Giants Fall and Giants Rise Again
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The web3 community gathered at Consensus to reflect on what happened this year and analyze the possible ways forward, but the gaming world did not stand still. The appchain thesis grew stronger with new players coming into the space. The revolution in AI technology continued to capture attention, and game after game unveiled its testing phase. There is a lot to discuss, so let’s get to it.
A Slice of Humble Pie
On the back of the Mad Lads NFT mint, Solana heavyweight Magic Eden, has been surpassed by Tensor on 24 hour trading volume. The Magic Eden team seems to have recognized the importance of the event, as there were a number of acknowledgements of shortcomings on twitter. A few days later the team announced their AMM, but given how commonplace those have become in the NFT space, it can hardly be considered a breakthrough.
Magic Eden is not the only incumbent to feel its crown slipping. Earlier this year, Blur surpassed OpenSea in 24 hour daily volume by offering a more tailored experience and token rewards. OpenSea has come back with OpenSea Pro, but the challengers have seen the king bleed.
This is an important reminder that the space, despite its growth, is still at a very early stage and most of the companies are still startups, so anyone can be challenged, no matter what their share of the market is.
It is Playtest Season in Web3 Land
The much anticipated second wave of web3 games is starting to occupy gamers with early builds. From Ember Sword to Star Atlas gaming teams are starting to run playtests and tournaments to get feedback from the communities and help iterate on their products.
A couple of our portfolio games have some excitement to share as well. Mighty Bear’s Mighty Action Heroes ran through a weekend playtest with a host of new features for gamers to try. I particularly enjoyed throwing around the grandes. MetalCore, has introduced a PvE to its action packed Open World Alpha 2, and there are “Elite Swag Packs” to find for those who dare to explore. Adding to the excitement is the fact MetalCore will be appearing in Epic Games Store, taking a big step towards broader gamer awareness.
Iterative development is very important for gaming, which gravitates towards longer development cycles. Playtest helps studios find flaws and adjust game loops and features to address the needs of real gamers. The community first approach has had a positive impact on studios embracing the web3 way.
Most recently, the approach has been adopted by the team behind Project V. A group of high profile streamers is looking to create an experience by actively engaging their community, albeit without web3 elements. At least for now.
No One is Safe From Technical Difficulties
Even big name traditional studios can face technical challenges post release. Recently, The Last of Us received yet another sizable patch to fix ongoing issues, and now there is trouble in a galaxy far far away. It appears as though the Star Wars Jedi: Survivor has stumbled out of the gate due to its poor performance on PCs. The issues may have caught EA off guard, and the initial patch did not make the problems disappear.
Web3 games receive a lot of criticism for poor optimization and at times subpar performance on devices. However, it is important to remember that these titles are mostly in pre-alpha or alpha stages. As you can see from the above, even big name studios are not immune from technical challenges. Gaming worlds are not built in a day, and require patience.
The Pace of AI Development Quickens
Seemingly every day there is a wave of new advancement in AI technology. Twitter is overflowing with aggregation threads detailing the latest and greatest. Gaming stands to benefit from these.
While traditional gaming may not have the same culture as “forking” in web3, it has modders, who are accustomed to tinkering and pushing the boundaries of beloved titles. Now, one of them has implemented ChatGPT in Skyrim VR to make NPCs more intelligent. The idea of using AI has been batted about in the web3 space for some time, as intelligence and conversational fluidity could potentially dramatically enhance the utility of PFPs. The new advancements could make this a nearterm reality.
The League of Legends AI bots are also getting upgraded in what could be a foreshadowing for the industry. Intelligent bots can be great training companions for competitive players, but they can also push PvE and PvPvE modes to a whole new level. During one of my philosophy classes at the university, our professor asked the class: “would you be able to tell if you were in the matrix?” As bot actions become harder and harder to distinguish from human ones, the question becomes increasingly more relevant.
Nevertheless, it is only natural for the web3 space to integrate AI tools, as the metaverse is likely to be built and in part populated by AI entities. So it is great to see Solana offer an implementation for a ChatGPT plugin. Despite the struggles the network has endured, the team has been quick to incorporate innovations. This implementation won’t give Solana’s ecosystem an advantage, but rather it demonstrates a commitment to continued progress. This is why we continue to keep an eye on the network, whatever naysayers may post on twitter.
New Gaming Ecosystem are Emerging
Mythical Games made some noise this week, with the release of NFL Rivals and the decision to deploy its own parachain in the Polkadot ecosystem. Polkadot has become somewhat of a forgotten name in the web3 space. However, gaming has the ability to bring millions of users, and a single successful game has the potential to revitalize a network. This is why so many ecosystems have been quick to develop a gaming strategy.
The team behind the MMORPG, Mist, also shared its plans to deploy an EVM compatible blockchain, Mist Chain. For teams with the desire to build a gaming world the allure of having their own chain may be too great to resist.
While a multi-chain future offers many benefits to gaming studios looking for greater flexibility for building their gaming worlds, cross-chain communication and transfer remain a challenge. Circle’s Cross-Chain Transfer Protocol may make life easier for users. Game developers often mention that onboarding and asset transferring need to be frictionless for users, and having a way to easily move one of the most popular stablecoin cross-chain could be very helpful.
Regulators Challenge a Web2 Giant
The web3 space has grown accustomed to the regulators making life challenging, but now web2 gaming also gets a taste. UK’s CMA blocked Microsoft’s acquisition of Activision Blizzard fearing the growing clout of Microsoft’s cloud gaming.
The silver lining for Blizzard may be found in China. It has been clarified that although the company is being sued, NetEase is not involved. The two bits of legal news are unrelated, but good news was not easy to find after a difficult week.
All Hail the Indie Game Developer
You can often hear web3 gaming critics say that the space needs better quality games, often implying midcore and hardcore rivals for the likes of COD, GTA or LoL. Gaming teams are talking about developing comic books and searching for Netflix deals in effort to galvanize a community.
Then you look back at the traditional gaming space and see Vampire Survivors. The game developed by Luca Galante, doesn’t have flashy graphics, but it is aesthetically pleasing in its simplicity and incredibly addictive. I myself have spent many hours playing the game, and I am not alone as the game has seen millions of downloads across PC and mobile.
Now the game will be adopted for an animated series. The path of LoL, with its esports scene and the success of Arcane is very attractive. However, it may be beneficial for some game studios working in web3 to look at other role models as well.
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.
