Dark Times and Web3 Silver Lining

Sanctor Capital
8 min readMay 30, 2023

The authors or their affiliates have ownership or other economic interests or intend to have interests in ETH, SOL, BTC, and may have ownership or other economic interests or intend to have interests in other organizations and/or crypto assets discussed as well as other crypto assets not referenced.

Another tough week for the gaming world is in the books, and I still have no title for this gaming newsletter (please send suggestions). There is plenty of disappointment and heartache to wade through in search of a way forward:

  • Lord of the Rings: Gollum tanked on launch, rivaling Redfall for the dishonor of “gaming collapse of the year”
  • Content creator GaspodeWD bucked the trend of useless CT praise and offered constructive criticism to gaming studios
  • FaZe Clan continued to self destruct, amidst talks of a possible delisting
  • WoW fans were up in arms over the introduction of a token
  • War Thunder gamers staged a boycott
  • Rumors of web3 elements in GTA VI persisted
  • Binance delved into NFT loans, as Blur continued to soar
  • China may be softening its stance on web3
  • AI IDOs have started to take place in line with recent hype

Let’s dive in!

Gollum brings sadness to Middle Earth

It’s safe to say that Lord of the Rings: Gollum was not a success, as Daedalic Entertainment has already issued an apology for what looks like a resounding failure. The game had a bold concept. It wanted to show the events of the LOTR saga from a different point of view.

Source: http://www.gollumgame.com/

However, between the bugs and lackluster gameplay, the game has not received much positive response. Curiously, the studio seems to already have another LOTR title in the works, and it’s hard not to wonder if the studio got ahead of itself and lost focus and perspective.

We frequently see web3 studios talking about (and even working on) multiple titles before releasing the first, which often raises concerns about focus and commitment. Past months have shown traditional studios make major blunders, and web3 up and comers should learn from their mistakes.

No Good Can Come From Fake Flattery

Some may wonder how a game of Gollum’s stature can miss the mark by such a wide margin. Perhaps, the critics deserve some of the blame.

For instance, IGN, a media publication that needs no introduction, came out with a harsh review of the new game. However, just earlier this spring, IGN came out with a much kinder review for the then upcoming title.

Source: https://twitter.com/GollumGame/status/1662124108614717448

The article did mention that the demo wasn’t enough to say if the game would come together in an exciting way, but everything from stealth-battle mechanics to the characters internal strife was covered in a much better light.

It could be that the reviewer just wanted to give the studio the benefit of the doubt, afterall, it was only a demo. Earlier this week, Decrypt’s Kate Irving, wrote about the need for gamers to be mindful of the stage a game is in, and not expect full polish from alpha and beta builds.

On one hand, game worlds require patience, as the development process is long and full of changes and redesigns. On the other hand, pulling back criticism does a disservice to studios as they get trapped between their own perspective and a media echo chamber.

This is especially true for web3 studios, as crypto related social media is known as a notorious hype machine. This made GaspodeWD’s invitation for studios to submit themselves to critical feedback, particularly noteworthy.

Source: https://twitter.com/gaspodewd/status/1662049773354905600

Current discourse around games in web3 is heavy on hype and light on constructive criticism. The industry is already seeing studios shutting down servers because of a lack of interest from gamers. We need to be honest with studios, so they can fix things before it is too late.

WoW Gamers Angered by a Token And it Has Nothing to do With Web3

The WoW community appears to be outraged because Blizzard is adding a token to Wrath of the Lich King. The move appears to be the studios attempt to curb the black market gold traffic that’s become a staple of the virtual world’s ecosystem.

However, the community isn’t buying it, partly because Blizzard will profit from this “remedy”. Similarly, to how web3 studios look to make money through fees on secondary sales, Blizzard would earn on the token market. The proverbial attempt to have your cake and eat it too.

Source: https://wowclassic.blizzard.com/en-us/

To be fair, the token is not a new concept to the WoW ecosystem, but Classic has run free from it for years. Perhaps, the tough economic times are pushing studios to try and squeeze an extra dollar out of gamers, but it’s certainly souring the overall sentiment.

The problem is not unique to WoW. In fact, in War Thunder, gamers got so angry, they organized a boycott. The game economy changes proposed by Gaijin Entertainment were egregious enough that even after they were retracted the community remained up in arms.

The boycott itself appears to have rather limited participation, but it may be a sign of changing times. There is a saying that consumers vote with their dollars. It could be that gamers will start being more active in the process.

Source: https://www.reddit.com/r/WarthunderPlayerUnion/comments/13tlsgz/a_couple_of_posters_that_i_posted_to_rwarthunder/

This is a major opportunity for the web3 space. There are serious grievances gamers have over the abusive nature of closed economies. Rumors of major franchises like GTA introducing a token continue to circle, but many are giving web3 only a halfhearted attempt.

If game developers working in web3 are able to communicate how and why their economies function differently, it could help foster a more constructive conversation with mainstream gamers.

Faze Clan Continues to Self Destruct

Last week FaZe Clan announced that they have brought on Grace Van Dien. This could have been a moment of joy for an embattled brand, and instead turned into what some are calling a “civil war”, with a backdrop of a plugging stock price.

Source: https://twitter.com/FaZeClan/status/1661809830221283347

Faze Clan is no stranger to controversy, but this time faze bluefille seems to be caught in the crossfire as different factions battle over the company’s direction. With a possible deslisting on the horizon this is just more bad news of the one time esports darling.

Source: https://finance.yahoo.com/chart/FAZE

Esports brands are struggling to find a sustainable business model. The hype from a few years back has been replaced by skepticism over viable monetization paths. The toxic nature of one of the industry’s biggest names certainly isn’t helping.

The NFT Lending Space Gets Validation From Binance

NFT lending is growing in popularity, and now Binace will be adding the feature to its NFT marketplace. Blur remains the leader in the space, and according to DappRadar accounts for 82% of the borrowed volume.

Blur continues to expand its arsenal offering lending alongside a buy-now-pay-later model for NFTs. Continued innovation from the team has not gone unnoticed by the market, as the platform has garnered much attention from traders.

Source: https://dappradar.com/blog/blur-dominates-82-of-the-nft-lending-market

However, DeFi tooling around the NFT space remained somewhat of a niche. With PFP interest far from its previous highs and gaming not yet being able to offer up much demand, there were questions over the immediate need for these tools.

With Binance jumping in, there is a sense of validation for NFT lending. While the web3 giant has had an uneven presence in the gaming and collectibles spaces, its sheer size, attunement to trends and massive user base carry a lot of weight.

For now, much of lending and borrowing is focused on speculation and trading. However, it will be interesting to see if and when marketplaces start offering tailored solutions for gamers.

China May Be Softening Its Stance on Web3

A recently released white paper by Beijing’s municipal government offers hope that China may be turning around on its tough stance on crypto.

Many have pointed out that the publication coincides with the upcoming crypto regulations coming into effect in Hong Kong. These have been welcomed signs of a changing sentiment towards the technology in the region.

Source: https://twitter.com/cz_binance/status/1662334590332153868

Hopefully, this will also help catalyze thoughtful regulation in the US. While the country has been one of the cradles of web3 innovation, regulatory uncertainty coupled with aggressive enforcement actions by the SEC have given entrepreneurs and capital allocators pause.

Things will need to change in order for the US to keep its leading position in the web3 industry.

A Wave of AI Tokens May be on The Horizon

The AI space has seen a tremendous amount of progress over the past few months. A good portion may have significant applications for gaming. You can look at Replica Studios recent demo of its AI enhanced NPCs, or check out Voyager, an AI agent that plays Minecraft for recent examples.

Previously, the crypto space has seen token waves as a response to the market’s demand to participate in the next popular trend. AI may be no different. Seedify, for instance, has now conducted two AI related IDOs, with Orbofi being the latest to conduct a token sale.

Source: https://twitter.com/SeedifyFund/status/1662041864717869056

The AI technology is powerful, and has a multitude of applications in the gaming space, from asset generation to NPC enhancement. The economic models for each are different and so token implementation requires much care.

Given the history of past trend tokens, it may be prudent to exercise extreme caution when conducting research around them. Nevertheless, the idea of incentivizing distributed architecture for AI-powered use cases, particularly when it comes to computing, storage and data aggregation and training is very exciting.

This wraps it up for this entry. As always, if you are working on something exciting in the web3 gaming space, or are a traditional gaming team looking to explore the possibilities, don’t hesitate to reach out to any of us at Sanctor Capital. Have a great rest of your week!

Ilya Abugov (@AbugovIlya)

Disclaimer: This commentary is not investment advice. It does not purport to include any recommendation as to any particular investment, transaction or investment strategy, or any recommendation to buy or sell any investment. It does not reflect any attempt to effect any transactions or render any investment advice.

This post is solely for informational and entertainment purposes. It is inherently limited and does not purport to be a complete discussion of the issues presented or the risks involved. Readers should seek their own independent legal, tax, accounting, and investment advice from professional advisors. The views reflected in this commentary are subject to change at any time without notice.

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