Web3 Gaming Studios Grapple With Tokenomics and DAOs at 3XP Conference

Blockchain gaming companies converged on the Pasadena Convention Center for the 3XP Web3 Gaming Expo, where hopeful independents and major players all sought to crack the secret to the perfect crypto-infused game.

The gaming industry is estimated to be a $396B market in 2023, and is projected to grow to $533B by 2027, according to Statista. In a bid to earn a slice of the pie, web3 gaming studios are making an effort to explore just how to balance the necessary components of building an integrated blockchain stack alongside a compelling gameplay experience.

A Kingdom For DeFi

Some web3 projects, rather than invent an entirely new universe, are making a game out of crypto itself.

Behind the curtain of decentralized finance (DeFi) are a number of technical bits and pieces that are often complex to newcomers. The Kingdom Studios project DeFi Kingdoms began with the gamification of a DeFi exchange (DEX) into a 16 bit interface.

DeFi Kingdoms seeks to make the technical side of the DEX ecosystem more approachable to players by representing its elements with those from classic games.

“So what we did is we made the DEX a garden. And instead of getting LP tokens, you get seeds. And you plant the seed in the garden, the garden bears fruit makes a lot more sense to people that just want to gamify it,” the President of Kingdom Studios, who goes by Dreamer, told The Defiant.

Players can log into the Crystalvale server which resides on an Avalanche subnet, or choose the Serendale server on the Klaytn blockchain.

“Each blockchain has different types of resources,” said Dreamer.

To advance in the game players must collect various resources from both blockchain ecosystems. Connecting the networks is Synapse Bridge, which partnered with DeFi Kingdoms to manage the backend.

On the game’s more established CrystalVale server, roughly 1.5M–2M transactions are processed each day, according to Dreamer.

Tokenomics Design

Former Axie Director of Esports, now Head of Growth at Laguna Games’ Crypto Unicorns Andrew Campbell, said that the proper balance for web3 gaming studios involves not only creating a compelling experience for players, but fine tuning the adjoining tokenomics properly.

“The tokenomics side has to make sense in some way, it can’t just be infinitely inflationary as we saw with Axie, and I think that marriage is the real sweet spot,” said Campbell.

For its mystical beast husbandry game, Crypto Unicorns, took lessons from past projects like Crypto Kitties, and Axie Infinity, to drive the game’s user base via a perpetual incentive to selectively breed rare beasts.

Campbell explained that the game tries to focus on a positive player experience as opposed to introducing changes via seasonal resets that may diminish hardly sought after traits. “We don’t want it to feel bad to breed. Sometimes you won’t get the dice roll that you wanted, but that’s different from feeling like, hey, I cracked the code and bred this really great unicorn and then you guys changed the rules of the game and nerf its ability. That’s a bad feeling.”

Gamers as DAO Members

A key function of Crypto Unicorns’ operations is the integration of a decentralized autonomous organization (DAO) made up of token bearing players that helps govern the project. Recently, members of the DAO voted to increase breeding fees, in what Campbell called the sign of a humble player base interested in the project’s long term sustainability.

In an ecosystem built on tokenomic cycles, Campbell said it’s important to consider the related loops carefully, and consider where the buy and sell pressure originate.

“Explosive Growth”

Ed Chang, Head of Gaming at AVA Labs said Avalanche is seeing rapid expansion in the industry, and it’s only a matter of time until AAA gaming studios come sniffing around.

At the expo, Avalanche announced the launch of Arcad3, a program built to onboard Web2 gaming companies and help them bring blockchain integrated games to market. Initial participating projects include Republic Crypto, Shrapnel, Gunz Chain by Gunzilla, Dynasty Studios, DeFi Kingdoms, Blitz by TSM, 2dao3, and Avalaunch.

“Web3 gaming on Avalanche continues to see explosive growth, with publishers developing ambitious projects across the globe,” said Chang. “We expect AAA titles exploring Web3 to see the novel value propositions of Avalanche and completely alter expectations of what a blockchain game can be and provide experiences that bring a new generation into Web3.

A new wave of AAA web3 titles, including action shooters such as Shrapnel and Gunzilla, which Chang said could bring millions of users on-chain, and that traditional web2 gaming studios are also bringing core IP into the blockchain ecosystem.

For a growing blockchain gaming industry, the challenges ahead remain the same for those seeking to onboard the masses into the rest of crypto according to Chang.

He explained that for web3 studios to tap into a potential 3B user web2 gaming pool, user interfaces must be streamlined, and the non-crypto gamer experience must match the ease-of-use that featured in web2. The focus must be on user acquisition, not wallets, he said.