Licensed IP is a trap. It creates a massive upfront cost that starves development budgets and forces studios to prioritize safe, derivative gameplay that fails to leverage blockchain's composability. The financial model is inverted.
gaming-and-metaverse-the-next-billion-users
Blog
Why Web3 Gaming Will Be Won by Infrastructure, Not IP
A first-principles analysis arguing that sustainable Web3 gaming growth depends on open, composable infrastructure layers, not exclusive intellectual property licenses. The winning studios will be infrastructure-native.
introduction
THE WRONG BET
The IP Fallacy
Web3 gaming's obsession with licensed intellectual property is a strategic misallocation of capital that ignores the sector's fundamental infrastructure gaps.
Infrastructure enables new genres. True innovation requires cheap, fast, and secure primitives for assets, identity, and state. Without robust L2s like Arbitrum or Immutable zkEVM, games remain isolated applications, not interconnected economies.
The data shows failure. Major licensed IP launches on-chain have consistently underperformed in player retention and secondary market volume compared to native web3 titles like Parallel or Pirate Nation, which built on strong technical foundations first.
The winning stack is emerging. Success requires integrating dynamic NFTs (ERC-6551), seamless credentialing via Privy or Dynamic, and asset bridges like LayerZero. These are the real moats, not a Spider-Man skin.
key-trends
WHY WEB3 GAMING WILL BE WON BY INFRASTRUCTURE, NOT IP
The Infrastructure-First Thesis
Superior intellectual property is a commodity; the battle for sustainable, scalable games will be decided by the underlying tech stack.
01
The Problem: Unplayable Latency & Cost
On-chain games on general-purpose L1s like Ethereum are economically and technically unviable. Every action is a transaction, creating >5 second latency and >$0.10 fees that destroy gameplay.
- Kills player retention: No one waits 10 seconds for a sword swing.
- Prohibitive microtransactions: A $0.50 potion costs $0.15 in gas.
>5s
Latency
$0.10+
Base Cost
02
The Solution: Application-Specific Rollups
Dedicated execution environments like L3s or app-chains (using Arbitrum Orbit, OP Stack, zkSync Hyperchains) provide sovereign performance.
- Sub-second finality: Enables real-time, competitive gameplay.
- Near-zero gas fees: Subsidized or batch-processed via EigenLayer for sustainability.
- Custom economics: Native gas token is the game token.
<1s
Finality
~$0.001
Tx Cost
03
The Problem: Fragmented Asset Silos
Assets locked in one game's contract are useless elsewhere. This defeats the core Web3 promise of composability and player-owned economies.
- No liquidity: A rare skin has value only in its native game.
- High friction: Moving assets between chains requires complex bridging via LayerZero or Axelar.
0%
External Utility
High
Friction
04
The Solution: Universal Asset Layer
Interoperability protocols like ERC-6551 (Token Bound Accounts) and dynamic NFTs separate asset logic from game logic. Infrastructure like Polygon Supernets or Avalanche Subnets natively supports cross-game composability.
- True ownership: Assets are portable wallets with their own state.
- Emergent economies: A sword from Game A can be a key in Game B.
ERC-6551
Standard
100%
Portable
05
The Problem: Centralized Game Servers in Disguise
Most 'on-chain' games use a hybrid model where critical logic runs on permissioned servers, reintroducing single points of failure and control.
- Not credibly neutral: Developers can alter rules or censor players.
- Vulnerable: Server downtime means game downtime.
Hybrid
Architecture
Centralized
Control
06
The Solution: Verifiable Execution & Provers
Fully on-chain games (Autonomous Worlds) require infrastructure for deterministic, verifiable state transitions. zk-proofs (via RISC Zero, SP1) and optimistic fraud proofs (like Cartesi) enable trust-minimized game engines.
- Provable fairness: Every game outcome is cryptographically verified.
- Permanence: The game state lives forever on a decentralized data availability layer like Celestia or EigenDA.
zk-Proofs
Verification
Autonomous
Worlds
deep-dive
THE INFRASTRUCTURE PLAY
The Modular Gaming Stack
Web3 gaming's ultimate winners are the infrastructure providers enabling seamless, scalable, and composable player experiences, not the game studios themselves.
Infrastructure captures the value. Game studios build on top of modular components like AltLayer for rollups and Particle Network for account abstraction. These infrastructure layers extract fees from every transaction and asset movement, creating a more defensible business model than hit-driven game IP.
Composability is the killer app. A modular stack with ERC-4337 wallets and Hyperliquid-style order books enables assets and liquidity to flow between games. This interoperability creates network effects that individual game worlds cannot replicate, locking players into the ecosystem, not a single title.
The data proves the shift. The capital and developer activity flow into L3 gaming rollups and SDKs like MUD from Lattice, not into AAA game development studios. Infrastructure protocols scale with the entire category's growth, making them the higher-leverage, lower-risk investment.
THE WINNING BET
Infrastructure vs. IP: The On-Chain Scorecard
Comparing the defensibility and long-term value accrual of core infrastructure versus intellectual property in the web3 gaming stack.
| Key Dimension | Infrastructure (e.g., Ronin, Immutable X, StarkEx) | Intellectual Property (e.g., Game Studio Assets) | Traditional Gaming Model |
|---|---|---|---|
Network Effects | Exponential (composable across all games) | Linear (confined to single franchise) | Linear (confined to platform/store) |
Switching Cost for Developers | High (SDK integration, user base) | Low (asset design is replicable) | Extreme (platform lock-in) |
Revenue Model | Protocol fees (0.5-2% per tx), Staking | Asset sales, Royalties (5-10%) | 30% platform tax, Unit sales |
Value Accrual to Token | Direct (fee capture, staking yield) | Indirect (speculation on ecosystem) | None (corporate equity only) |
Time to Liquidity | < 2 sec (on-chain settlement) | Months (art/development cycle) | Years (development & publishing) |
Composability / Interoperability | |||
Defensible Moat | Technical lead, Validator set, Liquidity | Brand loyalty, First-mover advantage | Distribution, IP library |
Recurring Revenue Stream |
protocol-spotlight
INFRASTRUCTURE IS THE GAME
The Builders Getting It Right
The next wave of web3 gaming won't be about licensing Spiderman; it will be won by the protocols that solve the fundamental technical constraints holding developers back.
01
The Problem: The On-Chain Bottleneck
Traditional L1s and even L2s fail at gaming's core requirement: high-frequency, low-cost state updates. A single action can require multiple transactions, creating a ~$0.50+ cost and ~2+ second latency per interaction, which kills gameplay.
- State Bloat: Every item, every move, every stat change must be written to a global ledger.
- User Abstraction: Players must sign a transaction for every micro-action, a non-starter for mainstream adoption.
~2s+
Per-Action Latency
$0.50+
Cost Per Click
02
The Solution: Sovereign Game Rollups
Dedicated app-chains like MUD from Lattice and Argus Labs' World Engine provide a dedicated, optimized execution environment for a single game universe.
- Horizontal Scaling: Isolate game state from general-purpose chains, enabling ~100ms finality and <$0.001 transaction costs.
- Composable State: MUD's Entity-Component-System (ECS) architecture allows for on-chain game logic that is modular and interoperable, enabling emergent gameplay.
~100ms
State Finality
<$0.001
Tx Cost
03
The Problem: The Wallet Wall
Seed phrases and gas fees are the ultimate player acquisition cost. >90% drop-off occurs at the onboarding step when a user is asked to create or fund a wallet. This isn't a UX issue; it's a fundamental architectural mismatch.
- Friction at Scale: You cannot onboard millions of casual players with a cryptographic identity lesson.
- Asset Fragmentation: Items are locked to a wallet/chain, preventing true cross-game portability.
>90%
Onboarding Drop-Off
10+ Steps
To First Action
04
The Solution: Account Abstraction & Passkeys
ERC-4337 and native AA chains like Starknet and zkSync enable gasless sessions, social recovery, and biometric sign-in via Web2 Passkeys. Particle Network and Privy abstract wallets into embedded, familiar experiences.
- Session Keys: Players approve a 'game session' once, enabling seamless play for hours without further prompts.
- Sponsored Transactions: Developers pay gas in stablecoins, presenting a pure free-to-play model to the user.
1-Click
Sign-In
Gasless
Gameplay
05
The Problem: Centralized Asset Black Holes
In-game assets on centralized servers are illiquid and perishable. When a studio shuts down a game, billions in player time and money vanish. True digital ownership requires assets to exist independently of the game client, but interoperability has been a pipe dream.
- Vendor Lock-in: Assets are trapped in a single game's economy.
- No Secondary Market: Players cannot freely trade or leverage their in-game capital.
$100B+
Locked Value
0
Portability
06
The Solution: Dynamic NFTs & Cross-Chain Registries
Standards like ERC-6551 (Token Bound Accounts) turn static NFTs into smart contract wallets that can hold other assets and evolve. Hyperplay and Ready Games are building distribution and asset layers that treat games as front-ends to a persistent asset graph.
- Composable Inventories: Your sword NFT can hold loot, enchantments, and history as nested assets.
- Chain-Agnostic Ledgers: Protocols like LayerZero and CCIP enable a unified asset registry across sovereign game rollups, making the chain irrelevant to the player.
ERC-6551
Token Standard
Omnichain
Asset Layer
counter-argument
THE COUNTER-ARGUMENT
Steelman: But IP Drives User Acquisition
Acknowledging the powerful, traditional argument that intellectual property is the primary engine for capturing player attention and market share.
IP is a proven funnel. Established franchises like Star Wars or Call of Duty command instant user recognition, reducing the astronomical customer acquisition costs that plague Web3. This is the traditional playbook: use a known universe to bootstrap a network effect before gameplay even begins.
Web3 amplifies IP monetization. Blockchain enables provable digital scarcity and creator royalties, allowing IP holders to capture more value from secondary markets. Projects like Yuga Labs' Otherside demonstrate that strong IP can drive speculative and community engagement, creating a powerful initial flywheel.
The infrastructure gap remains. Even with iconic IP, a game built on high-latency RPCs or expensive L1 settlement will fail. The player experience is dictated by the underlying transaction finality and gas cost abstraction, not the brand name on the loading screen. Immutable zkEVM and Ronin succeed because they solved infrastructure first.
Evidence: The 2023 failure of Square Enix's Symbiogenesis NFT game, despite its Final Fantasy pedigree, proves that poor technical execution and user experience will crater any IP advantage. The win goes to studios that treat gameplay infrastructure as a core product feature.
takeaways
THE INFRASTRUCTURE FRONTIER
TL;DR for Builders and Backers
The next wave of web3 gaming will be defined not by branded characters, but by the foundational tech enabling seamless, scalable, and composable player experiences.
01
The Problem: Friction Kills Fun
Onboarding is a UX nightmare. Gas fees, seed phrases, and slow L1s create a >90% drop-off rate for new players. The solution isn't better IP; it's infrastructure that abstracts the blockchain away.
- Gasless Onboarding: Sponsored transactions & account abstraction (ERC-4337).
- Near-Instant Finality: Sub-second blockchains (Solana) or L2s (Arbitrum, zkSync).
- Seamless Asset Portability: Non-custodial wallets with MPC (Privy, Dynamic).
>90%
Drop-off Rate
<1s
Target TTF
02
The Solution: Modular Asset Stacks
Monolithic game engines (Unity, Unreal) aren't built for composable digital property. The winning stack will be modular, plugging specialized infra into a game's core loop.
- Sovereign Asset Ledgers: Dedicated app-chains (using Polygon CDK, Arbitrum Orbit).
- Programmable Economies: On-chain logic for assets (ERC-6551 token-bound accounts).
- Interoperability Layer: Secure cross-chain asset bridges (LayerZero, Wormhole).
~500ms
State Latency
$0.001
Target Tx Cost
03
The Moats: Data & Distribution Networks
IP is replicable; network effects in asset liquidity and player graphs are not. The real defensibility lies in infrastructure that becomes the default settlement layer.
- Player Reputation Graphs: Portable, on-chain credential systems (Worldcoin, Gitcoin Passport).
- Liquidity Aggregation: Native in-game DEXs & NFT market aggregators (Blur, Reservoir).
- Verifiable Randomness: On-chain RNG for provably fair gameplay (Chainlink VRF).
10x
Asset Velocity
100M+
User Graph Scale
04
The Pivot: From Speculation to Utility
The 'play-to-earn' model collapsed under its own Ponzi economics. Sustainable games require infrastructure that prioritizes engagement over extraction, making assets useful, not just tradable.
- Dynamic NFTs: Assets that evolve based on in-game use (ERC-6551, ERC-404 experiments).
- DeFi-Integrated Economies: Yield-bearing in-game currencies (Aave, Compound).
- Provable Scarcity: Truly limited items via verifiable supply caps.
-99%
Speculative Volume
1000+
Avg. Sessions/User
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