What are Web3 games, and how do they work?

Muhammad Naeem

Blogger

The video gaming industry is booming and in 2023, there are about 3 billion gamers all over the world out of a population of 8 billion. The video gaming industry is currently valued at $200 billion and is growing at an exceptional rate of 10% each year.

Capitalizing on these opportunities, Web3 entered the gaming arena to provide an unparalleled gaming experience utilizing blockchain technology.

Web3 Games

As the video gaming industry evolved, its limitations also became visible and players started expecting more from developers. Traditional games allow players to interact with their assets only by buying licenses; true ownership over these assets doesn't exist because everything in the games belongs to the developers under copyright laws. Web3 games, on the other hand, allow players to have an innovative and decentralized gaming experience, and to truly own their digital assets, and these assets can be bought, sold, or traded without the interference of a third party.

Problems with traditional games

For decades, traditional games have been the major source of entertainment for gamers all over the world; however, there are certain problems and limitations which have led to the rise of Web3 gaming, which offers a new way of experiencing video games.

I. Limitations on Trading In-Game Assets

The biggest problem with traditional games is that their in-game assets are limited within the game ecosystem. Players spend their fiat money to purchase assets such as armor, weapons, and other virtual stuff, but they do not truly own those items. In case the game shuts down somehow, all of the progress and assets are lost forever, leaving players with nothing.

II. Lack of transparency

Another problem with traditional games is their lack of transparency. Players are often unaware of how the works, how it hosts random events, and how the scores are calculated. This lack of transparency ultimately damages the collaboration of players and developers .

III. Centralized server

All the players' progress and assets are stored on centralized [systems?] which are vulnerable to hacks and exploitation. In case the main server is breached or goes down, all the hard work and progress of years can be lost forever.

What is Web3 Gaming?

Web3 has revolutionized multiple industries, including finance and banking, marketing and advertising, music, and social media, and now it is poised to transform the gaming experience as well. The gaming industry is experiencing a shift and Web3 games are becoming the new face of the gaming industry. Web3-based gaming, also known as blockchain gaming, refers to gaming that utilizes distributed ledger technology to enable players to have complete ownership of their in-game assets. Unlike traditional games, these games incentivize players with cryptocurrencies and NFTs for the time they spend on the platform. Web3 games also offer interoperability -- the assets owned in one game ecosystem can be utilized or transferred in another game’s ecosystem. The decentralized nature of Web3 games enables players to share their opinion on how and when the game should evolve.

Key features of Web3 games

Web3 games have distinct features that set them apart from traditional centralized games. Here are some of these features.

I. Decentralization and Ownership

Web3 games are decentralized: they are not under the control of a central authority. All the decision power is equally distributed among all players. Moreover, players have true ownership over their digital assets and they can sell and trade these assets outside the game’s ecosystem.

II. Player-driven Experience

As all the decision power is held by players, they can tailor Web3 games according to their own wishes and preferences. The underlying blockchain technology of these games allows players to earn crypto and NFTs, transfer assets, and make their own decisions in a secure environment.

III. Decreased Downtime and improved scalability

As there is no central decision-making authority in these games, the downtime is almost zero. Web3 gaming ecosystems run autonomously and there is no maintenance cost with zero interference from a central entity. As these games run on highly scalable blockchain technology, they are capable of handling a large number of players simultaneously.

How do Web3 games work?

Web3 games utilize blockchain technology to provide a decentralized ecosystem for players where they can earn, trade, and use these assets across the blockchains. The transactions are often carried out using smart contracts, which are simply programs executed when certain conditions are met such as when players trade their assets. These transactions are transparent and recorded on a tamper-proof ledger.

Gaming DAOs also play an important role in the sustainability of Web3 ecosystems. Gaming DAOs are community-led entities with distributed decision-making across all the members. These DAOs are run by smart contracts and are governed by their members, who collectively make decisions about the direction of the Web3 ecosystem.

Risks of Web3 Gaming

Despite the numerous potential benefits and exciting features that Web3 delivers to its users, it is critical to mention the various limitations and obstacles that exist within this evolving technology.

I. Regulatory Issues

Regulations, much like cryptocurrencies, pose significant challenges for Web3 gaming. Some countries have implemented different approaches to regulating digital assets, and in some cases have banned them entirely. The global nature of web3 gaming can create additional complexities when it comes to determining which taxes apply and how to report them. These uncertainties surrounding the crypto space could jeopardize their future.

II. Economic Challenges

Designing a token that suits the game’s ecosystem and incentive system is a huge challenge for the Web3 future. As these games incentivize players in the form of cryptocurrencies, it is difficult to attract a large number of players who may be wary of getting rewards in highly volatile digital assets.

III. Scalability

Scalability has been a long-standing issue for blockchain across the crypto sphere. While some blockchains are actively finding solutions for this problem, there are still a large number of blockchains that are suffering from it. Scalability issues make it difficult to handle a large number of smart contract executions at once.

IV. Player Engagement Issue

Web3 game developers are focusing more on financial incentives than the fun, the key to the overall gaming experience and player engagement. Some players may find the game too complicated which could result in less engagement from players. Developers must maintain a balance between incentivizing players and providing them with fun gameplay elements.

Conclusion

The Web3 gaming sector is a big step forward in the development of the continuously growing gaming industry. The future of Web3 games looks promising as they provide true ownership over the assets, enabling players to interact with games in a decentralized way. As web3 technology continues to evolve and expand, we can expect to see more competitive games with balanced incentive systems.