- The gaming industry is facing significant challenges with high development costs and studio closures, even among major players.
- Web3 gaming, despite raising billions in investment, has failed to address gaming’s core problems or attract mainstream players.
- Current blockchain infrastructure forces developers to either compromise gameplay or create isolated ecosystems that recreate traditional gaming’s problems.
Daryl Xu, co-founder and CEO of NPC Labs, believes Web3 gaming has yet to fulfill its promise of rejuvenating the struggling gaming industry. Despite significant investment, Web3 gaming platforms have recreated the same enclosed systems that blockchain technology was meant to solve, while failing to capture mainstream attention or address fundamental industry issues.
The gaming industry has been in steady decline since the end of COVID-19 lockdowns, with 2024 bringing numerous layoffs and studio closures. According to a recent article in The New York Times, industry executives have prioritized improved graphics over creativity for decades, leading to unsustainably high development costs that regularly exceed $100 million per title.
Blockchain technology initially appeared promising for independent developers, offering new fundraising opportunities and distribution control. However, Web3 gaming created new problems while failing to solve existing ones. A January DappRadar report shows Web3 gaming reached 7.3 million unique active wallets, but community insights suggest only 10,000-100,000 of these represent actual gamers rather than reward farmers.
The Technology Mismatch
Game developers face an impossible choice when entering the Web3 space. They must either build on existing blockchains that weren’t designed for gaming and compromise gameplay, or create their own chains—diverting resources away from game development. While crypto enthusiasts may accept these tradeoffs, mainstream gamers simply want engaging experiences.
“The thing that converts mainstream users onchain isn’t non-fungible tokens (NFTs) or decentralized finance, its meaningful ownership of in-asset games,” Xu explains. Most Web3 games prioritize crypto technology and tokenomics over gameplay, competing for the same limited pool of crypto-native users rather than expanding the market.
A Path Forward
Despite these challenges, Xu sees a second chance for Web3 gaming as major traditional studios struggle. The solution requires gaming-specific blockchain infrastructure that enables both developer control and cross-ecosystem collaboration.
“We need to restore economic freedom to creators and put control back in players’ hands,” argues Xu. This means developing revenue models rewarding collaboration instead of isolation and returning to gaming’s roots—making games fun again.
The vision is an industry where creativity thrives without the burden of building technological moats. When developers can focus on creating engaging experiences rather than dealing with blockchain complexities, both players and creators will benefit.
AI: This article was created by transforming content originally published by Cointelegraph, maintaining factual accuracy while presenting the information with fresh wording.
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