Blockchain gaming has been rapidly growing for a while, attracting users and investors globally. However, this growing industry still has a lot of issues that need to be solved, including the large amount of speculation and its unsustainability.

The landscape is unsustainable

According to DappRadar, the use of blockchain titles grew 2000% over the last year. This area also attracts investors, as blockchain games raised a total of $2.5 billion in the first quarter of 2022.

In its latest report, Arcane Research highlighted the ongoing expansion of Web3 gaming. The landscape is already full of games of different genres, from MMORPGs and card games to farming simulators and battle royales.

Although all these factors contribute to the growing popularity of blockchain games, interest is now mostly fueled by speculation rather than enjoyment. What it means is that people get into top games like Axie Infinity or The Sandbox not to have fun but to earn money in the first place. As a result, these projects sometimes struggle to retain their audience.

Here lies one of the major problems with the current state of Web3 gaming.

Developing classic AAA games-as-a-service like Fortnite and World of Warcraft, as well as creating a sustainable ecosystem around them takes years. On the other hand, NFT and blockchain titles usually launch with no clear vision or pre-existing content.

Web3 games and platforms exist in the rapidly changing market, with the constant need for outside investments. “This is unsustainable and requires a major realignment, with games supporting DeFi — not the other way around,” Arcane Research points out.

Three main issues of blockchain gaming

Growing costs of entry hinders mass adoption of NFT titles

  • Web3 titles usually require users to buy in-game assets in exchange for potential rewards. It prevents mass players from entering this risky area, especially when classic games offer fun gameplay for smaller costs or even for free at the start.
  • The ones who get into these games often have to join special guilds that lend in-game NFTs or other assets for a potential revenue split.
  • This results in speculation and emergence of different Ponzi schemes, with only a small percentage of players eventually benefiting from the in-game economy.

Risk of inflation

  • Most blockchain games rely only on one native token, pegging both the entry price and potential rewards to it. This leads to a lack of sustainability of the whole in-game economy, which can be affected by this token’s fluctuation.
  • According to Arcane Research, this problem can be solved by creating well-designed mechanisms, where a token can be eventually removed from circulation.
  • However, rewards that players earn within a game usually outpace the main token’s burn rate, leading to inflation and making the whole ecosystem unsustainable in the long term.

Incentives shouldn’t be the only motivation

  • Most Web3 games attract new players by offering them different rewards and other incentives. While being a good motivational driver, it is not enough to retain users.
  • So these games should engage players through entertaining gameplay before capturing their money. Otherwise, they will flee to other projects, gradually draining the ecosystem.

The full report, where Arcane Research also explains why blockchain gaming is an evolution rather than a revolution for the industry, can be found here.

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