What are Web3 games and how do they work?

by Arthur · February 28, 2023

Table of Contents

What are Web3 games?

Web3-based gaming, also known as blockchain gaming, refers to games that use distributed ledger technology to offer greater transparency, security, democratization, and user control over in-game assets.

Web3 games are based on the decentralized, peer-to-peer architecture of blockchains, and include cryptocurrencies and non-fungible tokens (NFTs). Blockchain enables players to own and trade in-game items – such as NFTs and other digital assets – and transfer them without third-party interference. The assets are managed and traded on decentralized marketplaces using smart contracts.

Decentralization brings many unique benefits to the gaming industry and players. Alongside the increased transparency and security a blockchain provides, decentralized gaming gave rise to the play-to-earn (P2E) gaming model, where players earn cryptocurrency to play and level up in games.

Web3 games contribute to the financial strength of the gaming industry through innovations such as decentralized autonomous organizations (DAOs), crypto-secured gaming wallets and the metaverse.

How do Web3 games work?

Web3 games use blockchain technology to enable decentralized ownership of in-game assets and currencies, allowing players to earn, trade, and use these assets outside of the game. They also often incorporate cryptocurrency payments and smart contracts for secure and transparent transactions.

Web3 games are built on decentralized blockchains, providing greater transparency, security and user control compared to traditional centralized gaming platforms. Blockchain technology provides a tamper-proof ledger of all transactions and ensures that verifiable algorithms rather than centralized servers determine game results.

Another key component of Web3 games is smart contracts, which are programmed to perform specific actions automatically when certain conditions are met, such as when a player buys or sells an asset. In Web3 games, they manage the ownership, transfer and trading of in-game assets.

Web3 gaming platforms use digital cryptocurrency wallets to house players’ collectibles and in-game assets. Crypto wallets are an important part of the Web3 game architecture and a necessary tool for interacting with blockchain-based services.

Players can also own and trade in-game assets, such as virtual items or currencies, which are stored on a blockchain and can be easily transferred or traded. NFTs or other digital assets often represent these assets.

Web3 games often involve high levels of collaboration and co-creation between developers and players. The decentralized nature of the platforms allows for greater input and feedback from the community, which can help shape the game’s direction and development.

Gaming DAOs help create a player-driven gaming ecosystem to manage gaming communities and decentralized gaming platforms. Types of gaming DAOs include scholarship DAOs, gaming guilds, incubators, and accelerators.

Unique features of Web3 gaming

Web3 gaming offers several unique features such as high transparency and greater control that are not possible on traditional centralized gaming platforms.

First, Web3 games offer high transparency since peer-hosting ensures that players have all the information, without a centralized third party restricting or hiding access. These games are easily accessible to players. Buying cryptocurrency and setting up a wallet to start playing is easy, even for non-tech-savvy users.

Another important benefit of blockchain-based gaming is that it gives players greater ownership and control over their in-game assets, such as virtual land, currencies and characters. With Web3 technology, players can truly own and trade their digital assets – which can have real value – and exercise greater control over their gaming experience.

Web3 games create innovative in-game economies where players are rewarded for gaming skills and at the same time open up new methods of monetization. For example, in P2E games, players can generate income while playing and earn real money for their in-game achievements, such as completing missions. This can create a more robust and reliable ecosystem for players and developers.

Web3 games also ensure greater interoperability between different games and platforms. Players can use their assets in different contexts and settings, and easily transfer or switch them between different games.

Web3 game developers show how a new game ecosystem thrives on personalized player experiences, prioritizing immersive, engaging game processes with the best incentives for players. The P2E model is a big motivator for many players, and games are often designed with the player in mind.

Blockchain provides a way to trace the origins of digital assets. This means developers and players can easily track the owners of specific assets and transaction history, resulting in greater transparency in the game’s economy.

Web3 games enable digital scarcity, meaning that in-game assets can be made unique, rare, and valuable. In traditional gaming environments, this is difficult to achieve. Developers can print multiple copies of rare items or give them to players as rewards, which can lead to inflation.

In Web3, game developers can ensure that in-game items are scarce and not subject to inflationary pressures. Items are stored on the blockchain and cannot be replicated or tampered with.

Web3 games vs. traditional games

Web3 games and traditional games have several important differences, including how they are built and played.

Here are some of the main differences between traditional and Web3 games:

Risks of Web3 gaming

As attractive as the Web3 gaming space may be, it is still nascent and niche, with some significant challenges. There are problems related to user adoption and mainstream acceptance.

Web3 can be complex and lack user-friendly interfaces for non-crypto-savvy players. Developers, along with communities, should work to raise awareness and educate players about the benefits of Web3 gaming.

Web3 games are built on decentralized networks, which are generally more secure than centralized ones. However, Web3 games are still vulnerable to hacks and cyber attacks, which can lead to the loss or theft of game items. Players should take precautions to protect their private keys and use secure crypto wallets to store their digital assets.

Furthermore, there is a risk of missing something special – the “fun” element that is key to the overall gaming experience. Web3 games can focus more on financial incentives than providing a fun and enjoyable experience. Web3 game developers need to prioritize the fun game element in design to attract a wider audience and compete with the big Web2 companies.

And last but not least, there is a regulatory risk as the legal and regulatory environment surrounding Web3 gaming is still evolving. There may be uncertainty around taxation, licensing and anti-money laundering regulations. Developers and players should be aware of these risks and work to comply with the relevant rules.

Examples of Web3 games

There are many blockchain games and decentralized applications (DApps) in the modern Web3 gaming universe such as CryptoKitties, Axie Infinity and Decentraland.

Each game has its unique features and game mechanics, but they all use the power of blockchain technology to create innovative gaming experiences that are not possible on traditional centralized gaming platforms.

Here are some examples of Web3 games:

CryptoKitties is one of the first massively popular Ethereum-based games where players can collect, breed and trade unique digital cats. The game uses blockchain technology to ensure the uniqueness and ownership of each digital cat.
Axie Infinity is a Pokemon-inspired play-to-earn metaverse game built on the Ethereum-linked Ronin sidechain developed by Sky Mavis, where players can collect, raise and battle creatures called Axies. Web3 tools allow players to own and trade their axes and assets in-game.
Sandbox is a virtual world where players can build and monetize their virtual worlds, in-game assets and digital currencies using blockchain technology.
Decentraland is a virtual world that allows players to create, explore and monetize their virtual experiences.
Gods Unchained is a digital collectible card game that uses blockchain technology to allow players to own and trade their cards. The game uses the Ethereum blockchain to ensure the authenticity and scarcity of the digital cards.

The future of Web3 gaming

The future of Web3 gaming is exciting and promising, as it provides new opportunities for players to truly own their assets and in-game currencies, as well as new revenue streams for developers.

Incorporating blockchain into gaming has changed the industry, democratizing it by removing centralized parties and creating new ways to monetize with more social and community-oriented gaming experiences – all of which further enhance the social and entertainment aspects of gaming.

However, it is unlikely that Web3 games will completely replace traditional games, as they offer different experiences and target different target groups. However, Web3 games have the potential to create new opportunities and revenue streams for the gaming industry and provide unique gaming experiences.

Furthermore, as the technology and infrastructure for Web3 games continues to evolve, we can expect to see more innovative and immersive games, increased use of cryptocurrency payments, and more opportunities for players and developers to participate in the decentralized gaming ecosystem.