Why We\'re (Still) Investing in Web3 Gaming

For innovation, adoption and impact, gaming stands out as a leading use case for blockchain technology, say Leah Callon-Butler and Nathan Smale

Despite a downturn in game tokens, Web3 gaming is still attracting investment due to its potential for innovation, adoption, and impact.

Key Takeaways:

With game tokens down 37% overall in 2024, some are writing off Web3 gaming, but this is shortsighted.

Despite the downturn, Emfarsis is still actively angel investing in seed and pre-seed Web3 startups.

This is a great time to invest, as builders are pitching mind-bending new ideas and shipping intriguing MVPs.

Emfarsis is putting its money where its mouth is, guided by the thesis that Web3 gaming will move us further forward in terms of innovation, adoption, and impact than any other use case.

Our company Emfarsis is now investing in and advising early stage Web3 projects with a focus on gaming. We originally became interested in blockchain way back in 2016 because we saw the potential for the technology to empower marginalized groups and champion inclusion, redistribute wealth and power more fairly and transparently, and improve the lives of billions of people all around the world. Ultimately, we believed that Web3 could be a force for good.

It wasn’t until late 2017 when we went all in on Web3, joining a crypto payments startup that sought to level the playing field for business operators that were fighting tooth and nail with the banks for a fair go. We got to go around the world giving talks and running workshops, while I wrote red pill-styled opinion pieces on everything from peer-to-peer (P2P) payments and crypto-asset backed remittance to decentralized identity and reputation.

But, OMG, the education effort was a hard slog. Yes, of course, people would nod emphatically as we told them they could be their own bank, and transact permissionlessly — yada yada yada — but only a small number actually converted. Even then, they were more likely to buy on a local, licensed CEX and HODL, rather than self custody and go off exploring the decentralized ecosystem.

We found ourselves asking: what’s the point of world-changing tech if you can’t get people to use it? Not just check the balance on their wallets once in a BTC moon, but really use it? At the time (circa 2018-19), we felt the learning curve was too steep, the UX sucked, and quite frankly, talking about wallets, payments and remittance put people to sleep. Not to mention that most people weren’t overly enthused about investing their savings into “magic beans” that they viewed as volatile, risky, and possibly scammy. Few normies wanted to gamble on that.

But making money by playing a video game? Now THAT was a different proposition altogether. This was the promise of play-to-earn and we discovered it before most, when “blockchain gaming” was still an oxymoron. When I first wrote about it for CoinDesk in August 2020, Axie had less than 500 DAU, was still on Ethereum, and suffered all of the same UX and on/off ramping issues as the rest of crypto. But that didn’t stop a tidal wave of new users, when word got around about the game that paid you to play — particularly in the Philippines where we’d relocated in 2018 in the belief that the country would see a crypto adoption miracle thanks to its young, digitally-savvy but mostly unbanked population that was highly proficient in English.

At its peak in July 2021, Axie counted nearly 3 million daily active users (DAU). Largely, they were poor, low-skilled service sector workers hailing from emerging economies in Southeast Asia, Latin America, India and Africa — exactly the kind of people that we’d hoped might one day find personal empowerment in crypto. This community had previously been ignored by crypto marketers due to their lack of disposable cash, and here they were, finally, and legitimately, competing in the global decentralized digital economy as equals. It was the miracle we had predicted; we just never dreamed a video game would be the catalyst.

Read more: Jeff Wilser - What Hamster Kombat Did: How Telegram Built a Web3 Gaming Juggernaut

It’s critical to note here that Axie’s developer, Sky Mavis, had achieved this great adoption feat without needing to make blockchain easier to use or understand. It didn’t even lower the cost of participation, as you still had to buy the NFTs you needed to play (at least, you did in the early days — more on that later). Instead, Axie changed the game entirely, by delivering an unapologetically Web3-native experience that was unparalleled. It financialized gaming in such a way that anyone who contributed real value to the game’s virtual economy (not just the developers and the publishers) could reap the benefits. And people wanted it so bad

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