Looking ahead to 2024, it will be fascinating to observe how Magic Eden extends these marketplace tools to an increasing array of games.
Furthermore, Magic Eden deserves recognition for its expansion into offering both ETH and BTC marketplaces on their platform, broadening its appeal and functionality.
LimitBreak:
Over the past year, LimitBreak has been at the forefront of developing the ERC721-C standard, a game-changer for creators as it enables the programming of enforceable royalties. This innovation is a significant breakthrough from the standpoint of future Web3 monetization, offering gaming studios a pathway to more sustainable revenue models.
The Xterio marketplace seemed one of the first reputable marketplaces, which enforces this standard. It won’t be unlikely to see more studios move to marketplaces with the ERC721-C standard in 2024.
Reservoir:
Reservoir stands out as an innovative open-source NFT trading platform, offering developers a toolkit for engaging with the NFT market. It encompasses a range of utilities, including the creation of custom marketplaces and the integration of buying and selling features within an app. Such tools are instrumental for studios, simplifying the integration of Web3 components and thereby accelerating the time-to-market for games.
The Delights of 2023
The year 2023 witnessed a few pivotal events that positively influenced Web3 gaming, reinforcing the optimistic outlook for the industry's future. Below is an overview of the most significant and encouraging events that marked the year 2023:
Mobile Web3 Games:
While navigating the App Store and Google Play as a Web3 mobile game continues to present challenges, 2023 marked a shift towards greater flexibility by at least one major player in the mobile market. Notably, in July 2023, Google Play amended its policies to permit tokenized digital assets, thereby opening the door for NFTs in apps and games.
A pioneering example of adapting to these changes was Mythical Studio with their game NFL Rivals. They took the lead by integrating an in-app marketplace and actively collaborating with Google Play, contributing to the development of more Web3-friendly policies in the mobile gaming sphere.
Google vs. Epic Lawsuit:
Approximately a month ago, a pivotal legal decision was made, declaring Google's Play Store practices as constituting an illegal monopoly, resulting in a victory for Epic Games. The most significant outcome of this lawsuit is that for the next several years, Google will be required to permit developers to direct users away from the Play Store.
For Web3 studios, this ruling opens up new avenues for monetization. They will now have the freedom to guide users towards alternative platforms, such as out-of-app web stores or Progressive Web Apps (PWAs), for their financial transactions.
Larger Gaming Studios Entering
2023 marked a pivotal year for Web3, witnessing an influx of major players from the traditional gaming sector. Industry giants such as Zynga, Square Enix, Nexon, and a group of renowned Japanese legacy gaming studios ventured into the Web3 arena. Ubisoft, in its third foray into this space, also joined this wave. These entries significantly bolstered the momentum of the Web3 gaming movement, serving as a powerful validation for this industry.
The Disappointments of 2023
While the year saw positive strides in various sectors, it's important to acknowledge that the industry still faces a multitude of uncertainties. Let's take a closer look at some of the disappointments and challenges that emerged in 2023
Scammers and Drains
Web3 remains a complex terrain, full of risks such as phishing links, dubious downloads, and encounters with malicious individuals. The scarcity of intuitive, user-friendly solutions, particularly in terms of security, renders Web3 a daunting environment for newcomers. This lack of accessibility heightens the inherent risks, making cautious navigation vital for those exploring this emerging space.
Not Mainstream yet
Although there were great expectations for a Web3 game to make a significant mainstream impact in 2023, this milestone remains unachieved. The standard of quality that currently excites the Web3 audience is relatively modest, and the vast majority of games in this space still fall short of the benchmarks set by traditional gaming. Web3’s quality gap underscores the ongoing challenge for these games to match or surpass the quality and appeal of their traditional counterparts.
Looking back at 2023 in Web3 gaming, it's been a pretty awesome year, but we're not quite at the 'mainstream party' just yet. We're still on the hunt for that one killer game that'll drag all those Web2 folks into our world and 2024 might just be the year it happens, with a bunch of cool games set to launch soon.
Market Sentiment Changed Consumer Interest
Up until October 2023, the prevailing narrative in Web3 gaming centered around developing quality games, echoing the phrase 'the bear is for building.' However, a notable shift in market sentiment began around mid to late October, creating the onset of a pre-bull run. This change steered the majority of discussions back towards the financial aspects of Web3 gaming.
While it's undeniable that financialization is a core aspect of Web3 gaming, this abrupt pivot in conversation highlights a prevalent trend: a significant portion of the community remains primarily engaged in speculating on gaming tokens and NFTs. This tendency underscores the current scarcity of 'real players' in the space, a phenomenon that can be attributed to its early, formative stages.
Broken Token Models and Game Economies
The surge in P2A popularity led numerous game studios to integrate on-chain reward tokens into their platforms. However, it appears that many of these studios made these decisions hastily, without thoroughly considering the implications for their token models and overall game economies. Furthermore, a trend has emerged of studios launching tokens even before a game's release.
There seems to be a disregard among these game studios for the lessons learned from the previous P2E cycle of 2021-2022. Consequently, the sustainability of many token launches in Q4 2023 is questionable. Likely, the value of these projects' reward tokens will gradually diminish, potentially approaching zero.
Even if the token sinks for the upcoming games are good, the player base is not large enough to maintain 20+ gaming ecosystems.
While a very exciting song is playing, I think the music will stop playing at some point.
Discontinued Games and Funding Climate
Blockchaingamer.biz reports that 31% (407 out of 1318) of Web3 games have been discontinued or abandoned this year. The article cites the challenging funding environment and market conditions resulting from the crypto winter as primary reasons for these shutdowns. While the last quarter of 2023 saw an improvement in crypto market sentiment, the venture capital scene remains sluggish. The poor situation suggests that many game studios will again face difficulties in securing venture or investor capital, potentially leading them to seek funding directly from their communities
The shift in market sentiment has also influenced the adoption of minting structures more favorable to game developers, transitioning from free to paid mints. Successful examples include Overworld, Age of Dino, and MixMob. Should the market continue trending towards a full bull run, there may be an increase in minting structures and a shift towards bidding mechanisms aimed at maximizing fundraising from communities.
The venture capital downturn is further evidenced by the growing role of KOLs, communities, and DAOs in pre-sales for tokens and NFTs. With often low market capitalizations and advantageous unlock terms at TGEs, these sales present attractive opportunities for these groups. This enables studios to raise funds in smaller, more frequent increments.
Lots of games are burning through their final tranches of funds. So unless the bull hits and raises everything, we will see a bevy of projects declare bankruptcy.
Predictions 2024
I'm both callously cynical and cautiously optimistic going into 2024. The cynicism comes from having peeked behind the curtain of creators/influencer deal flow and how most people here are driven by greed; the optimism comes from knowing passionate, smart professionals are leading lots of kickass projects that will be undeniably good gaming experiences.
As we wrapped up our discussion, the Wolves shared their forecasts for 2024. Looking back on these predictions at the year's end will certainly be intriguing. Below are some of the most significant projections they made for the upcoming year:
From Building to LiveOps and Scaling
Web3 gaming, still in its early stages, is an industry where most games have been in development for just 2-3 years — a typical timeframe required for the production and release of a game. In 2024, as more established games are expected to enter the market, the industry will undergo a significant test. It will gauge the consumer demand for Web3 games and assess the viability of this model in the broader gaming landscape.
Games > Liquidity
In terms of traditional gaming, the influx of new game releases is significantly outstripping the growth of the player base. The industry is grappling with an excess of games catering to a ‘limited’ audience. This issue is beginning to manifest in the Web3 gaming sector as well, and its impact is magnified by the relatively small size of this industry's total addressable market. For Web3 gaming to achieve broader recognition, an increasing number of studios will find themselves competing for a rather limited pool of players and wallets.
Furthermore, the challenging funding environment and shifting market sentiments are driving more studios to introduce new tokens. This trend means not just an increase in the number of games requiring liquidity but also a rise in the amount of liquidity each studio needs. However, the current trend of relying on tokens appears to have limited sustainability, raising questions about the long-term viability of this approach in the gaming ecosystem.
Macro Influences
The recent greenlight for Bitcoin ETFs has made investing in BTC more regulated and accessible than ever before. BTC’s approval is set to enhance BTC's liquidity, bringing its price under the influence of a broader and more financially robust group of investors. Consequently, the price movements of BTC are likely to align more closely with the general trading market. This implies that in scenarios like a recession in the US or globally, BTC's value could also experience a downturn. Given BTC's significant role in the cryptocurrency market, its price fluctuations are expected to have a substantial impact on the broader crypto landscape.
Token Legislation
In 2023 one of the most significant events in the crypto sector was the case between Binance and the US Commodity Futures Trading Commission. The root of this legal battle lay in Binance's non-compliance with US legislation, particularly in failing to prevent money laundering. The consequence was a substantial fine of $2.7 billion levied on Binance, and Changpeng Zhao (CZ), the CEO, had to plead guilty and faced a prison sentence
The case specifically references AXS, which says: “The information Sky Mavis publicly disseminated has led AXS holders, including those who have purchased AXS since August 2021, reasonably to view AXS as an investment in and to expect to profit from Sky Mavis’s efforts to grow the Axie protocol”. Given this context, it seems increasingly probable that the SEC will intensify its scrutiny of gaming tokens, especially those promoted or perceived as investment opportunities. The potential tightening of legislation in this area in 2024 is not unlikely.
The Battle of Gaming Chains
As the year unfolds with the anticipated launch of numerous high-quality games, it’s likely to see intensified competition among gaming chains to attract the best titles. The chain that succeeds in onboarding a game with mass appeal stands to reap substantial benefits. Successful games can drive significant trading volume, attract high-value players (whales), garner widespread attention, and offer a degree of longevity.
Given these stakes, it’s reasonable to expect that leading chains like Avalanche, Immutable, and Ronin will ramp up their business development initiatives, enhance development support, and engage in strategic cross-pollination to secure lucrative gaming deals.
There are a dozen gaming chains now all vying for gaming chain dominance. Few have anything to show (Ronin and Gala), while others are making big bold promises in this space. This is the battle to watch. Excited to see who comes out on top.
Summarized
To finalize this article, here’s an overview of all studios, chains, 3rd parties, and events we mentioned that shaped 2023 for Web3 gaming:
Games that stood out: Parallel TCG, Pixels, Overworld, Axie Infinity, Oh Baby Kart, Borneless, Deadrop, Pixelmon, and Big Time.
Blockchains that stood out: Ronin, Avalanche, and Arbitrum.
3rd parties that stood out: Magic Eden, LimitBreak, and Reservoir.
Delights: Mobile Web3 gaming, Google vs. Epic lawsuit, and larger studios entering.
Disappointments: Scammers and drains, not mainstream yet, market sentiment changed consumer interest, broken token models and game economies, discontinued games, and funding climate.
Predictions 2024: From building to LiveOps and scaling, games > liquidity, macro influences, token legislation, and the battle of gaming chains.
Special Thanks To
Maria, Bogdan, S4mmy.eth, TheWriteDude, TheNPCEO, Legendary, Clearblue, and Sh3k1n4h for actively contributing to the discussion and providing valuable insights.
Disclaimer
None of this is financial or legal advice.
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Top roundup, great read! Here's to a huge 2024!