Will the adoption of cryptos come through the video game sector? Indeed, it is very likely that this sector will be a vector of adoption for cryptocurrencies. It is therefore impossible to ignore the games. More than just entertainment, games have become an integral part of our lives and, as virtuality takes more and more space in our daily routines, this trend is not going to stop any time soon. The video game industry has come a long way since its humble beginnings in the 1970s, with Atari releasing the first game, Pong. As of mid-2020, Fortnite has 3.8 billion days of play, which is the equivalent of 10.4 million years. Players have spent more time playing Fortnite than humans have ever lived.
The video game industry is thriving, with 3.38 billion players worldwide and an expected revenue of $184 billion in 2023. Generations Z and Alpha, who increasingly value digital experiences and physical as one, devote considerable time to games, with an average of 15 hours per week.
According to Pitchbook, $3.475 billion in venture capital was invested in Web3 gaming between the start of 2019 and the end of June 2023. So how Web3 and cryptos intend to shake up one of the largest industries in the world, and why should an investor give it importance?
Crypto Gamefi & Play To Own – Gaming Chapter 4
Timeline for the transformation of the video game industry:
| Period | Era | Economic model |
| 1978 – 1985 | The arcade era | Chapter 1 – Vist & Pay to Play |
| 1978 – 2000 | The era of game consoles | Chapter 2 – Own & Pay to Play |
| 2000 – 2010 | The computer and the beginning of the online era | Chapter 2.5 – Pay to Play & Free To Play |
| 2000 – 2021 | The era of mobile and Cloud | Chapter 3 – Free To Play |
| 2021 – today | The era of Web3.0 Gamefi | Chapter 4 – Play to Own |
In the early days of gaming, player engagement was directly linked to the revenue generated by an arcade unit. The birth of the gaming console changed the economics of game development away from smaller revenue streams toward larger upfront purchases. Major game studios and publishers fought to be part of the inner circle of those who deserved the $60 a consumer spent on a single game.
The birth of the Internet and the rise of mobile telephony have caused the economic model of games to evolve towards small, permanent transactions. Game developers deliberately design their in-game economies to make it easier for players to spend throughout their customer life.
Games experience paradigm shifts every 15 or 20 years and the rise of pay-per-view gaming is similar to that of free gaming 15 years ago. It is likely that in the next 10 years, most games will integrate Web3 technology, cryptocurrencies, blockchain and ownership layers, allowing Web3 to become a dominant business model in gaming.
What are business models?
Understanding business models is essential for understanding the status quo and opportunities, and therefore for making assumptions about the future direction of an industry. In our view, the current business model for games has serious ownership issues. It is therefore simply inevitable that players will eventually demand ownership of virtual goods. Web3.0 is the answer to this change.
The adoption of cryptocurrencies is mainly driven by speculation, will Gamefi be a game changer?
It’s safe to assume that the vast majority of people think about money within the first ten minutes of waking up each morning. Earning enough money to live on is a common goal and obsession in our daily lives. Players play above all to forget their daily problems; they seek to have fun, to be entertained and to be distracted.
The first wave of gaming adoption failed in this regard, as players’ primary motivation for engaging in games like Axie Infinity or other Play-to-Earn titles was to make money rather than enjoy.
The first generation of GameFi crypto projects in the 2020/21 era were designed for DeFi traders, not gamers, but that is changing. To illustrate this phenomenon, the Epic Games store in the United States now offers 69 games on the blockchain.
Driving Forces and Main Upcoming Crypto & Web3 Gaming Projects
It is important to understand that gaming is central to the strategic development of most blockchains, as there is a global consensus that gaming will be a driving force in the adoption of cryptocurrencies in the future. As a result, the competitive infrastructure environment is intense because the stakes are high. The blockchain ecosystem that succeeds in attracting the next Fortnite or League of Legends will be the big winner in terms of traffic and On-Chain activity:
As investors, it is therefore important to monitor which blockchain and crypto is leading in terms of gaming adoption. Now that you understand, an indirect way to take advantage of the emergence of GameFi is to invest in the right infrastructure. However, in games as in cinema, you just have to make blockbusters to win; quantity matters less than quality.
Are we ready to compete with Web2 games? This is the burning question everyone is asking right now. SwissBorg believes we are getting closer and closer to that moment. Indeed, there are encouraging signs such as significant investments ($50M Parallel financing and $20M Shrapnel financing) or the recent partnership between ILV and Team Liquid.
However, as the graph above shows, triple-A games can still be counted on the fingers of one hand. For this cycle, we will prioritize infrastructure projects and, in particular, gaming projects focused on digital identity with the aim of improving the experience of fans, players and other video game enthusiasts by providing a Web3 layer to their favorite Web2 games. We are convinced that XBorg will become a GameFi benchmark in 2024.
Our favorite selection at the dawn of 2024:
Triple A games category
- Prime
- Shrapnel
- Big Time
- Illivium
Infrastructure Category
- XBorg
- IMX
- BEAM
Thank you to the teams of Swissborg for their collaboration in the creation and writing of this content.
Sources:
https://messari.io/report-pdf/7fbdbf30ec57b9a7fa0d4df8b4193b768597a88b.pdf
https://www.galaxy.com/insights/research/history-of-gaming-and-web3-future/
https://research.game7.io/state-of-web3-gaming-2023
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