What to Expect from Web3 Gaming in 2024: Potential Rise, Risks, and Realities

This article is co-authored by Olga Vox and Anastasia Vitruk

The landscape of Web3 gaming and GameFi, characterized by the convergence of decentralized finance (DeFi) and gaming, is undergoing a tumultuous period. This article delves into the challenges and potential solutions in the realm of Web3 applications, particularly focusing on tokenomics, financing strategies, and treasury management.

The Current State of Web3 Gaming

In the recent past, the gaming industry has witnessed a surge in projects promising groundbreaking experiences, leveraging advanced gaming engines. These projects, often led by industry veterans from giants like Square Enix and Ubisoft, have unfortunately paired these gaming innovations with questionable cryptocurrencies, launched prematurely before any substantive game content.

This phenomenon can be attributed to a misguided belief, particularly prevalent during the 2021-2022 "Ape Market," that massive capital can be raised through the issuance of tokens, bypassing traditional monetization strategies. This approach, however, has led to a situation where many projects are heavily capitalized but lack a sustainable economic model.

Picture this: talented game developers, fresh from the hallowed halls of Tencent, Riot, and their ilk, promising us the moon with their latest gaming sorcery. And then, what do they do? Pair it up with some dubious 'shiny new coin' - because why not throw a bit of cryptocurrency chaos into the mix?

Between Token Hype and Treasury Management

Everyone's a genius in a bull market, especially during our beloved 'monkey run.' Remember the good old days when projects threw around fancy smart contract lingo and DeFi jargon? They would sell you dreams of gaming utopias, backed by nothing but hot air and token economics diagrams that looked like a toddler's art project. Some of the brightest minds were convinced that minting tokens out of thin air was the equivalent of striking gold. Who needs a solid monetization strategy when you've got digital gold, right? Wrong.

The real test of a project's viability comes during market downturns. The challenge lies in balancing the aggressive promotion of tokens (the "balls-to-wall" approach) with responsible treasury management. Neglecting the need for an actual product can lead to short-term gains but risks long-term sustainability.

My Thesis: The Future of GameFi

The true value in gaming and metaverse applications lies in the unique in-game assets they create, not just the tokens they circulate. These assets, often NFT-based, derive their value from their uniqueness, utility, and the reluctance of users to sell them.

This perspective suggests that projects do not necessarily need their own tokens to monetize. Instead, tokens should be seen as a means of exchange for the assets generated within the virtual world. A successful Web3 game should be able to operate using existing liquid tokens or stablecoins. If it cannot, it's a sign that the project needs reevaluation.

Practical Steps for Web3 Game Developers

Launch your token in the bull market frenzy, no game necessary. Step one: hype it up like it's the next big thing since sliced bread. Step two: cash out before the house of cards collapses. Rinse and repeat.

1. Token Launch Strategy: Delay launching your own token until you have a stable, engaging product. Use existing tokens like USDC or SOL for transactions within the game.
2. Observation and Analysis: Monitor core game loops and revenue streams. Understand user behavior and preferences, and adjust your strategies accordingly.
3. Token Utility Design: Design your project token to incentivize user retention and engagement. Offer discounts for using your token and charge a premium for other currencies.
4. Treasury Management: Diversify your treasury by holding USD, your platform's native token, and your project token. This approach mitigates risks associated with market downturns and token volatility.
5. Focus on Game Quality: Continuously improve your game. Remember, the success of a game is determined by its quality and user engagement, not by its associated token.

In conclusion, the future of Web3 gaming and GameFi hinges on a shift in mindset from token-centric to asset-centric development. It's not just about fixing what's broken; it's about building something so awesome, so epic, that tokens become the cherry on top, not the whole sundae.