Over the course of a few months this summer, ethereum-based Axie Infinity transformed from a relatively small cryptocurrency game to the largest project in the booming NFT space, with over $2.2 billion in transactions to date. Players are spending hundreds, if not thousands, of dollars on digital Axie monsters, plots, and more.
According to Amy Wu, a partner at Lightspeed Venture Partners, video game industry heavyweights are now paying attention.
“Every major game publisher is exploring blockchain,” Wu said in an August viral tweet. Axie has “lit a fire around blockchain in gaming,” she added, and traditional game publishers are actively seeking partners to help them navigate the challenges of entering the space.
Lightspeed manages more than $10 billion worth of assets invested in companies across the cryptocurrency and gaming space. This includes stakes in traditional video game makers such as Fortnite publisher Epic Games and Splitgate developer 1047 Games.
Thousands of games are released every year on PCs, consoles and mobile devices, but only a handful of them actually break out and reach the masses. Wu believes that cryptocurrency elements can help games stand out from the competition and really resonate with players.
“Blockchain is a way to cut through the noise,” Wu told us at last week’s Messari Mainnet conference.
Building a game with cryptocurrency elements and user-owned NFT items is a departure from traditional approaches to game design, and “it’s still novel,” Wu added. For some players, the speculative aspect is key – the value of the NFT game assets they own has the potential to increase. For other players, there is an inherent value in actually owning items in a game they enjoy and play regularly.
Community and compliance
Wu also sees NFT as an important part of stimulating the game’s fan base, which can take years to develop and expand – especially for smaller indie projects.” She explains, “One of the use cases for NFT is the ability to engage the community prior to launch.
Axie Infinity has done this as the game has gradually expanded since development began in 2017, with many planned upgrades ahead. Upcoming games like The Sandbox and Star Atlas have similarly built communities through NFT sales before playable games launch, engaging early fans in the prospect of ownership and becoming early “founders.” On Thursday, Axie airdropped $60 million worth of AXS tokens to early players.
Axie Infinity has sold $2 billion worth of Ether NFTs. here’s what’s next
On top of that, Wu said, blockchain games can enhance publishers’ revenues compared to traditional games, thanks to a user-owned economy that constantly offers a share of sales.
“If you have in-game items that are traded as NFT items, either within or outside of that game publisher’s closed ecosystem, you can really deepen the game economy significantly,” she told us.” You have more liquidity, and that’s actually a great way for players to spend as much money as they want in the game, which was previously restricted.”
Wu expects there will be hundreds of cryptocurrency-fueled games in the next few years, but he said major publishers exploring the space are still trying to figure out the possibility of regulatory hurdles.
Video games typically launch internationally, which means there are a significant number of national regulations to contend with. The broader cryptocurrency industry still needs regulatory guidance, particularly regarding whether certain types of tokens are considered securities. This could amplify the challenges faced by large game publishers considering cryptocurrency-powered creations.
“When you’re a large game publisher, you have players in maybe 150 jurisdictions around the world,” Wu explained.” If you’re going to be on and off cryptocurrencies and allow trading in them, you need to consider compliance issues.”