Legends

Web3 Game

Axie Infinity

Big Time

<p>Will the adoption of cryptocurrencies pass through the video game sector? Indeed, it is quite likely that this sector will be a vector of adoption for cryptocurrencies. It is therefore impossible to ignore games. More than just entertainment, games are now an integral part of our lives and, as virtuality takes up more and more space in our daily routines, this trend is not about to stop. The video game industry has come a long way since its humble beginnings in the 1970s, with Atari releasing the first game, Pong. By mid-2020, Fortnite had totaled 3.8 billion days of gameplay, which equates to 10.4 million years. Players spent more time playing Fortnite than there have ever been humans.</p>
<p>The video game industry is thriving, with 3.38 billion gamers worldwide and expected revenue of $184 billion in 2023. Generations Z and Alpha, who increasingly see digital and physical experiences as one, spend a considerable amount of time gaming, with an average of 15 hours per week.</p>
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<p>According to Pitchbook, $3.475 billion of venture capital was invested in Web3 games between the beginning of 2019 and the end of June 2023. So, how do Web3 and cryptos intend to disrupt one of the largest industries in the world, and why should an investor care about it?</p>
<h2 id="h-crypto-gamefi-play-to-own-gaming-s-chapter-4">Crypto GameFi &amp; Play To Own – Gaming’s Chapter 4</h2>
<p><strong>Timeline of the video game industry transformation: </strong></p>
<figure class="wp-block-table">
 <table>
  <tbody>
   <tr>
    <td><strong>Period</strong></td>
    <td><strong>Era</strong></td>
    <td><strong>Business Model</strong></td>
   </tr>
   <tr>
    <td>1978 – 1985</td>
    <td>The Arcade era</td>
    <td>Chapter 1 – Visit &amp; Pay to Play</td>
   </tr>
   <tr>
    <td>1978 – 2000</td>
    <td>The era of gaming consoles</td>
    <td>Chapter 2 – Own &amp; Pay to Play</td>
   </tr>
   <tr>
    <td>2000 – 2010</td>
    <td>The computer and the beginnings of the online era</td>
    <td>Chapter 2.5 – Pay to Play &amp; Free To Play</td>
   </tr>
   <tr>
    <td>2000 – 2021</td>
    <td>The era of mobile and Cloud</td>
    <td>Chapter 3 – Free To Play</td>
   </tr>
   <tr>
    <td>2021 – today</td>
    <td>The era of Web3.0 GameFi</td>
    <td>Chapter 4 – Play to Own</td>
   </tr>
  </tbody>
 </table>
</figure>
<p>In the early days of gaming, player engagement was directly linked to the revenue generated by an arcade unit. The birth of the gaming console changed the economy of game development, shifting away from more modest revenue streams to larger initial purchases. Major studios and game publishers fought to be part of the select circle that deserved the 60 dollars spent by a consumer on a single game.</p>
<p>The advent of the internet and the rise of mobile phones have evolved the business model of games towards small permanent transactions. Game developers deliberately design their game economies to facilitate player spending throughout their customer lifetime.</p>
<p>Games experience paradigm shifts every 15 or 20 years, and the rise of à la carte gaming is similar to that of free-to-play gaming 15 years ago. It is likely that within the next 10 years, most games will incorporate Web3 technology, cryptocurrencies, blockchain, and ownership layers, which will allow Web3 to become a dominant business model in the gaming sphere.</p>
<h2 id="what-are-business-models">What are business models?</h2>
<p>Understanding business models is key to understanding the status quo and opportunities, and thus to making assumptions about the future direction of a sector. In our view, the current business model of games presents serious ownership issues. Therefore, it is simply inevitable that players will eventually demand ownership of virtual goods. Web3.0 is the response to this change.</p>
<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/9nbk4N2F04n7NQEekEr7AGdqgTD1e8iD9RMX_WF_WpOTer5Ugh-Uy6StqbCbqbwk3PwNudB8QaIOjH0sM7JqbDSXEvfNOhOtH--oych54DSVqzIvY5nN1ErrCjyLYT2MQq8eOyKXd1jxA2X6Ffo-TeI" alt="">
</figure>
<h2 id="is-cryptocurrency-adoption-mainly-driven-by-speculation-and-will-gamefi-change-the-game">Is cryptocurrency adoption mainly driven by speculation, and will GameFi change the game?</h2>
<p>It’s reasonable to assume that the vast majority of the population thinks about money within the first ten minutes of waking up each morning. Earning enough money to live is a common goal and an obsession in our daily lives. Players primarily play to escape their daily problems; they seek to have fun, be entertained, and be distracted.</p>
<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/7ifhKb-nq_pJ9WlcqzmBYUpiSmnP6_QP7BDwPSbrAwJuw-ABzMe-ohuAt24eBZHTd0dsF5_Rn7ukCk1YniR0zIzCqSEIcc0qQkJt5T8LynNrsq5c5DIBxMntExd8gxU7xi5leLRErArl5guXQBqPg-I" alt="The 4 types of players">
</figure>
<p>The first wave of game adoption failed in this regard, as players’ main motivation for engaging with games like Axie Infinity or other Play-to-Earn titles was to make money rather than have fun.</p>
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<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/kE_KOPEaLvTsC511sqWNcCLlvBGfRPeS2noxiOXVOeb2wP65Q79qeKYt0Vkb_zlkm69pczXtQubQVOr_m8S6ZttGgbpbizxruQT47CJ2Txzbx8W16wJ7M6rZ9q_ANimLe05Xy7kwZ0kc4QCv1APyT_w" alt="video game sales volume and AXS token price">
</figure>
<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/gXuoeUVHX-CwqG34NSCuEijQ176NEFqpW242pVt9FUOGnaUNCWWs_EELR8SHLUXrYrL55bx-C-CkrMW0vnToiSLXKZd5C9uJ372whBJx1ZR7o38-IvNxmCcnlMznFje_Ccr5lfwP30z5iRNvRLuKrjU" alt="AXS Infinity Daily Active Users">
 <figcaption class="wp-element-caption"><a href="https://www.deconstructoroffun.com/blog/2022/6/17/axie-infinity-part-2-redemption-or-ruin" target="_blank" rel="noopener noreferrer nofollow">https://www.deconstructoroffun.com/blog/2022/6/17/axie-infinity-part-2-redemption-or-ruin</a>
 </figcaption>
</figure>
<p>The first generation of crypto GameFi projects from 2020/21 was designed for DeFi traders, not players, but that is changing. To illustrate this, the Epic Games store in the United States now offers 69 blockchain games.</p>
<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/VgZrnbjuZEn3lUQ8lnpZ1D4DsMCc0nXsbhiciCKXHDYI0UAGMdjycPCQpwCQz2QejzsOP3EsJgGO6AuOKepKzu0I4Lk9Gw1G1Hmsr2-e_Jn63k7nx3ctTEjNkMRksW6_xdOobPdjviEw6xOwLo6rR0w" alt="New vs. abandoned Web3 games by year">
</figure>
<h2 id="driving-forces-and-main-upcoming-crypto-web3-game-projects">Driving Forces and Main Upcoming Crypto &amp; Web3 Game Projects</h2>
<p>It’s important to understand that gaming is at the center of strategic development for most blockchains because there is a global consensus that gaming will be a driving force in the future adoption of cryptocurrencies. Therefore, the competitive environment at the infrastructure level is intense as the stakes are considerable. The blockchain ecosystem that manages to attract the next Fortnite or League of Legends will emerge as the big winner in terms of traffic and on-chain activity:</p>
<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/Jzsmgwkyis3rgzcjO86yGUTnYoN5GeOZwdfyMYWM_lKOz68w8Ffr59uDFV4P_tfXspGusHd9CLc3y-_PpGR4nlBe4it2mXBqTu6kXy_wv0RCo-LzF7lYJOcLT013ZDmGGrVwyEAoVlC26lS8MkjuwhI" alt="Blockchain and Crypto Gaming network">
</figure>
<p>As investors, it is thus important to monitor which blockchain and crypto is leading in terms of gaming adoption. Now that you understand this, an indirect way to benefit from the rise of GameFi is to invest in the right infrastructure. Nevertheless, in games as in movies, it is enough to make blockbusters to win; quantity matters less than quality.</p>
<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/owqt4ByVFFjviS7bGGBlRKhejwAVO6iuahAUi784ZR6c0oEsfXuRKHJEJqA8RSMtlts9eBxfEI8F_J8uZ0Htuo2X_q3zj1P-MccpNYv_DlpHR0SlYtihzNEQ5FyOzhpT1NZnNO3pO2vV02pI6DpO__A" alt="Web3 Games by blockchain and crypto ecosystem">
</figure>
<p>Are we ready to compete with Web2 games? This is the burning question on everyone’s lips right now. SwissBorg believes that we are getting closer and closer to this moment. There are encouraging signs like significant investments (Parallel’s $50M funding and Shrapnel’s $20M funding) or <a href="https://illuvium.io/news/illuvium-x-team-liquid" target="_blank" rel="noopener noreferrer nofollow">the recent partnership between ILV and Team Liquid</a>.</p>
<figure class="wp-block-image"><img decoding="async" src="https://lh7-us.googleusercontent.com/eTJOlkCPoA8zxKuVxRjpoRa-FguxNnOkmxZ4JPs1DRKWoPURop4RoW9rPsMd0ZIreR_6fKglyBOcFFg7W_i0LDnJ3X3jDkMWW3GFh0oLDGs_SuUIzTQBI_m3SPJR2-0MY4958keOn7QN2RWc4MwGAjE" alt="Web3, Crypto games by production quality level">
</figure>
<p>Still, as the above graph shows, triple A games are still few and far between. For this cycle, we will prioritize infrastructure projects and, specifically, gaming projects focused on digital identity with the aim of enhancing the experience of fans, players, and other video game enthusiasts by bringing a Web3 layer to their favorite Web2 games. We are convinced that XBorg will become a GameFi benchmark in 2024.</p>
<p>Our favorite picks at the dawn of 2024:</p>
<p><strong>Triple A game category</strong></p>
<ul>
 <li>Prime</li>
 <li>Shrapnel</li>
 <li>Big Time</li>
 <li>Illivium&nbsp;</li>
</ul>
<p><strong>Infrastructure Category</strong></p>
<ul>
 <li>XBorg</li>
 <li>IMX</li>
 <li>BEAM</li>
</ul>
<p>Thank you to the teams at <a href="https://swissborg.com/" target="_blank" rel="noopener noreferrer nofollow">Swissborg</a> for their collaboration in creating and writing this content.</p>
<h3 id="sources">Sources:</h3>
<p><a href="https://messari.io/report-pdf/7fbdbf30ec57b9a7fa0d4df8b4193b768597a88b.pdf" target="_blank" rel="noopener noreferrer nofollow">https://messari.io/report-pdf/7fbdbf30ec57b9a7fa0d4df8b4193b768597a88b.pdf</a></p>
<p><a href="https://www.galaxy.com/insights/research/history-of-gaming-and-web3-future/" target="_blank" rel="noopener noreferrer nofollow">https://www.galaxy.com/insights/research/history-of-gaming-and-web3-future/</a></p>
<p><a href="https://research.game7.io/state-of-web3-gaming-2023" target="_blank" rel="noopener noreferrer nofollow">https://research.game7.io/state-of-web3-gaming-2023</a></p>

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