Web3 Gaming Needs Collaboration, Not Competition

Funtico’s CCO says early Web3 games failed due to poor infrastructure but says the industry has shifted its focus to improving this.

Collaboration: A Win-Win for Web2 and Web3 Gaming

Doron Wesly, Chief Commercial Officer (CCO) at Funtico, argues that early Web3 games struggled to compete with their Web2 counterparts due to limitations in infrastructure. These limitations prevented them from delivering high-quality experiences with the visual appeal necessary to attract Web2 gamers. Wesly further criticizes early Web3 games for their “lame” storytelling and unsatisfying gameplay, which ultimately led to their downfall.

Nevertheless, Wesly emphasizes that the industry is actively addressing these challenges by focusing on building a more robust infrastructure. According to him, this means moving away from the goal of seeking to directly replace existing Web2 games with Web3 alternatives.

A December 2023 study report supports Wesly’s point, noting a significant shift in priorities. The ratio of games launched compared to networks built has dropped dramatically, from 29:1 in 2021 to 2.8:1, indicating a greater focus on infrastructure development.

Instead of direct competition, Wesly advocates for collaboration between Web2 and Web3 gaming sectors. This approach, he believes, would be mutually beneficial. Web2 platforms could learn about blockchain technology, while Web3 platforms could leverage the existing trust users have in established Web2 games.

In written responses to Bitcoin.com News, Wesly also addressed legal considerations for Web3 game providers, the potential for integrating Web3 elements into online games, and the likely impact of such integration. Below are the CCO’s answers to all the questions sent.

Bitcoin.com News (BCN): After the 2021 crypto hype subsided, there was a backlash from some in the gaming community who complained of low-quality gameplay and NFT shills ruining the experience. In your opinion, what was behind the rise and fall of the Web3 gaming sector from 2021 and beyond?

Doron Wesly (DW): Web3 gaming’s rise was fueled by a perfect storm, with COVID lockdowns promoting gaming and the emergence of high-profile NFT projects, backed by A-list celebrities and sports franchises. This created widespread visibility for NFTs, which are central to Web3 games, enabling players to own in-game assets like skins and weapons, and get paid for playing the games.

However, gamers quickly realized that most Web3 games were marred by poor gameplay, and there were many that turned out to be rug-pull scams, leaving them disillusioned with the concept. Many games were more focused on monetization rather than creating immersive and engaging gameplay, causing significant backlash. Then there were the highly publicized collapses of FTX, Celsius and other platforms that ushered in crypto winter and eroded the value of in-game assets.

Fortunately developers have learned the lessons of this experience and are now putting more emphasis on the gameplay, with a focus on Layer-2 solutions that improve scalability and decreased transaction costs, and the next phase of Web3 gaming holds a lot more promise.

BCN: A December 2023 report showed there were 29 times more games launched than networks built to support them in 2021. By 2023, this ratio had dropped to 2.8 times. This trend indicates a strong focus on infrastructure rather than attempts to replace existing Web2 games with Web3 equivalents. Do you agree there is a shift in focus, targeting infrastructure adjustments rather than creating brand-new gaming products? What would you say is the motivation behind this change of philosophy?

DW: I agree it suggests that the industry is rebalancing its priorities and such a shift was sorely needed. The earliest Web3 games couldn’t compete with the best Web2 games because the infrastructure didn’t support the high-quality experiences players are used to. They lacked visual appeal, the storytelling was lame and the gameplay wasn’t rewarding enough.

With better infrastructure behind them, Web3 developers have time to focus on creating enthralling gameplay experiences instead of the technicalities, meaning we’re seeing more ambitious and polished projects. Ownership of Web3 gaming assets becomes more seamless, with more fluid transactions, making the promise of ownership and decentralization more viable.

This is key because if Web3 games are going to win over mainstream audiences, the experience has to be free from the technical limitations that hampered earlier projects. By focusing on infrastructure now, the industry is laying the groundwork for a more stable and exciting future.

BCN: Going forward, what do you think would be the best approach for the Web3 gaming sector towards claiming a share of the online gaming market? Would setting out for outright competition work for upcoming blockchain games or would they fare better by collaborating with their well-established Web2 counterparts?

DW: Collaboration is the key. Web3 capabilities like asset ownership and new economic models can really improve the experiences of Web2 games that have already got the gameplay aspect nailed on.

One clear advantage Web3 brings to the table is interoperability – so we can imagine a scenario where a gamer can bring assets from one game into another, creating a cross-platform experience that doesn’t yet exist in Web2 games, potentially increasing engagement and loyalty among gamers.

Of course, the monetization aspect is exciting, with Web3 making it possible for players to trade their in-game assets. Imagine being able to buy skins or items on Roblox or Fortnite and then be able to sell them later on. It means you’re not just throwing money at the game all of the time, and I think this kind of model benefits gamers and developers alike. Gamers get more value for money, while developers will see more loyalty from players.

The other thing is the level of trust Web2 can bring to Web3 games. People don’t trust Web3 games due to all of the scams and things, but Web2 games are trusted. So they can introduce players to blockchain-based elements gradually via a kind of hybrid experience. For instance, if a player buys an item, the experience would be the same as what they’re used to in Web2. But when it comes to the time they want to sell that item, that’s the time we can introduce them to the concept of a digital wallet and a blockchain transaction, making it as seamless and “Web2-like” as possible.

This means they can learn the ins and outs of blockchain at their own pace, which should mitigate many of the risks.

BCN: Your Web3 gaming project, Funtico, claims to offer players more control and excitement without losing the thrill of gearing up and achieving victory in virtual worlds. Can you briefly highlight how you plan to achieve this, citing some steps you have taken and future targets you have set that would benefit the blockchain gaming industry?

DW: We do this by giving players full control over their in-game assets and rewards, so they have the ownership, ability to trade and interoperability I’ve already mentioned.

Part of our plan involved helping Web2 game developers transition to Web3, so they can offer these things in their own games. At the same time, we’re focused on community development, giving players the chance to influence things like game content and updates, so they can see more of what they want in their favorite games.

BCN: Regulatory compliance was one of the Achilles heels that hampered the Web3 gaming expansion. With the benefit of hindsight and understanding the existing challenges, what steps would you propose for Web3 game providers that would prevent the kind of complications experienced in the past?

DW: To be compliant, incentivized skill-based games must avoid any element of gambling, which means no wagering on battles. This can be done through skills-based contests that require players to pay an entry fee. The outcome of the game must be entirely skill-based, so the most skillful players win, rather than having any element of luck or chance. This ensures compliance with global anti-gambling regulations.

As for digital assets, these must be directly related to the games they’re associated with, and they cannot infringe on anyone else’s intellectual property. They should also avoid integrating staking mechanisms so regulators won’t classify them as securities.

Finally, the rewards tokens or coins that players can earn need to function more like traditional in-game currencies, with their main purpose being to pay for in-game purchases and tournament entry fees. Players can still have the option to withdraw them, but doing this must necessitate proper Know Your Customer and Know Your Transaction checks to comply with anti-money laundering regulations. The best way to do this is to go through licensed payment gateways that implement these checks, so developers don’t have to worry about this themselves.

BCN: Several Web2 game developers are implementing Web3 elements, but this leads to questions around where to draw the line between continuing with existing systems and allowing for a decentralized industry. How do you think the existing companies adopting Web3 elements can manage this upgrade from centralized to decentralized systems to avoid financial losses or losing users’ attention in the future?

DW: The transition from Web2 to Web3 can be daunting, especially in terms of balancing existing centralized systems with newer, decentralized elements. That’s why we’re seeing the emergence of Web3 gaming platforms that help developers with this process.

Developers can be reassured that not every aspect of their games needs to be hosted on the blockchain. It’s much easier just to decentralize certain elements, such as the results, rewards, leaderboards and digital asset ownership, while leaving the rest. This allows us to make games more engaging and valuable while retaining the same gameplay experience.

By using a platform for implementing Web3 features within an existing game, developers can avoid overhauling their entire backend infrastructure. This means developers can retain their existing user base and gameplay, and just offer them new features and rewards. They can test and refine these decentralized elements in a more controlled way, ensuring a smooth transition without any disruption that might alienate existing players.

BCN: Blockchain and crypto proponents believe introducing Web3 elements in online gaming will boost the industry and lead to significant expansion. Do you agree with this and where do you see the online gaming industry by 2030?

DW: Of course it will. Web3 can help to drive more interactive and economically stable ecosystems in games. We can see this already with things like rare digital assets players can invest in, and the ability to buy and monetize virtual real estate in games like Decentraland and The Sandbox. Players can monetize this real estate or content they create themselves, creating a more dynamic community experience that elevates engagement and opens up new revenue streams for both them and developers.

Player-owned economies can expand gaming experiences beyond their current limits, increasing their immersiveness and making them more valuable to players, and I think they will have a transformative impact on the industry.