Electronic sports are organized multiplayer video game competitions, often involving professional players. Esports are predominantly played and followed by young, tech-savvy men, while the proportion of women is also increasing. The growing audience is driving Web3 concepts in esports, with startups coming up with novel Web3-related offerings, especially monetization opportunities for teams, players, and the audience.

Web3 is gaining momentum in esports

Web3 is an ideology that refers to the next blockchain-based iteration of the Internet. Web3 aims to allow users to create, own, and monetize their content, which is stored on the blockchain instead of third-party servers.

Several startups aim to end the dominance of the big game publishers and hand the power over to esports teams and players. They want to develop a creator economy where teams and players can monetize their skills and success. monkey league Y EV.io, for example, allows individual athletes to create and play games, compete against other players, and earn money (usually cryptocurrency). In September 2022, Sky Mavis announced a $2.4 million grant to be distributed between Q4 2022 and Q2 2023 for esports events on its Web3-based metaverse platform, Axie Infinity.

Investment by cryptocurrency companies in esports will increase

Brands from a wide range of sectors target the esports audience. GlobalData’s sports sponsorship database reveals that 111 esports sponsorship deals were signed in the first half of 2022 worth approximately $129 million. Less than 25% of the value of new deals in the first half of 2022 came from endemic brands, while non-endemic brands claimed the remaining 75%. Cryptocurrency, financial services, automobiles, consumer electronics, and energy drink companies were the top spenders on esports sponsorships in the first half of 2022.

The prominence of cryptocurrency companies is not surprising, given the digital nature of esports and the growing user base. Investment by cryptocurrency companies in esports will increase in the coming years as they try to add users to their platforms. These companies will develop esports-oriented offerings (for example, team and player NFTs) that users can purchase using cryptocurrency. In addition, crypto platforms (eg Bitcashier) and esports platform providers (eg Community Gaming) are also looking for cryptocurrency-based prize pools.

Non-fungible tokens (NFTs) represent lucrative opportunities for esports organizations

Esports organizations see NFTs as an opportunity to engage with and monetize their fans. In August 2021, esports clubs Boom Esports and Fact Revolution partnered with Yieldly, the first decentralized finance platform on Algorand, to explore NFTs in esports. Subsequently, in February 2022, esports team 100 Thieves released 300,000 Polygon-based NFTs to thank fans for their support and increase engagement. Similarly, Spececaps, the parent company of esports team Loud, is also looking into Solana-based NFTs, tokenized fan incentives, and play-and-win games. Indian startup Loco has launched Legends, an NFT platform for esports. Indian esports teams including Godlike, Revenant, and Blind will be using Loco’s Legends to deliver NFT experiences to their fans.

Theoretically, esports teams and players can monetize the games they play by minting NFTs in the form of avatars or merchandise without running into legal issues with publishers. However, popular and traditional games have not yet announced support for NFTs in their intellectual property (IP). Accordingly, NFTs will be limited to Web3 platforms (eg Axie Infinity) and social media platforms (eg Instagram) for the next two years.

Web3 in esports is a promising concept, but has a long way to go

While Web3 can potentially increase fan engagement and revenue for esports teams and players, it is still in its infancy. Web3 has yet to match the functionality, reliability, and scalability of the current generation of the Internet (ie Web2). Its success will depend on the adoption of cryptocurrencies and blockchain technologies.