It delves into various aspects of the industry, covering the Web3 gaming stack, gameplay trends, blockchain networks, competitive dynamics and fundraising. It also sheds light on the evolution of Web3 gaming since the 2022 market correction.
Asia-Pacific a frontrunner
The Asia-Pacific region leads the way in Web3 game development, with 40 per cent of developers based there, followed by North America at 30 per cent. Notably, half of the new games entering the space this year originated in Asia.
In 2023, 30 per cent of new Web3 gaming teams emerged from the US, while South Korea accounted for 27 per cent, nearly doubling its contribution from the previous year. The USA remains the largest market for Web3 game developers at 30 per cent, with other significant markets including South Korea (12 per cent), the UK (six per cent), Singapore (six per cent), Vietnam (four per cent), and Australia (four per cent).
Web3 gaming investments show resilience
Investments in the Web3 gaming sector have exhibited resilience, experiencing a significant surge in 2021 and stabilising in 2023, reminiscent of pre-bull market levels. Since 2018, a whopping $19billion has been poured into Web3 gaming-related projects.
The Web3 gaming market continues to grow, albeit at a slower pace after the 2022 market correction. Up until Q3, blockchain gaming-related funding rounds reached $1.5billion in 2023, with over $800million exclusive to Web3 gaming, while the rest was distributed across multiple sectors. U
US-based Web3 gaming projects have attracted over $4billion in funding, with France ($0.9billion), Canada ($0.67billion), Singapore ($0.67billion), and Hong Kong ($0.66billion) following suit.
Genres such as Sports ($1billion), MMOs ($1billion), RPG ($0.7billion), and Action ($0.3billion) have garnered the most funding since 2018.
AAA Web3 games remain a rarity
The Web3 gaming ecosystem predominantly consists of indie-level and midsize projects, making up a huge 94 per cent of the market. In contrast, AA and AAA titles contribute to only six per cent of the market share.
The most commonly developed genres include RPG, action, strategy, and casual games, with platform-specific preferences indicating that RPG and action are popular on PC, a balanced mix on mobile, and casual games leading in browser-based gaming. Most Web3 games are free-to-play (F2P) at 69 per cent, while 26 per cent of current titles require players to hold specific NFTs to access the game.
Rise of blockchain networks
Despite challenging market conditions, blockchain networks targeting the gaming sector are on the rise in 2023. Over 81 new blockchain networks catering to gaming were announced, reflecting a 40 per cent year-over-year growth.
The majority of Web3 games (81 per cent) use general-use Layer 1 (L1) networks, with EVM sidechains also gaining prominence. L1 networks continue to be the preferred choice for most games launched this year (75 per cent). In contrast, 51 per cent of new networks were either Layer 2 (L2) (42 per cent) or Layer 3 (L3) (nine per cent), largely driven by the rise of Optimistic L2/L3 solutions. A new category of application-specific networks for gaming accounted for 43 per cent of newly launched networks this year, marking an 84 per cent year-over-year growth.
Distribution challenges persist
Distribution remains a strategic challenge for the Web3 Gaming Stack, with six out of 10 Web3 games excluded from mainstream distribution platforms, relying on direct channels or Web3-native platforms for distribution.
Notably, the Epic Games store has shown increasing support for Web3 games, going from listing only 2 games in June 2022 to featuring 69 games by October 2023. Unity and Unreal Engine dominate Web3 PC game development, capturing a commanding 95 per cent share.
The majority of Web3 games (85 per cent) utilise blockchain technology to tokenise fungible and non-fungible assets while keeping the game state and logic off-chain. Only five per cent of the total game population operates on a fully on-chain model.
Blockchain competition
In 2023, a record number of Web3 games migrated to different networks, with Polygon, Immutable and Arbitrum emerging as favoured destinations. The Polygon ecosystem currently hosts the most Web3 games, followed by BNB and the Ethereum Mainnet. Immutable has become the most popular Layer 2 gaming ecosystem, followed closely by Arbitrum. Solana remains the largest non-EVM ecosystem for Web3 games.
The OP Stack is the preferred choice among blockchain frameworks for creating new networks targeting gaming use cases.
