When investing in Web3 Games, investors should consider due diligence on the long-term potential of the game, considering factors such as user-related data, team, administration, liquidity of game assets, etc. Investors should also consider larger market movements, such as tracking smart money and monitoring public sentiment regarding the project.
We have compiled for you things to consider when investing in Web3 games…
Things to consider while investing in Web3 Games
Monthly gaming volumes in the web3 market have decreased significantly since the peak of the bull market. But innovation is alive in the Web3 gaming space, and developers are focusing on long-term trends as they continually develop their products.
Currently, the Web3 gaming industry exhibits a vibrant outlook with over 2,500 active game projects and a market value of $5.6 billion by August 2023. This dynamic sector also has an active user base of 820k, which shows its potential. Furthermore, significant investment continues to flow into the industry, as evidenced by companies such as Sui and Mysten Labs, which have raised $300 million in funding and plan to introduce high-end games.
The Gamefy ecosystem offers a variety of opportunities, such as investing in game tokens, a play-to-win model, and investing in projects. However, it is important to understand that each investment comes with its own potential returns and risks. Therefore, the use of powerful on-chain analytics is essential to effectively analyze investment performance, market liquidity, and user engagement in specific projects.
Managing Risks and Taking Advantage of Momentum in the GameFi Market
Independent investors can make informed decisions about the gaming market even if they do not have the extensive research facilities that institutions do.
Funding and resource constraints can naturally lead individual investors to speculate. There are risks involved, because in addition to high rewards, there can be significant losses.
On the other hand, direct control of individual investors over their investments can enable faster decision making. This agility can often come in handy in the fast-paced and ever-evolving sporting world. An individual investor’s ability to adapt and respond quickly to market changes is an advantage that can be exploited for potential profit, although careful management is required to minimize risk.
due diligence on projects
In the Web3 playing field, the need for long-term investors to do extensive due diligence and analyze on-chain metrics is critical. This approach facilitates comprehensive understanding, risk reduction and more informed decision making.
Long-term investing requires substantial capital commitment, a high degree of patience and a solid risk tolerance from investors. As a result, these investors often base their decisions on careful research and analysis. This includes examining the fundamentals of the game (or a company’s equivalent), growth potential, competitive position, and other relevant factors.
In the web3games sector, long-term investors are targeting a variety of carefully researched projects. By doing the hard work and analyzing on-chain metrics, they can make data-driven decisions that align with their investment strategy. This systematic approach is also key to navigating the complex and dynamic world of blockchain gaming investing.
long term potential
In the rapidly evolving web3 gaming industry, it is important to distinguish between exaggeration and longevity. Not all great projects last long. Identifying games with solid foundations and sustainable potential is the key to a successful investment.
Long-term prospects are often found in games that have strong foundations, high user engagement, and a history of continuous innovation and updates. A vibrant and interactive community also indicates longevity and can potentially provide significant returns over time. Therefore, long-term investors need to look beyond the current hype and evaluate the key features that make the game promising for the future.
user related data
The user is the basis of any game project and this principle is extremely important in the web3 game ecosystem. User behavior and feedback not only shape the course of the game, but also form the pillars supporting the entire ecosystem.
In the initial stages, it is important to carefully monitor the flow of new users. Tracking these early participants allows us to gauge a game’s early appeal, a litmus test for potential success.
Instead, our focus should be on monitoring active users during the middle and late stages of a game’s lifecycle. This change is important because it is the connected users who set the pace of the ecosystem, and it is through their activities that we can measure the impact and retention rate of certain events. It is also an important criterion for evaluating the effectiveness of a game’s design.
Furthermore, the behavior and activities of new and old users can affect the game’s economic ecosystem. Therefore, tracking users’ movements can provide important clues about the course of the game.
Such careful monitoring of active users gives a strong indication of a game’s long-term potential. Games that successfully maintain and even grow their active user base have a better chance of continuing their success over time, which shows the strategic importance of user-related data in the web3 gaming world. underlines.
Game Design and Economic System
Game design—which includes overall gameplay, toconomics, and ecosystem design—is a key factor in the longevity and success of Web3 games. Usually, we can get an overview of game design from their whitepaper.
For example, a typical Web3 game includes elements such as NFTs, tokens, and other game content. This understanding can help investors identify which tokens or NFTs have the potential to appreciate. You can also evaluate the sustainability and potential of this monetization opportunity.
Tokenomics and Token Distribution
Another factor to consider is the symbolic aspect of the game, which is part of the game design.
Tokonomics is a unique aspect of blockchain-based gaming that shapes economic interactions and incentives within games and plays a key role in player engagement and retention. This understanding of toconomics allows people to actively participate in the gaming economy, allowing them to adapt to dynamic changes in the ever-evolving gaming market. With Tokonomics as its foundation, players are motivated to become an integral part of the game’s ecosystem, fostering a vibrant and sustainable gaming community.
Furthermore, the rich and innovative game design enhances the game’s appeal, making it more fun and engaging for users, thereby increasing its long-term potential. The ability to deliver a unique and immersive experience is at the heart of every successful game, and it’s even more important in the Web3 environment. Taking full advantage of Web3 features such as decentralization, interoperability, and player dominance requires robust game design that differentiates these games from traditional games.
Token distribution is an essential element when analyzing the long-term potential of a game and the integrity of its economy. It refers to how the native tokens of games are distributed among different stakeholders such as players, developers, and investors.
The distribution of tokens is usually determined by the team. However, we can still analyze the data and look at the overall distribution of tokens, not just based on team ownership and user. Data analysts can determine token distribution based on each individual’s wallet balance. For example, if 1 percent of people owned 90 percent of the tokens, it would be very dangerous and a small group of people would cause the token price to change rapidly.
Ideally, a distributed token economy is one in which no single organization controls an excessive number of tokens. This not only ensures a level playing field for all participants but also protects them from the risk of price manipulation by a single entity.
Government
Another important aspect that investors should consider is the administration of the project. In the context of a Web3 project, governance refers to the decision-making mechanisms and processes within the project. In a truly decentralized system, token holders often have the power to vote on important issues affecting the project. Information about a project’s governance model can often be found in the project’s white paper or official documentation.
Projects with a decentralized and inclusive governance model are generally considered to be more protective of investors’ interests. This is because the decentralized governance model promotes transparency and fairness and reduces the risk of making decisions that will benefit only a few.
investor protection
In the rapidly evolving Web3 world, investor protection often depends on a number of factors.
In addition to smart contract security and regulatory compliance, token distribution and project governance are of paramount importance. Investors should be vigilant by monitoring data exchanges and examining token distribution patterns to avoid becoming victims of market manipulation by “whales”, key stakeholders who hold a significant portion of tokens.
Decision making by focusing on market movements
Investing in Web3 Games, an industry known for its high risk, high reward paradigm, requires extensive research and a deep understanding of the complexities of the industry. The speculative nature of this emerging industry requires careful decision making, always commensurate with the risk tolerance of the investor.
As mentioned above, it is important to carefully consider all elements and details, conduct due diligence, and analyze on-chain metrics to make informed decisions and mitigate risk. By taking these steps, you can ultimately make a comprehensive decision that maximizes profit while minimizing risk.
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