There are a lot of people who want blockchain games to stand and deliver. And 2023 is likely to be the year when we get some answers about whether high-quality games will show up using the technology.
Urvit Goel, vice president of games at Polygon, recently talked to me about how the blockchain protocol company is trying hard to make that happen.
“Specifically in gaming, 2023 will be the year that blockchain and gaming will be judged heavily on all of the promises that are being made about great games,” Goel said. “We need to start seeing some of those games. There will be enough to start making a determination about quality. A lot of these builders in stealth mode haven’t launched a product yet.”
He notes that Polygon has been at the forefront of Web3 gaming with its recent integration of the popular NFT marketplace Magic Eden as well as top games in the industry such as The Sandbox, Dencentral Games, and more.
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While the collapse of FTX set the industry back, DappRadar reported that the Web3 blockchain gaming sector has seen continued investment north of $500 million between October and November, even after the FTX debacle.
“Our focus will be on helping these builders come to market, whether that is with broad tooling to make it easier to launch or new technology for scaling,” Goel said.
Goel joined Polygon about a year ago, diving into Web3 for the first time after a decade of service at Amazon in game-related roles. He serves as the head of games at Polygon, with the goal of driving the adoption of blockchain technology by game developers. He reports to Ryan Wyatt, who previously headed YouTube Gaming and now oversees all of the vertical industries at Polygon.
A $100 million fund
Goel’s job is to connect developers to technology and marketplaces to build better products. Polygon set up a $100 million fund to invest in Web3 gaming and other verticals, using a lot of its own money from when it raised a $450 million funding round.
Goel believes that the blockchain game industry is getting closer to being an adult. In its early years, during the bull run for blockchain and cryptocurrencies, people brought out very simple experiences that took advantage of the financial opportunity but were viewed as a bunch of noise by gamers.
With the bear market, Goel believes the “true builders” who have been working for multiple years are pushing through and removing a lot of the noise.
“What’s left is the high-quality builders in the space who are committed to building great and fun experiences for customers,” Goel said. “These are well-funded teams that have the runway to build great games. Or it’s large Web2 developers who have Web3 initiatives and can continue to build. I’m not seeing a slowdown.”
As for the competition among blockchains, he believes we’ll see many successful blockchains. He doesn’t view others as competition. Rather, the main task is to evangelize the tech so that more people are willing to adopt Web3 gaming. Different blockchains are trying different experiments.
“A rising tide lifts all boats because we are in this phase of the mission where there are a lot of trials,” he said. “We’ve seen what hasn’t worked quite clearly. And if we continue to go through the trials, we can find what it is that will work. It’s similar to how mobile games took off. We’ve only seen the first iteration. The number of chains out there is actually helpful.”
The FTX crash is definitely a negative event that is hanging over the industry, Goel said. He said it’s worth noting there is a difference between a centralized exchange versus true blockchain technology enablement. The fallout from FTX will take months to unfold, he said.
The $100 million fund is an ecosystem fund that focuses on multiple verticals including gaming, where the company deploys capital to game builders. The fund is still operational and the company is looking at the builders applying to it. Goel said the fund has made hundreds of investments so far.
“The thought behind it is there are a lot of Web3 native builders, and they need support and they need capital,” he said. “We are in a lucky position to deploy part of our treasury to help the ecosystem. It gives builders confidence to see we support them.”
Other funds are also putting money into blockchain games, which helps because Polygon isn’t planning to completely bankroll blockchain game studios on its own.
Goel said blockchain games are already strong, as the number of active wallets has been consistently going back up in recent months. And games are accounting for a large part of all blockchain transactions, according to DappRadar.
“The sector is down, but it has held quite strong,” he said. “The thesis is that players are going to play games whether we are in a bull market or a bear market. The other piece is there are a lot of free digital collectibles ready to drive the top of the funnel.”
It reminds him of the early day of free-to-play games where players eventually started making premium purchases.
“We’re still in the early early stages of blockchain gaming. So if you zoom out a little bit, it’s like making predictions about mobile games back in 2000 [before the iPhone came along] That was hard,” he said. “The focus is on helping developers get to the market. Consumers will tell us what they like.”
Negative gamer reaction
Goel acknowledges that a lot of Western gamers have been vocal about their negative reaction to blockchain games as scams and financial plays rather than fun.
“A lot of the focus has been on technology versus the experiences available,” Goel said.
He noted there is a “cultural movement” around owning profile pictures, or JPEGs of apes that are costing hundreds of thousands of dollars. He said people don’t want to spend that kind of money. But he does believe that players would rather own the assets that they pay for rather than just rent them. If players invest in their digital assets, they should be able to sell or trade them to get some benefit, he said.
“The challenge lies today in the fact that [blockchain] games that companies have been able to show just aren’t great,” he said. “You have to take a leap of faith and look further out.”
There was a big backlash against mobile free-to-play games as well a decade ago, he said. But it has opened games for the gaming industry and is now the biggest part of gaming revenue, he said. He noted that free-to-play games took off first in Asia, where consumers didn’t have a negative view of collectibles.
“At the end of the day, it’s going to be great experiences that matter,” he said. “Nobody cares about the technology as a consumer. It’s about what you are enabling for me. We as an industry have to do a better job at that.”
A fledgling market
I wrote about the success of Million on Mars, which has a profitable hardcore simulation game for Mars exploration with blockchain elements. But its base of players is still small at about 10,000 players.
Goel said he doesn’t think of various segments of the blockchain gaming population yet because the industry is still so small. There is a contingent of crypto-savvy blockchain enthusiasts, and there aren’t enough blockchain games on the market yet. Goel believes the game startups and indie studios will lead the way in blockchain games, as they’re the ones who aren’t afraid to adopt new technology.
And coming up with new kinds of games is better than launching the blockchain equivalent of a Call of Duty game, he said.
“I think you will continue to see a disproportionate amount of funding go into blockchain games,” he said. “I’m bullish for blockchain games. There are more shots on goal at the end of the day.”
Of course, not everything is going swimming. Yosuke Matsuda, CEO of Square Enix, announced he will step aside and promote a younger executive to the top role in June. He was a big advocate of blockchain games and sold off the company’s Western studios to focus on new technologies. (It’s not clear if the new CEO will also focus on blockchain games). The number of active wallets in the blockchain is still pretty small. And the funding could dry up if the economic downturn starts to hurt companies even more.
The blockchain companies are also competing with each other for gaming customers, with ImmutableX poaching studios from both Solana and Polygon and so on.
Goel noted that some of the largest companies in South Korea and some of the largest gaming companies in Japan are still taking their intellectual properties into the blockchain space.
“We’re starting to see some of those dominoes fall. And then what’s that mean for Western game developers? I think that remains to be seen. But this industry is very global,” Goel said.
Meanwhile, the industry needs to improve its infrastructure, whether that is marketplaces, data analytics, wallets, or payment solutions. Game companies shouldn’t have to dedicate their internal staff to do that kind of work.
“We want to partner more closely with developers and help them,” he said.
The blockchain metaverse
As for blockchain gaming’s intersection with the metaverse, Goel said gaming and the metaverse are very closely tied, as some of the earliest metaverse experiences are games where people are willing to stay engaged with the content for a long time.
“I think the metaverse trend will continue,” he said. “Obviously, there are large investments from companies putting in tens of billions of dollars. Then there are the companies building in Web3 where they believer in the decentralized metaverse. We’ll see more large companies come into this space, and I believe there will be gamified experiences and games within the metaverse. But we haven’t seen a true and impactful metaverse just yet. It’s going to take time.”
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