Yearly, my firm Emfarsis companions with the Blockchain Recreation Alliance (BGA) to conduct an industry-wide survey of blockchain gaming professionals. And yearly, the overwhelming majority of respondents agree that digital asset possession is the one greatest profit that blockchain can convey to video games; this 12 months was no completely different, with 71.1% rating it primary. Even with extra folks becoming a member of the {industry} — in 2024 we had 3 times as many respondents as in comparison with the inaugural survey in 2021 — it’s at all times digital asset possession that comes out because the {industry}’s undisputed North Star.
However whereas we hail digital asset possession as blockchain gaming’s defining characteristic, most blockchain video games at present are free-to-play and don’t require asset possession in any respect. On high of that, much-hyped guarantees that relaxation on the premise of digital asset possession stay largely unrealized. Apparently, blockchain gaming professionals have discovered themselves in a curious bind the place the very best proposition they’ve for avid gamers is similar factor they’re making excuses for.
Digital asset possession has at all times been central to blockchain gaming, providing gamers true digital property rights to personal, commerce, and monetize in-game belongings within the type of tokens and NFTs. Going again to play-to-earn’s heyday of 2020-21, digital asset possession was how you may inform the distinction between a blockchain sport and a conventional sport. Early video games required gamers to purchase a number of NFTs upfront. However this created a barrier to onboarding, as many couldn’t afford the NFT(s) or just weren’t enthused about having to purchase an asset in a sport they didn’t even know they favored but.
In fact, these NFTs weren’t simply any outdated sport belongings, they had been yield producing. Shopping for an NFT in a blockchain sport was extra like investing in a software that you should do a job — a job that paid in crypto. Among the extra entrepreneurially-minded NFT house owners began renting out their belongings to would-be gamers, in return for a lower of their earnings. It was an incredible demonstration of the type of decentralized, permissionless innovation that’s made attainable by blockchain — a community-led workaround that was developed by the gamers, not the sport builders.
Wonderful because it was, the rental system which was well-liked in early blockchain video games like Axie Infinity, Pegaxy, CyBall, and others, did not really remedy the onboarding downside. The restricted availability of belongings and excessive entry prices created a bottleneck, so the rental demand couldn’t be met, thus perpetuating the friction with top-of-the-funnel person acquisition.
By 2022, in an effort to decrease limitations and appeal to a broader viewers, blockchain video games had began to embrace the free-to-play mannequin as a substitute. With this, blockchain-based options of the sport had been handled as non-obligatory enhancements somewhat than a prerequisite to play. Gamers might buy belongings later, or commit effort and time to earn them, however provided that they desired. There was no express requirement to take action.
The transfer got here at a time when blockchain video games had been being pressured to focus much less on financialization and extra on enjoyable. And it was seen as needed in the event that they wished to nab a share of the massive, juicy $220B conventional gaming market, made up of billions of avid gamers that had been unlikely to put in a crypto pockets not to mention put up money for an NFT.
This contradiction — the place digital asset possession is each a defining characteristic and a major barrier — displays the complexities of blockchain gaming’s evolution. On one hand, possession is what makes blockchain video games particular; on the opposite, requiring it deters gamers. To draw conventional avid gamers, who lack Web3 familiarity, builders have prioritized accessibility.
Findings from the 2024 BGA State of the Trade Report again this up. When requested concerning the greatest challenges dealing with the {industry}, greater than half (53.9%) cited onboarding challenges and poor person expertise, whereas one other 33.6% mentioned that blockchain ideas usually are not totally understood. Thus, with out clear, tangible advantages, the trouble and price of changing into a digital asset proprietor is unjustified. This reveals a significant ache level for builders attempting to promote noobs on a clunky tech stack that feels extra like a chore than a selection, so you possibly can see how they arrived on the resolution to not drive it.
However this raises the query: How a lot blockchain can a blockchain sport omit, earlier than the blockchain sport is not a sport on the blockchain?
This half-hearted strategy to embracing on-chain experiences signifies that doubtlessly transformative Web3-native improvements — just like the promise of interoperability, the place gamers might use a sword from Recreation A in Recreation B — stay largely theoretical. Some progress has been made, similar to enabling NFT profile image (PFP) collections to turn into playable avatars, however this largely caters to present web3 communities somewhat than delivering a palpable profit to lure the Web2 gaming lots.
True interoperability requires industry-wide collaboration, each technically and economically, which continues to be fragmented throughout chains and ecosystems. In the meantime, builders are sweeping Web3 underneath the rug, treating it as a layer within the tech stack somewhat than a defining characteristic. So for many gamers, the “Web3” half is hidden, non-obligatory, and about as impactful as a collectible spoon in a cereal field.
Frankly, the notion of “possession” in Web3 is vastly overhyped and largely unsupported by any substantial product-market match. Web3 possession, because it’s typically offered, is a mirage. The truth is: even in case you “personal” an NFT, its utility and worth typically rely totally on the builders’ centralized infrastructure and ongoing operations. What Web3 does provide is elevated company over your belongings, permitting for faster, frictionless gross sales. However true possession? Not a lot.
There’s really little proof to counsel that Web3 possession has pushed sustainable demand. That mentioned, the power to exert extra management over your digital belongings is undeniably useful — simply not the “true possession” that’s typically claimed.
That mentioned, there have been some very promising experiments with totally onchain video games and inventive catalysts such because the Loot NFT assortment. Its composable construction allowed builders to construct by-product tasks, video games, and economies round it without having approval or enter from the unique creators.
Different latest improvements born within the enviornment of digital asset possession embrace Ethereum requirements ERC-6551, ERC-4337, ERC-404 and soulbound tokens (SBTs). ERC-6551 launched tokenbound accounts, permitting NFTs to behave as their very own wallets. ERC-4337 delivered account abstraction, enabling customizable wallets that improve safety and usefulness with out counting on centralized custodians. ERC-404 mixed the options of fungible and non-fungible tokens, to supply versatile possession of each distinctive and divisible digital belongings. SBTs gave us non-transferable, identity-linked belongings representing credentials for belief and repute.
Whereas nonetheless early on the adoption curve, these developments empower avid gamers to unlock experiences that may by no means have been attainable with out digital property rights. And the outcomes of the annual BGA survey affirm that the enchantment of digital asset possession stays sturdy: it offers gamers company, management and worth.
The problem now could be to let gamers expertise the enjoyable first and uncover the worth of possession organically. However we shouldn’t be ashamed to face up for what we really imagine in. If we wish others to get onboard with our imaginative and prescient, we have to develop experiences that exhibit the advantages of digital asset possession from the get-go.
In any other case, we’re not doing something very particular in any respect. Are we?
Because of Nathan Smale, Duncan Matthes and Owl of Moistness for his or her evaluate of this text.