The buzz around Web3 gaming on the PS5 is over-the-top. All anyone wants to talk about is Illuvium, Big Time, Shrapnel, Phantom Galaxies, and The Sandbox. By 2025, it’s estimated that one in five PS5 users will take the plunge into the blockchain gaming metaverse. I’m Liu Wenjing, and I’ve spent most of my professional life studying emerging tech markets. The data, though encouraging, paints a much more complex picture than the hype-filled headlines imply.

NFT Hype Unsustainable, Really?

At the heart of Web3 gaming, the piece that is touted as the ticket to transforming the industry, is the Non-Fungible Token (NFT). We’re promised that players will truly own their in-game assets, they’ll be able to trade them with others, and possibly even profit off of them. Sounds great, right? Look closer. Speculation isn’t intrinsic value. The current NFT market is driven by speculative interest and hype, not intrinsic value.

Consider the Beanie Baby boom of the late 90s. Remember that? In the 1990s, consumers were led to believe those furry toys were retirement plans. They weren't. And most of today’s NFT valuations are eerily reminiscent. A digital sword in Shrapnel may be worth a small fortune long before the year 2190 rolls around. Then what happens when Shrapnel 2 comes out and you get even sweeter swords? Or when the game simply loses popularity? The value evaporates.

Our data makes the case for a strong correlation between subsequent hype cycles and prices of NFTs. As the game comes out and demand is high, prices easily double or more. Then, inevitably, they crash. Draw inspiration from the past, but think ahead. Are we actually building an ecosystem, or are we just building Iraq 2.0 in ever-cooler-looking polygons?

Play-To-Earn Is Fundamentally Flawed

The promise of "play-to-earn" is incredibly seductive. For gamers — particularly those in developing countries — the potential to earn real-world cash while gaming is innovative and thrilling. If we’re really being honest, the existing play-to-earn models are, in most instances, overhyped grindfests.

Players spend dozens of hours on largely pointless tasks just to farm tokens. Then they pump and dump these tokens on speculative exchanges. It's less "gaming" and more "digital sharecropping." The whole system is dependent on an ever-growing base of new players to fund the economy. What happens when the player base plateaus? The value of those tokens crashes, the early adopters have all cashed out, and the naive latecomers are left with the worthless tokens.

Consider this: If everyone is earning, who is actually paying? The answer is usually more entrants or investors. That’s not a sustainable new economy; that’s a transfer of wealth. The long-term data on play-to-earn games is telling: many have struggled to maintain their player base and token value. To truly expand opportunity, we need to create more innovative models that reward skill, engagement and mastery of concepts over just time spent grinding.

Limited Window To Capitalize Now?

Here's where things get interesting. While I'm skeptical of the current state of Web3 gaming, I believe there's a genuine opportunity here. The window to take advantage of it is closing quickly. Companies need to act, but act intelligently.

Sony is clearly testing the waters. They're allowing Web3 games on the PS5, but they're being cautious. They know the risks. The best developers understand that their number one priority should be making the most enjoyable, rewarding games. Then, as a second step, they shoehorn in blockchain technology. That said, Illuvium judging by everything from the gameplay to gorgeous graphics is a much-needed move in the right direction. Yet it has to be more than a pretty face. For one thing, it requires a much more sustainable economic model and more importantly, a burning desire for players to really want to own those Illuvials.

What adds to the urgency is that the technology is changing at breakneck speed. New blockchain solutions seem to be popping up every day. The regulatory landscape is in flux. Those that don’t will be unable to keep up and will suffer the consequences. Those that are moving in without a real strategy will find themselves fizzling out or burned. Picture it as the internet’s inception 2.0. Both consumer companies and enterprise companies that were not able to establish a clear path business model went bankrupt virtually overnight in the second half of 2022.

Keep an eye on regulatory developments. The SEC has already started to crack down on specific projects. Tighter rules would have a major effect on the nascent Web3 gaming industry. Second, keep an eye out for the development of new blockchain platforms. Solutions that provide improved transaction speeds, fees, and scalability may provide some of these games an unfair competitive advantage.

Ethical Considerations Matter Most

Let’s take a moment to acknowledge the ethical elephant in the room. Beyond environmental impact, the use of blockchain technology in gaming presents a new layer of harmful and exploitative possibilities—including NFTs being used to scam players and defraud investors. As many have noted, the energy consumption of some blockchain networks is staggering. Though newer, more energy-efficient technologies are available today than ever before, the industry is far from fully implementing these solutions.

There’s the issue of scams. With this anonymity, a nefarious supplier can just make a game that’s fake, or a pump-and-dump game. Players shouldn’t have to remain in constant fear of being duped, and platforms should be doing much more to keep their users safe.

What we need is responsible regulation—not to suppress innovation in the sharing economy, but to protect consumers and ensure a level playing field. We’d argue, though, that we need a just as serious discussion about the environmental cost of blockchain technology itself. Until these ethical considerations are tackled, Web3 gaming will be doomed to remain on the fringes.

The future of Web3 PS5 gaming in 2025 isn’t set in granite. We need action not platitudes, but more importantly, we need to learn from past mistakes. In doing so, we can create sustainable economic models and address the serious moral challenges to come. The data shows a mixed bag, a situation that requires serious analysis and maybe even a bit of skepticism. Don't just believe the hype. So go beyond the pretty picture, do your homework, and hold the industry to a higher standard. Your digital future depends on it.