7 min read

The State of Web3 Gaming

How we at Earn Alliance envision the present and future of blockchain-powered games.
The State of Web3 Gaming


At Earn Alliance, we’re big believers in game ecosystems powered by blockchains, also known as web3 games. We believe in them so deeply that we envision a future where games can positively transform the lives of billions.

Now, that’s a bold statement we’re making. Allow us to elaborate.

Blockchains enable gamers to own assets with real-world value: assets they can buy, trade, profit and incur losses from. They make it possible for gamers to be more than gamers; by default, gamers are now also (passive and active) investors and have access to all the opportunities that come with being an owner of something.

Deep ecosystems have formed around these games and their assets. Gamers, guilds, guild and gaming infrastructure providers, game asset marketplaces, investors, community members and spectators are all coming together to shape the future of the next generation of games.

And there are numbers to prove it: in the past two years, billions of dollars have poured into the industry from traditional and crypto gaming investors alike, showing clear product-market fit and consumer demand for web3 games.

But let's be clear: nothing new is ever perfect. To make the future we envision a reality, web3 games must first address their current shortcomings, while tapping into the vast opportunities they create for casual and competitive gaming communities.

At Earn Alliance, we aim to sit at the intersection of all stakeholders in crypto-gaming. In fact, we are already a key infrastructure layer for gamers, games and guilds, with over 300K assets managed.

The Current State of Web3 Gaming


Web3 gaming was born from a frustrated base of players that is tired of spending an ever-increasing amount of money in games, without ever truly owning any of the in-game assets.

Fig (i): Breakdown of global player spend by category (Source: ARK Invest)

When Axie Infinity launched, gamers and investors experimented with ownership of their Axies as assets, buying and selling them in a marketplace as their value evolved with the gameplay. While holding assets, owners attempted to maximize their yield through their various utilities.

There is a reason why Axie Infinity’s marketplace revenue has cumulatively raked in more than a billion dollars in revenue in 2021, with players continuously trading Axies to form the perfect team and breeding Axies to create new ones, which are further traded.

Fig (ii): Axie Infinity cumulative revenues (Source: Token Terminal) 

There is no doubt that gamers are demanding ownership and competitive yielding opportunities of in-game assets, and gaming studios are also quickly realizing the potential for monetizing games via selling assets instead of in-game purchases with app store fees of 30% and annoying ads.

Introducing game assets to open economies allows speculating investors to trade and innovating a new revenue-driving customer segment should fund both richer gaming experiences and the largest esports reward pools the world has yet to see.

Not only do gaming studios have the potential to break revenue records, but launch costs have been disrupted through organic engagement. Crypto-gaming has inspired communities to get involved early in a game’s marketing, feedback, game development, and financial utility.

In the essence of decentralization, early adopters are rewarded for their support. Traditional gaming studios, especially indie studios, have never had this level of access to communities, marketing, and monetization.

With that said, there are several drawbacks that have plagued the space and need to be solved in order for web3 gaming to truly reach mass market appeal.


Unsustainable Game Economies

While the Axie Infinity revenue data from figure (ii) turns several heads, the keen observer can easily see major growth slowdowns starting in October 2021.

When players began to churn, the price of the SLP token started declining, and mainstream enthusiasm for the game started winding down.

This was well before Axie Infinity’s Ronin chain was hacked; it was a direct result of Axie’s economy being highly inflationary, resulting in lower earnings for most players (who would never play the game purely for fun!).

This deceleration is reflected below in Axie’s monthly new accounts.

Fig (iii): Axie Infinity monthly new accounts (Source: Dune Analytics)

Competition: A Game of Capital / Access

Most web3 games today are not competitive. And by competitive, we mean purely from a skill perspective.

This is not to say that anyone can win at games like Axie Infinity, but a fairly large proportion of Axie’s daily active users (DAU) probably can arrive at the same outcome, with enough capital, access to the best assets, and understanding of how to use the assets in game.

These environments, where one can simply pay more than another player to gain access to the best set of assets to win games, are clearly unsustainable.

Undifferentiated Guilds

If one takes a look at Yield Guild Games (the largest gaming guild), and compares it to Merit Circle, another guild, there is virtually no difference in how these two run their operations, generate revenue, recruit “scholars” and discover new games.

This is a result of most web3 games prioritizing early access, and influential capital for their respective in-game assets. The earlier guilds can get access to these assets, the more valuable their distribution, and hence marketplace value, eventually becomes.

This comes at a cost to the average gamer, who is neither a scholar nor an early evangelist, and can only acquire the game assets via marketplaces (rather than via sheer talent).

The Future of Games

At Earn Alliance, we view the next generation of games as fun, sustainable and competitive! Here’s what we mean by that:

Sustainable Game Economies

The future of web3 game economies is circular and sustainable. This means no excessive printing of in-game tokens to reward players, except for utility tokens that can be used in the game for upgrades/repair mechanics.

In current “dual token” models, the in-game token is often inflationary and is constantly cashed out, and the governance token’s price is often correlated to the health of the game economy (which obviously suffers due to fluctuations in the in-game token).

The solution for this involves eliminating the dual-token model, and only rewarding players money that has been organically generated from the game, creating a healthy and circular economy.

While there are many ideas of how this could play out, here’s a quick example of what a healthy game economy could look like:

  1. Bob plays a zombie survival game (for fun! Imagine that!)
  2. He is unable to get past a certain round and pays the game developer to unlock access to an upgrade (NFT) that allows his guns to recharge faster
  3. After hours and hours of grinding in-game and upgrading weapons, Bob finally survives all rounds and decides he wants to move on to another game
  4. He sells his weapons (NFTs) in the game’s marketplace, which generates revenue for the game via secondary royalties
  5. The revenues from in-game NFT purchases and marketplace royalties are circled back to the developer and the game’s economy, with a monthly prize pool being distributed to the top 10,000 players based on survival rank and total points scored
  6. These players spend money on NFTs and upgrades in order to try winning the weekly prize pool, and the fly-wheel repeats

Esports 2.0

We believe that web3 games of the future will resemble the most viral free-to-play games of today such as Fortnite, World of Warcraft, Diablo, and League of Legends, only much, much bigger.

As an example, an international esports tournament for Dota 2 had a prize pool of $40m in 2021, but according to us, this is just the tip of the iceberg. Imagine if every skin, weapon, character, potion, or upgrade was an asset you could own in Dota 2.

The monthly marketplace fees from trading these items alone could be worth more than the $40m prize pool.

To put this into perspective, Axie Infinity would only have to invest 3% of their revenue from just their marketplace transactions in 2021 to make a $40m prize pool (and that’s without saying that the marketplace is not the only source of revenue for Axie Infinity!).

However, the biggest unlock here is that given most web3 games will be free to play, skilled players with low barriers to entry can continue minting the strongest assets via a combination of their grind and paying for upgrades.

Not to mention, casual players who aren’t hyper-competitive can aim to hunt for, mint and supply competitive gamers the necessary assets to win.

This will create immense competition among other gamers and guilds (including investors) to constantly acquire the best assets, enabling wealth creation (via marketplaces) and distribution (via game/community-sponsored tournaments) at scale.

This is a new paradigm for esports that only blockchains can enable.

Guilds 2.0

Presently, guilds are undifferentiated capital factories, deploying capital into in-game assets and sourcing players with a desire to make money (and enough free time to play games). With web3 games becoming more sustainable, generally popular, and competitive, guilds will need to adapt to survive. This means:

  1. Gamers will be gamers. They will self teach themselves through Twitch and YouTube and level up to the top of the ladder. Guilds “training” individuals will become extinct by 2023 and a focus on training teams of gamers like in traditional esports will prevail
  2. Increased focus on acquiring, retaining, and nurturing the best gamers, and building a differentiated brand that organically attracts top gaming talent
  3. A shift in earning power towards the gamers due to the democratization of asset-lending from common investors and gamers themselves sponsoring the best players with assets
  4. Extracting a 30% fee from players will be challenged by traditional esports models such as salaries and brand sponsorships
  5. Improved automated methods of sourcing and selecting the best gaming assets, and pairing them with the right players


We remain ever-bullish on the future of web3 games, and are here to build for the long term.

At Earn Alliance, we are focusing on creating a community-driven platform for discovering  web3 games, sharing knowledge amongst skilled gamers, and providing infrastructure for guilds to buy and operate NFTs at scale by eliminating the complexities of blockchain gaming.

Stay tuned for more information about Earn Alliance in the coming weeks, and subscribe to our social channels for the latest on web3 gaming.