Why the Web3-enabled gaming world still has hope

The recent crypto bear market has cast a shadow over Web3 games. Whilst Axie Infinity brought Web3 gaming to mainstream consciousness, and it is now frowned upon by builders and investors alike.

Just as excitement over the “play-to-earn” phenomenon emerged suddenly and rapidly in 2021, the scepticism over the very same phenomenon has accumulated similarly, with more than a handful “writing off” Web3 games as a fad.

Yet I believe we are at the cusp of an evolution, where we can look to the next generation of web3 games emerging as higher quality, more sustainable and most importantly, more enjoyable.

As Stanford Graduate School of Business students wrote, “Gen one Web3 games were built by crypto natives, game enthusiasts and traditional finance professionals”. This led to the fallacy, “We enjoy playing games, so we know how to build games.” The equivalent of this would be, “I enjoy eating delicious food, so I know how to be a Michelin-star chef,” a misguided belief that can unravel quickly.

The next phase of Web3 games will be built by strong game developers who already have experience building fun and engaging games without the shackles of rushed token launches or Ponzi-like game economies and are now looking to elevate the game with Web3 tools.

These builders understand that a Web3 game is first and foremost, while tokens are accompaniments that deepen engagement and engineer incentives but cannot replace intense gameplay.

These Web3 games will be more than games; they will be economies, driven by supply and demand, possibly underwritten by tokens and access gated by NFTs.

This multi-part series explores building health economies, discusses mental models for supply and demand, and highlights best practices around Web3 game tokenomics.

Also Read: All hands on deck: How Iron Sail strengthens blockchain gaming ecosystem through collaboration

We have started this conversation with the ‘demand-side’ of the equation before discussing the ‘supply-side’ of tokenomics because tokenomics are not sustainable without a product (in this case, a game) that is in demand. A game with no demand is effectively dead.

Patrons, players and farmers of Web3 games

Demand for Web3 games comes from three persona groups: patrons, players and farmers.

• Patrons are die-hard believers who often have an ironclad belief in and support of the game. Patrons are often the early adopters in the community, the investor who writes a cheque before a line of code is written, or the individual who joins a new Discord server and starts conversation religiously. Patrons often feel emotionally connected to the game or the team behind the game: a passionate but small group.
• Players are true gamers who participate in the gameplay for various non-financial reasons. The player is someone who invests a non-trivial amount of time in engaging in the game and, at best, considers the financial reward as a fringe benefit.
• Farmers focus almost exclusively on the financial upside of the gameplay. The primary objective of investing time in the game is to earn a financial return exceeding the initial participation cost in the shortest possible time period.
• Examples include the popular Axie Infinity scholarship model, where farmers would invest in in-game character NFTs and rent the characters out to players on a revenue-sharing model instead of playing.

Persona	Mindset	Play the game?	Leave when earning stops?
Patrons	I am here to support	N	N
Players	I am here to have fun	Y	N
Farmers	I am here to make money	Y	Y

These three personas are not mutually exclusive, even within the same game. An individual who begins as a Patron (before the game is launched) can transition to a Player (when the game launches), then onto a Farmer, due to a change in family circumstances.

Also Read: Exploring the creator economy in gaming

All three personas are usually present to some extent, yet one will be the dominant persona at a time.

The challenge for game developers is to keep a close pulse on the demographics of their population and how they shift over time. All three personas are necessary to build a healthy web3 game ecosystem.

The Patron is needed to seed initial confidence, attracting Players and Farmers; the Player is needed to engage with the game and consume/utilise game assets produced by Farmers; the Farmer is needed to produce game assets for the Player, especially those who are time poor.

The impact of an imbalanced population is evident among “Gen 1” Web3 games like Axie Infinity, especially between Players and Farmers. When the population’s majority are Farmers, excessive value is extracted from the game, while there are insufficient Players to consume the economy.

This leads to “Ponzi-nomics”, where new entrants largely support the value of game assets until the supply of players and the token price craters.

Patrons will always remain a small but important proportion of participants and have a less material impact. So, what then is the Goldilocks ratio between Players and Farmers? 

A quick online literature review does not reveal much insight, but having informally surveyed several game studios with a track record of building games with decent traction among non-Web3 audiences, the consensus is 7:3, out of every 10 participants in a fun, seven or more have to be Players who consume game assets. At the same time, three or fewer should create assets as Farmers.

This ratio is anecdotal: if you have evidence to prove or disprove this, please reach out at qinen@saisoncapital.com; we would love to engage.

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