It’s been 14 years since the Bitcoin whitepaper was released and most people still don’t understand the power of web3 tools like NFTs and smart contract platforms. To change the narrative, we need more killer apps.
Many people, myself included, believe games are the most likely catalyst. But what exactly is a “game”? To many people, games are developed using an engine like Unity or Unreal and accessed via a console, PC, or mobile phone.
However, the proliferation of mobile phones and new tech has started blurring the line between games and consumer apps.
Web3 gives us new tools to turn consumer apps into economic games. For example:
The $BLUR airdrop, loyalty score system, and tiered mystery boxes clearly introduced game design elements to NFT marketplaces.
The Serum airdrop for Bored Ape holders was used to craft Mutant Apes with random rarity. Yuga also has a fungible token, $APE coin, which can be staked to earn yield and used as in-game currency for mini games like Dookey Dash.
Sound.xyz has leaderboards to show top songs, artists, and collectors based on ETH volume.
However, applying game design principles to your consumer app is much more nuanced than just adding XP, badges, currencies, exclusive rewards, and leaderboards. Game design is really about system design. It’s about understanding a combination of consumer psychology, marketing, product design, economy design, monetization, technology, and more to develop a system with a sustainable business model and compelling consumer experience.
Over the past few months I’ve been building a web3 consumer brand and have been obsessively following some of the top web3 game designers to understand how they’re thinking about the space. Their views have heavily influenced how I’m approaching things so I figured I’d share here.
Here are the four major trends I believe will influence the next-generation of web3 games and consumer products:
NFTs are a next-generation pre-registration tool
Founding influencers are a core marketing channel
NFT “Factories” are the next evolution in web3 economy design
NFTs are a better way to monetize whales
Trend #1: NFTs are a next-generation pre-registration tool
Their core onboarding strategy was a pre-registration system where players could earn rewards based on how many people created an account and signed up for email updates before the game launched.
In a world of ATT and rising customer acquisition costs, pre-registration systems are a key lever for bootstrapping initial demand for a game, product, or brand. Nikke offered a combination of in-game currency and exclusive characters as rewards for reaching certain registration milestones.
The next obvious step is giving people valuable NFTs for pre-registering. We’re starting to see some early models through products like PreMint, FreeNFT, and Mirror. The key will be designing a system where all registrants get a reward, and a lucky few (based on how many others they refer and how engaged they are within the community) receive an airdrop of extremely rare NFTs that are valuable in-game assets and instantly tradeable for thousands of dollars.
I’ve heard stories from veteran game designers saying that back in 2009 they used to run banner ads on websites and offer raffle spots for an iPod giveaway to people that downloaded their apps. Pre-registrations with NFT giveaways are the exact same thing except now you can either use the NFT in the game or sell it for thousands of dollars. Pretty funny how we’re actually just applying old patterns but with upgraded tech.
Trend #2: Founding influencers are a core marketing channel
Another way web3 game studios are innovating on customer acquisition is through influencer marketing. In the past, influencer marketing was about paying a Twitch streamer or YouTuber to shill your game. This kinda worked but not really. Consumers are less likely to try products that are obviously paid promotions versus something an influencer supports organically.
Meanwhile, top web3 games and consumer brands are taking a different approach. They have a founding influencer that understands crypto culture and memes, knows how to shitpost, engages on Twitter Spaces, and can consistently entertain an audience of degenerate Twitter followers.
Frank DeGods is probably the best example, followed by Gabe, Igor, 9gag, wab, Sash, Luca, and Dayton. They all have their own unique style but they’ve all grown to over 100k followers through a combination of memes and actively engaging with their audience. Many of them also used whitelist giveaways (trend #1) to accelerate their growth over the past couple months.
Trend #3: NFT “Factories” are the next evolution in web3 economy design
The first era of web3 economy design was about token-first models. Examples include games like Axie and Illuvium. In these ecosystems, the core asset for value capture is a fungible token.
The second era of web3 economy design was about NFT-first models with a token. Examples include games and brands like Wolf Game, EtherOrcs, and Yuga Labs / BAYC.
Today, many top game designers are moving away from fungible tokens entirely, because they’ve realized it’s really damn hard to balance a virtual economy with a freely tradable token. Let alone all of the regulatory risk that comes with launching a token.
Instead, top game designers are starting to use what they call an “NFT Factory” model. With this approach, they launch a FREE Genesis NFT collection with a relatively low supply (500 to 2k), and these NFTs become the most powerful assets in the ecosystem. Over time, the game developers airdrop other less powerful and higher supply NFT collections to the Genesis holders. This turns the Genesis collection into a “factory” that mints other NFTs in the ecosystem.
Genesis holders can then choose to hold or sell their airdropped NFTs. Selling gives them some liquidity without fully exiting the ecosystem, while also onboarding new members at lower price points.
The tricky part with the NFT Factory model is determining the rate at which you airdrop new collections. DigiDaigaku probably airdropped too many collections which flooded the market and caused prices to fall over 50% the past few months.
As a general rule of thumb, game designers are saying that launching about 5 collections over 12 months is a good pace. There’s still a lot to figure out with the NFT Factory model but it seems like a promising innovation within web3 economy design.
Trend #4: NFTs are a better way to monetize whales
The common narrative for web3 gaming is that we need to create a fun game, add some NFTs and tokens to the economy, and then we’ll onboard the masses. But most top game designers have a different view. Instead of trying to get grandmothers in Ohio to buy ETH and download a wallet, their goal is to onboard just the ~10% of players that spend a meaningful amount of money on games.
Most game designers are planning to release two versions of their game. One version that’s web2 friendly on mobile, PC, or web. And another version that’s crypto-native and web-only. Most people will just play the web2 friendly version and not even know about the crypto-native version. However, both ecosystems will be interoperable so whales and crypto-natives can collect rare NFTs and trade them while still being part of a lively web2 friendly ecosystem.
In traditional free-to-play games, players that spend over $1,000 per year on a game are deemed whales. At the high end, there’s people that spend $10k, $50k, or even $1M.
Performance marketers in the gaming industry pay billions of dollars every year to get these whales to download their game and spend a lot of money in it. Performance marketing is not about spending $3 to acquire a user that spends $4. It’s about spending $300 across 100 users with the hope that a few of them spend $1,000. These marketers are fishing for whales, not minnows.
The crazy thing is that crypto already has tens of thousands of people willing to spend $1,000 (or just ~0.6 ETH!) on a game. Web3 game devs and web3 consumer product builders should be focused on monetizing this segment and onboarding others like them, while interoperating with a web2 friendly ecosystem.
There’s a lot to learn from previous generations of web3 games and consumer products. Studying the latest trends has helped me think through where the future could be going and hopefully it’s helpful to you as well.
I’m building a new type of NFT project + web3 brand with a few awesome viral marketers, designers, engineers, and game designers, and will be launching this summer. We have open roles across design and engineering so feel free to DM me on Twitter if you’re interested :)