If you are a gamer, you are probably playing on a console like X Box. Three main players – Sony Group SONY, Nintendo and Microsoft MSFT — control that market.  Then there are the newcomers. They operate in the blockchain universe: the so-called Web3 games.  Analysts estimate Web3 gaming’s market size at $23.9 billion, about half the size of the console gaming market.

Investors have an upside here, however. Market analysts forecast Web3 gaming compound annual growth rates (CAGR) somewhere between 18.7% to 30%. Console gaming CAGR: 4.8%.

Web3 gaming taps into the cryptocurrency, decentralized blockchain hype. That is what separates them from traditional video games. In the most bullish case, the market could hit $133 billion by 2030. Analysts expect the console gaming market size to reach around $73 billion in 2027.

These forecasts might be why Sony is building a blockchain called Soneium to support Web3 games. No word yet on rivals Microsoft and Nintendo doing the same.

“Our goal is to make Web3 games as enjoyable as the ones you play on your Xbox, but with less hassle. Browser games are more versatile; you can play them on your TV by connecting your laptop, and you can take them with you when you travel,” said Riccardo Sibani, Chief Product Officer at My Neighbor Alice, a blockchain-based game.

Web3 games are similar to traditional PC games in some ways. Some key differences are:

• Wallet Connection: Most Web3 games require a cryptocurrency wallet to play. It acts as your identity and stores any in-game assets or tokens in play-to-earn games.
• Browser-based: Many Web3 games are browser-based, allowing gamers to play directly in a web browser after connecting a wallet.
• Downloadable Clients: Complex Web3 games often require users to download a dedicated game client, similar to traditional online games. Australia-based Illuvium (ILV) is an example of this type. ILV is down considerably year-to-date.

They also differ from console games and traditional PC games as they allow for in-game transactions, which means players can buy “assets” like non-fungible tokens (NFTs). Recent market shifts destroyed these asset values from an investor standpoint.

NFT trading volumes fell by 61% from $3.1 billion to $1.2 billion dollars, based on CoinGecko data. NFT loan volumes dropped by around 74% to $284 million. The fortunes of Web3 gaming tie many NFTs to their success. This segment of the digital assets market has not recovered from its 2021 highs despite recent gains.

“A fully decentralized game, unlike console games, cannot just disappear. You keep the ownership of the items you bought, and they can be used in different games and decentralized applications,” said Sibani, comparing Web3 in-game purchases to those one makes to upgrade console games that are usually not transferable to new versions of the same game. “Some major NFT collections are usable across various games. That level of interoperability is unheard of in traditional games,” he said.

Paul Thomas, founder of the blockchain project Somnia –- a blockchain geared towards Web3 gaming and other applications — said that despite the bear market, Web3 games are getting better and the user base is growing.

“Critics say that it’s time to start giving people high-quality games they can’t put down, and games that they would play without the financial incentives in play-to-earn models,” he said. “I think those incentives should just be an added bonus, not the main reason you’re playing the game. We are seeing this shift happening already. Look at Pirate Nation (PIRATE), Parallel,or Off the Grid — they all are engaging games that have kept people hooked. They attracted players, not just cryptocurrency speculators,” he said. 

Blockchain Gaming Growth Stories and Newcomers

Web3 gaming ranked fifth in the digital asset markets for venture capital raised in 2024, according to RootData.

The gaming sector has attracted some $580 million in investments, ending in the third quarter. Blockchain games have about 4.2 million daily active users as of August, according to a DappRadar report.

Gamer blockchain Ronin (RON) leads this space based on unique active wallets, thanks to super popular games like its flagship game Axie Infinity (AXS) and now Pixels.

(See Benzinga interview with Pixels founder here.)

Pixels reportedly hit over 1 million daily active users (DAUs) for the first time in May, although this number has since fallen to around 725,000 DAUs.

“I’m excited about games like Shrapnel (SHRAP), Unioverse (a first-of-its-kind composable IP-as-a-service platform), and IconX(ICNX), with their tokenized game management layer for e-sports,” said Alex Casassovici, CEO and Founder of Azarus, a  San Francisco-based blockchain gaming and live streaming platform.

He also mentioned Off the Grid, which is traditionally a console and PC game made by Gunzilla Games out of Frankfurt. The third-person shooter game recently launched a Web3 version on Epic Store and hit 900,000 concurrent users.

“If they maintain that momentum, they could help bring Web3 gaming mainstream,” Casassovici said.

Gunzilla is privately held. Accredited investors can potentially invest in Gunzilla Games through platforms like EquityZen, which offers pre-IPO shares.

Web3 is a growth story.

“Gamers are everywhere.  Many haven’t made the jump to Web3 gaming yet,” said Sibani.

Web3 Gaming Hype and the “Degens” that Ruin Markets

The sector is a victim of its own hype. Investors have paid the price. Timing is everything in these alt-coins, which have moved wildly thanks to what the crypto market refers to as “degens”.

The degens, or “degenerates” to put it bluntly, refers to the player or investor who speculates on blockchain-based games and platform tokens. They often invest heavily in new or unproven games and build up their hype. There’s tons of pump and dump. That trade has killed the sector as an investment theme, and made it roulette wheel.

“There is good reason for the criticism of this market. Web3 games have been built to generate yield, not fun. They attract people looking for quick gains, but then it all crashes when the hype dies down, and users disappear,” said Casassovici.

With Azarus and Stream, “It’s not about players buying from each other to pump up items,” Casassovici said. “Our Watch, Play, and Earn model is about creating value from activities people already enjoy, then sharing it with stakeholders. No wash trading; no market manipulation.”

Thomas from Somnia predicts 2025 will see Web3 games breaking out of their primarily Web3 gamer audience and will attract more of the traditional console and PC gamer.

“Web3 has a really bad rep from console and PC players, especially in the U.S.,” Thomas said. “People have a misconception that everything in Web3 is play-to-earn or is just there to exploit cryptocurrency traders. Now we are seeing a lot more games where those Web3 components are optional or hidden unless the player wants to find them. I think that this subtle introduction will work to get more gamers familiar with Web3 and realize that it’s basically just Steam (a digital distribution platform for PC games developed by Valve Corporation) with better fees and more freedom,” said Thomas. “You have major game streamers like Shroud talking about blockchain when he is playing Off the Grid,” he said. “We are seeing the changes develop.”

*The writer of this article is an investor in the Decentraland token.