The rise of web3 gaming has been one of the most discussed topics in the tech and gaming industries over the past few years. With the promise of decentralized ownership, player-driven economies, and innovative blockchain integrations, many believed that web3 gaming would revolutionize the gaming world. However, recent developments have sparked questions about whether the sector is living up to its potential.
A downward trend in web3 gaming
In this episode of the Games Growth podcast with Upptic, industry experts gathered to explore the current state of web3 gaming, analyzing whether it’s cooked or if there’s still hope for its future. Participants included Upptic CGO Warren Woodward, Upptic Web3 Growth Strategist Jerry Singer, Upptic Web3 Growth Lead Mateo “Mat” Arias, and Upptic Marketing Director Xander Agosta highlighted a common theme: many of the most hyped web3 gaming projects are struggling. They noted that Illuvium, Dimensionals, and Shrapnel — once dubbed “chosen ones” of web3 — have seen major setbacks.
Warren presented token charts for these games, showing a significant downward trend across the board, sparking debate about whether the early euphoria around web3 gaming has died down. Jerry succinctly captured the issue: “They’re not doing well.”
Why web3 gaming projects are failing
Several factors were identified as contributing to the failure of high-profile web3 gaming projects. Each game seemed to have its own challenges, but they shared common issues:
- Dimensionals: After initially launching an NFT set, the team behind Dimensionals backed away from web3, opting instead to release the game traditionally on Steam. This move led to significant community backlash, particularly from web3 proponents who felt abandoned.
- Shrapnel: Internal legal battles, along with key team members leaving, have caused turmoil. Despite a strong start, these issues have destabilized both the team and the game’s token value.
- Illuvium: After years of development, Illuvium launched three games simultaneously. Unfortunately, they were met with negative reviews, and the games struggled to engage players. Illuvium’s ambitious multi-launch may have been too much for the team, as noted by Warren: “That would be wild for Blizzard, let alone a first-time developer.”
The problem with early token launches
One recurring issue discussed during the podcast is the premature release of web3 tokens. Many projects, eager to capitalize on the early hype of web3, launched their tokens well before the games were ready. This practice, while providing early liquidity for the developers, often resulted in long-term problems as these tokens quickly lost value when the games failed to meet expectations.
Jerry pointed out that early token releases have created additional pressure for game developers: “You can’t put things back in Pandora’s box.” Once a token is out in the market, stakeholders — including NFT owners and token holders — expect rapid progress and returns, often far sooner than what is feasible in game development.
Web3 as a monetization method vs. game design mechanic
The roundtable discussed whether web3 is being treated as a funding mechanism rather than a core game design element. Xander, the resident skeptic, raised the question, “Is web3 a mechanism for funding game companies or a game design mechanic?” Jerry noted that so far, web3 has largely been used to monetize users earlier than would be possible in traditional gaming. He added that successful web3 games must integrate blockchain as a central feature rather than an afterthought.
Matt echoed this sentiment, explaining how many web3 developers mistakenly believed launching NFTs would guarantee a loyal community. In reality, many web3 gamers were more interested in speculative profits than in becoming long-term supporters of a game. When these expectations weren’t met, both the games and their tokens crumbled.
A shift toward gameplay-first development
A critical takeaway from the discussion was the need for web3 games to focus on gameplay before monetization. Successful web3 games, the roundtable agreed, are the ones that prioritize building a solid, engaging product before launching a token. Examples of this new approach include:
- King of Destiny: This game has yet to release a token but is building its community and gameplay first. Its goal is to reach a million downloads before considering monetization.
- Fable Borne: Another game that has focused on continuous improvement, scrapping and rebuilding its game several times before even considering launching a token.
- Pirate Nation: Pirate Nation had a playable game well before releasing its token, which helped the game’s community support a successful token launch.
This shift is a reaction to the failures of earlier web3 projects that released tokens without a fully realized game behind them. As Matt explained, “The only way forward is to flip the script. Fake hype only lasts so long.”
Additionally, Jerry mentioned Parallel and Off the Grid as other web3 games to watch closely due to the way they’ve approached web3 gaming and the broad base of support they’ve built.
The future of web3 gaming: Lessons learned
Despite the challenges, the roundtable agreed that web3 gaming is not cooked — at least not entirely. Lessons from past failures are informing the next generation of games, where gameplay takes precedence over early monetization.
Examples of emerging successful projects include:
- Star Atlas, which recovered from the FTX collapse and continues to develop its expansive gaming universe.
- Ronin (formerly associated with Axie Infinity), which has shifted towards becoming a publisher for new web3 games, supporting promising projects like Pixels and Machines Arena.
As Warren noted, “Not every game needs a token,” suggesting that web3 projects may need to rethink the necessity of early token releases altogether. Instead, future games are likely to focus on building strong, engaging gameplay, with blockchain elements operating in the background, enhancing player experience without being the primary selling point.
Hope continues for web3 gaming
Web3 gaming faces significant challenges, particularly as early excitement has waned, and players demand more from both gameplay and blockchain integration. The lessons from Dimensionals, Shrapnel, and Illuvium highlight the pitfalls of early token releases and the dangers of mismanaging community expectations.
However, all hope is not lost. A new wave of games — focused on gameplay first and thoughtful integration of web3 — shows promise. If the industry can learn from its mistakes, the future of web3 gaming may still be bright, with opportunities to innovate in ways that traditional games cannot. The key, as the podcast guests concluded, is to put the game first, ensuring that blockchain enhances the experience rather than detracts from it.
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