Explaining the Business Model of Web3 Games

What Are Web3 Games?

Web3 games are blockchain-based games that leverage NFTs (non-fungible tokens), introducing a fundamentally different approach from traditional gaming. This emerging genre grants players true ownership of digital assets such as in-game items and characters, creating innovative business models unlike anything seen before.

In traditional games, in-game items and characters remain the property of the game company, with players possessing only usage rights. In contrast, the core feature of Web3 games is that blockchain technology allows individual players to own digital assets directly.

This ownership model empowers players to buy and sell the items they obtain in-game with other players or trade them on external NFT marketplaces. The "Play to Earn" concept, in particular, has captured significant attention across the gaming, economic, and financial sectors.

Key Features of Web3 Games

Web3 games introduce unique features not present in conventional games. The three primary characteristics are as follows:

Establishing Ownership

As previously noted, NFT technology enables players to hold digital assets as true property. Players can genuinely "own" the items or characters they acquire, and these assets may retain value as NFTs even if the game service ends.

Stimulating Economic Activity

Trading in-game items and characters gives players access to new income streams. In some developing economies—especially in Southeast Asia—playing Web3 games has become a viable source of income, highlighting their significance as a new digital economic model.

Global Reach

Web3 and NFTs enable seamless cross-border transactions, allowing games to access global markets immediately upon release. This broadens opportunities for small development teams to reach a worldwide audience.

Major Japanese gaming companies such as Square Enix are actively entering the Web3 gaming sector. With a wealth of globally recognized IP, Japan is well positioned for success in Web3 gaming, raising expectations for the country to drive global industry growth.

Web3 Game Business Models

The distinctive business model of Web3 games centers on converting game content into NFTs and implementing token economies. Together, these elements create a revenue structure fundamentally different from traditional gaming models.

In Web3 games, in-game land, items, and characters are issued as NFTs. This enables players to have clear ownership of in-game assets and freely use or trade them. The establishment of ownership imparts real economic value to digital assets, fostering active trading markets.

Web3 game companies primarily generate revenue from transaction fees on their proprietary NFT marketplaces. Each time players buy or sell NFT items, the operator collects a fee. The more active the market, the more revenue is generated, incentivizing player-driven economic activity.

Many Web3 games also issue proprietary tokens for in-game use. Players can use these tokens to purchase items or earn them as gameplay rewards. Tokens can be accumulated and exchanged for in-game items, sold to other players, or traded for other cryptocurrencies on leading exchange platforms.

This token economy ties in-game economic activity to real-world value, enabling players to earn actual income by playing. Flagship titles like Axie Infinity and The Sandbox have established vast economic systems using tokens and NFTs, with transaction fees from NFT and token trades serving as primary revenue streams for game operators.

Top 5 Notable Web3 Games

The Web3 gaming market already features numerous high-profile projects. Here are five of the most influential and commercially successful Web3 games.

Notable Web3 Game #1: The Sandbox

The Sandbox, developed by Animoca Brands, fuses blockchain-powered Web3 gaming with the metaverse. Players can own NFTs representing land and items, freely trade them, and earn revenue through gameplay.

The Sandbox consists of three core components:

Game Maker is an intuitive tool that enables anyone to create games without programming expertise. This empowers creators to realize their ideas and share them with the community.

Marketplace is a marketplace where players can buy and sell user-generated NFT items. This active trading environment underpins a thriving creator economy.

LAND refers to virtual real estate that players can own as NFTs and freely trade. Owners can develop games or event spaces on their LAND parcels.

Leading corporations have already joined The Sandbox, acquiring LAND to operate virtual storefronts and event venues. The virtual economy is expected to expand further, presenting significant business opportunities.

Notable Web3 Game #2: Axie Infinity

Axie Infinity is a Web3 game inspired by Japanese favorites such as Pokémon and Tamagotchi. It has achieved explosive popularity in Southeast Asia and stands as a global flagship for Web3 gaming.

Players command three unique creatures called Axies on adventures. Axies are NFTs that can be traded on the marketplace. Each Axie has unique abilities and appearances, with rare Axies commanding premium prices.

Players can battle others, complete quests, and earn experience, items, and in-game tokens. The competitive mode offers deep strategy, attracting a large and dedicated player base.

Axie Infinity has become a social phenomenon, especially in Southeast Asia. In the Philippines, for example, many individuals earn a living by playing, making it a prime illustration of the economic impact of Web3 gaming.

Notable Web3 Game #3: STEPN

STEPN is an innovative Web3 game based on the Move to Earn (M2E) model. It blends real-world physical activity with gameplay, offering a unique experience.

Players purchase NFT sneakers and earn GMT, the in-game currency, by walking, running, or jogging daily. This model simultaneously promotes health, engagement, and income generation.

At the heart of STEPN are NFT sneakers, each with different stats and rarity that affect exercise outcomes and GMT earnings. High-value sneakers can command premium prices on the marketplace, making them attractive as investment assets.

STEPN has achieved global popularity and became a social phenomenon in Japan. The intersection of health consciousness and the Web3 gaming trend has helped attract a broad user base.

STEPN is also exploring integration with the metaverse, with further growth anticipated. As a groundbreaking Web3 game that combines fitness and earning potential, it is expected to expand its user base over the long term.

Notable Web3 Game #4: XANA

XANA is a Web3.0 game platform developed by NOBORDERZ, led by a Japanese CEO. Its key feature is enabling anyone to easily build metaverses, avatars, and games, and freely trade digital item ownership.

XANA actively collaborates with Japan’s entertainment industry, launching innovative projects such as metaverse tie-ins with Breaking Down and NFT collaborations with Japan’s largest NFT initiative, CNP.

As Japan’s first metaverse company, XANA has partnered with numerous enterprises and influencers, drawing considerable attention both domestically and internationally. Its deep synergy with Japanese IP culture, including anime and gaming character metaverse projects, gives it a business model that leverages Japan’s unique strengths.

Yuuji Mizoguchi, CEO of XANA JAPAN and president of BACKSTAGE Co., Ltd., which drives digital transformation in entertainment, leads the company and is expected to further strengthen industry ties.

XANA’s vision is "Another place, another self for everyone." The company aims to foster new lifestyles and communities within the metaverse.

Notable Web3 Game #5: Star Atlas

Star Atlas is a next-generation Web3 game built on Unreal Engine 5, delivering cinematic-quality graphics. Set in a vast universe, players compete as various races and factions to expand their domains in an epic narrative.

Star Atlas features diverse modes, including third-person shooters, spaceship combat, and fleet battles. Players are free to choose modes that suit their playstyle.

The game offers rich content such as space exploration, resource mining, and trading, providing players with freedom to explore, mine, and trade as they wish—an appeal for many.

Star Atlas employs NFT technology for its game economy, enabling players to own and trade in-game items such as spaceships and land as NFTs. Spaceship NFTs, in particular, vary greatly in value according to performance and design, fueling an active trading market.

Though still under development, Star Atlas’s stunning graphics and innovative story have made it one of the most anticipated Web3 games for the future.

Key Considerations for the Web3 Game Business

While the Web3 game business offers significant potential, investors and players must heed several critical considerations. Here are two key points to be aware of:

Consideration #1: Be Mindful of NFT Price Volatility

Web3 games allow players to earn revenue by trading NFT items; however, the NFT market is relatively new and often illiquid, resulting in high price volatility.

NFTs bought at a premium may sharply lose value as market conditions change or game popularity wanes. Assets acquired during initial hype phases are especially vulnerable to long-term depreciation.

Additionally, the NFT market lacks the regulatory safeguards of stock markets, exposing it to risks such as price manipulation. Operational changes or updates can also cause sudden shifts in NFT values.

Invest only surplus funds and play within your risk tolerance. Understand that NFT investments are inherently high-risk, high-reward, and exercise prudent judgment.

Consideration #2: Avoid Investing in Unproven Web3 Games

The rapid expansion of the Web3 gaming sector has unfortunately led to the rise of fraudulent projects. Some games lure players with promises of high returns, only to disappear with their funds.

To mitigate this risk, invest only in established games with proven track records, and conduct thorough due diligence. Pay particular attention to the following:

Development Team: Confirm that the team has experience and a solid track record. Research team members’ backgrounds and past projects to assess technical ability and credibility.

Roadmap: Look for clear, achievable roadmaps with specific milestones and regular progress updates—signs of a trustworthy project.

Partner Companies: Partnerships with well-known brands or major firms are important indicators of a project’s reliability.

Major VCs: Backing from global venture capital firms indicates rigorous due diligence and adds credibility.

By evaluating these factors, you can minimize the risk of falling victim to scams and select trustworthy projects.

Conclusion: Web3 Game Business Models Are Poised for Long-Term Growth

This article provided a comprehensive overview of the Web3 game business—from foundational concepts and business models to leading projects and important considerations.

Web3 games leverage blockchain to create innovative gaming experiences, allowing players to earn income from trading NFT items and to be rewarded for contributing to the game. The Play to Earn model has ushered in a new economic paradigm for the industry.

Thanks to this groundbreaking business approach, many leading global game companies have entered the market. Japan, with its rich portfolio of globally recognized game IP, is especially well positioned to seize new global opportunities through Web3 technology.

Over the long term, Web3 games are expected to become a new industry standard rather than a passing trend. Continued advances in blockchain technology, regulatory improvements, and enhanced user experience will likely attract even more players to the Web3 gaming space.

However, players and investors must remain aware of important risks such as NFT price volatility and the presence of fraudulent projects. A strong understanding of these risks and prudent decision-making are essential for success.

If you are considering getting involved in Web3 gaming, refer to the information in this article to select trustworthy projects, manage risk appropriately, and explore the opportunities this dynamic new market offers. Web3 games are certain to play a defining role in the future of the gaming industry.

FAQ

What is the Web3 game business model, and how does it differ from traditional games?

Web3 games use a Play to Earn structure, allowing users to earn rewards by buying and selling tokens earned in-game. Unlike traditional games, users own digital assets and can monetize them, which is the model’s defining feature.

How do Web3 games generate revenue, and how do players earn profits?

Web3 games earn revenue from NFT item trading, token rewards, and staking. Players profit by selling NFTs and tokens acquired in-game on the marketplace or by earning rewards based on their contributions.

What role do NFTs and token economies play in Web3 game business models?

NFTs provide asset ownership and enable trading, so players can buy and sell equipment or characters. The token economy acts as in-game currency and supports both player rewards and studio monetization.

What are the main revenue sources for Web3 games (gas fees, marketplace fees, tokens, etc.)?

The main revenue drivers are NFT sales fees, gas fees, marketplace transaction fees, and in-game token sales. Fees and gas costs from NFT transactions are especially important for supporting ecosystem sustainability.

Are Web3 games a sustainable business model? What risks and challenges do they face?

The sustainability of Web3 games remains a work in progress. Key challenges include user acquisition costs, token price volatility, and balancing gameplay with tokenomics. Success depends on strong communities and innovative gameplay.

How do famous Web3 games (Axie Infinity, The Sandbox, etc.) structure their business models?

They use NFTs and tokens to establish player ownership and create in-game economies. Players can monetize assets by selling or leasing NFTs, while developers earn from token issuance and marketplace fees.

Can players cash out NFTs or tokens earned in Web3 games?

Yes. Players can exchange tokens directly for cash from their wallets. NFTs can be sold for profit on in-game or secondary marketplaces. The asset’s liquidity determines how quickly it can be cashed out.