The collapse of several popular blockchain games this year has marked the beginning of what could be a rough time ahead for the Web3 gaming industry. Titles such as Raini: The Lords of Light, MetalCore, Blast Royale, Mojo Melee, OpenSeason, Realms of Alurya, The Walking Dead: Empires, and Symbiogenesis have all shut down, raising questions about the sustainability of the current model. Experts are blaming a combination of factors fueling this trend. They identify over-speculation, unsustainable tokenomics, and the unique challenges of game development all as major factors.
The Hype Cycle and its Discontents
Mythical Games' CEO, John Linden, believes that Web3 gaming's primary misstep lies in its overemphasis on hype and speculation rather than fundamental game design. This reflects national market trends across the entire crypto space, where speculative bubbles have historically led to painful busts.
"Even in the traditional game world, 90% of games fail." - John Linden
Linden likens the state of play in traditional gaming to what he sees in Web3, emphasizing the low success rate that exists everywhere.
"That's kind of what we're seeing on the Web3 side—90% are going to fail. I think the problem is it's just more public, because on the traditional game side, you don't have the players investing and being part of that game design before it fails. You see that after it comes out." - John Linden
He notes that failures in Web3 are as conspicuous as possible. In this space, players tend to enter as investors from day one.
Krypticrooks, a co-founder of Fractional Uprising, agrees with this sentiment. He discusses how insane the pressure token integration creates for game development is. In his experience with OpenSeason, the need to manage and maintain a crypto token added significant complexity to an already challenging process.
Tokenomics and Investor Expectations
The current market environment, characterized by the rapid creation and deployment of new tokens, may be exacerbating the problems faced by blockchain game developers. As Krypticrooks notes, platforms such as Pump.fun have rolled out more than 11.8 million tokens since January 2024. This frenzied growth has led to market oversaturation and reduced investor patience.
Keith Kim, chief of strategy for Nexpace, touched on the difficult tightrope walk of game development. Beyond that, he had to juggle the pressures of being in charge of a token. He remembers 18-hour turns trying to keep up with both full-time jobs.
"Three or four years ago, you had your random blockchain games with tokens and NFTs—it was much easier for you to get funding from different VCs and also get traction from users," - Keith Kim
Kim points out that in the early days of Web3 gaming, raising capital was a piece of cake. This might have masked significant challenges to their sustainability and revenue generation.
"Because people were not too well-versed [...] in the aspects of sustainability, revenue, and all these things." - Keith Kim
He shares his experiences to unpack how investors frequently came in with unrealistic expectations around fast returns.
"It was sort of like: Hey, take my money. I’m pretty sure it's going to 10x or 100x." - Keith Kim
That pressure to deliver short-term profits can be very damaging to the long-term viability of a game. The disastrous performance of gaming tokens is a stark depiction of these perils. Today, not one gaming token is in the top 100 crypto by market cap.
The Quest for Quality and Sustainable Models
John Smedley, founder of studio Daybreak Game Company and veteran game developer responsible for the creation of EverQuest, Planetside and H1Z1. He thinks the blockchain gaming space is still missing that flagship title which can really show off the technology’s full potential.
"There just hasn't been the right game out there to be sort of the vanguard of quality" - John Smedley
Linden thinks that game development is extremely time-intensive. He stresses that it’ll take time to develop genuinely engaging blockchain games.
"It takes a while to make games" - John Linden
Even through the doom and gloom, some developers are taking different approaches to blockchain gaming that will be potentially more fruitful and sustainable in the future. In that regard, Off the Grid is a very successful blockchain title. It allows gamers to play on trusted platforms such as Steam, PlayStation, and Xbox without needing crypto knowledge or access. The move expands the game’s reach and lowers its dependence on the unpredictable crypto market. Reaper Actual is an up and coming crypto shooter with some seriously cool stuff in the pipeline. It will develop a marketplace that is tailored for both traditional and crypto gamers, truly connecting these two communities.
It’s easy to blame all these failures on poorly designed tokenomics or bear market conditions. The build of Deadrop, a project spearheaded by popular content creator Dr. Disrespect, grabbed tons of attention. It stumbled in his absence, highlighting the need for strong leadership and sustained implementation.