“If Fortnite was developed in 2021, all the Skins would be NFTs and a robust in-game token economy would have powered the prizes, concerts and life in the Fortnite metaverse.” – 2021 crypto investors
The “web3 Fortnite narrative” was common as NFT prices were going through the roof and speculative gaming tokens were taking off earlier this decade. The next Fortnite would be bigger and more lucrative with a robust onchain monetary ecosystem. It hasn’t happened; you could blame FTX, you could blame interest rates or previous regulation, you could blame traditional gamers who hate crypto. Although there have been small pockets of gaming success, we are still waiting for crypto gaming to go mainstream. Gaming has a rich history of new platform adoption, suggesting that the industry will shift.
Why does gaming accelerate on new platforms and how can the app layer on crypto see sustained gaming momentum?
Looking back at the history of gaming, there is always a new attribute or set of features native to the emergent platform that enables a novel game experience. Specifically, something new that can only be done because of the new form factor or platform that accelerates adoption. There were three phases: 1) new type of game 2) familiar games coming to the platform 3) super charged versions of games. When home consoles came to market in the first phase, these coincided with larger color screens and improved smaller computing devices that enabled colorful graphics and relatable characters on a home TV. These were specific platform attributes that allowed in home consoles to exist and thrive. The first at scale in home console gaming hits were social (people could sit around a tv), with characters you could experience in color and geared towards sitting in a living room with friends and family. These introduced a new type of friendly player dynamic that was fast, simple and usable (all attributes of in-home computing platforms)-Mario, Sonic, Zelda. This set of games was distinctly different from those in the arcades but were native to in-home playing. Once console adoption hit scale and the form factor matured, and the second set of the arcade games arrived-Street Fighter, Mortal Kombat, NBA Jam. From there they evolved into the third phase and one of the biggest categories in entertainment with Halo, 2K sports, Call of Duty.
Mobile games had a similar trajectory. The first few mobile games on feature phones were natively mobile for feature phones with numeric keypads-Snake, Dope Wars, Glu mobile titles. Similarly, smartphone games were natively mobile for touch screens – Angry Birds, Candy Crush, Zynga titles (these were natively social as well, where we saw two platforms emerge at once). These helped the form factor scale and only later did Triple A games, licensed titles and multiplayer strategy games emerge. From there, we saw all types of games have a mobile form factor. The first games that were natively mobile had to emerge and open the door for the larger market participants to come in.
Crypto gaming should be no different. The breakout gaming successes need to be natively crypto, taking advantage of novel mechanics never before possible. The problem we have today is that the vast majority of new crypto games are trying to mimic something that happened in PC, home console or mobile while cramming some type of crypto feature in. If Fortnite was built now, it would not be a crypto game. Crypto games need to embrace core crypto native traits. For example, 1) speculative ownership is fun and social, 2) monetization and in-game rewards can occur via on-chain economies and interactions with others 3) digital items are simple, easy to onboard and trade and have an element of humor. The content and the game needs to be inherently social and community driven. The first breakouts will not look the same as what we saw in previous platforms and will be driven by what makes crypto different and fun.
We have been trying to force non crypto gamers to play crypto games, but the starting point needs to be to get the crypto community playing games. Just like in home consoles and mobile, we need the core audience to embrace the games and as the platforms scale non-core audiences come in. The segment will appeal to normies when more people are onboarded to crypto and excited by crypto elements.
Crypto gaming is going to be a massive industry, but it will scale with crypto. Gaming gaming can show off why crypto is such a transformative shift of how people interact with a new financial system and ownership economy. Once that happens, all the traditional types of games will arrive and the entire gaming industry can be bigger than ever.
To date there have been some early successes that have embraced these crypto native elements. Just like in traditional gaming, most titles have a limited shelf life and need to create a franchise or a studio that can keep publishing more games. The goal will be to make them stickier with in-game economies that should have cross selling benefits and overlapping communities. Hamster Kombat, Notcoin and Tap Tap games on Telegram have shown how hyper social communities can turn into a new genre of simple games with tradable rewards. Axie Infinity introduced play to earn and an ownership economy that was later replicated in other speculative versions of the model such as the simple and one time lucrative Stepn’s Move to Earn game. NFL Rivals, Sorare and NBA Top Shot turned licensed collectibles into an ownership economy. Licensed content drove speculative trading, a community of fans creating content and interacting with each other with simple games. We saw a new type of licensed game that was native to how crypto users interact. Similarly, Zed Run and Photo Finish embraced ownership, scarcity, speculation and an interactive environment. Ultimately the lack of simplicity and uncertainty around the in-game economy caught up with Zed’s recent failures. Photo Finish continues to thrive but what made them succeed initially were the early elements that crypto users love.
Many of these games have proven to have short shelf lives, so the challenge remains to create a franchise or a studio that keeps their audience coming back, which will ultimately unlock the big opportunity. How does this happen? 1) a real viral loop where the studio brand accrues value in a cross game ecosystem and not just a flash in the pan title 2) in-game token economies that actually get players something that enhances game play to earn more in a fun crypto native way 3) in game multi sided market that has earners, speculators and ecosystem managers who are deeply committed. Nintendo, Sega, EA, Zynga, King and others figured out the studio modal and crypto native companies who famously innovate in creative ways should be able to do it as well.