Top News
#1: Apple Takes a 30% Bite of NFT Sales
Up until this week, there has been a lot of ambiguity around selling NFTs in apps on the iOS platform. People have been able to purchase digital goods for a long time, but those goods could never truly leave the app to exist and be tradable on a blockchain. According to a report by The Information, Apple is telling startups that they can now sell NFTs in apps through the in-app purchasing system using fiat non-crypto currencies, and thus paying a 30% fee to Apple. As the system follows the normal rules for IAPs, the fee is only 15% for apps selling under $1M yearly, but that’s little consolidation for developers looking at web3 as a potential source of growth and a technology that idealistically could evade oligopolistic middlemen.
Initial responses have proven fairly mixed, with Tim Sweeney of Epic Games (fresh off a long legal battle with Apple over App Store fees) coming out swinging in a tweet stating:
Magic Eden, the popular Solana-based NFT marketplace, pulled development for in-app purchases from its app despite Apple offering the 15% fee option.
There are others taking the opposite approach and embracing the news, like Gabriel Leydon of Limit Break who is jokingly happy to give 30% of nothing as his company give NFTs away for free. Leydon instead was very bullish on Apple explicitly allowing NFTs and providing much needed clarity; he tweeted that:
While it’s generally a positive that Apple is finally establishing a clear stance on NFTs, it does make one question whether this is a smart approach. Apple makes significant revenue from the IAP fee, but it has become a point of contention for developers, i.e., Epic which saw huge amounts of money from Fortnite enriching Apple disproportionately to what the company provides in return. This contention has led to lawsuits, which have started opening up opportunities for alternative payment methods.
One method that’s proven popular and relevant to web3 is developers selling discounted digital goods via the browser (on whatever device) to spur alternatives over IAP. This clearly has limited impact — most users won’t want to deal with the extra hassle — but the benefit to developers is that they can discount the virtual goods (up to 30%) and profit more than when using IAPs. Web3 developers are already accustomed to making sales through the web and wallet extensions, so this isn’t a stretch for them, and it could make good sense for whales — the biggest buyers — to follow along. Apple’s move here will likely cause developers to push customers to use web stores, especially since Apple won’t (yet) accept cryptocurrencies or tokens for the purchases. In theory, the system does make sense if Apple is just trying to treat NFTs as any other type of digital good, but this also runs into Apple’s $100 limitation on individual IAP purchases, an amount that NFTs often exceed.
With the business model for web3 gaming still evolving and many F2P mobile developers looking to move into the space, we do expect there will be many developers willing to take direct revenue instead of crypto or tokens even at a 30% “loss.” It still seems sensible for the developers who are minting or selling NFTs directly to players to consider this move a positive, but any kind of player-to-player transactions make little sense to happen in-app now. Developers may also take the route of allowing items that were purchased in-app to be minted into NFTs at some point after the initial purchase, thereby reducing the number of on-chain transactions and gas fees. Financial motivations aside, there are aspects of this that are counter to much of the decentralized ethos blockchain advocates are excited about, and it exposes the real power dynamics at play (unsurprisingly, the platform with all the users gets to set terms in its favor). We expect a continued mixed reception of adopters and haters, a similar policy on Google’s side, ongoing tweaks to the specific rules over time (perhaps some even do to new regulations), but, regardless, this move will significantly increase the presence of NFTs and web3 in mobile gaming.
#2: The Merge Emerges Successful
Despite the struggles that crypto has been facing since spring, many looked with eager anticipation toward the biggest chainwide event in a long time: the Ethereum 2.0 “Merge” on September 14th. Despite the nervousness and anticipation, The Merge quietly succeeded, but instead of Ethereum prices jumping up, they went down (classic “buy the rumor, sell the news”). Let’s dig into what this event means in general and for blockchain games.
Over the years that Ethereum has been around, there have been many proposals on how to upgrade the network. One of the big lessons was that Proof of Work wasn’t a great way to scale, especially in terms of environmental impact. To secure the network in a Proof of Work system, like the one Bitcoin still uses, it requires tons of electricity and computers crunching numbers 24 hours a day. Proof of Stake, on the other hand, is a system designed to use pure financial incentives, where users validate transactions via “staking” their assets to guard against fraudulent behavior.
Ethereum began this transition with a “Beacon Chain” starting back in 2020, with plans to eventually merge it with the main chain, and in doing so replace the consensus system with Proof of Stake. This is all The Merge essentially did, despite all the excitement around other upgrades. Most importantly, though, it did lay the groundwork for all the other things that people are usually excited about when it comes to improving Ethereum. It is worth highlighting that the success of The Merge reduced Ethereum's energy consumption by an estimated 99.95%, making Ethereum now an environmentally friendly blockchain, so we can finally end the “NFTs are burning down the rainforests” narrative.
While moving to Proof of Stake itself is a huge accomplishment, there are a couple of areas it didn’t improve on. First, moving to PoS doesn’t improve the ability to process more transactions or reduce gas fees. Transaction throughput is exactly the same, and gas prices haven’t really changed. Those areas will improve with future upgrades around sharding and rollups, but PoS had to be done first.
The area that may push the value of ETH up, however, is that the network should become far less inflationary and potentially deflationary. Processing transactions in the Proof of Work system required both minting new ETH to pay for miners and burning ETH (since the London fork a while ago). Now that Ethereum has moved to Proof of Stake, ETH is still burned, but the minting for staking rewards is far less, dropping from ~13,000 ETH/day to ~1,600 ETH/day. With current gas prices, at least 1,600 ETH is burned daily, which creeps into deflationary territory. In short, if demand for ETH rises over time while the supply of ETH shrinks, it should be a net-positive on the long-term price.
So what does this all mean for games? While there are competing Layer 1 networks like Solana for web3 gaming, Ethereum is still considered as the primary backbone of NFTs and NFT-driven gaming for the foreseeable future. With Apple now explicitly allowing for some forms of NFT support and other large platforms like The Epic Games Store allowing web3 games, the scene is set for accelerated adoption. Ethereum has proven to be stable and capable of successfully upgrading along with supporting popular Layer 2 networks like Polygon and Immutable X. We expect that despite the ongoing macroeconomic stresses, web3 games are increasingly positioned for a potential explosion in the next 2-3 years, and The Merge’s importance will be better understood in hindsight than by looking at any immediate short-term impact.
Game Launch Radar
- MetalCore is releasing an open world alpha for Genesis Infantry NFT holders in early October after making tweaks based on its PAX West showing. Link
- THUNDR Games launched a mobile solitaire-style game with Bitcoin earning. Link
- Illuvium is releasing a new private beta for existing testers with lots of updates soon. Link
- R-Planet: Conquest is running a closed alpha for select testers. Link
- Voxie Tactics announced Season 0 launching on October 10th. Link
- Stella Fantasy is running a week-long closed beta test of its ARPG for NFT holders. Link
- DragonMaster launched breeding version 2 and went free-to-play. Link
- Midnight Society, headed by Dr. Disrespect, has released the second snapshot of DEADROP for Access Pass NFT holders. Link
- Metarun, a mobile P2E endless runner, launched an open beta with PvE and PvPvP. Link
Other Game Announcements
- Genopets announced economics changes for improved sustainability. Link
- Brendan Greene, creator of PUBG, revealed his next title will be a blockchain-metaverse-related project. Link
- The Sandbox announced a new SAND-staking pool for land owners. Link
- Gods Unchained announced a new mini card set called Light’s Verdict that will be on sale for two weeks from September 28th until October 12th. Link
- Upland launched new community developer tools for third parties to create game experiences. Link
- Lost Relics, an Enjin ARPG, announced new features. Link
- Oxya Origin, an Immutable X MMORPG, announced an upcoming land mint on October 9th with a whitelist. Link
- Pixelmon announced broad new plans to try and recover from previous missteps. Link
- Monsterra launched Super Farmer Season 2, running from September 26th to October 3rd. Link
- Fragnova announced a pivot to blockchain technology for its kickstarted Ambal Duels card game. Link
- Metashooter announced a series of major updates on September 30th including an NFT marketplace and a pre-beta version. Link
- Gunfire Polygon, an Auto NFT shooter on Android, launched Mega Endless Tournament Season 3 with $10K in prizes. Link
- Football club AC Milan announced a partnership with MonkeyLeague. Link
- Liverpool football club announced an expanded partnership with Sorare. Link
- Bitverse launched its Bitverse Heroes NFT collection for its three-game Bitverse project. Link
- DeFi Kingdoms released a new multi-questing feature for Crystalvale. Link
- Gala Games released a teaser for a new business simulator game, Legacy, by 22cans and Peter Molyneux, intended for release later this year. Link
- Cross the Ages, an NFT TCG, announced an off-chain tournament with a $20K prize pool in USDT. Link
Funding Announcements
- Theorycraft Games raised $50M in a Series B funding round for its game Loki led by Makers Fund. Link
- Vulcan Forged raised $8M to build out its VulcanVerse game in a Series A funding round led by SkyBridge Capital with an option to invest an additional $33M. Link
- Hadean raised $30M in a Series A funding round for its metaverse infrastructure technology led by Molten Ventures with participation from Epic Games. Link
- Headquarters, a web3 back-office platform, raised $5M in a round co-led by Crypto.com Capital, Forge Ventures, and MassMutual Ventures. Link
Ecosystem Updates
- Lamina1, the blockchain metaverse by Neal Stephenson, released its whitepaper. Link
- Stanford researchers have proposed a reversible token standard for fungible and non-fungible tokens to combat fraud. Link
- OpenSea has a new Drop Pages program to allow minting and publishing NFTs directly on OpenSea for enhanced visibility. Link
- The US Treasury has requested comments from the public regarding NFTs and CBDCs. Link
- Meta Studio announced a partnership with Polygon Studios on a metaverse project. Link
- Zilliqa announced a web3 console with first-party games and wallet integration for its blockchain for pre-order in Q1 2023. Link
- Atari launched a new company for its web3 projects as Atari.X. Link
- Disney is looking for a lawyer to help with web3 and metaverse plans. Link
Notable Market Moves
- As expected, after two weeks of 13% growth, ApeCoin finally corrected back down by a small 5.28%. Most of the movement has revolved around DAO proposals and is likely to continue until other concrete utility comes out in the form of The Otherside or perhaps usage in other game or metaverse projects.
- AXS fared pretty well with a 5.09% gain. AXS rewards for Season 0 leaderboard players are being distributed now, so we may see it come back down next week if those receiving the token decide to sell.
- In a similar vein, StepN managed to have a good week, but it could be short-lived as GMT-earning mode finally went live on the 28th. Depending on emission rates and the desire of earners to sell, it could see a significant drop. StepN did announce an opportunity to donate GMT to charitable causes, with price matching from The Giving Block, which at least is some positive PR for GMT.
- Gala continued on its recent downward trajectory despite positive attention coming from the Superior playtest and the announcement of a new business management game, Legacy. Gala Games has a lot of titles in its pipeline, so if it manages to deliver on many of them, then long-term results could turn positive.
- As always, we remind you to look long-term. Much of the belt-tightening and general crypto winter behavior is likely to persist for some time before more significant upward trends appear, but either way, crypto is still always volatile in the short-term. There are scores of games with high potential still in development that may have a huge impact over the next few years.
Content Worth Consuming
What is ev.io and why is it one of the most popular web3 games? (Sequel) - “Blockchain has zero effect on a user’s experience when it comes to direct gameplay. There are no avatar-enabled features that provide in-game utility or pay-to-win blockchain mechanics to drive up your score. The driving force of the game is its gameplay, as it should be. Ev.io is fun and casual, and it doesn’t require any sign-ups, non-fungible tokens (NFTs), tokens, or even wallet connectivity. It is a truly frictionless game that forces users to play before judging. Perhaps it’s never on the ‘Most Popular Web3 Games’ list because the web3 element is completely optional, for good reason, especially in today’s gaming climate.” Link
Polygon & The Future of Gaming: An Overview (Dappradar) - “And that’s when it gets interesting. After all, onboarding traditional gamers is the optimal challenge for Web3 game enthusiasts. GameSwift, the decentralized Web3 ecosystem focused on gaming, aims to facilitate this process. It not only provides developers and studios with all they need to get started with implementing projects in the Web3, but also gives them space to simply innovate. Once we understand the benefits of decentralization and true ownership of your in-game assets, you can’t go back. But the evangelization process is almost too difficult to be worth the effort. Unless we’ve been trying the wrong strategy.” Link
NFT Marketplaces: Winners, Losers, and Lessons for Growth (Kazm Blog) - “To fend off new competitors, NFT marketplaces will have to transition from temporary to sustainable moats. Temporary moats include low fees, chain-specific integrations, and engaging features. These can generate growth initially but are easily copied. Even first-mover benefits can wear off. Instead, long-term market leadership comes from sustainable moats. In web2, sustainable moats are built with advantages like network effects, scale, brand loyalty, and switching costs. In web3, there’s still debate about how sustainable moats can be created. NFT marketplaces will provide a real-time case study. As OpenSea looks to consolidate its position, projects like Magic Eden and LooksRare are building communities to try to establish a durable advantage. For SudoSwap, decentralization and a focus on traders provide a marked difference from OpenSea and other platforms. With its governance token, SudoSwap also appears to be gesturing toward a community-driven moat that could ward off forks using its code.” Link
Web3 Mobile Games Bring Millions of Users to Blockchain (Dappradar) - “One important nuance here is that casual mobile games traditionally attract users looking to kill some time with a fun mechanic. The sounds, graphics, and feasibility of progressing through levels play their part in the game’s addictiveness. Earning is the kicker. On the flip side, crypto-native players see both sides of the coin. Recently we saw two breakout games on the Near blockchain in Solitaire Blitz and Trickshot Blitz. These two games come from Joyride Games and reward players with RLY tokens, which can be used and exchanged for fiat. They are built exclusively for mobile and are available on iOS and Android. They are responsible for over 750,000 active blockchain game users in the last 30 days.” Link
Top Gaming VCs explain their obligation to invest during crypto winter (Deconstructor of Fun Blog) - “So a typical VC fund would have, let’s say, a 10-year mandate. A typical setup would be that during the first four years you invest most of the capital. After those four years, you stop investing in new companies and any remaining capital you have in the fund is earmarked for your existing portfolio. And you only invest in your portfolio companies’ future rounds after the 10-year period. And there’s usually a way to also extend that period. At the 10-year mark, you distribute those returns to the investors. So, the investors know that when they get into the fund after 10 years, they will get their money back based on certain multiples.” Link
Blockchain won't disrupt the gaming industry, it will complement it (Future of Gaming) - “However, despite the current constraints, blockchain technology could very easily become one of the most compelling ways to onboard players that wouldn't otherwise consider gaming (and even less call themselves ‘gamers’) as their main form of entertainment. Regardless of the many challenges that Axie may have faced and/or is currently facing, it's only fair to mention it as a success story even strictly from the point of view of expanding awareness and adding new players to the pie. Sure, it's factually true that a lot of things converged to contribute to the rise of play-to-earn (COVID-19 pandemic, global economic circumstances, local market tailwinds, etc.), but there's no denying the fact that they proved that it is entirely possible to bring new players, albeit only temporarily up to this point. Our prediction is that it will take a few more years (not just crypto cycles) to see the real potential of blockchain gaming to onboard a completely new cohort/generation of players.” Link
Reimagining NFTs (The Metacast by Naavik) - “On this week’s Crypto Corner, Luda CEO and Co-founder Vijay Sundaram joins your host Nico Vereecke for a conversation about community-driven IP creation, the current state of Web3 games, how NFTs can be so much more than just ‘collections of 10.000,’ what he’s building at Luda, and more!” Link
Mighty Bear’s $10M pivot from Butter Royale to blockchain games (Deconstructor of Fun) - “Born from the ashes of a studio closure, Mighty Bear Games was founded by an experienced team of F2P veterans whose work crossed browser and mobile games. Having built up their studio and tech stack with Butter Royale and Disney Melee Mayhem, the studio's pivot to Web3 has seen it secure a $10M investment to build games for the blockchain. With Mighty Action Heroes nearing its initial mint, Ethan speaks with Might Bear CEO Simon Davis about his studio, his experience in F2P, and his transition to Web3 gaming. In addition to Web3, they talk about learning from the pain of crunch and the lessons learned leading games and studios that have led to Mighty Bears’ culture and focus on the people who make the games.” Link
