Web3 Gaming: It's Not Over Till It's Over

1. The Rise and Fall of Web3 Gaming

Axie Infinity, launched in 2018, marks the starting point of Web3 gaming. As a pioneer of the P2E (Play-to-Earn) system, the game captured market attention with its NFT-based 'Axie' characters that players could collect and develop. It opened new horizons for Web3 gaming by guaranteeing true digital property rights for game items through blockchain technology and enabling secure marketplace transactions. In 2022, The Sandbox emerged as a UGC (User-Generated Content) platform. Similar to Roblox, it introduced a new paradigm where gamers could create content and monetize their work using blockchain technology. Through continuous development, it maintains an innovative business model that protects creators' intellectual property rights and enables revenue generation.

Most recently, Hamster Kombat drew industry attention as a Telegram-based T2E (Tapt-to-Earn) game with 950 million MAU. It successfully lowered entry barriers by combining simple tapping mechanics with marketing tools.

Currently, AI-related projects dominate the cryptocurrency market with over 70% of market interest, while the gaming sector follows with single-digit market share. This concentration of interest has led to an undervaluation of Web3 gaming's innovation and growth potential.

This report aims to analyze in depth why many gaming companies entered the Web3 gaming market and why the sector has since lost momentum.

2. Stalled Gaming Industry Growth: Traditional Gaming Companies' Web3 Ventures

Mobile gaming transformed the gaming industry. According to Newzoo, global gaming revenue grew from $70.6 billion in 2012 to $187.7 billion in 2024. Notably, the rise of smartphones made games more accessible, driving revenue to 18% in 2012, reaching 49% 2024 – an approximately 2.7 times increase from 2012.

Also, the mobile gaming market is expected to reach $110.9 billion by 2025 and $181.9 billion by 2030, according to Mordor Intelligence. However, industry experts warn that the market may be nearing its peak growth potential.

The gaming industry is seeking new directions as mobile gaming growth slows. While cloud gaming and AR/VR initially showed promise, high development and infrastructure costs limited their adoption.

Web3 gaming has since emerged as an appealing alternative. Its ability to generate quick returns with lower development costs has sparked industry-wide interest in its growth potential.

In particular, Axie Infinity demonstrated Web3 gaming's potential in Southeast Asia, a traditionally challenging market for conventional games. With a smaller team and lower development costs, it reached 2.7 million daily active users and a $3 billion valuation. This success showed companies that Web3 gaming could expand their market reach and create new growth opportunities in an increasingly competitive industry.

Consequently, major gaming companies rushed to enter the market. As of 2023, 29 out of the top 40 gaming companies, including Take-Two Interactive, Nexon, and Bandai, are pursuing Web3 initiatives.

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