To See Where Web3 Gaming Is Headed, Look to the Philippines

Pixels, a farming game on the Ronin blockchain, recently became the first web3 game since Axie Infinity to surpass 100,000 daily active users (DAU). Shooting from 4,000 to 111,000 DAU in the space of a week, some skeptics poked holes in the figures, accusing the users of being bots. Even the Pixels CEO conceded that likely only 40% of their DAU were real people.

But, during his keynote at the YGG Web3 Games Summit (W3GS) last month in Manila, Philippines, Jeffrey ‘Jihoz’ Zirlin, co-founder of Sky Mavis, the company behind Ronin and Axie Infinity, pointed to Google Analytics data to show that over 82,000 visitors, or more than 25% of all traffic to the Pixels’ website, was coming from the Philippines. The players, he boldly claimed, were not bots. They were Filipinos.

Disclosure: Leah Callon-Butler is the Director of Emfarsis, a consulting firm based in Southeast Asia that has represented web3 gaming sector clients including Yield Guild Games, Animoca Brands, Laguna Games (Crypto Unicorns), AMGI Studios (My Pet Hooligan), Blockchain Game Alliance and others. As an investor in the web3 gaming space, the author has long term crypto holdings in a variety of gaming tokens including YGG and AXS, which are both issued by companies discussed in this article.

For any game with financial incentives, there will always be bots. And DAU is an easy measurement to fudge as it can be very difficult to tell the difference between a bot and a real person. But I have reason to believe that the Pixels’ player base could indeed be more flesh and blood than it is chips and algos. Because at the beginning of the last cycle, back in mid 2020, the way I learned of the burgeoning web3 gaming phenomenon before most had introduced the term “NFT” to their everyday vocabulary was through another “Filipinos-not-bots” scenario.

The Game That Started It All

At the time, I was living in the rural Philippines and I’d heard along the grapevine that a family in the next province got banned from playing a little-known blockchain game called Axie Infinity. When the gamemaker, Sky Mavis, saw up to 20 accounts playing around the clock on a single IP address, they kicked them out.

To get their accounts reinstated, the family shared proof of humanness in the form of a video that showed their extended family sitting in a circle on the floor, all battling in the PvP Arena. Lo and behold, they were Filipinos, not bots. And in hindsight, that video may be the world’s first evidence of a multi-generational household of DeFi users.

Despite low interest in the game at the time — in July 2020, Axie had less than 500 DAU — I thought the idea of earning income by playing a blockchain game was a fascinating use case so I decided to write about it for an opinion column. Not in my wildest dreams could I have imagined what would happen next.

Word got around about the game that pays you to play and millions more not-bot Filipinos onboarded. By July 2021, Axie counted just shy of three million DAU with at least 40% hailing from the Philippines. Their in-game earnings raked in roughly 2 billion pesos that month, by our calculations, or $40 million — equal to the amount that all the OFWs (Overseas Filipino Workers) were sending money home from Hong Kong.

As a result, Filipino gamers started calling themselves MFWs (Metaverse Filipino Workers). SLP, Axie’s utility token, was used for cross-border remittances, got listed on all the major locally licensed exchanges, and was readily accepted by merchants — from dentists to dumpling houses. Hundreds of web3 gaming guilds formed across the archipelago, the first being Yield Guild Games (YGG), which raised over $21 million in VC funding and was the first Filipino-led startup to be backed by a16z crypto. By November 2021, 17% of MetaMask’s 21 million users were in the Philippines.

The craze sparked a media frenzy and the trend was picked up by other emerging economies such as Indonesia, India, Venezuela, Brazil and Nigeria. Quickly, it became clear that each country was following a familiar trajectory. All the crazy happenings I saw in the Philippines, I recognized elsewhere with about a three month lag. I learned that whatever happened in the Philippines was a harbinger for web3 gaming adoption globally.

Primed for Web3 Gaming

This was to be expected. For three years running, the Philippines has ranked first in the world for interest in web3 gaming, according to CoinGecko, with ready take up attributed to a young, digitally-savvy, largely unbanked population, with a strong remittance culture.

As such the main use case for blockchain circa 2015 was crypto-asset backed remittances that reduced the cost and time it took OFWs to send funds home to family. So, when Axie broke through, Filipinos in the farthest-flung corners of the country needed little onboarding support because they already used and understood crypto.

Even so, the sophistication of early Axie players surprised even the most enthusiastic advocates for blockchain in the Philippines. On any given day, players were swapping pesos for ETH via a licensed exchange, such as Coins.ph or PDAX. They might then transfer the ETH to MetaMask to buy NFT assets at the open marketplace, send them into the PvP arena to battle for SLP tokens, and exchange their winnings back to ETH via a DEX such as Uniswap, before off-ramping whence they came.

These dedicated players put Axie’s virtual economy to the test, and, in its first iteration, it failed. Crashing from a high of $0.36 in May 2021, SLP was at $0.01 by January 2022. From there, millions of players withdrew — not just from Axie, but from web3 gaming as a whole, as the entire market slumped. Then, North Korean hackers targeted Sky Mavis with a $620 million hack. The company did eventually compensate all victims, but in the meantime, a media shitstorm ensued and once-devoted supporters abandoned the brand for greener pastures.

Axie Returns

Meanwhile, a small cohort in the Philippines continued to play the game for fun, even without financial rewards, which had been stopped in 2022. Which is why it’s no coincidence that Jihoz chose Manila as the place to announce that Axie Classic is back — with rewards. Because Filipinos are the tastemakers of web3 games. And Classic, the original version of Axie, was always much-loved by Filipinos despite being lambasted by the rest of the world for being unfun.

Upon its return, some of my Filipino friends got emotional, even nostalgic. For this is the game that changed their life; the game that opened their eyes to the possibilities of games of the future. The game that started it all.

A Pivotal Moment

Based on prior experience, I think this is a pivotal moment and we’re just about to see the web3 gaming space go parabolic again. The earliest stages of the cycle will be inspired and fueled by web3-native innovation, like what we’re seeing with ERC-6551. Then, as soon as one of the new games or models gets traction, there will be a thousand imitators — I’ve already seen a few pitches for GameFi versions of Friend.Tech, for example.

This is just as we saw it last cycle, when there was an “Axie for this” and an “Axie for that” period, not unlike the earlier trend of “Uber for X.” As the market nears a boiling point, all the web3 advisors that jumped ship for AI will come back to gaming with a spiffy new pitch deck. This time, some will be funded, and they’ll experience huge but unsustainable growth. And when they inevitably drop, the good ones will go lower, but they won’t go to zero.

Whatever goes up will come back down, albeit a notable notch higher than wherever it began — counting a few more community members, a few more DAU and a much better understanding of the promises and perils of the web3 world. This is a well-trodden path for more experienced crypto journeymen, but perhaps the first time around for web3 aficionados in the current cycle.

When I think back to the beginning of the last bull run, I remember a Filipino family playing Axie on their living room floor. Now, as we teeter on the precipice of the next cycle, the top web3 game, Pixels, already hit well over 100,000 DAU and the bots-or-not debates are in full swing. This time, the numbers and possibilities are wildly bigger but all the signals are the same, and it’s all originating in the Philippines.

Per Mark Twain, “History doesn’t repeat itself but it often rhymes.”

CORRECTION Dec. 12 2:45 p.m. ET: An earlier version of this article mistakenly stated that Filipinos’ in-game earnings on Axie Infinity in July 2021 amounted to $23.8 million. The correct figure is $40 million.