The gaming landscape is in the midst of an extraordinary revolution, where traditional boundaries are being shattered and replaced by boundless opportunities. With the advent of Web3 gaming, a new era has dawned, transforming the way we play, interact, and monetize virtual experiences. For gaming companies and developers seeking to seize the moment and thrive in this dynamic landscape, understanding the intricacies of Web3 gaming and harnessing its revenue potential is paramount.  

Web3 games are the future of gaming. They offer a more immersive and interactive experience than traditional games, and they have the potential to be much more profitable for developers and even the gamers themselves.

In this article, we will delve into the world of Web3 gaming, exploring its unique features and highlighting how it differs from the current gaming industry. We will unravel the mysteries of gaming monetization, dissect the factors that affect it, and provide actionable insights on how to improve revenue generation.  

Whether you're a forward-thinking gaming company or an ambitious game developer, this article is your definitive guide to unlocking the vast potential of Web3 gaming and thriving in the rapidly evolving web3 industry.

What is Web3 gaming?

Web3 gaming is a modern form of gaming that uses blockchain technology to allow players to have true ownership of gaming assets and currencies. Often players can contribute to the decision-making process. While some games are completely blockchain-based, others combine traditional “Web2” gaming elements with blockchain technology.  

Web3—the new decentralized internet—has turned things on their head wherever it goes. From finance to fashion, the concepts of decentralization, transparency, and true ownership have helped spark innovation in every industry. And gaming is no different.  

A major departure from traditional gaming norms, Web3-based games allow players to engage with the games in exciting and innovative ways. People can play games to earn assets like cryptocurrencies and NFTs (Non-Fungible Tokens). This puts power in the hands of the players rather than power only being wielded by the game developer. Rather than pay-to-play, web3 gaming often embraces a play-to-earn model.  

In traditional gaming, players purchase in-game content or digital assets using fiat money or receive them as rewards. However, game companies still hold the copyright to any in-game content. Essentially, players do not truly own the in-game digital assets. In reality, “ownership” is simply a license for engaging with the aspects of the game.

Assets, items, and collectibles in Web3 games are owned by the players—genuinely owned. This is done by NFTs (often referred to in gaming as digital collectibles), and ownership is recorded onto the blockchain. Furthermore, players can sell or trade their items for a profit through decentralized marketplaces.  

Another important feature of many web3 games is decentralized governance. While not every company has taken this route, it can allow gamers to make decisions on when and how the game should evolve.  

Web3 gaming also facilitates wide interoperability within various gaming ecosystems by linking the in-game assets and players across games. Basically, you can take your earned assets from one game and transfer them to another game or even another blockchain. This has allowed for the creation of gaming ecosystems with multiple games of different styles and genres.

Some of the key features that make web3 gaming unique—apart from the implementation of a blockchain—are:

• Decentralization: Web3 games are decentralized, meaning they are not controlled by any one entity. This means that players have more control over their in-game assets and data.
• Transparency: Web3 games are transparent—all game data is stored on a public blockchain. This makes it easy for players to verify the fairness of the game and the provenance of in-game assets.
• Ownership: Web3 games allow players to own their in-game assets. This means that players can trade, sell, or lend their assets to other players.
• Economy: Web3 games have their own economies, which are driven by player activity. This means that players can earn money by playing games.

• Interoperability: Web3 games are interoperable, meaning that in-game assets can be used across different games. This allows players to build their own unique gaming experiences within an entire gaming ecosystem.
• Community: Web3 games are built on a foundation of community. This means that players have a say in the development of the game and the direction of the game's economy.

GameFi

Some crypto “games” fall under the DeFi (Decentralized Finance) umbrella. GameFi evolved from DeFi and describes financial protocols with gamified mechanisms. This is quite different from Web3 gaming. Web3 gaming is a game-first project with earning mechanisms.

For example, DeFi Land is a farming simulation gamified play-to-earn DeFi protocol on the Solana blockchain. It integrates existing DeFi protocols within the ecosystem of the game. Its in-game token is Defi Land ($DFL). The token lets you buy NFTs and various other resources to farm your land. The in-game assets—or crops— are actually equated with cryptocurrencies like the sunflowers in the game are SOL, the pumpkins are COPE, and the corn is USDC.

Some of the basic protocol features of the game include liquidity providing, customizable land, yielding farming, staking, governance, lending, crafting, multiplayer competitions, NFT marketplace, trading, etc. Overall, the gameplay is kept simple, with the primary focus being gamifying finance.

The metaverse

The metaverse has been touted as the future of the internet, but this vision has been slow to materialize. However, it holds immense potential for Web3 gaming. Metaverse games are virtual worlds that allow players to interact with each other in a decentralized ecosystem. Once virtual reality gaming hardware and software have improved, we may see more high-quality games set in the metaverse.

Game monetization

Companies are always on the lookout for new ways to bring added value to games—and monetize it in the process. With “traditional” web2 gaming, this has become a long-term transactional relationship that many gamers feel is too heavily skewed in favor of big companies.  

Web2 gaming monetization

Back in the days of dial-up and the N64, the primary way for a gaming company to make money was simply the sale of the physical game. A gaming company would make a game, and the gamer would buy a disc or cartridge. That singular purchase would be the only financial transaction between gamers and gaming. Now, in modern gaming, this has changed hugely.

Not only do gamers pay for the disc or file, but there are a wide host of revenue streams for companies and developers:

• Downloadable content (DLC): Additional content created for an already-released game. This can vary from new clothes, items, different skins, extra levels, side quests, loot boxes, new storylines, etc. Many gamers appreciate the addition of DLC to keep the game engaging and fresh. Some, however, consider it an over-commodification of gaming.  
• Microtransactions (MTX): Similar to DLC, these are in-game purchases, often of weapons, cosmetic features, or level-ups. This form of revenue has attracted some criticism as microtransactions can often rack up huge bills if you don’t keep a close eye on them. They’ve become a popular revenue source for mobile games and Facebook games and a bane for many gamers.
• Expansion packs: A hallmark of The Sims, expansion packs were the precursor to DLC and are still used today. Most companies have switched to the DLC format for ease of distribution and convenience.  
• Subscriptions: This monthly revenue can be a great reliable source of income, but you’ll have to find players willing to pay a monthly or quarterly fee. Often companies offer a free-to-play introductory period or a “freemium” version to get people hooked.
• Advertising: Many mobile games now feature in-app advertisements. Players can often pay a premium or start a subscription to remove the ads. Popular in mobile gaming, ads can vary from subtle (in-game, say, a billboard in Grand Theft Auto) to obnoxious (large pop-ups that require you to watch for a minimum period before you can close it).

These different formats mean the relationship between the gaming company and the players continues if the game is paid. The physical games have become just a part of gaming revenue, while DLC, MTX, and subscriptions are on track to become the biggest source of income.  

For developers and companies, this is great news for their bottom line if done right. However, there has been intense pushback against the commodification of every aspect of gaming. So, you have to tread a fine line between making money and pushing players past the point of no return.  

Enter Web3

Web3 is attempting to revolutionize all this and more. Rather than having in-game assets owned by the developers, Web3 allows players to have true ownership of their assets. By using NFTs, players can buy and earn items.  

Web3 games can reduce some of the friction of Web2 games. In microtransaction-driven games, it’s all about pushing the players to make repeat purchases by adding friction. With Web3 games, the primary in-game monetization method is through the primary and secondary sales of NFTs. This eliminates the need for constant friction.

Developers and companies can still enlist the monetization methods of Web2, but these can be combined with the more equitable methods of Web3. Done right, it presents a unique opportunity to earn long-term, sustainable revenue for both the developers and the players.  

Different Models of Web3 Games

Web3 gaming can come in many forms, but there are some commonly used models:

• P2E or Play-To-Earn: Players earn income by participating in battles and playing games. The focus is on revenue generation, making it the most popular model in the industry.
• P2O or Play-To-Own: Similar to P2E, but with a stronger focus on entertainment. Players join games for fun and can earn additional income by turning in-game assets into non-fungible tokens (NFTs) and selling them.
• P2P or Pay-To-Play: This traditional model has been popular since the 1970s. Players invest in devices, products, and subscriptions for fun, while developers profit. It's primarily about entertainment, and earnings are usually limited to professional esports gamers.
• L2E or Learn-To-Earn: A subvariety of P2E, this model allows gamers to earn by learning about blockchain or answering questions. In some cases, users may need to pay to access such games or unlock additional earning opportunities.

• M2E or Move-To-Earn: Players engage in physical activities like running or swimming to earn cryptocurrency. This model gained popularity but faced criticism for its economics and sustainability.
• F2O or Free-To-Own: A model aiming to shift power from developers to players, allowing them to play and earn by minting NFTs within the game's economy without any upfront costs.
• F2P or Free-To-Play: A standard model in both Web 2 and Web 3 gaming, where players can access games without initial investments. Additional features or levels may require payments, or players can earn them by buying NFTs or other assets.
• X2E or X-Activity-To-Earn: Similar to P2E, players earn by completing tasks, but they can be unrelated to gaming. Activities like sleeping or eating out can be monetized, providing bonuses and emotional satisfaction.

Factors to consider when developing a Web3 game

Before you go rushing to implement heavy monetization structures and tokenomics, it’s important to remember no one is going to play your game if it isn’t good. Yes, Web3 is exciting, and many people will rush to try out a new game in the hope that the game might be the next Axie Infinity and they’ll get rich quick. But at the end of the day, games are meant to be fun.  

Without spending time and effort on creating an engaging and exciting game, people will give your game a quick spin and move on to the next thing. You’ll be left with a ghost town empty of players. First and foremost, you need to focus on long-term gameplay, user engagement, graphics, physics, strategy, etc. All the things that go into making a good Web2 game. Get those right, and you’ll have a game people want to play, support, and even put money into.

Once you have the fundamentals down, here are some important Web3-specific factors to consider.  

User engagement, activity, and retention

User engagement and retention are vital factors for a successful game. A captivating gameplay experience, an immersive storyline, and meaningful interactions can keep players coming back for more. By continuously offering fresh content, updates, and incentives, developers can maintain user activity and encourage longer-term engagement. This will also have the knock-on effect of increasing the opportunities for monetization.

Tokenomics

What would a web3 game be without tokens? Tokenomics is a crucial aspect of web3 games, and it encompasses several key points:  

1. Create a play-to-earn economy: Implementing a play-to-earn economy is an innovative way to monetize Web3 games. In this model, players can earn in-game currency or other rewards simply by playing the game. This currency can then be used to buy in-game items, traded for other cryptocurrencies, or even withdrawn as real-world money. This approach provides a strong incentive for players to engage with the game and boosts the overall monetization potential.  

2. Establish a fair and balanced economy: It is vital to ensure that the game's economy is fair and balanced. Striking the right balance between in-game purchases and the ability to earn rewards through gameplay is crucial for maintaining a healthy and sustainable monetization model. However, depending on your target market, you’ll need to decide if players should be able to gain a major advantage simply by spending more money. Pay-to-win games are popular in Asian markets but fall flat for Western audiences.  

3. Offer a variety of ways to earn in-game currency: Providing players with multiple avenues to earn in-game currency enhances engagement. Besides playing the game, players can earn currency by completing quests, participating in tournaments, or achieving specific milestones. Offering a diverse range of earning options keeps players motivated and encourages ongoing participation.  

NFTs and collectibles  

Non-fungible tokens (NFTs) have emerged as a game-changing component in Web3 gaming monetization. Implementing valuable and unique in-game items as NFTs can drive monetization by creating a market where players can buy, sell, and trade these items.  

Make sure that your in-game items are valuable. Players should be willing to pay for them because they add value to the game. NFTs fall into two main categories in gaming assets:  

• The first category is the core NFT assets, including NFT characters, entry equipment, etc. These items are used as the game passes to enter the game. It is the first contact with the users.  

• The second category is the core NFT items, including character skins, weapons and armor, power-ups, mystery boxes, etc. These in-game items can be used to improve the player's character, gain an advantage in the game, or boost the utility value of players during their game experience.

These items can be bought and sold by players and can also be used to improve the player's character or gain an advantage in the game. Ensuring that these in-game items offer meaningful benefits to players incentivizes their purchase and fuels the economy within the game.  

You can also run an official NFT marketplace where players can trade their assets and implement NFT rentals. These can open new revenue streams for both the players and the gaming company.  

NFT royalties  

NFTs offer a secondary stream of revenue. Developers can implement smart contracts, which means developers and creators earn a percentage of each subsequent transaction when their NFT is resold in secondary markets. This means that the game earns money when NFTs are resold. The demand will influence the price, resulting in more passive income for the game project.

By establishing fair royalty structures, developers can benefit from the long-term value and popularity of their NFTs. It also incentivizes the creation of high-quality and desirable NFTs as a source of recurring revenue, benefiting both players and creators.  

As a developer, it’s important to take care when creating these smart contracts. Unless they’re watertight, players may be able to get around them. Proxy contracts are an invaluable tool here as you may wish to upgrade or adapt your smart contract as time goes on.  

Community building and social aspects

In Web3, community is everything. And in gaming, a community can make or break a game. This means you’ll want to pay particular attention. A thriving community is the lifeblood of any successful game. Use social media platforms, Discord channels, discussion boards, and in-game chat features to build a strong and engaged player community. Actively listen to player feedback and make changes based on their suggestions. By nurturing a community-driven environment, you create a loyal player base that becomes advocates for your game.  

It’s worth hiring a community manager with a proven track record in fostering and maintaining a large online community. This is someone who will need to have their finger on the pulse when it comes to player sentiment and profiling. They’ll also be adept at encouraging engagement and organizing events.  

Reward system

Designing a compelling reward system is a pivotal aspect of Web3 gaming, significantly impacting player engagement and satisfaction. Here are some crucial elements in crafting an engaging, sustainable, and effective reward system:

1. Diverse Rewards: Offer a variety of incentives, including traditional in-game currencies and NFT-based rewards like rare character skins and powerful weapons.

2. Milestones and Achievements: Recognize players' accomplishments with tiered rewards, encouraging goal-setting and a sense of progression.

3. Play-to-Earn Mechanics: Implement gamified earning through play-to-earn mechanics, where players can earn tokens or NFTs by actively participating in the game.

4. Community and Social Rewards: Foster a strong community with social rewards, such as exclusive NFTs for top contributors or in-game titles for active members.

5. Seasonal Events: Host limited-time events with unique rewards to drive player engagement and excitement.

6. Skill-Based Rewards: Reward top performers with prestigious NFTs or assets, showcasing talent and encouraging healthy competition.

7. Adaptability: Continuously monitor player data and feedback to iterate and improve the reward system.

With these elements in place, a well-crafted reward system enhances player retention, motivates engagement, and enriches the overall gaming experience.

How to analyze and increase revenue

If you are a developer interested in monetizing a Web3 game, there are many things you need to do to ensure your game is successful. The basics are clear. First, you need to create a game that is fun and engaging. Second, you need to make sure that your game is easy to use and navigate. Third, you need to market your game effectively. While these are no simple tasks, you’ll need to get these foundations right to see any success.  

But beyond that, what practical tips can help you increase revenue and create a long-lasting game that benefits both you and your players? Here are six ways to improve your game monetization.

Collect and analyze gaming data

The key to optimizing monetization is understanding your players and their behaviors. By tapping into the swathes of data generated the on-chain and off-chain activity of your players, you’ll be able to determine what players to target, what methods work for your game, and how to optimize your players' experiences.

Use Web3 analytics tools

While you can use blockchain explorers to track and verify transactions, much more sophisticated solutions are available. There are dedicated Web3 gaming analytic tools to help you gain a competitive edge and understand both your gamers and their on-chain activities.  

Tools like Blockmate Analytics enable you to delve into on-chain activities, identify high-value customers, and target them effectively. By harnessing the power of data analysis, you gain a competitive edge and a deep understanding of your players.

Test and iterate

Don't settle for mediocrity—continuously test and iterate your game to refine monetization strategies. Experiment with pricing models, in-game purchases, and rewards to find what resonates with your players. Through A/B testing, you can measure the impact of changes and make data-driven decisions. Adaptation and evolution are the keys to staying ahead in the ever-changing world of Web3 gaming.

Incentivize long-term engagement

People love to feel rewarded for their time and effort. Daily login bonuses, exclusive rewards, leaderboards, special events, and seasonal NFTs—all these can encourage long-term engagement and increase your CLV (customer lifetime value). You can also implement an effective reward system, as we’ve discussed above.  

It’s also vital to keep the game fresh and exciting. Add new content and features on a regular basis to keep players engaged. As we’ve discussed earlier, community is vital. An engaged and active community will happily invest in a game that provides them with fun and connection.  

Balance monetization and gameplay experience

Achieving the perfect balance between monetization and gameplay experience is crucial. Avoid bombarding players with excessive advertisements or intrusive monetization tactics. Consider whether you're going to optimize your game for mobile platforms to reach a wider audience and, if you do, provide a seamless experience across devices. Strive to create a harmonious marriage of revenue generation and an enjoyable gaming experience.

NFT royalties and rentals

Embrace the power of NFTs to enhance monetization. Implement NFT royalties, where you earn a percentage from subsequent transactions, to set up recurring revenue streams. Additionally, explore NFT rentals, allowing players to temporarily access rare in-game assets for a fee. These strategies expand revenue opportunities while adding value for players. But always ensure your NFTs add value to your players' experience rather than solely useful as a revenue stream for you.  

Advertisement and subscription fees

Consider additional revenue streams like advertisements and subscription fees as your game gains popularity. Once you have a large number of players and a popular game, these can help you increase revenue further.  

However, tread carefully and maintain a player-first mindset. Gamers can be quick to turn on a game if they feel like you’re trying to squeeze every penny out of them. Avoid overwhelming players with excessive ads or exploiting their wallets. Strive for a fair balance that respects your players while generating sustainable revenue.

Web3 gaming: An exciting opportunity for gamers and developers

The world of Web3 gaming presents a thrilling landscape of possibilities for developers and players alike, offering innovative ways to monetize games that go beyond traditional revenue models. By implementing these tips and practices, you’ll be able to create a game that delights players for years to come.

Key Takeaways

1. Web3 gaming is revolutionizing the gaming industry, offering decentralized, transparent, and player-centric experiences. It allows true ownership of in-game assets through NFTs, creating a player-driven economy with play-to-earn opportunities.

2. It’s vital to balance monetization with designing a fun and engaging game.

3. NFTs and collectibles play a crucial role in Web3 gaming monetization, providing valuable and unique in-game assets that can be traded and sold. NFT royalties and rentals can open additional revenue streams.

4. A strong and engaged community is vital for success, fostering loyalty, and supplying valuable feedback for game improvement.

5. Designing a rewarding experience through a well-crafted reward system, with milestones, achievements, and play-to-earn mechanics, enhances player engagement and retention.

6. Analyzing gaming data and using Web3 analytics tools like Blockmate Analytics help developers understand player behavior, make data-driven decisions, and optimize monetization strategies.

7. Most of all, make sure it’s fun!

Now, go forth and create an exceptional gaming experience that captures hearts, minds, and wallets!

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