The State of GameFi. Podcast Key Takeaways. 

This episode of the Aleph Zero Podcast played out as a meeting with Juan Rivera Perez of Revv and Lukasz Plewa of DRKVRS, who bring to their table their unique perspectives on the Web3 gaming sector and the changes it is undergoing. 

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TL;DL

Too Long; Didn’t Listen 

• Juan Rivera Perez has been highly involved with Web3 gaming as he learned the intricacies of the space first by taking initiative in the guild structures of blockchain games before heading out to create Revv, a platform that aims to innovate the streamer-fan relationship by providing perks and unique experiences to loyal fans. 
• Lukasz Plewa is the head of blockchain and economy at DKRVRS, a unique adult-oriented metaverse game being developed on the Aleph Zero network. 
• GameFi was first coined in 2020 to describe the intersection of gaming and decentralized finance, as blockchain technology enabled new methods to create in-game economies and digital ownership. 
• Web3 gaming didn’t originate natively in crypto but among gamers and game developers who were frustrated with mainstream gaming’s lack of ownership and revenue options that benefit not only the parent company but also gamers and developers. 
• Gaming in crypto has centered around a new relationship between the developers and gamers as those who play online games band together in guilds and decentralized autonomous organizations (DAOs) to enact changes to the game. 
• The economic model of Web3 games has also dramatically shifted, with gamers also benefiting financially throughout a game’s life cycle.
  • This can occur through play-to-earn models, as well as the sale of NFTs and user-generated content. 
• According to Juan, there is not much overlap between Web2 and Web3 gaming, and creating a market for Web3 gaming must come natively from the space. The key to this is creating new and engaging games that are entertaining. 
• Game development is a time-consuming process, resulting in blockchain gaming being in a difficult spot where the space is so young that competitive, high-quality games are still on the horizon. 
• Lukas Plewa believes that Web2 gamers will jump into Web3 gaming once it becomes unnoticeable to use Web3 solutions such as wallets. 
• One of the challenges facing blockchain-based funding is procuring funds from investors who are still wary of investing in this unproven space. There was also a dearth of experienced game developers in the space. This has been changing. 
• The current relationship between Web2 and Web3 mirrors the relationship between legacy Web1 creators and Web2 creators, with the former party always historically skeptical of the new wave of innovators. 
• One worry shared by Lukasz regarding the development of the blockchain space is the encroachment of crypto regulations that will heavily favor institutions connected to traditional finance and governments. 

What is GameFi? 

GameFi is a term first coined in 2020 to describe the crossroad of gaming and decentralized finance to explore new possibilities for monetizing games as well as redistributing ownership from the developers to users. As noted by Juan Rivera Perez, Web3 gaming is not a concept that initially sprung out from the crypto space but rather was a byproduct of the frustration of modern game developers and gamers who latched onto the novel blockchain technology to break away from the limitations confining Web2 games. 

One of the defining characteristics of crypto gaming is how it benefits users and developers by offering them new ways to benefit from both playing and developing the game financially. For example, users are incentivized by play-to-earn mechanics, where players are compensated for engaging with the game. Both Juan and Lukasz note, however, that in the long term, these models are unsustainable. More interesting, though, are the possibilities espoused by the trading of NFTs, user-generated content, and tokenization. 

Another aspect of GameFi that piqued the industry’s interest is the possibility of creating new systems for distributing ownership that benefit developers and gamers by delegating more power to guilds and DAOs, creating exciting frontiers for community building. How does this work? 

Building Inclusive Games in Web3 

Games that leverage the community-creating abilities of blockchain technology allow gamers to collect in guilds and DAOs to strengthen their position in relation to developers by allowing them to make decisions determining elements of the game’s gameplay, story, and rules. This sharing of responsibility for the game is also attractive for developers who can more closely participate in the life of the online community and better cater to the wishes of the users. 

As Lukasz mentioned, one of the cornerstones of DRKVRS, the gloomy adult-oriented metaverse game currently being developed on Aleph Zero, is this community engagement, which will result in gamers having a serious impact on the direction the story will take in this MMORPG. Lukas also mentioned that DRKVRS, first and foremost, caters to the Web3 audience before the developers start onboarding Web2 gamers. 

Bridging Web2 and Web3—Is It Even Feasible? 

As mentioned by Juan, Web3 gaming is a small subsection of the broader gaming world and that is the front on which all discussions regarding gaming will ultimately be resolved. In the end, users are interested in entertainment and a streamlined user experience; discussions of privacy or the technology that underpins their chosen game are irrelevant to vast swathes of the population. Current Web3 gamers are largely those who are either sold on the technology or the financial benefits that are to be found by exploring this niche market of the gaming sector. To ensure the mainstream adoption of blockchain-based games, developers must focus on simplifying onboarding (setting up wallets, storing seed phrases, etc., is headache-inducing for many Web2 users) and by providing entertaining products that stand on their own merits across from their Web2 counterparts. However, according to Juan, the road to the increased popularity of blockchain gaming must come from within the crypto space itself without expectations that Web2 giants will be pioneers in the field. 

As Lukasz noted during the podcast, there are many similarities in the transition from Web1 to Web2 as there are currently when moving from Web2 to Web3. Historically, Web1 providers were highly skeptical of the new technologies for online interaction provided by social media platforms and not only viewed these new avenues with suspicion but also trivialized them. This ended once they realized the potential resting in these technologies, but this was also the moment when it was too late for these giants to build these solutions from scratch. Their only option was to either buy out ready-made solutions or partner with those who spearheaded the new web model. It is Lukasz’s suspicion that a similar story is playing out now, with Web3 builders pioneering the systems that, in a few years, legacy game creators will desperately need to stay relevant. 

The Challenges Facing Blockchain-Based Games 

As with all novel sectors, Web3 gaming is also facing its own set of challenges that must be solved to expedite the industry’s growth. As Juan mentioned, there is a deficit of capital and developers. Building games is expensive, and the budget for indie Web3 projects is minuscule compared to AAA titles. This lack of capital is reflected in the quality of the games, but the source for this state of affairs can also be attributed to the lack of experienced developers. Due to the novelty of the sector, there is a need for fresh talent who has the experience and know-how to deliver a product that not only stands as a game but also fully takes advantage of the various technical idiosyncrasies provided by blockchain technology. Lukasz mentions that many experienced developers, despite being attracted by Web3’s freedom and better financial opportunities for game creators, are hesitant to jump ship from Web2 game production due to the blight it may leave on one’s resume should one ever need to return to Web2. 

Other challenges mentioned by Lukasz involve the fear of overbearing regulations that may cripple the space and heavily skew the playing field toward legacy Web2 giants destroying the foundation of what was created to this day. From a technological standpoint, Lukasz is concerned by the freshness of the space and the possibility of mistakes in the codebase, which, combined with the immutable nature of blockchain, may make introducing corrections difficult. 

Despite these challenges, both Lukasz and Juan are optimistic that this is only the beginning of the Web3 gaming sector. They jokingly acknowledge that technological advancement has always been the domain of video games and the pornographic industry and are confident that Web3 gaming is just warming up.