Gaming has transcended its status as a throwaway pastime. The introduction of P2E (play to earn) web3 gaming has brought with it an entirely new and highly lucrative economy built on blockchain technology. Currently, web3 gaming is projected to become a $65.7 B industry by 2027. This is no surprise when looking at a breakdown of the economic activity that transpires within these gamified virtual worlds.

CryptoKitties, one of the first web3 games, merges gaming and NFTs to create a virtual world where kitties are bred and collected. Demonstrating their unprecedented economic value, at its height, a digital kitten was sold for $170,000. 

With all of web3 gaming’s financial potential, there are certain roadblocks that stand in the way of it achieving mass adoption and representing a seamless source of revenue generation. Many of the challenges that face web3 gaming are similar to those that other industries within the web3 sector are also confronting. These include the difficulties of receiving salaries or large payouts in crypto, evolving global regulations that challenge the compliance of crypto payments, and token volatility. 

The Unique Financial Dynamics of Web3 Gaming

One of the most pressing challenges facing web3 gamers and developers is navigating global regulations with full compliance. Typically, earnings in web3 games come in the form of tokens. Across the globe, different countries have vastly divergent regulations governing the use and taxation of digital currencies. 

While in certain jurisdictions, tokens earned through digital gaming would be considered perfectly legal and taxed as wage payments, in other countries, such as China, earning in crypto is considered illegal. For this reason, understanding how to properly report earnings from web3 gaming is of utmost importance. 

Alongside concerns that arise around tax reporting, from the perspective of the game developers, there is risk in violating international AML laws. When interacting with gaming platforms and using pseudonyms in lieu of personal information, without the proper KYC infrastructure in place, illegal transactions and money laundering can transpire. This, of course, puts the team behind a game at risk for penalties that can include fines in the hundred of thousands of dollars and imprisonment. 

Tokenomics Design within Web3 Gaming

In addition to creating a game that is fun and user-friendly, when building out a well-designed P2E game, tokenomics must take center stage. For a game that rewards players in tokens, incentivizing user participation, maintaining a healthy ecosystem, and fostering sustainable growth are pillars for success. 

For one, a well-thought-out game economy must take measures to prevent inflation of the game’s native currency. Crypto is inherently volatile. When a gamer is earning a salary in tokens, although a certain level of volatility is a calculated risk, skyrocketing inflation has the potential to drive away the user base, and consequently bring about the premature conclusion of a game’s lifespan. For developers getting compensated in tokens, as is the case with DAOs and other web3-native projects, loss of value means loss of income. 

Token distribution is another key player in effective P2E game design. Defining a clear and fair model for distributing native tokens in order to avoid concentration in a few hands is critical. In addition to what is transacted via game play, developers should consider allocations for the development team, early backers, community incentives, and other stakeholders.  

When implemented effectively, a successful system of tokenomics ensures that gamers are incentivized to participate in a game due to high-value rewards and developers earning in native tokens receive fair compensation. 

Comprehensive Payroll Solutions for Game Developers 

On top of the complex tokenomics, managing collaboration and payroll for teams working in web3 gaming poses its own set of challenges. Due to web3’s inherently global nature, the design teams behind games are typically collaborating from distinct countries and continents. While today’s collaboration tools allow for the seamless ability to connect online, payroll still represents a roadblock. In particular, abiding by all local and global tax and labor laws. As was mentioned earlier, different jurisdictions have varying treatment of digital assets that range from little to no restrictions to a full ban on payments in crypto. 

For many web3 gaming projects, an initial attempt to handle all payroll and compliance in-house results in everything from spreadsheet errors to compliance violations. Finding a remedy to these challenges typically entails searching for a comprehensive payroll solution that not only addresses compliance but is built specifically for web3-native companies. 

Web3 Payroll, Compliance, and Beyond with Rise 

Rise is a market leader in web3-friendly payroll and compliance. Designed to address the unique needs of projects operating in the web3 industry, Rise allows for payroll funding to come directly from a project’s digital wallet while unlocking access to fiat payouts for workers. 

Web3 game developers can connect their digital wallets directly to the Rise ecosystem, issuing payments to employees in USDC. Rise will then automatically route USDC to USD to allow for simplified compliance on the end of both the employer and employee. Once received, an employee is able to choose the currency in which to cash out their paycheck, from a range of 100 cryptos and 90 fiat currencies. 

Flexibility is taken to the next level with workers able to cash out part of their paycheck in fiat and part in crypto. A portion of one’s wages can be deposited into a traditional bank account while the rest can be sent to a digital wallet for seamless and instant access to the DeFi ecosystem. 

Healthcare with Rise

An added perk of using Rise for web3 payroll is its partnership with SafetyWing, an international healthcare network designed for a globally distributed and nomadic workforce. Oftentimes companies operating fully online and managing international teams made up of a mix of contractors and full-time employees encounter difficulties in identifying a healthcare plan that aligns with the unconventional structure of their organization. SafetyWing resolves these challenges by offering tiered plans for web3-native and other digitally-nomadic companies. 

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The partnership between SafetyWing and Rise brings next-level access to hiring, payroll, compliance, and benefits. Rise members can tap into the benefits of top-quality global healthcare while experiencing expanded coverage options that include dental, vision, and outpatient care. Discounted rates are available for three different plans for residents in more than 175 countries. 

Rise’s On-Chain Identity

Another standout element integral to the rise ecosystem is the RiseID, a professional on-chain identity minted by all Rise users after completing their KYC check. The RiseID allows for employers to start pay schedules, approve time sheets, and issue payments. Rise users in turn connect their RiseIDs in order to cash out their paychecks. 

In addition to its functions with respect to payroll, the RiseID stores immutable professional information that can travel web3 with its user. This data includes bootcamp certificates, education history, work history, KYC data, and beyond. Rise is not the owner of a user’s RiseID; the individual has full control over the information it stores, what is shared at any given moment, and its interactions across platforms. 

As on-chain professional DIDs gain prominence in web3 and beyond, the range of their utility is highlighted. From the perspective of web3 gaming, they allow for a user or developer's information to travel across gaming and DeFi platforms with them. When hiring on developers, this means close-to-instant credential verification and thus an expedited hiring and onboarding process. For gamers, the ability to effortlessly transfer credentials and information between web3 games and applications ensures a smoother web3 experience. 

Innovative Payout Strategies for Play-To-Earn Gamers 

Unlike in other realms, payouts for gamers in web3 abide by their own set of requirements. The first and most obvious point to consider is that typically payments are made in crypto, stablecoins, or a game's native token. As a result, gamers will need access to a digital wallet in order to receive their earnings. Another feature that distinguishes web3 gaming payouts is the use of smart contracts. Oftentimes P2E games are governed by smart contracts which play into claiming rewards or participating in governance mechanisms. All of these factors ultimately influence the legal and tax implications of receiving money via blockchain gaming. Gamers must be aware of the tax laws in place around crypto earnings in their specific jurisdictions. 

Ultimately, the ideal solution to allow for utmost ease for gamers earning wages through P2E games are payouts across the range of currencies. Rather than limiting players to receiving earnings in game’s native token, they can be incentivized to participate with payment options that include stablecoins and fiat currencies. The ability to hold a game’s native token in order to participate in governance, invest in a project, and participate in a game is complemented by access to fiat currency for covering life expenses that cannot be paid in crypto. 

To further elevate the user experience, built-in compliance systems that ensure that all payouts to gamers abide by local compliance standards feed into a game’s attractiveness and long-term sustainability. 

Embracing Hybrid Payroll Platforms for Enhanced Flexibility

Across web3, attention has been directed at ensuring a unified experience that promotes ease and flexibility. This can be seen from platforms such as Cosmos that aim to boost interoperability, scalability, and usability, to Rise which has its mission in making compliant and flexible payroll accessible to all nature of web3 projects. 

While even just a few years ago blockchain technology was considered niche and crypto too volatile for the layman investor to take part, a rapid shift in global acceptance has ushered in a new era of web3 integrations. Today, crypto is not only held as an investment asset by millions across the globe but has become accepted for payments from everything from a hamburger to a smartphone. 

With its user base steadily growing, web3 developers have had to continue to push the bounds of flexibility and create platforms and systems that are user-friendly for those beyond the tech-savvy. 

In the wake of these shifts, Rise has remained a key player in providing invaluable services that bridge the web2 to web3 gap. Easy to use for traditional companies and with all the necessary features to boost the needs to web3-native entities, Rise sits right in the middle of the web2 to web3 spectrum. The unparalleled levels of flexibility that Rise offers to employers and employees alike make it unique amongst payroll services. While many platforms have a singular focus on token payments or fiat payments, Rise is one of few that allows for compensation across fiat, crypto, and stablecoins. 

Whether for a DAO that is seeking a payroll solution that allows for direct wallet connections and anonymity through on-chain identity or a web3 gaming platform that wants to incentivize developers and players with expanded payout options, Rise offers a convenient and scalable answer. 

Navigating Regulatory Compliance in a Decentralized World

The hot-button issue that many conversations around web3 end in is the role of compliance. It is both ever-changing and subject to unpredictable differences depending on the jurisdiction. As a result, it often represents the weakest link in an otherwise well-developed project’s infrastructure.

Rise is stepping up to make sure that this no longer needs to be a begrudgingly accepted norm. The international tax experts at Rise are the go-to pros when it comes to understanding the legal intricacies that arise with full-time salary versus part-time contractor payments in crypto, navigating benefits in crypto, and the ever-changing legal landscape of crypto across the globe. 

For game developers in the web3 space, spending more time on building and less time on avoiding compliance landmines is critical for a successful project. Automating payroll with a platform like Rise and ensuring that all payments will be fully compliant, regardless of the country in which workers are based, represents a significant step towards risk reduction, time savings, and a project’s longevity. 

The Future of Financial Management in Web3 Gaming 

Despite the significant dips that the crypto market has undergone, web3 gaming has proved its  resilience. This has been evident in the number of new games being released and the technical innovations that have been integrated to pre-existing ones.  

With their rising popularity, a notable trend that has emerged is the cohesion between gaming worlds and the real world. By earning in-game assets that have real-world financial weight, the gap between virtual worlds and the physical world becomes smaller. This results in greater participation and a more robust gaming ecosystem, allowing for inter-connectedness between games, dApps, DeFi, and real-world applications. 

The ever-expanding ecosystem of blockchain gaming is predicted to experience substantial growth in 2024. It can be anticipated that as web3 games become more robust and sophisticated, their on and off-chain integrations will evolve. The demand for payout options that include fiat will most likely be a byproduct of a wider net of players and more real-world integrations. Anticipating this shift, game developers can get started early by adopting practices that allow for payouts in currencies beyond their native token and infrastructure for ensuring compliance. 

For web3 developers that are ready to future-proof their games, early integration of flexible payments and global compliance ensures a project’s ability to thrive in 2024 and beyond. Get started with next-level web3 integrations, payroll, and compliance today with Rise.