Author: Stella L (stella@footprint.network) 
Data Source: Footprint Analytics Games Research Page

IVS Crypto 2024, the largest global startup and crypto conference in Japan, has once again positioned itself as a central hub for the Japanese Web3 ecosystem. As a media partner, Footprint Analytics engaged with key players driving Japan’s Web3 landscape, exploring how global Web3 entities can collaborate with Japanese companies. Through these discussions with industry leaders, we have gained exclusive insights into the current state of Web3 gaming and the challenges the industry faces.

Growth of Games Outpacing User Growth

On the other hand, despite the surge in the number of blockchain games from less than 700 in January 2021 to 3,402 by August 2024, the active player base growth has not kept pace. Games with over 1,000 monthly active users (MAU) increased from 45 in January 2021 to 291 in August 2024, but this remains below 9% of the total games. This discrepancy can be attributed to incomplete on-chain data and a concentration of traffic on a few star games, creating a “head effect.”
Souce: Monthly Active Blockchain Games

Web3 Gaming Industry in Its Early Stages

Despite several years of development, the Web3 gaming industry is still considered to be in its early stages. Rotten, VP of Ecosystem at double jump.tokyo, a leading Japanese startup specializing in NFT solutions and blockchain games, shared his perspective: “Right now, I feel like it’s still in the early stage. We’ve been in this field for more than five years, but it still hasn’t found the right balance between Web2 and Web3 functions.”

Moving Beyond Financial Incentives

Keisuke Hata, Director of the Blockchain Entertainment Division at Square Enix, the renowned Japanese video game publisher and entertainment conglomerate, highlighted a key limitation of blockchain gaming. He pointed out that Web2 gaming already offers in-game currency, which reduces the motivation for users to buy and use tokens in Web3 games. Hata emphasized, “In the industry, the main driver for adopting these games is the financial gamification—users can earn from the games. This needs to change, and new kinds of innovation are needed.”

Sebastien Borget, Co-founder and COO of the famous metaverse platform The Sandbox, emphasized the importance of building trust with the audience. He noted that market fluctuations and a focus on financial incentives over gameplay have posed significant challenges. “Teams now need a product, an MVP, and an engaged community to fundraise, which is better than a few years ago when everyone was raising funds without anything concrete,” Borget said.

Balancing Blockchain Features and Gameplay

Keisuke Hata highlighted the unique features that blockchain can bring to gaming. He noted, “The real enhancement feature of blockchain in gaming is in activating several features of the current gaming ecosystem. For example, Symbiogenesis uses a very simplified NFT. The game is very simple: users solve mysteries by gathering information. This information comes from items obtained through holding NFTs.  This represents a very simple utility of NFTs. The incentive for holding them also passes from person to person, that is a unique mechanism to blockchain.”

Takuro Eika, Game Director at Konami Digital Entertainment, discussed the challenges of integrating blockchain with gaming in the Japanese market. “Maybe about 5 or 7 years ago, people wanted to bring everything on-chain or everything in blockchain. Right now, if you look at the Japanese consumer space, the education of the Japanese consumers is still behind. For them to create something more blockchain-focused is going to have a few problems. For example, the users who already know about the blockchain and how it works might just refrain from it. Those people who don’t know about it might just drop off from there. It’s kind of risky,” he explained. However, Eika believes that NFTs have the potential to create communities, as demonstrated by My Crypto Heroes. “So we launched an NFT
solution called Resella with features that will be very useful for Web2 users this
year.”

Rotten argued that blockchain needs gaming more than the other way around. “There aren’t many applications besides DeFi that utilize blockchain well enough to make people believe it’s necessary. I think gaming comes second and is more relevant to most people. Financial strategies or tools are a sensitive part of people’s lives. So, for blockchain to be relevant, people need more casual use cases, and I believe it’s in gaming,” he said. He also highlighted the utility of open game data for strategizing in-game activities, although he acknowledged the challenges it poses for game balance and enjoyment. 

Navigating Regulatory Challenges

Keisuke Hata noted, “If there was a single rule for every country, it would be much easier. This is one of the problems we are facing right now. There’s no fixed strategy for every country, making globalization a challenge.” These regulatory inconsistencies complicate efforts to create a unified approach to blockchain gaming.

Hata suggested that based on learnings from the projects deployed on the DOSI platform, a common distribution platform, similar to the Play Store and Apple Store for Web2 apps, could facilitate blockchain adoption. Such a platform would consolidate global rules and guidelines, streamlining the process for developers and making it easier to reach a broader audience.

Competitive Strategies for Smaller Projects

New Methods for Acquiring Users

The industry is exploring ways to bring existing Web2 players into Web3. Keisuke Hata stated, “We want to make it clear that we do not have to move every Web2 player into Web3. Some people prefer to enjoy centralized content. But it’s also true that some people love to have a decentralized world where each player can contribute to the system, making the ecosystem better. So, it’s not for everybody, but it’s great to have something that people have been waiting for—a new way of playing and collaborative co-creation.”

Takuro Eika discussed strategies to engage traditional gamers. He emphasized the importance of having an economy based on NFTs and tokens. Eika explained, “Right now, what I’m thinking is to have different phases of the NFT collection. There is a 1st phase, 2nd phase, 3rd phase. And each phase, starting from the 1st, your core users, those people who played it, can just keep on playing for the 2nd and 3rd phase and get additional benefits. Maybe not just within the game, but something that is kind of correlated with the game. Some kind of features or perks that could come with the game. Those are one of the strategies.”

Ensuring Long-Term User Engagement

Rotten also emphasized the importance of sustainability in Web3 games. He noted, “Any sustainable project has a large trading volume. Once the token hits some acknowledgment from the traders, the games or the game developers can fund themselves on the market with the token. That makes it sustainable for any games or successive games to not lose the attention of the users.”

The industry is shifting towards more robust engagement strategies that focus on long-term player retention. This includes integrating complex gameplay mechanics, evolving narratives, and character development systems that keep players invested over time. Additionally, fostering a span community through social features and regular updates can significantly enhance user engagement.

Keisuke Hata highlighted the importance of C2C (consumer-to-consumer) transactions in maintaining a vibrant in-game economy. “Metrics such as user engagement, transaction volume, and the overall health of the in-game economy are crucial for Web3 gaming,” Hata explained.

Conclusion

The Web3 gaming industry is at a pivotal stage of development, facing challenges related to technology integration, user growth, and regulatory compliance. However, industry leaders remain confident in the sector’s potential. With continuous technological advancements and the emergence of innovative models, Web3 gaming is poised to find a better balance and achieve sustainable growth in the future.

As we look ahead, the collaboration between global Web3 players and Japanese companies, as highlighted at IVS Crypto 2024, promises to drive further innovation and development in the blockchain gaming sector. Footprint Analytics will continue to track and analyze these trends, supporting the industry’s journey towards a more integrated and prosperous future.

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About Footprint Analytics 
Footprint Analytics is a comprehensive blockchain data analytics platform that simplifies complex analysis for businesses and projects in the Web3 ecosystem. It offers tailored solutions that eliminate the need for extensive expertise and infrastructure maintenance. The platform provides long-term growth tools designed to help build and manage communities step by step, emphasizing sustainable growth and user loyalty. By combining powerful analytics with community management tools, Footprint Analytics enables projects to leverage blockchain data effectively for decision-making and growth strategies across various sectors including GameFi, NFT, and DeFi.

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