Web3 in Gaming

Web3 gaming involves the use of decentralized technologies like blockchain, smart contracts, NFTs, and cryptocurrencies within the gaming industry. This approach aims to create a more secure, transparent, and player-focused gaming experience.

NFTs grant gamers ownership of unique in-game items, while cryptocurrencies facilitate swift transactions. Web3 gaming empowers developers to craft games with innovative mechanics and monetization strategies, such as Decentralized Autonomous Organizations (DAOs) that allow players to influence the game's economy and future.

It's important to differentiate between Web3 games and the metaverse. While Web3 games focus on gameplay mechanics and economic systems, the metaverse encompasses a wider range of digital activities, including virtual events and social interactions unrelated to gaming. Furthermore, Web3 games can be accessed on various platforms, whereas the metaverse typically requires dedicated virtual worlds and social networks built for real-time engagement. Despite these differences, both Web3 games and the metaverse leverage decentralized technologies, providing users with enhanced control and ownership.

Several Web3 gaming initiatives, such as Immortal Game, have faced challenges in establishing sustainable in-game economies and player engagement. By early 2022, the leading blockchain gaming projects by market cap had seen declines of up to 95%. Contributing factors include market illiquidity, difficulty retaining players, and high transaction costs associated with blockchain.

The play-to-earn model, exemplified by Axie Infinity and Decentraland, emerges as a potential solution. This model allows players to earn cryptocurrency through in-game tasks, encouraging ongoing participation. However, it has raised concerns about potential exploitation, as it may resemble a Ponzi scheme due to its reliance on attracting new players to sustain income for existing ones. Critics worry about its long-term viability, especially during market downturns.

Critics have pointed out the high costs associated with Axie Infinity, where players must invest substantial sums to start playing and earning rewards. Although marketed as a means for individuals in lower-income countries, such as the Philippines, to achieve financial stability, the initial investment can be prohibitively expensive.

The Philippines leads in daily active participation in Axie Infinity, followed by Venezuela, the United States, Thailand, and Brazil. A new employment model has emerged where affluent investors, referred to as "managers," acquire Axie creatures and lend them to "scholars," who handle the gameplay. Managers then take a cut of the scholars' earnings, creating a modern form of servitude.

Many players have reported accruing debt due to the high costs of Axies and the difficulty in earning enough cryptocurrency to offset these expenses. Despite the game’s promise to provide economic opportunities, some players find themselves in financial distress, resorting to loans or selling their Axies to settle debts.

The situation worsened in July 2022, when a hacker compromised the game's blockchain, stealing $620 million worth of cryptocurrency, significantly impacting players and investors. Other Web3 games, like Cross the Ages, attempt to address these issues by adopting a play-and-earn model, yet the fundamental principles remain largely unchanged.

At Brazil’s International Games Festival, developer Mark Venturelli criticized the integration of blockchain and NFTs in gaming, labeling them as "scams" and "fads." His comments highlight an ongoing debate within the Web3 gaming community regarding the pros and cons of blockchain technology and NFTs, particularly concerning their influence on game design and accessibility.

Web3-Enabled Sports

Web3 technology in traditional sports integrates blockchain, NFTs, and cryptocurrencies, fostering a more decentralized and transparent sports industry with new opportunities for fans, players, and teams.

Web3-enhanced sports offer various advantages, including new revenue streams for athletes and teams. For example, athletes can receive direct payments from fans via cryptocurrencies or NFTs, granting them greater financial autonomy and diminishing their reliance on traditional sponsorships.

Additionally, Web3 technology enhances fan engagement. Fans can interact with their favorite athletes and teams through fan tokens, which allow them to influence team decisions and earn exclusive rewards. They can also own NFTs representing memorable sports moments, leading to a more immersive and personalized fan experience.

Moreover, Web3 technology promotes improved transparency and security. It can be used to document athlete performance metrics and mitigate fraud in ticket sales and merchandise authentication.

Numerous sports organizations are adopting or exploring Web3 technology, including:

1. Sacramento Kings: The NBA team has entered a multi-year partnership with Ankr, a blockchain company, becoming its official NFT and cryptocurrency infrastructure partner. This collaboration will enable the Kings to explore new opportunities within the NFT and blockchain sectors.
2. International Chess Federation (FIDE): FIDE, the governing body for competitive chess with over 500 million players worldwide, is developing Web3 products on the Avalanche platform. These innovations aim to address challenges in chess, enhance operational efficiency, improve game integrity, and attract new generations of players. FIDE's major tournaments, like the World Chess Championship, garner immense global attention.
3. World Chess Tennis Association: This organization governs chess tennis, a hybrid sport that combines elements of chess and tennis. To fund its development, the WCTA will supervise the creation of a utility token via a Token Generation Event, utilizing the Binance Smart Chain to enhance the sport's economy.

Despite the potential revenue opportunities associated with Web3 in sports, financial, technical, ethical, and political challenges must be addressed.

One primary obstacle is the technological barriers, as Web3 remains relatively nascent and not yet widely adopted. This can complicate the integration of Web3 within existing sports frameworks and necessitate substantial investments in infrastructure and personnel, which may be unaffordable for smaller organizations.

Another significant challenge is the potential for cheating. While blockchain technology can enhance event security and transparency, it can also be manipulated by individuals seeking unfair advantages. For instance, athletes might attempt to distort blockchain data to falsify results. Additionally, hackers could exploit weaknesses in Web3-enabled sports infrastructure.

Ethical and regulatory concerns also arise with the implementation of Web3 in sports. Privacy issues may surface if personal data is stored on blockchain networks. Regulatory bodies may need to establish new guidelines, which could create additional hurdles to adoption. Furthermore, collaborations with US-based organizations under scrutiny may jeopardize projects, as evidenced by recent events involving firms like Paxos and Tornado Cash.

Lastly, the use of NFTs in sports raises questions about wealth distribution among fans and athletes. Concerns exist that NFTs could exacerbate the wealth gap between fans who can afford them and those who cannot, creating an exclusive environment. Additionally, high-demand NFTs might increase the earnings of top athletes, widening the gap between high-earning and lower-earning players. There is apprehension that NFTs could further commercialize sports, diverting attention from athletic performance.

In contrast to traditional sports, Web3-enabled sports provide greater fan involvement, enhanced transparency, and innovative revenue streams for athletes and teams. The integration of Web3 technologies into the sports sector is expected to continue, presenting new ways for fans to connect with and experience sports.

Conclusion

When comparing Web3-enabled physical sports to Web3 virtual gaming, the former appears to offer more advantages. Physical sports are deeply ingrained in our culture and provide various physical, mental, and social benefits. Integrating Web3 technology into physical sports can create novel avenues for fan engagement, such as tracking player statistics and developing virtual experiences that enrich the physical experience. Additionally, Web3 can enhance transparency and efficiency within the sports sector, minimizing fraud and facilitating secure transactions.

Conversely, while Web3 virtual gaming is accessible globally, it lacks the physical and social benefits inherent in traditional sports. Moreover, concerns regarding addiction and mental health persist within the realm of virtual gaming.

In summary, Web3 is significantly impacting the gaming and sports industries, with immense potential for innovation and growth. The convergence of gaming, sports, entertainment, and broader culture is driving the adoption of immersive technologies that Web3 can facilitate. As the Web3 Summit transitions to SEG3 to support the ambitions of sports, entertainment, and gaming businesses, it is evident that the future of both industries is intertwined with Web3 technologies.

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References

1. What is Web3 and why is it important
2. Wikipedia about Web3
3. The Impact of Web3 Gaming Industry: Future Trends & Aspects
4. The impact of Web3 on the business of sports
5. How can we use what we have learned from traditional gaming to enhance Web3 games?
6. Immortal Game raises $12M to build out Web3 chess platform
7. Web3 gaming needs to focus on sustainable economies
8. Play-to-earn crypto games have exploded onto the scene and are shaking up gaming business models
9. Play-to-earn games like Axie Infinity are blowing up right now, but they look a lot like Ponzi schemes
10. Axie Infinity Live Player Count
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14. Cross The Ages NFT collection rockets to Top-3 on ImmutableX, reaches $750K in 24 hours
15. Developer Ambushes NFTs In Public Talk, Makes Crypto Sponsors Real Mad
16. Sacramento Kings and Blockchain Company Ankr Launch Multi-Year Partnership
17. The International Chess Federation Brings Chess into Web3 on Avalanche
18. World Chess Tennis Association community token
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20. Tornado Cash Developer Alexey Pertsev to Remain in Jail Until at Least Late February
21. Legal Implications of NFTs in Sports
22. SEG3 to fuel Sports, Entertainment & Gaming businesses web3 ambitions