When you think of crypto narratives, you can reference how the sector rotation in the equities space works, where money invested in stocks goes from industry to industry. Similarly, investors change their focus frequently in crypto, as demonstrated by the transitions from ICOs to DeFi, NFTs, DAOs, stablecoins, web3 gaming, Layer 2s, derivatives, and AI from 2016 to 2022.

Everyone who talks about Web3 gaming would revere it as the sector which will onboard the next billion in crypto. Web3 gaming is about giving players ownership, something web2 cannot offer. According to Messari, this idea centres around how players with a stake in the game would feel more invested in a game’s success by spending and playing more.

With the dawn of Axie Infinity and various play-to-earn models at the start of 2022, those games aimed to achieve just that. Over $18B has been poured into web3 gaming in the last 2 years, but development still lags behind funding significantly.

According to Delphi Digital, daily unique active wallets dropped 40% in 2022 while showing no current signs of growth.

Even with massive funding in 2021, with over $6B raised by gaming projects, at the core, games need gamers. But “as game profits decline and web3 games failed to be truly fun, players simply left.”

The great respawn in generative AI for gaming

a16z explored the idea of production-ready generative AI in their paper on the big ideas in tech for 2023.

This will be visualized by creating production-ready generative AI models for all asset types needed to produce a modern game.

Gaming in the current day is the most complex form of entertainment. It involves multiple types and variations of creative assets to make a proper playable game. This comes in 2D and 3D models, textures, music, cinematics and many more. Each vertical also has its respective high level of the specialized process.

The pace at which AI is developing now might change that. Imagine using a text prompt to generate all these virtual assets needed to produce a game. Not only will this make it faster for game production, but achieving at a higher level in terms of quality.

Gaming is great, but there are some problems though…

While the inflow of capital is present, there are areas in which gaming jumped the gun—Messari crypto theses for 2023 cited areas in web3 gaming that needs to solve before we see success.

Firstly, to build a sustainable P2E gaming franchise. To do that, the game has to be fun; that way, people will naturally gravitate towards it.

But that would need large amounts of capital. Building a game itself is complex on its own, but throwing in a complex token mechanism and the elements of DeFi into the mix, makes development a more complex and lengthy process.

The rapid cooling of Axie and STEPN growth are examples of development efforts being shortlived. “I’m bearish and will only update my thesis when I see signs of life or startup valuations that don’t pull forward ten years of credit for the entrepreneurs building in this sector.”

Till these problems are solved, crypto.com’s 2023 year ahead dropped expectations of “a few AAA games in the next year or two, which will provide players with new gaming experiences that integrate high-performance gameplay with blockchain technology.”

The final boss battle: Sustainability

Axie Infinity proved that crypto games could go viral. Now we need a game that can prove sustainability for a Web3 gaming model. According to Cointelegraph, there is a current trend towards sustainability and stability. But that mountain is a tall one to climb.

The lessons from Axie and STEPN will likely spawn a wave of products with built-in stability, but that lack the dynamic boom-and-bust nature of most crypto speculation. Over time, game developers will relearn that market speculation is part of the fun and try to incorporate it in healthy, responsible ways.

This thread below explains the stark differences between P2E games and traditional games and what the ideal future of gaming would look like.

Closing thoughts

Gaming needs gamers would mean games need to be fun. After that will come a need for a sustainable model to ensure long-term success. In its current form, web3 gaming is still in its early stages, and the journey ahead for it will not be easy. Intentional steps must be taken; it needs time and legroom to grow.

While web3 gaming had bad spells in 2022, we hear of big web2 players such as Meta, Twitter and even Reddit; large-scale mainstream adoption is here. I remain optimistic about its future and the value it will bring. 2023 instead, will be the season of the great reset.

Also Read: Top 10 Yield Farming Opportunities For Ethereum (2023)

[Editor’s Note: This article does not represent financial advice. Please do your research before investing.]

Featured Image Credit: Chaindebrief