A casual discussion on the gaming field: what does the transition from Web2 to Web3 mean at five different levels?

Author: Derek Lau, Medium Author*

Compiled by: Dong Xun, The Way of DeFi

A review of the transition from Web 1.0 to Web 2.0.

New technologies are never used correctly when they are first discovered. This is because they are often used to solve pre-existing problems rather than to unlock new opportunities.

We have seen this happen time and again. In the early days of the internet, when we transitioned from web1 to web2, the most popular ideas were digital "yellow pages" or digital "newspapers." While useful, they did not truly leverage the technology.

But we now know that the internet's role is much more than that. Digital "yellow pages" evolved into user-driven search engines like Google or Yelp, while digital "newspapers" transformed into user-driven content platforms like YouTube.

What is its Web3 version? Perhaps we are seeing it now.

I recently spoke with founders transitioning to the web3 space, many of whom have extensive experience in traditional gaming. Based on these conversations and observations of what various studios are doing, I would like to share my thoughts on the shift from web2 games to web3 games.

This will be 100% wrong, as I believe we still do not know how to best utilize this technology. But let's give it a try…

Level 1: Ownership and Tradability

Clearly, the most obvious application of web3 in gaming is also the easiest to understand—ownership and tradability.

"Imagine playing Fortnite, where you can resell any skins you purchase and even earn skins that can be sold for real money!"

The most powerful idea in the gaming industry right now is that, all else being equal, players owning assets is better than not owning assets. The idea is that players should not just "invest" time and money in video games, but should earn some reward for their efforts while having fun.

I think this is amazing and could disrupt the industry on its own! But it is not enough.

It does not truly encompass the full spirit of web3. It is akin to "let's put the yellow pages on the internet."

So, let's look at Level 2.

Level 2: Improving Player Experience

Games are designed to capture attention. Time is limited, and people ultimately make choices between playing games, watching movies, going out with friends, and so on.

Some difficult questions include: How does blockchain really improve the gaming experience for players? What does this technology offer that current games cannot? Why is it important compared to using centralized databases?

"Imagine playing Fortnite, but their maps are much more interesting because community members created these maps, controlled the management, and earn rewards every time people play these maps."

We are looking for a better version of a web2 game that cannot be replicated.

Take Guild of Guardians as an example, a mobile team action RPG where players join guilds and fight in dungeons for loot. How does blockchain provide a better gaming experience for players?

• Strategy: Players of these types of games enjoy the strategic depth of hero synergies, their abilities, equipment, and how all of this affects their overall progress and success. Adding another layer of economic strategy can actually enhance strategic depth and make the game more engaging.
• Collectibility: Players in these games love collecting; they enjoy rolling for heroes with gacha and building their collections. Turning these collectibles into digital assets and giving players the opportunity to showcase their collections makes this aspect of the game more satisfying.
• Social: Players often remain active in these games by interacting with others in their "guild" or "clan." Playing with friends and fostering social connections is very positive for gamers.

Level 3: Economic Incentive Alignment

One of the core principles of Web 3 is economic incentive alignment. The idea is that any individual or business should be economically incentivized to contribute positively to the ecosystem, resulting in a net benefit for that ecosystem.

"For example, in Fortnite, any content creator in the world can earn 50% of the 'value' they bring to the game, whether it's new players spending money or brand awareness (advertising)."

The buzzwords now are "play to earn" or "play and earn." Both concepts revolve around the idea that players are valuable, and by playing the game, you should be rewarded for contributing to its success.

As the web3 space evolves, we will see more data-driven and strategic approaches to achieving incentive alignment. Just as PayPal paid each new registered user $10 to reach its first million users, we may see this same idea used to guide new blockchain games.

However, it is very important to note that the incentive mechanisms are not just for players. Web 3 means everyone, and in a gaming ecosystem, there are many participants contributing to its success, and each of them should be empowered and incentivized to perform different actions.

See the example image below of the "types" of participants that typically exist in the industry:

Level 4: Revenue, Distribution, and Publishing Models

Web3 unlocks entirely new business models. We are currently seeing it most commonly in the democratization of fundraising. Many teams are able to raise funds through NFT or token sales and then create games, which is very different from the traditional model where teams raise funds after reaching each milestone (i.e., pre-production, vertical slice, etc.).

We will also see this apply to all other aspects of game development and publishing.

"Imagine Apple, but instead of taking 30% of all in-app purchase fees, they take a percentage of the NFT secondary transaction fees that occur within their apps."

Let's look at some more examples. Imagine…

• Game releases are handled by millions of micro-influencers rather than large agencies.
• Large esports teams genuinely participate in gaming competitions and earn a living without relying on advertising or sponsorships.
• Not spending a dollar on Facebook ads but using it as a registration reward for new players.
• Watching your favorite streamer play and earning NFTs through interaction with them and the game.
• Voting on how much compensation the development team should receive based on the game's success.
• Open-sourcing code and paying any developer who submits a PR and gets approved.

The opportunities here are almost limitless. What may seem like a strange idea now could ultimately become the "way of doing things" in the future.

Innovation in Web3 must happen beyond the games themselves.

Level 5: Decentralized Ownership and Development

Blockchain is inherently decentralized. This is in stark contrast to today's gaming industry, where decisions about a game are typically made internally by a small group of people.

This makes sense. Game development is a combination of part art and part science, and it is extremely difficult. Steam releases about 8,000 games each year, but almost all of them fail. Experts are those who know the games best and make the best decisions, rather than relying on "majority rule" or "Reddit experts."

But must it be centralized? Can we have a truly decentralized game model or development approach? And establish the right systems, processes, and incentive mechanisms to make it a better way of developing games?

Maybe.

We have already seen some games start experimenting with DAOs (Decentralized Autonomous Organizations), and many games claim they will transition to decentralization in the future. However, DAO organizations are still in their infancy and do not yet operate with the efficiency of companies. It has proven to be a challenge to create the appropriate organizational structures, decision-making processes, and incentive mechanisms to unlock the potential of DAOs (though fortunately, many smart people are working on this).

In any case, this is a huge blue ocean opportunity. Most importantly, there is a significant chance to leverage decentralized structures to achieve things that a single company cannot replicate.

"Imagine a game that is completely owned and operated by a million community members, covering everything from development to marketing to design. Contributing is easy, making the right decisions is straightforward, and the biggest contributors are rewarded. What kind of individual company can compete with that speed and scale?"

Decentralized gaming is a space worth considering that will disrupt traditional game development.

Level 6: ???

I believe there is more, and we have only scratched the surface. I would love to hear ideas that are not listed here.

Conclusion

We are in the super early stages. No one really knows how this industry will change. We need to focus more on innovation rather than "copying" existing models and thinking that "adding" blockchain or NFTs will make it better.