Web3 Games - Freedom from the walled garden (September 2023)

Web3 Games: Freedom from the walled garden
Prepared for The Metaverse Society by Enders Analysis
3 September 2023

The potential of Web3 games is clear: a creative world of great game play with the freedom to
expand beyond existing platforms and “walled garden” franchises. It means players and creators
being offered new choices of ownership and investment in their favourite games and virtual
worlds—building fun, social and immersive communities and market economies.
Web3 games, those enabled by blockchain technologies, still need great games to grow the
sector—and they’re on their way, along with improved tools and technology standards.
2
Freedom from the “walled garden”
Web3 Games: Freedom from the Walled Garden | September 2023

1. Executive Summary
2. The universal appeal of games and their regularly radical change
3. Blockchain technologies underpin Web3 gaming
4. A Web3 character’s journey: a blockchain-enabled, asset-driven model
5. Web3 technologies overview: what does it enable?
6. Tokenisation and the player-owned economy
7. Game Token/NFT example
8. “NFL Rivals”: adding Web3 mechanics to mobile sports games
9. Web3 versus Web2? Neither. It’s a question of great game design and
what is “on” or “off” chain
10. Overcoming game friction: great designers required
11. Games as platforms: is Web3 the next stage in their development?
12. Nike x Fortnite: Airphoria bridges brand collectibles into games
13. Major game developers: more infrastructure partners required
14. The crypto winter
15. How new games can embrace Web3
3
Contents

• Web3 games represent a radical transformation for all elements of the gamer ecosystem: gamer, developer, publisher and platform. Through blockchain
technologies, and the development of a digital asset economy, gamers will benefit from true ownership and investment in games—driving new network
effects and growth
• Complex game economies using tokenisation will inevitably form part of larger metaverse initiatives, that move beyond walled garden platforms, and deliver
dynamic digital asset marketplaces and economies
• Integration of Web3 tech could be beneficial to and seamless inside existing revenue systems for games; it’s not an either/or. Subscription is an interesting
and underutilised test case for major platforms, with NFT usage across games a novel approach to engaging users and reducing churn. Improvements in UX
around wallet management and other elements of asset management are necessary, but potentially at less risk inside a subscription system
• Unlike previous platform-derived transformations in the games industry, Web3 gaming is unlikely to have a ‘big bang’ moment dependent on a new device
or hardware. Instead, we expect organic growth, with a positive ramp due to ongoing investment in the space. A hit new game franchise will be needed to
supercharge the sector. Each new generation of game technology has had one
• Web3 gaming is currently made for core gamers—the element of the gaming population that invest the most time and money in the games world.
Notoriously prickly, there is opportunity to subdue the current critical view of Web3 by focusing on great gameplay and the additional value of NFTs in games
and as collectibles. Crypto mining masquerading as games and speculative NFT hype has been highly damaging but can ultimately be subdued and reversed
• Existing large-scale franchises remain cautious and are unlikely to integrate tokenisation into main gameplay for some time. However, there is opportunity
for initiatives that use NFTs through partnerships, promotion, and online events that will be used to trial and test audience engagement
• Complexity and friction shouldn’t be underestimated. Web3 will require imaginative design solutions along with new tools and service providers to smooth
the limitations related to blockchain decentralisation. Already the proliferation of service providers is a sign these issues are being addressed
• The crypto winter is likely to persist but remains a separate issue from many games being designed now. By focusing on digital assets as opposed to
cryptocurrency models, games have a viable route to player acquisition. Fiat money integration and payment system support need to improve
• Platform barriers remain substantial. The PC platform is the only open platform capable of supporting the full range of Web3 gaming designs. Mobile
ecosystems are under pressure to provide more openness across the game spectrum, with Google Play recently approving restricted support for NFTs.
Consoles appear to be closed to Web3 indefinitely
Executive Summary: The adoption of Web3 gaming will be accelerated by new franchises
Web3 Games: Freedom from the Walled Garden | September 2023 4

The games industry benefits from and is used to radical, technology-led change, more so than any other entertainment medium. The last decade is case in point: it has
not only cemented mobile gaming with more gamers on more devices than ever before, but it has also seen a range of revenue models develop, be that free to play,
subscription, or pay as you go. Multiplayer and live service gaming have also resulted in huge industry-defining platforms such as Fortnite, Minecraft, and Roblox: all
proto-metaverses that span games, entertainment and community experiences.
Web3 technologies hold the promise of being the next innovation wave in gaming—at both a business model and gameplay level. With the help of blockchain, game
makers will derive value through the creation, sale, and trading of digital assets, and subsequently upend their traditional revenue and even capital raising models.
However, the rise of Web3 gaming will be different to prior transformations. Rather than platform-derived change (the growth of mobile gaming) or revenue model-
based (such as free to play), Web3 technologies are intended to bestride all platforms and all business models.
Web3 gaming is unlikely to provide a platform-led “big bang” moment—in the way that iOS did for mobile gaming or live service gaming did for Fortnite. Rather Web3
will become part of the games industry’s continuing evolution with appropriate and efficient use of new technologies. The transformation could be both elegant in its
implementation and transformational in its scope. By combining a new suite of core technologies that generate more value for gamers, and allowing integration inside
existing platforms (subject to platform holder cooperation), Web3 should be net additive for players and developers alike.
The scope of games provides an ample set of experiences for Web3 to be useful in many but not all titles: it will be dependent on game design, and the requirement for
sophisticated player economies to be successful at scale. What is needed is a new generation-defining franchise that can render the possibilities of Web3 into the next
massive games sensation and commercial hit. Every new generation has had such a moment. The question is, when will Web3 be able to move beyond existing closed
platform ecosystems and break out? Decisions made over the next 24 months will be critical to success before the end of the decade.
5
The universal appeal of games and their regularly radical change
2000 onwards
• Connected devices
• Multi-player gaming
• In-game purchasing
• Digital distribution
2010 onwards
• Mobile platform
ecosystems
• Games as a Service (GaaS)
• Free to play gaming
• 1st billion-dollar franchises
2020s and beyond
• Subscription services
• Proto-metaverse platforms
• Cloud Gaming
…Web3à

Web3 gaming is a root and branch change in the underlying architecture of games and their platforms, and requires new approaches to customer management
as well as elements of gameplay design. It is however a model of variation, depending on the requirements of the game creators, the business model and the
long-term premise of both platforms and specific games. For existing games, significant additional (re)tooling will be required, but for green fields games,
designed from the outset to support Web3, creators can bypass many elements related to walled-garden live service games. The adoption of Web3 is a broad
philosophical as well as technology-based change, and does not have an all-encompassing definition or even feature set. For the purposes of this report, our
definition of Web3 gaming is those games (and platforms) that utilise blockchain technologies for game features and experiences.
Blockchains: the core underpinning of Web3 via open and published ledgers (or databases). The blockchain is distributed on multiple nodes and machines
across the internet, and benefits from redundancy across nodes, but also immutability—once an event or transaction occurs on the blockchain there is a
permanent and unalterable record of the event. Blockchains not only enable many components of the traditional live game backend and events to be recorded
and accessed by all, but also their decentralised architecture permits trusted peer-to-peer events and transactions.
The most widely used blockchain in Web3 gaming is currently Ethereum, with new game-focused blockchains such as Oasis in development and testing.
Tokens and smart contracts: Tokens, in their most simple form, represent digital assets in the gaming ecosystem. The tokens themselves rely on blockchain
addresses to determine the ownership of the digital asset. Token types can be non-fungible, the well-known “NFT”, which cannot be adjusted or amended.
There are also fungible or even semi-fungible tokens—that can represent in game currencies or useable elements in games (useable materials for
building/crafting) and can have ‘smart contract’ elements. Examples of these smart contracts include items that can be bound to a user (soulbound) or used
once in gameplay (burnt) or variations that involve trading across a game ecosystem.
Wallets: Wallets are the ownership space for tokens, the access area or portal by which tokens and digital assets can be managed. Gamers will require a wallet to
be associated or tied to their account to manage their web3 enabled experiences. Wallets represent one of the most significant new user management elements
for Web3 games.
6
Web3 technologies for the games industry: blockchain technologies underpin Web3 gaming
Key Technology Components

7
A future Web3 character’s Journey: a blockchain-enabled, asset-driven model
Closed Platform/Walled Garden
Digital
items stay
on single
platform
Creator
Economy
controlled
and limited
by platform
rules
No true
asset
ownership
Game #1
Game #3
Game #4
Game #2
Game #5
Game #6
NFT Game Character
NFT
Character can
be used in
many games*
NFT Character
can be traded
among players
Creators can build
and sell items on
open markets
Creator NFT Marketplace Gamers
Web2.0 Game
Character
Gamers may pay to
use NFT in game and
then sell it to others
*A future scenario requiring improvements in standards, design, and creative and technical openness across titles

The Web3 technology stack for the games industry relies on blockchain-based technologies, but the scenarios they enable are only at the earliest stages of
implementation. At a base level, there are five new environment states that provide the foundations for new games:
1. Decentralisation: the nature of blockchain dilutes the existing 100% control of walled-garden systems for all live (networked) games. The impacts are
profound: digital items can exist outside of a game and players can interact independent of centralised game control. Decentralisation also makes
interoperability of games, players, items and assets far easier, as records on blockchain are accessible by third parties, unlike with existing closed platforms
2. True ownership of digital assets: the most compelling and important new state is the ‘true ownership’ of digital assets via tokens. Already familiar from the
NFT hype cycle of 2022, game assets are a meaningful and important category with real applications and long-term value potential. The ownership of digital
assets (e.g. weapons, costumes, skins—the list is virtually endless) resides with the player and allows for their usage in-game, but also in any other game
that recognises the digital item
3. True marketplaces for digital assets: ownership of digital assets by the gamer will also lead to trading marketplaces for those assets independent of the
game in which they were created or acquired. This important point allows gamers to sell, trade, or even rent items peer-to-peer outside of game
environments. It also creates the conditions for real money to be used to acquire items outside of game—another enormous change to the existing model.
This is not as catastrophic as it may sound to developers: it expands the revenue model from one-off item sales into a richer marketplace allowing for
residual incomes on digital assets via rents or taxes in-game (the ‘pay to use’ model)
4. Creator economy separated from platforms: the expansion of ownership and trading of digital items will enhance the attractiveness of the creator economy,
where gamers will be able to develop digital items outside of walled gardens, and be able to use them in games that allow for it. This not only provides buy-
in to committed gamer communities, but adds an additional organic growth mechanism, allowing players to invest directly in games through creation
5. Longevity and the rise of ‘perpetuity’ digital items: the enablement of true digital asset ownership, and the prospect of real asset values, will stretch the
longevity of digital items. This is a significant change for a comparatively young industry, with items that may outlive their usefulness in a particular game
or experience, or even the game itself. In the future those items could find new utility in new games, recycling their use, and restoring value. For larger
publishers, and those with large franchise universes, this will allow the establishment of long tail models, where assets held by gamers will allow for
different implementations (or even game access), incentivising gamers to stay and spend over longer periods
8
Web3 technologies overview for the games industry: what does it enable?

Tokenisation and “token economics” (Tokenomics) represent the most radical shift in gaming enabled by Web3.
Player ownership of game assets will shift the economic model for games, gamers, developers and publishers. While
traditional walled-garden/Web2 games allow for virtual ownership of items, moving to a decentralised and true
ownership model will enable new network effects, and a range of additional, and mostly new, asset-based
monetisation methods. Game developers are only at the earliest stages of the potential for tokenomics; the more
advanced scenarios will appear as games reach larger scale and game designers gain experience with the format.
Game designers face the hurdle of educating players as well as appealing to core users. This is no different from prior
game design initiatives that have often waterfalled from core gamers down to more casual gameplay. Core gamers,
particularly PC-centric core gamers, are already engaged with Web3 models, but remain notoriously prickly—they
need to be sold on the merits of gameplay for long-term success rather than the market-based initiatives for NFTs.
Out-of-game examples and scenarios
↑ Player driven economic models: markets for NFTs, including player created items, will allow for trading of assets,
potentially earning returns to players and building digital economies
↑ Capital raising: NFTs can be used to raise equity in games; developers can sell assets to fund game development
↓ 3rd party actors, liquidity and market distortions: open markets open the doors to bad actors, assets hoarding, and
other events that pose new risks to a game universe
In-game examples and scenarios
↑ New revenue opportunities around rents and taxes for using NFTs in game, along with existing methods of selling
digital items
↑ Complex game economies will require assets to be managed by economic rules of supply and demand
↑ Soulbound NFTs can be tied to an individual user, allowing for items such as passes to not be traded
↔ Interoperability of items between games is possible, subject to recognition between developers and franchises
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Tokenisation and the player-owned economy
Decentralisation
Blockchains enable assets and
value to exist outside of the
game
True Ownership
Ownership resides with the
player not the platform
Creator
Economy
Creators are incentivised to
build and sell items
Marketplaces
Exist outside of the game world
and allow true asset trading
Longevity
Assets exist beyond specific
games and platforms

10
Game Token/NFT Example
• Characters
• Weapons
• Costumes
• Skins
• Resources and
consumables….
In-game items
• Level-ups and unlocks
• Achievements
• New environments and quests
• Crafting options (burning or
combining NFTs to create new
in-game assets)
Tokens may also unlock
game play mechanics
and scenarios: • Buying: acquisition of NFT in-
game or on open market
• Minting: the creation of NFT
in game
• Burning: destroying an NFT to
progress in game or acquire
new assets
• Dynamic: NFT that reflect
gameplay state (e.g. an item
that gets levelled up)
Asset management rules

11
NFL Rivals: Adding Web3 mechanics to mobile sports games
“NFL Rivals”, an all-new officially licensed 2023 release by Mythical Games,
demonstrates a light touch but compelling Web3 component to a mobile-centric
football (NFL) game. Players compete as a General Manager for their own ‘fantasy
football’ side, building their team with digital assets (players, helmets, blueprints)
that can be owned and traded through Mythical’s digital marketplace. Once their
team is in place it’s game on, with arcade style game play allowing players to earn
rewards and level-up their teams.
“NFL Rivals” : Key
Components
Web3
Free to Play iOS/Android
In-app purchases App Stores
Community building In-game PvP plus official
Discord for out of game
Rewards In-game level-ups
Player ownership of digital
assets
✓ NFT-based with Mythical run
wallet or independent wallet.
NFL licensed collectibles as
well as gameplay enabled
items
Independent marketplace ✓ NFT item marketplace for
trades and paid items,
operated by Mythical Images courtesy of Mythical Games Inc

We will not see a total transition to Web3 gaming from established Web2 systems—
both systems will exist side-by-side, and most Web3 experiences will require solid
Web2 infrastructure to support and scale. There is genuine reason to beware of the
purist view that blockchain will replace most elements currently part of traditional
Web2 infrastructure. There is considerable downside risk related to consumer
experience and cost of going all in on blockchain, not least inherent latency related to
the distributed nature of blockchains themselves.
The better question is to factor where blockchain events (known as ‘on-chain’) can be
handled versus events that are ‘off-chain’ and can be parsed using existing
infrastructure. This is a core engineering issue and will be a matter for game designers
(both technical and creative); it should be fundamentally invisible to the gamer.
Developers will have to account for the fact that decentralisation will mean that tokens
are being used without using traditional Web2 game services—with their
instantaneous overview of the game state—and will need to use new techniques to
ensure that game states remain current (namely indexing).
For many game developers, Web2 systems will continue to provide advantages through
efficiencies in deployment, cost and ease of scaling. More importantly, Web2 systems
are quicker and cheaper. We expect that Web3 implementations will continue to
improve, with additional toolsets becoming available that provide access to Web3 data
in quicker formats. Indexing as well as streaming services will be the most obvious
solutions. Indexing provides ‘carbon copies’ of blockchain data without needing to read
the chain itself, while game streaming will respond quickly in real time to events
happening on chain.
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Web3 versus Web2? Neither. It’s a question of great game design and what is ‘on’ or ‘off’ chain
Web3
Enabled
Game
Web2: game servers and databases
Web3: Blockchains, Wallets and Token records
Assets, game states and matchmaking.
CRM: identity, access and billing
Wallets and Tokens: acquisition
transactions, minting, burning.
Tools and services
to enhance
blockchain tech:
indexing and
streaming

The decentralised nature of blockchain, and the addition of new game features and off-game complexity, will inevitably produce further overhead to game
design and ongoing gamer management. While the friction at this stage of evolution is a pain point, we expect the development of new tools and services, along
with paradigm shifts in the way developers and publishers think about Web3, to ease friction over the longer term. Particularly as large platforms adopt
elements of Web3, along with the inherent resilience and exploration of core gamers leading the way, Web3 additions to games, as well as all-new titles, will
become less exotic.
The current high friction elements comprise systemic platform as well as design issues, that will resolve at variable rates:
1. Discovery and launching games: while blockchain can enable new network effects through tokenomics, and the evangelisation of games through invested
player communities, the incumbent platforms make discovery and launching of Web3 games a tougher sell than for Web2. Traditional ad platforms remain
lukewarm on Web3 gaming (Twitch, Google, Facebook), while incumbent game platforms are still a foundational block. PC gaming remains the dominant
and clear platform of choice for Web3 gaming, and neatly intersects with appeal to PC-centric core gamers. Ultimately this will need to be resolved, but the
timeline on mobile remains long. Consoles are still an unlikely vehicle for full Web3 functionality
2. Signups and onboarding: with Web3 games relying on data sitting outside the traditional walled-garden model, game designers will need to factor in how to
create as well as integrate player accounts with new elements such as wallets (where a player manages their tokens). Whilst this is a pain point for all game
designers for existing game types, blockchain technologies are less resilient to user error or mistakes, they require 100% accuracy, and will need ongoing
vigilance. Game developers may have additional regulatory requirements related to ‘know your customer; to consider
13
Overcoming game friction and complexity...great game designers required
PC Xbox PlayStation iOS Android
Web3 Support Yes Prohibited Prohibited Limited Yes

3. Wallet management and payments: in existing Web2 games payments are handled by platforms or direct payment using payment providers, and assets are
held on centralised game systems. This will likely continue as an element of Web3-enabled games, but an additional layer of overhead with players
transacting with items in their wallets outside of the game, and trading on independent platforms, will need to be included. Easier payment enablement for
trading as well as recognition of new assets inside wallets will add to design complexity. New providers are already capitalising on this area, from new
generation payment providers (xSolla, Stripe, Adyen) through to integration providers such as Polygon, providing a range of services to reduce this friction
area. We anticipate most Web3 game designers will require third-party support in the near term to integrate the additional requirements
4. User experience (UX): Beyond having a great game(!), the UX requirements to include blockchain transaction requests will likely require additional
abstraction layers, again probably via a service provider. Blockchain transactions aren’t free—they require ‘gas’ (payment usually expressed via a crypto
cost), which will be factored as part of game economics, whether ‘included’ or ‘pay as you go’. Game developers will need to ensure that additional
blockchain transacting costs are expressed to the user
5. In-game content usage, control, and complexity: the use of tokens in game will be the single most challenging aspect of game design as games evolve over
time and become more complex. Aside from the practical considerations of integrating assets into the game acquired by the gamer as outlined above, game
designers will need to have advanced content management and metadata protocols in place to understand and control tokens before affecting elements of
game play and player progression
14
Overcoming game friction and complexity.....great game designers required (cont.)
PC Xbox PlayStation iOS Android
Web3 Support Yes Prohibited Prohibited Limited Yes

The development of Fortnite, Minecraft and PUBG are examples of the transition of games to platforms, where games have expanded their mission to include
broad entertainment, community, and creator offerings. The broad swathe of opportunity inside these walled-garden platforms has resulted in staggering
user numbers (Roblox already has >300m MAU in 2023 and continues to grow), appeal to broad user groups beyond core gamers, and crucially advertisers. In
addition, these platforms can legitimately be described as proto-metaverses, with the establishment of marketplaces, creator environments that support
them, along with more traditional asymmetric content offerings (concerts and shows) that allow for community interaction.
There are three key areas that Web3 holds viable potential for deployment inside the current walled gardens of the three major platforms, Minecraft, Roblox
and Fortnite:
1. Creator economy and true ownership: the large-scale usage of digital items inside platforms, along with the ability to craft and create environments, raises
the question of true ownership of digital items. Particularly as these platforms pivot toward older audiences, a current focus in the case of Roblox,
establishing an NFT or NFT-like class of digital items is a logical step. An NFT asset class would allow gamers to grow their ‘investment’, trade and gift, and
ultimately sell their assets when they decide to retire from the platform. This would be a multistage evolution over time, but establishing a base level of
‘ownership’ would add a perceived value layer that doesn’t exist. While adding a new level of complexity, it does need to affect the entire game experience
2. Upside revenue potential through limited and defined NFT usage and marketplaces: following the establishment of an NFT asset, platforms would be
incentivised to create and manage marketplaces for NFT class assets, and provide assurance and trust to players (and item owners) beyond the current wild
west marketplaces. Platform owners would be able to capture margin outside of the game by managing these asset exchanges, while at the same time
managing the liquidity of assets (both minting and burning)
3. Brand activations/the ‘NFT export’ model: Both Fortnite and Roblox have ongoing programs to attract advertisers through branded events, items,
sponsorships and product placements. In-game events (including linking accounts and buying items) that unlock achievements and advertiser-minted
NFTs are already occurring (see next slide for Nike x Epic example), effectively an ‘NFT export’ out-of-game model. The NFT never appears or is used in
the game itself, but does require the game for its creation. With only a single degree of separation, NFTs are closer than ever to inclusion in game
While these leading platforms are currently locked from NFT usage, the current high levels of R&D at the platforms as well as limited test cases related to NFTs
indicate that the question of NFT deployment is very much alive. We anticipate further trials and limited deployments to be ongoing for the foreseeable future,
particularly if tied to revenue via advertising and brand partnerships. Pressure from the gaming audience remains crucial, especially if competitive games and
platforms emerge with NFTs. While platform holders are publicly proclaiming to be resistant to Web3 inclusion at a macro level, it remains a balance between
upside revenue and consumer demand, versus the friction to deploy and consumer hesitance.
15
Games as platforms: is Web3 the next stage in their development?

16
Nike x Fortnite “Airphoria”: bridging brand collectables into games (June 2023)
Nike .Swoosh Platform: NFT-based
platform (Polygon and Ethereum
back-end, Wallet by BitGo)
Physical “Airphoria” product
shipping
Fortnite: “AirMax” themed island
in Fortnite incorporating a
“sneakerhunt”
Nike themed digital items able to be
purchased and used in game
Steps for Achievement Unlocks: Connecting account to Fortnite, Buying in-game
Fortnite items
Unlocks will generate NFT achievements inside the Swoosh user account, and also place
user on waitlist for additional digital items

Ubisoft remains the only major developer to have announced definitive plans to launch an NFT-enabled game in 2023: “Champions Tactics: Grimoria
Chronicles”, a PC-based RPG title. Whilst appearing to be the first major with an announced Web3 title, we do not expect it to be the last. Electronic Arts (EA)
has already signalled that it expects NFTs (and ‘play to earn’) to be part of its future as well. The overall trendline from second tier, but well-established,
developers such as Square Enix, Sega, and Bandai Namco, is more explicit: token-based and decentralised games will be part of their portfolio in the future.
This in turn will further develop the underlying technology ecosystem, and blockchain architecture, to support game-specific deployments.
That game support infrastructure is a crucial step for majors, who will require test and trial partners before building an in-house solution. An example of a
maturing game-specific ecosystem is the Oasis Protocol. Oasis has been developed as a new game-centric blockchain following investments from Andreessen
Horowitz (A16Z) and Accel. The development of app-specific chains like Oasis, known as ‘Supernets’, promises to add variety to available blockchains for
games, as well as specifically addressing game requirements such as privacy and low fees. Additionally, companies such as Square Enix have signed on as ‘node
operators’, hosting indexing capable carbon copies of the blockchain to add speed to chain-specific transactions. Oasis provides additional competition in a still
relatively concentrated sector, against high-profile companies such as Polygon, a games industry-focused Blockchain solutions provider.
Currently, Web3 gaming infrastructure is set to follow a similar trajectory to that of the live service games ecosystem circa 2010s, where smaller specialist
service providers were eventually acquired by large-scale cloud services such as Amazon AWS, Google, and Microsoft’s Azure. Companies such as Playfab
(acquired by Azure) and Gamesparks (acquired by AWS) denoted the importance of the transition to live service gaming and filled significant gaps in larger
companies’ portfolios while providing assurance to major developers of their long-term viability. Web3 is currently underrepresented at all the major service
providers—we expect acquisitions to be the only credible strategy for growth, and to attract major developer support.
Testing and trials will be closely monitored in the coming year. While Ubisoft has had poorly received experiments in the category (Ghost Recon Breakpoint),
they maintain an appetite for investment—an original title is a significant development, not a bolt-on experiment. Meanwhile EA, in a similar vein to Epic
Games, has partnered with Nike Swoosh to enable Nike digital items in game, although not currently as tokens. The connection between brands is important—
Nike’s commitment to NFTs as part of the Swoosh platform will have an important signalling effect across EA.
When will Web3 gaming achieve breakthrough with major developers? Overall, we anticipate that systemic headwinds at major developer and platform holder
level will continue into 2024, that will slow or halt large-scale development of Web3 initiatives. These systemic issues relate to the overall crypto winter (page
18), including distancing from earlier supportive views on play to earn, but also platform resistance, particularly from console manufacturers Sony, Microsoft
and Nintendo. The ongoing Microsoft/Activision acquisition effectively rules out Activision from any initiatives until resolution, in addition to the sector-
chilling effect against large-scale developer consolidation.
17
Major Game Developers: more infrastructure partners required for traction

The US Security and Exchange Commission (SEC) investigations into Coinbase and Binance, along with the collapse of FTX and Terra-Luna, have plunged the
cryptocurrency ecosystem into not only a ‘crypto winter’, but a far more existential crisis that can be expected to last for years. With investigations expected to
continue and likely increase in scope, along with a regulator backlash against the entire ecosystem, including a pull-back from central bank digital currencies
(CBDC), we anticipate cryptocurrency to be a very high-risk area for the foreseeable future. More importantly, with US Federal authorities at the forefront of the
move to clean up crypto on multiple levels related to consumer safety, including money laundering and racketeering, the impacts will be global in reach.
The reputation of the entire Web3 game space has been tarred by elements of the cryptocurrency industry using games as camouflage for crypto mining, asset
speculation, gambling, and at the extreme end, tax evasion, money laundering and theft. Neither is this an isolated case—the estimated crypto value losses in
2022 exceeded $1.8 trillion, and affected millions of ‘retail’ investors with small holdings of less than $1k, particularly in emerging economies. This has resulted
in many gamers, including core gamers, becoming not only wary of the entire concept, but actively agitating against games that feature Web3 elements, to the
detriment of good faith actors. This in turn then downgrades investment attractiveness for all developers attempting to build games featuring these components.
This correction should be perceived as having come at the right time for more nefarious elements of the Web3 gaming ecosystem, and offers the opportunity to
reset the narrative on Web3 overall. Developers will need to invest across the marketing mix to overcome the shadow player resistance and build a positive
narrative on the merits of Web3 gaming.
There are currently four key focus areas to weather the storm and build trusted gameplay environments:
1. Complete separation of gameplay from cryptocurrency activity: whether crypto mining and ‘play to earn’, crypto-centric ‘pay to play’, compulsory crypto
deposits, or other elements that tie game progression to cryptocurrencies. This whole area is at risk of regulator intervention, including the use of stablecoins
2. Focus on tokens as being inherently important to great game play, and having utility, as opposed to unlocking trading environments and asset speculation. In
a similar vein to cryptocurrencies, NFT trading systems masquerading as games are anathema to core gamers and at heightened risk of regulator intervention
3. Better payment systems and fiat on-ramps: already a focus for payment providers, who are currently establishing game specific outreach programs.
Conversely, developers and publishers should also proactively outline their game and Web3 model to payment solution providers, to build better in-game
integration tools, and reduce customer friction and payment failure. It remains a missed opportunity for many developers to evangelise the model
4. Wallet management and safety: complementary to payment system integration, game developers need to undertake additional messaging work with wallet
providers, to recognise that wallet actions and protections are an equally important and co-equal pillar to payment itself
18
The Crypto Winter: Web3 games can weather the storm by distancing from currency involvement

Web3 Tech Stack
•Efficient blockchain with zero gas fees
•Fiat on-ramps and preferred payment
partners in place
•Web3 UX and wallet management focused
•Privacy and security centric
Economic Model
•Simple NFT assets
•Creator opportunities through ‘crafting’ and
‘easy export’ token model
•Game-centric marketplace, designed to be
part of (and possibly exclusive to) the game
experience
Early adopter style marketing
•Pre-release NFT strategy designed to excite and
raise capital (if required) through exclusives
•Limited ‘export-only’ model at early stage: NFTs
can be used to unlock limited scenarios
•Consider phased implementation of NFT model,
with complexity added over time
19
How new games can embrace Web3: three fundamentals beyond great gameplay
Great game play should be at the
core of any game experience.
With Web3 adding a complex
stack of technology options, as
well as sophistication to the
economic model of a game, new
franchises should focus on three
fundamentals at the start of their
journey:
1. a precise tech stack,
2. a simplified economic model,
3. marketing designed to
educate as well as excite
Web3 presents a clear progression
to more complex and dynamic
metaverse experiences from
existing closed platform walled
gardens. By layering an asset-
based model onto great gameplay,
game makers can enfranchise
players to help build the game
experience themselves beyond the
tight rails of today’s proto-
metaverses, and push toward
perpetual, life-long, metaverse
experiences

20
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Web3 Games - Freedom from the walled garden (September 2023)

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