Introduction to Web3 Gaming

TL;DR: Web3 gaming is a decentralized gaming model where players can own in-game assets, earn cryptocurrency, and participate in player-driven economies. Unlike traditional gaming, Web3 games use blockchain to offer true ownership, play-to-earn opportunities, and increasing interoperability across platforms.

What is Web3 Gaming

Web3 gaming represents the next evolution of the gaming industry, integrating blockchain technology to give players true ownership of in-game assets, the ability to earn cryptocurrency, and the freedom to trade or sell items across different platforms. This new gaming model is decentralized, meaning that the control and economy of the game are not held by a single company but are distributed across a blockchain network.

Key Elements of Web3 Gaming

• Player Ownership: In-game items, characters, and currencies can be represented as NFTs or tokens on a blockchain, giving players full ownership of these digital assets.
• Play-to-Earn (P2E): Players can earn cryptocurrency and NFTs through gameplay, which can often be sold or traded on external marketplaces.
• Decentralized Economies: Some Web3 games are built on decentralized economies, meaning the in-game economy is often governed by the players through decentralized autonomous organizations (DAOs) or through the use of governance tokens.
• Interoperability: Whilst still in its early stages, Web3 games will allow for assets to be used across multiple platforms or games, creating a connected metaverse where items have value beyond a single game.

Unique Features of Web3 Gaming

True Ownership of In-Game Assets

In traditional games, in-game items, skins, and currencies are owned by the game developers. Players can purchase or unlock items, but they are not usually able to sell, trade, or transfer them outside of the game. In contrast, Web3 gaming gives players true ownership of their in-game assets by representing them as NFTs or tokens on a blockchain. This allows players to trade, sell, or transfer these assets freely in secondary markets.

Play-to-Earn (P2E) Mechanics

One of the key innovations in Web3 gaming is the Play-to-Earn model, which allows players to earn real-world value through in-game activities. Players can be rewarded with cryptocurrency or NFTs for completing tasks, winning battles, or simply participating in the game. These rewards can then be traded on exchanges for other cryptocurrencies or fiat money.

Decentralized Economies

Web3 gaming introduces decentralized economies that can be largely governed by the community. Players can hold governance tokens, giving them the power to vote on game updates, economic policies, or new features. This decentralized structure will create a player-driven ecosystem, where users have more control over the direction of the game and its economy.

Interoperability and the Metaverse

In the near future a scenario is envisaged whereby Web3 games are part of a broader metaverse, where in-game assets, characters, or even virtual real estate can be used across multiple games or platforms. This interoperability will give digital assets a value that extends beyond a single game, enabling players to transport items across a connected metaverse.

Transparency and Security

Blockchain technology provides transparency and security for Web3 gaming, as all transactions are recorded on a public ledger. This ensures that in-game items and currencies cannot be duplicated or manipulated, providing a fair and secure environment for players.

Conclusion

Web3 gaming represents a significant shift in the gaming industry, offering players true ownership of in-game assets, the ability to earn real-world value, and the freedom to participate in decentralized economies. Unlike traditional gaming, where developers control the game’s assets and economy, Web3 games place power in the hands of the players through blockchain technology, NFTs, and governance tokens.

As Web3 continues to evolve, players will experience greater control, more financial opportunities, and a broader, interconnected gaming ecosystem.

TL;DR: Web3 gaming is evolving fast with trends like interoperability, tokenomics innovations, and decentralized governance. Expect better player ownership, new monetization models, and the rise of play-to-earn (P2E) economies.

Interoperability Across Games

One of the most exciting trends in Web3 gaming is interoperability, where players can transfer assets, such as NFTs, between different games or platforms.

While technically possible, widespread cross-game asset compatibility remains more theoretical than practical in the present day. Most Web3 games still operate in isolated ecosystems, with limited real-world examples of successful cross-game asset usage.

Interoperability, once fully developed, will enable shared universes where in-game items, characters, and even currencies are usable across multiple games. This will empower players to have more control and flexibility over their assets, as well as the opportunity to use the same items in different gaming environments.

Key Features of interoperability

• Cross-game Assets: Players will be able to use the same character, skin, or item across multiple games within the same blockchain ecosystem.
• Increased Utility: NFTs and tokens increase in value because they can be used in different game ecosystems.
• Seamless Experiences: Players can jump from one game to another without losing their investments in characters or items.

New Monetization Models

As blockchain continues to develop within the gaming industry, new monetization models are emerging, with the potential to shift the financial landscape of gaming entirely. Unlike traditional free-to-play (F2P) or pay-to-play models, Web3 gaming introduces monetization strategies like play-to-earn (P2E), own-and-earn, and staking.

Play-to-Earn (P2E)

The P2E model allows players to earn rewards—whether as cryptocurrency or NFTs—by engaging in gameplay. This model has opened new revenue streams for players, particularly in regions where access to traditional income is limited.

Key Benefits:

• Direct Earning Potential: Players earn crypto tokens and / or NFT's for completing in-game tasks, winning battles, or staking assets.
• Asset Liquidity: Players can sell or trade their earned NFTs and tokens on external marketplaces.

Own-and-Earn

In this model, players who own in-game assets such as land, characters, or items can monetize their ownership by selling, renting, or upgrading assets. This model gives long-term value to ownership as players gain more than just cosmetic or gameplay advantages from owning assets.

Key Benefits:

• Asset Value Appreciation: Items, characters, or land can increase (or decrease) in value based on rarity, customization, or demand.
• Ownership Economy: Players can create, sell, and trade digital goods in a player-driven economy.

Staking and Yield Farming

Some Web3 games integrate DeFi elements such as staking or yield farming, allowing players to lock up their tokens in-game for passive rewards. This deepens the financial mechanics of gaming, giving players a way to generate returns on their tokens while contributing to the game's economy.

Tokenomics Innovations

Tokenomics, or the economic structure behind in-game tokens and assets, is constantly evolving in Web3 gaming. Developers are now experimenting with dual-token models, deflationary mechanics, and reward pools to ensure sustainable in-game economies that benefit both players and developers.

Dual-token Systems

In a dual-token system, a game uses two types of tokens: one for in-game currency and another for governance or staking. This model helps maintain economic stability by preventing inflation of the in-game token while rewarding players with governance tokens that have long-term value.

Key Features:

• Governance Tokens: Players receive tokens that allow them to vote on game changes or development directions, fostering a decentralized governance model.
• In-game Currency: The secondary token is used for in-game purchases, keeping the economy separate from governance functions.

Deflationary Mechanics

Games are increasingly implementing deflationary token models, where tokens are periodically 'burned' (permanently removed from circulation) as one method to manage token supply. This reduction in supply can potentially help counteract inflationary pressures, though the token's actual value remains subject to various market forces. It should be noted that in the context of token economics, "inflationary pressures" typically refers specifically to the increase in token supply, not price increases. This is different from how we commonly use "inflation" in traditional economics, where we're usually talking about rising prices of goods and services.

So when a game implements token burning, they're primarily managing token supply inflation (the total number of tokens in circulation), not price inflation.

Key Features:

• Token Burns: A percentage of tokens used for purchases or transactions within the game is burned, reducing the total supply.
• Scarcity Creation: Players may seek out tokens as they become scarcer, increasing demand and value.

Reward Pools and Liquidity Mining

In some Game-Fi ecosystems, players can contribute liquidity to in-game reward pools, allowing them to mine rewards or earn interest on staked tokens. This further blurs the line between gaming and finance, as players invest their in-game earnings to generate additional returns.

Decentralized Governance

With the rise of decentralized autonomous organizations (DAOs), more Web3 games are moving toward decentralized governance. In this model, players who hold governance tokens can influence game development, rules, and even tokenomics by casting votes.

Key Features:

• Player Voting: Players use governance tokens to vote on game updates, rule changes, and new features.
• Community-driven Development: Game developers listen to their communities and make decisions based on the collective input of players, creating a more inclusive and participatory ecosystem.

Conclusion

The future of Web3 gaming will be driven by trends like interoperability, new monetization models, and innovative tokenomics structures. As more games adopt P2E, own-and-earn, and staking mechanisms, the gaming experience will become increasingly player-centric, giving gamers more control over their assets and earnings. The introduction of decentralized governance will also empower players to shape the future of their favorite games.

These developments are set to redefine the relationship between players, developers, and game economies, creating a more dynamic and financially rewarding gaming ecosystem.

TL;DR: Blockchain game engines and development tools are the foundation for building decentralized games, enabling NFT integration, token economies, and interoperability across virtual worlds. These tools empower developers to bring Web3 gaming to life.

Blockchain Game Engines

Blockchain game engines provide the technical infrastructure that allows developers to build games on blockchain technology. These engines often come with SDKs (Software Development Kits), APIs, and pre-built tools that make it easier to incorporate decentralized elements like NFTs, play-to-earn (P2E) mechanics, and token economies into games.

Enjin

Enjin is a popular blockchain game engine that empowers developers to create, manage, and integrate NFTs and other blockchain-based assets into their games. It supports the creation of NFTs on Ethereum and Enjin blockchains and offers tools for managing in-game assets with real-world value.

Key Features:

• Minting NFTs: Developers can create in-game assets as NFTs with real-world value.
• Interoperability: Players can use the same NFTs across multiple games built on the Enjin platform.
• Enjin Coin (ENJ): Enjin uses its native token to back NFTs, providing liquidity to digital assets.

Interoperability has a long way to go before it could be described as universal. If you'd like to find out more about Enjin's NFT Interoperability status read this article on their website.

Unity with Blockchain SDKs

Unity is one of the most popular game development engines, and several blockchain SDKs have been developed specifically for it. These SDKs allow developers to integrate blockchain elements such as NFTs, smart contracts, and token management directly into Unity games.

Key Features:

• Enjin Unity SDK: Adds blockchain asset management to Unity games, enabling the creation and trading of NFTs.
• Solana Unity SDK: Allows developers to integrate Solana’s fast and scalable blockchain into Unity games, supporting NFT creation and DeFi mechanics.
• Algorand Unity SDK: Helps developers integrate Algorand blockchain features, including NFTs and token management.

Unreal Engine with Blockchain Integrations

Unreal Engine is known for its high-end graphics and is frequently used in AAA games. Blockchain tools and SDKs enable developers to integrate decentralized features like NFT marketplaces, token economies, and player-owned assets into Unreal Engine games.

Key Features:

• NFT Marketplaces: Developers can create NFT marketplaces where players can trade their in-game assets.
• Scalability: Supports integration with blockchain networks like Immutable X and Polygon, which offer scalable and efficient transaction handling.

While these are possible features, they're not native to Unreal Engine itself but rather enabled through additional blockchain SDKs and plugins that developers need to integrate separately.

Blockchain Development Tools

In addition to game engines, several blockchain development tools simplify the process of building Web3 games. These tools provide pre-built functionality for managing tokens, NFTs, smart contracts, and decentralized infrastructure.

Moralis

Moralis is a development platform designed to simplify blockchain integration for Web3 games. It offers tools for creating dApps, managing NFTs, and integrating wallet functionality with minimal effort.Key Features:

• Cross-chain Support: Supports blockchains like Ethereum, Polygon, and BNB Smart Chain.
• NFT Management: Simplifies the process of minting and managing NFTs across multiple blockchains.
• Wallet Authentication: Provides easy wallet integration for in-game transactions and NFT ownership.

Moralis also provides server-side infrastructure and real-time blockchain data indexing, which many developers find valuable for building Web3 applications. They also offer SDKs in multiple programming languages to make integration easier.

ChainSafe Gaming SDK

The ChainSafe Gaming SDK is an open-source framework that helps developers integrate blockchain features like token transfers, NFT creation, and smart contracts into their games. It supports multiple blockchains, including Ethereum, BNB Smart Chain, and Polygon.

Key Features:

• Multi-chain Support: Developers can build games that operate on different blockchains.
• Wallet Management: Built-in tools for managing wallets and player assets.
• Token and NFT Transfers: Easily add functionality to trade or transfer tokens and NFTs within games.

ChainSafe Gaming SDK is particularly well-known for its Unity integration, making it especially popular among Unity game developers. It provides native Unity components and a straightforward API that helps bridge the gap between traditional game development and blockchain technology.

Alchemy

Alchemy provides a set of developer tools and APIs to help build decentralized applications (dApps) on Ethereum and other blockchains. It is often used by developers to integrate blockchain functionality, such as token and NFT management, into games.

Key Features:

• Multi-chain Support: Alchemy supports multiple blockchains, including Ethereum, Polygon, and Flow.
• Blockchain Data: Offers real-time blockchain data, allowing developers to integrate dynamic in-game events based on real-time activity.
• NFT and Token APIs: Provides easy access to APIs for creating, managing, and transferring NFTs and tokens.

Infura

Infura provides infrastructure for connecting to Ethereum and IPFS (InterPlanetary File System). It allows developers to interact with the Ethereum network without needing to run their own nodes, making it ideal for Web3 game development.

Key Features:

• Reliable Ethereum Access: Provides developers with scalable and secure access to the Ethereum blockchain.
• IPFS Integration: Developers can use Infura to store and retrieve game assets via IPFS, a decentralized file storage network.
• Smart Contract Integration: Easily connect smart contracts to Ethereum and interact with them in real-time.

NFT Minting and Marketplace Tools

Minting and trading NFTs are core aspects of Web3 gaming. Several tools allow developers to easily integrate NFT creation and marketplace features into their games.

OpenSea API

OpenSea is one of the largest NFT marketplaces, and its API allows developers to integrate NFT trading directly into their games. Players can mint, buy, sell, and trade NFTs from within the game using OpenSea’s marketplace infrastructure.

Key Features:

• Minting NFTs: Developers can allow players to mint new NFTs for in-game items or characters.
• Marketplace Integration: Connect in-game assets to the OpenSea marketplace for secondary sales and trading.
• Cross-platform Trading: Players can trade NFTs from multiple games or dApps in one place.

Mintable SDK

Mintable is another NFT marketplace that provides tools for integrating NFT minting and trading directly into Web3 games. Developers can use its SDK to create NFTs in-game and list them for sale on the Mintable platform.

Key Features:

• NFT Minting: Mint NFTs for in-game assets, like items, characters, and rewards.
• Marketplace Integration: Players can trade NFTs on the Mintable marketplace, creating additional revenue streams.
• User-friendly Tools: Provides a simple interface for players to buy and sell NFTs directly from within the game.

Conclusion

Blockchain game engines and development tools are reshaping the gaming landscape by enabling the integration of decentralized economies, NFT ownership, and interoperability into games. With tools like Enjin, Unity SDKs, Unreal Engine, and platforms like Moralis and Alchemy, developers can create immersive Web3 gaming experiences that give players true ownership of their assets and the ability to profit from in-game activities.

These tools are not only simplifying the development process but are also expanding the possibilities of what blockchain gaming can achieve.

TL;DR: Though Web3 games promise decentralization and player ownership, most still rely on Web2 infrastructure for actual gameplay. Blockchain is primarily used for transactions like NFT ownership, token rewards, and marketplace interactions, while the core gaming experience often happens on centralized servers.

The Hybrid Nature of Web3 Game Infrastructure

Web3 games are heralded for decentralizing the gaming experience, giving players ownership of assets through NFTs and allowing them to earn real-world value via play-to-earn (P2E) mechanics. However, the reality is that many Web3 games currently operate as hybrid models, blending Web2 and Web3 infrastructure.

Web2 for Gameplay

The bulk of a Web3 game’s gameplay mechanics, such as character movement, combat systems, rendering, and world-building, still happens on centralized Web2 servers. This infrastructure allows for:

• Fast and Responsive Gameplay: Centralized servers provide low-latency performance, which is essential for genres like first-person shooters (FPS) or racing games where split-second reactions are critical.
• Scalability: Web2 infrastructure allows games to scale to thousands or millions of players more effectively than current blockchain technology.
• Data Storage: Game assets that aren’t essential for decentralized ownership (like textures, sounds, and environments) are often stored on traditional databases or cloud services for easy access.

Web3 for Transactions

While the gameplay runs on Web2 infrastructure, blockchain technology is typically reserved for handling transactions and managing player ownership. Web3 elements come into play when:

• Ownership Transfers: NFTs representing characters, items, or land are minted, bought, sold, or traded on blockchain networks.
• Token Rewards: Players earn in-game currency (tokens) or rewards that can be exchanged for real-world value.
• Smart Contracts: Interactions between players—like trades, breeding creatures, or engaging in decentralized marketplaces—are facilitated through smart contracts on blockchains such as Ethereum, Polygon, or BNB Smart Chain.

Why Web2 Infrastructure is Still Critical

Although blockchain technology provides the backbone for asset ownership and transactional security, Web2 infrastructure remains crucial for the following reasons:

Performance and Speed

Most public layer 1 blockchains are not optimized for high-speed, high-volume transactions, which would be needed for real-time gameplay actions. Popular blockchains like Ethereum and BNB Smart Chain have relatively low transaction throughput, leading to network congestion, delays, and high gas fees during peak times. Centralized Web2 servers solve this by handling the real-time components of games, such as processing player inputs, handling world states, and managing interactions between players. There are purpose built layer 2 solutions that aim to solve this issue.

Cost Efficiency

Running an entire game on-chain would be expensive and inefficient. Every in-game action would require a blockchain transaction, which would incur gas fees. For many players, especially those in Free-to-Play models, paying fees for each action (like moving characters or using abilities) would be a major barrier to entry. Keeping these actions off-chain reduces costs for both developers and players.

Data Storage

Storing large amounts of data on-chain is not practical with current blockchain technology. Elements like high-quality graphics, complex environments, and detailed character models require vast storage capacity that decentralized networks currently struggle to handle. Instead, these assets are often stored in traditional cloud storage systems like AWS or Google Cloud, with only key ownership data stored on the blockchain.

How Blockchain is Used in Web3 Games

While much of the gameplay remains centralized, blockchain’s role in Web3 gaming is crucial for enabling player ownership and monetization. Key blockchain functions in Web3 games include:

1. NFT Ownership and Trading

In Web3 games, NFTs represent in-game assets such as characters, weapons, land, or skins. These NFTs are stored on the blockchain, allowing players to:

• Trade or sell assets on secondary markets (like OpenSea or Rarible).
• Prove ownership of rare or custom in-game items.
• Take their assets between games or platforms, enhancing interoperability.

2. Tokenized Economies

Game tokens serve as in-game currency, rewarding players for achievements or participation in the game’s ecosystem. These tokens, stored on-chain, allow players to:

• Earn cryptocurrency through Play-to-Earn models.
• Stake or use tokens in DeFi systems for passive income.
• Use tokens to purchase in-game items, upgrades, or NFTs.

3. Smart Contracts for Trustless Transactions

Smart contracts automate transactions without the need for intermediaries. In Web3 games, smart contracts facilitate:

• NFT minting when players create or unlock new in-game assets.
• Secure trades between players, ensuring items and currency are exchanged fairly.
• Revenue distribution from marketplace fees or staking rewards.

Example of Hybrid Web3 Game Infrastructure

Pixels

Pixels is a Web3 farming game that uses Web2 servers to manage the farming mechanics and real-time gameplay interactions. However, the game’s assets, like land, crops, and tools, are represented as NFTs on the Ethereum blockchain. Transactions, such as purchasing new plots of land or selling harvested crops, are recorded on-chain, allowing players to own and trade assets securely.

Off The Grid

Off The Grid, a third-person shooter, uses Web2 infrastructure to manage real-time combat and character actions, which need to be fast and seamless. However, player-owned weapons, armor, and gear are all stored as NFTs on the Avalanche Gunz blockchain. The game integrates blockchain for marketplace interactions and custom item ownership, but keeps the core gameplay centralized to maintain a smooth player experience.

The Future of Web3 Game Infrastructure

As blockchain technology evolves, more game elements could shift from centralized to decentralized systems. Projects like Immutable X and Polygon aim to reduce the limitations of blockchain by offering scalable Layer 2 solutions that allow for faster, cheaper transactions without compromising decentralization.

Possible Future Developments:

• Decentralized Data Storage: Solutions like IPFS and Arweave can enable games to store and serve assets like 3D models, textures, and environments in a decentralized manner.
• On-Chain Gameplay: As blockchain technology improves, it may become more feasible to move real-time gameplay elements on-chain, reducing reliance on Web2 infrastructure.
• Enhanced Interoperability: With Web3’s potential for interconnected worlds, players may one day transfer their characters and assets seamlessly across multiple games, all powered by a common blockchain infrastructure.

Conclusion

Web3 games may be powered by blockchain technology, but many still rely on Web2 infrastructure to deliver high-performance gameplay. While decentralized elements like NFT ownership and tokenized economies are transforming player experiences, the core gameplay is often managed on centralized servers to ensure speed, scalability, and cost efficiency. As blockchain technology evolves, the balance between Web2 and Web3 infrastructure will continue to shift, making way for more decentralized and seamless gaming experiences.