Searching For Real Gamers

Sanctor Capital
8 min readMay 16, 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.

This was a quiet week in the world of gaming. The arrival of the new Zelda title definitely stole the show. Major studios have chosen to rally around the flagship titles in a tough economic climate, and those games seem to be delivering big time.

The web3 space continued to delight with an array of playtests, including Gala’s May Mayhem. However, there were questions about the presentation and the go to market strategies being used.

Limit Break offered a solution to the zero-royalty NFT marketplace debacles, while the US Chamber of Commerce questioned the legality of SEC’s handling of crypto. Let’s dive in!

The Burden of Playtests

It may feel like most of the world stopped to try out Zelda: Tears of the Kingdom, but studios building in the web3 space continued to churn out playable versions, with Blocklords and Mirandus being some of the notable titles.


Early builds and different playtest formats can be incredibly valuable to get gamer feedback and data and field test the infrastructure and game mechanics. These are invaluable when it comes to calibrating the game.

This makes NFT gating a controversial practice. For instance, Mirandus’ playtest requires gamers to own a Mirandus Exemplar, which would currently run an incoming new gamer over $116 (depending on the rarity it can be a lot higher).


The much hyped Zelda title is priced at $69.99 with the collector’s edition going for $129.99. I am not trying to compare these two in any way, but I am wondering what sort of message this testing set up sends.

Some would counter, by saying that the playtest is for the Mirandus and/or Gala community, and that may be a fair point. Still, this is not Yuga Labs putting out Dookie Dash. BAYC was about a community searching for experiences. Mirandus was a game first endeavor.

Can they be confident that with a current set up they will attract gamers, who provide valuable feedback, and not NFT speculators. Moreover, what sort of expectations does this pricing set for a game in the eyes of traditional gamers?


Many studios have shifted to a free-to-play model, but this is a lot harder to do for teams that conducted substantial NFT sales in the past. This misalignment needs to be thoughtfully addressed, so as to reduce friction with traditional gamers, but also not alienate the original supporters.

The Reason We Play Games

The money question has been a big source of tension between traditional gamers and the web3 space. Even though the initial emergence of play-to-earn attracted millions of users to web3, many saw the games they played as jobs as opposed to games.

While many games now embrace the free-to-play approach and free mints are commonplace, much of the focus remains on resale of assets and speculation.

Consider how different the message is in traditional gaming. Last week NintendoAU published an ad for the Zelda game. It is all about how the game can help discover magic and joy amidst the mundane routine of the day-to-day grind.


Eliza Crichton-Stuart of RE3W wrote up a nice breakdown of the spot. Now, think back to Limit Break’s Super Bowl ad. How different was the message? Studios building in web3 keep saying they want to target the broad gaming market. However, are they really addressing it with their strategies, and if so is the message just adding to the frustration?

Faith in Flagship IP is Rewarded

The gaming industry has been rocked by economic storms. There have been lots of layoffs as investment capital has tightened up. In these tough conditions the gaming giants have opted to consolidate around their top IP, and it looks like the strategy may be working.

Recently, Krafton announced impressive figures for PUBG, while EA’s Q4 was once again propelled by Apex and FIFA franchises. The current excitement around Zelda and the energy around Jedi: Survivor exemplify how historical IP can galvanize a player base year after year.


This may hold several lessons for the web3 space. Having an established IP to utilize for a new game is a huge advantage. For instance, we have seen a multitude of trading card games try to storm the market, with most struggling to attract a significant user base (not counting bots).

In the traditional space, Marvel Snap has had much more success leveraging the MCU fanbase, and now Fantasy Flight Games will try to create a TCG for another famous franchise. The ability to leverage existing lore and speak to a fanbase passionate about the IP is so powerful.


With that being said, now may be the time to be bold for web3 teams. It scares me a bit when I hear: “we are going to be the web3 for [insert big name game here]. It will be immensely hard to get users to play a web3 LoL because there is so much history with the original.

However, with big name studios being more conservative and protecting existing IP, there may be room for new ideas. As amazing as CoD, Apex, LoL and others are, the evolution they see is incremental, with things getting repetitive after a certain point.

Instead of offering a web3 spin on the above, studios in web3 should try to present strikingly different experiences and dynamics. It may be their best chance to stand out when they go to traditional gamers.

Traditional Studios Embrace UGC

The recent metaverse report from Meta suggests that the space could increase global GDP by $3.6 trillion by 2035. UGC has been a key feature of the web3 version of the metaverse. However, traditional studios are no strangers to it.

Roblox has reported $655M in revenue for the previous quarter, and Fortnite made waves in March with its Unreal Editor for Fortnite. That was only the beginning. Epic Games’ Fall Guys will now have game design tools to allow gamers to create their own levels. EA is also talking about games as a platform approach.


While the centralized approach of these companies undermines core principles of the gamer owned universe, they are able to overshadow web3 efforts due to their size. For instance, Mini Royale has introduced create-and-earn to the ecosystem to help incentives and reward creators.

For now the system will be focused on skins, but offers generous revenue share opportunities. Nevertheless, it is unclear if there will be enough games to make the effort worthwhile for artists.


The Sandbox has long been working to address this challenge. Most recently, it kicked off the May Festival, which features a variety of experiences and 1M SAND in potential prizes. Additionally, The Wistaverse launched in The Sandbox to see if social and political activism can find a home in a virtual environment.

Nevertheless, getting gamers to join web3 gaming worlds has been tough, and without them, creatives have little reason to engage. The silver lining is that the overall player pool may grow faster than expected as the US Navy is training dolphins and sea lions to play games.

The Question of Royalties

Last week Limit Break introduced ERC721-C as its solution to the problem of enforcing on-chain royalties. In the summer of 2022, sudoAMM introduced NFT trading that circumvented creator royalties. It was soon followed by a host of marketplaces big and small who made paying royalties optional.

The controversial trend became a big deal in the art world, but it is a critical issue for gaming. Many studios are counting on UGC as part of their business plan. If creators are not properly incentivized that may become a bigger challenge than it already is.

With gaming already catalyzing around 38% of all onchain transactions, it is only natural that the studios would want to get ahead of the problem.


Limit Break offers the use of operator whitelists to restrict unwanted behavior, which can even prevent the wrapper workaround. While this may be an interesting approach it presents a number of challenges.

This can significantly limit the rights of the collector. Imposing conditions on what an owner can or cannot do with his/her asset goes against the ethos of complete ownership. Moreover, it is unclear how non-sale transactions will be identified and handled. P2P can be used just as well to circumvent royalties.

Royalties are an important part of the open economy, but enforcing them through limitations rather than incentives alignment may not be the best path forward.

SEC May Have Overreached

After years of regulation by enforcement the market is demanding clarity from the SEC regarding its stance on crypto. In April Conbase sued the SEC to try and force a response, and it appears that the US Chamber of Commerce is in its corner.


The lack of clarity regarding the regulatory framework has made life difficult for the gaming companies in the web3 space. Many are worried that a token issuance may be met with legal action. Some are choosing to delay issuance, some move to a non-US jurisdiction.

Given the economic potential of the metaverse and the importance of its web3 for fair and open development and use, regulatory clarity is vital. The US may already be starting to lag behind, so it is encouraging to see an entity with major economic, social and political clout call out the SEC.

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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