GameFi & SocialFi - Opportunities and challenges of Web3+ games and social applications-web3 series Section 19

Over the past few years, we have witnessed the rapid rise of Web3 in gaming and social. From the GameFi craze in 2021, to the emergence of the SocialFi concept in 2022, to the industry exploration stage after it gradually cools down, I believe many friends, like me, will ask:Is there still a chance for GameFi and SocialFi? If so, where are the opportunities? What are the challenges?

Today, I would like to combine some of my experience in cross-border operations and social media growth to talk to you about the current situation, opportunities and challenges of GameFi & SocialFi.

Why GameFi and SocialFi?

Let’s look at two data first:

• DappRadar’s report shows that the number of daily active users of the GameFi app in 2022 has exceeded1.2 million, accounting for nearly half of all Web3 applications.
• SocialFi related projects (such as Lens Protocol,friend.specialty) caused short-term traffic peaks in the early days of its launch, such asfriend.specialtyTransaction volume in the first week of August 2023 exceeded$20 million.

There is a problem behind this:Games and social interaction are the two most “sticky scenes” for humans.When the blockchain and token economic model are introduced, it is not only an entertainment or communication tool, but also a new ecosystem that can inspire and share benefits.

In other words, both GameFi and SocialFi are essentially exploring:

• How to combine the fun of "playing" or "socializing" with "profit"?
• How to solve user cold start and retention problems through the token model?

Opportunities and Challenges of GameFi

1. Chance

• Large user base: Games are the world’s largest entertainment industry. In 2022, the global game market will exceed$184 billion. Even if Web3 games cut off 1% of their share, the space will be huge.
• The appeal of Play-to-Earn: Many emerging market players are willing to try GameFi for profit. For example, in the Philippines, Axie Infinity players once earned $300-$500 a month by "killing monsters."
• Asset ownership on the chain: NFT equipment, skins, etc. can be traded freely. Players truly own assets and are no longer just "wasting money".

2. challenge

• sustainability issues: Many GameFi projects will soon "deflate" or even collapse because their economic models rely too much on the entry of new players.
• Not enough gameplay: Many projects place too much emphasis on “mining and income” but ignore the most fundamental gaming experience. When player enthusiasm wanes, the project becomes unsustainable.
• regulatory uncertainty: Some countries have strict regulations on the “token economy”, making it more difficult to go overseas.

Case sharing

1. Axie Infinity——A successful cold start, but the number of users will drop sharply in 2022 due to the unsustainable economic model.
2. STEP——The "earn while walking" model became popular in the first half of 2022, attracting millions of users in a short period of time, but subsequently encountered token inflation and user loss problems.
3. Guild XYZ——Use the guild mode to organize scattered players and help them obtain equipment and mission benefits, proving that "community-driven" is a feasible path for GameFi.

Opportunities and Challenges of SocialFi

1. Chance

• Creator economy upgrade: Traditional social media platforms have the right to distribute traffic, but the SocialFi project allows creators to directly earn income through tokens and NFTs.
• User capitalization: Behaviors such as following, liking, posting, etc. can be put on the chain and turned into tradable "social assets".
• Anti-platforming: The Web2 platform often "blocks accounts" or "limits traffic", while Web3's decentralized protocol can give users a stronger sense of security.

2. challenge

• Difficult to start cold: Without enough users, there will be no interaction. Without interaction, there is no value.
• Token model risk: Excessive financialization will make social relationships "utilitarian" and lead to insufficient community stickiness.
• Compliance issues: Different markets have different regulations on tokens and data privacy, which increases the difficulty of implementation.

Case sharing

1. Lens Protocol——The decentralized social graph based on Polygon allows users to carry their social relationships in different dApps.
2. friend.specialty——Users can buy and sell “friend shares”. Although it is very controversial, it at least proves that the market is interested in SocialFi.
3. DeSo (Decentralized Social)—— Trying to build a complete decentralized social chain. Although it is not developing quickly, it has accumulated a lot of developer ecology.

How to deal with opportunities and challenges?

Based on my experience in cross-border social media operations, I think three points are particularly important:

1. Focus on user experience

• GameFi should be “fun” first, and then talk about “making money”;
• SocialFi must first be "easy to use" and then talk about "token incentives".

2. Find the right landing market

• Users in emerging markets such as Southeast Asia and Latin America are more sensitive to “playing and earning”;
• North American and European users pay more attention to social privacy and data sovereignty.

3. Robust economic model

• Don’t rely on “new players subsidizing old players”;
• There must be continuous sources of value (such as in-game consumption, brand cooperation, on-chain advertising).

Frequently Asked Questions (FAQ)

Q1: Is GameFi obsolete?

A1: No. It’s just that “speculative GameFi” is on the wane. There's still a chance for Web3 games with real gameplay.

Q2: Will SocialFi be just a short-term craze?

A2: There is indeed a bubble at the moment, but social networking is a long-term need. As long as there is a good product experience, breakthroughs are possible.

Q3: Which market should I start from when I want to go global with GameFi?

A3: I suggest considering Southeast Asia (Philippines, Vietnam, Indonesia) first. Users are highly receptive to earning while playing and the cost is also low.

Q4: How does the project side avoid "token collapse"?

A4: Design diversified sources of income, set up a reasonable inflation mechanism, and avoid over-reliance on the secondary market.

Conclusion

GameFi and SocialFi do face challenges, but we also need to see the long-term value behind them. Gaming and social interaction are human needs that will never disappear. As long as we can find the balance point of "user experience + economic model + compliance implementation"**, we will definitely be able to go further on this track.

I often tell the team: The future of Web3 will not be achieved overnight, but it belongs to those who dare to try and keep iterating.

If you are preparing to enter this field, I hope this article can give you some inspiration.

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