Over the last half-century, there is no denying that video games have captured the attention and hearts of billions across the globe and cemented itself in a special place in popular culture.
At Immutable, we have been obsessed with gaming since day one. We believe that, as it once did, games will usher in a new wave of mainstream commercial adoption for an exciting and innovative frontier of technology: blockchain and tokenized digital assets as NFTs.
In a world where our peers are trying to solve everything for everyone, from DeFi to digital art - Immutable remains relentlessly focused on solving for gaming first. Our conviction is based on a number of reasons, explored in this article.
Gaming = Culture
The scale and impact of the gaming industry is hard to fathom. In 2023, the gaming market size reached approximately $250 billion, with projections suggesting a surge to $375 billion by 2028, according to Mordor Intelligence. To put this into perspective, the gaming industry is bigger than the movie, music, and art industries…combined.
Video games have transcended their status as mere entertainment. They've morphed into a cultural phenomenon, shaping language, influencing fashion, generating memes, and music, movies and art. Iconic games like Fortnite, World of Warcraft, and Minecraft are pillars of popular culture, with their characters and imagery instantly recognizable to millions. Gaming bridges generations and geographies, creating a truly global culture of shared experiences and narratives.
With the rise of the free-to-play model, games are becoming more accessible. However, the potential value of this industry could be exponentially greater and more equitably distributed through web3 enablement. By enabling true ownership and granting digital property rights to players via NFTs, we can solidify and map this concept as a cultural norm across all other digitised industries for global adoption.
Web3 Gaming is Not Slowing Down
Gaming continues to be the most compelling and dominant candidate to usher in mainstream blockchain adoption. According to a report by DappRadar this year, gaming accounts for approximately half of all blockchain activity in 2023.
What is unique about web3 gaming is not only its resilience in the face of ‘winter’, but its ability to thrive. In particular, the sector is seeing Asia doubling down on cementing itself as the new frontier for blockchain and gaming innovation. Recently, the Japanese government declared web3 innovation as one of the key fundamental pillars for economic development for the country, while the Hong Kong government launched a $50 million web3 marketing fund.
With the recent release of Immutable’s own Gods Unchained title on the Epic Games Store, and Google Play Store opening up to NFTs, the signals for a web3 gaming future are as convincing as ever. The industry is realizing that shifting towards a incentive-aligned model that empowering creators and a provides higher-quality user experience, can and should be lucrative.
Power Law: One Hit Will Change the World
The gaming industry is power-law driven - the most successful game will have more users than all other games combined. This means that all it takes is one initial hit with hundreds of millions of players for the rest to follow and completely reshape the industry, opening the floodgates for wider mainstream blockchain adoption. Power law is evident everywhere, but is especially true in gaming where a small number of franchises generate the lion's share of industry revenue.
The most prime example is the free-to-play and mobile genres of gaming. Before behemoth hits like League of Legends, Fortnite, Candy Crush, became widespread, players scoffed at the idea. Free-to-play and mobile were seen as low-quality, fringe categories of gaming that would never become mainstream. Today, mobile gaming has become one of the most dominant categories of the global gaming market, while free-to-play games account for 85% of the $250 billion in revenue generated from gaming.
Similarly to how categories within gaming follow the power law, we believe that unlocking gaming first will usher in a new wave of mainstream technological adoption, as the first real use-case for blockchain and crypto. It will also shift the paradigm and framing around digital assets, ownership, and digital property rights.
Why Do Players Spend?
Gaming is an incredibly unique and enduring medium of entertainment unlike any other. Players choose to invest money, time, effort, and emotion into their favorite game over and over again for several reasons:
- Depth: Unlike a movie ticket, which offers a one-time experience, games provide hundreds of hours of entertainment and enduring value. Successful franchises and IP often spawn sequels, merchandise, and even films, adding layers of fan engagement and continuously building narrative depth. Games can rival the best novels and films in terms of storytelling, keeping players emotionally engaged and invested.
- Identity and Expression: In-game assets like skins, avatars, and titles allow players to stand out and craft a unique digital identity.
- Community: Games foster a sense of belonging, whether through guilds, clans, or friends teaming up, becoming social platforms in their own right.
- Reward: In-game digital assets represent the time and effort players put into the game. We believe a world where true ownership over such assets is enabled will amplify this dimension of gaming by orders of magnitude. NFTs and on-chain game mechanics will enable lasting value and interoperability of these assets across games, chains, and IPs.
- Support: The rise of indie games demonstrates that players will spend to support creators. With the growing creator economy, this trend is set to increase.
Conclusion: A Future Beyond Gaming
While gaming is our current focus, we believe there's a vast untapped market in unique digital value. NFTs allow people to have digital custody and aligned incentives. Immutable envisions tokenizing all meaningful forms of real-world value, from term deposits, insurance contracts, to physical property like sneakers, commodities, oil, and wine.
We believe that if we can solve this use-case for something as culturally pervasive as gaming, this will open the floodgates for mainstream adoption and unlock trillions of dollars of market value for all digital property rights and assets in the future.
Immutable is the home for Ethereum gaming.