Animoca remains optimistic about the future of blockchain games and is eagerly awaiting a license for its metaverse fund.

Blockchain-based games have gained significant attention in the cryptocurrency space in the last two years, despite unfavorable market conditions. These games have experienced considerable growth and daily activity on various protocols.

According to market research, Web3 gaming received approximately $4.5 billion in funding in 2022. Asset managers, investment funds, and venture capitalists are eager to capitalize on this emerging sector.

In an exclusive interview with Cointelegraph, Yat Siu, co-founder of Animoca Brands, expressed renewed optimism in the blockchain gaming sector. He also provided an update on the highly anticipated metaverse fund that made headlines in late 2022.

Metaverse fund awaiting license

In November 2022, Animoca Brands initially allocated up to $2 billion for a proposed metaverse fund. The fund aims to invest in mid to late-stage startups that are building metaverse products and experiences.

However, due to various factors such as market volatility, the company had to scale back on its original investment target. In January, the amount was reduced to $1 billion, and in March, it was further reduced to $800 million.

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When asked about the current status of the proposed metaverse fund, Siu mentioned that the firm is still waiting for a license before it can start investing. However, Siu emphasized that Animoca has made numerous investments this year, with over 450 portfolio companies. He stated that the company has been active and not passive in its approach.

Upcoming ‘AAA’ blockchain games on the horizon

Although licensing remains a hurdle for Animoca’s metaverse fund, Siu expects several ‘AAA’ titles, in which the company has invested, to be released by the end of 2023 or early 2024.

Siu stated that the quality of titles Animoca is supporting is strong. He also mentioned that blockchain-based games don’t necessarily need immediate breakout success to be sustainable. Most importantly, these games are built on open protocol systems like Ethereum or Polygon, allowing third parties to create innovative solutions.

According to Siu, a new generation of AAA-level blockchain games will be launched by the end of 2024. This shift highlights a change in focus, capital, and talent from mainstream gaming to the blockchain gaming sector. Siu emphasized that these games are developed by individuals who understand the game development process, unlike three years ago when many games were created by blockchain enthusiasts with limited game development knowledge.

Blockchain games need to do business in the biggest markets

Another factor contributing to the development and quality of upcoming blockchain games is the introduction of scaling protocols like Polygon and technological advancements like zero-knowledge proofs.

Siu mentioned Immutable, a layer-2 platform, which has utilized zkEVM to reduce costs and improve transaction speeds for NFT generation in blockchain games. While the infrastructure plays a crucial role, Siu emphasized the importance of choosing the right blockchain. He stated that Ethereum is currently the biggest market for blockchain games, and doing business on this platform is necessary for success.

Siu also mentioned that early blockchain games were hindered by game design that followed “Web2 thinking,” which focused on monopolizing network effects. Moving to decentralized protocols like Ethereum has advantages and disadvantages. Opening up network effects and becoming more inclusive generates more value, but it also results in a loss of control.

He also admitted that taking a potential AAA, first-person shooter completely on-chain would be “really hard.” Adopting a hybrid on-chain approach might be better suited as the industry moves towards truly decentralized games.

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“Provenance, skins, and certain things that don’t require all the time and data is probably a good starting point,” he said.

Siu said that the established culture of gaming around the world could allow for gaming firms to design and implement blockchain elements as audiences continue to come to grips with Web3 functionality:

“There’s interfaces that we can design that are familiar to the gamer and essentially introduce the whole experience of crypto and Web3, which comes also with financial literacy onboarding.”