How to open a secondary market for Web3 games going global: how to choose among self-built Vs and three-party cooperation?

 

The development of overseas Web3 games also faces various complex obstacles. According to Footprint Analytics' July Web3 game research report, there were a total of 3,362 games in the Web3 game field in July, of which only about one-third remained active. Among them, only 289 games attracted more than 1,000 monthly active on-chain users (MAU). This has also triggered market discussions on the sustainable development of Web3 games.

Active users are the fundamental source of sustained revenue for Web3 games. Therefore, in addition to directly selling props through the primary trading market to obtain revenue, the project team will also improve the sustainability of revenue through various methods. For example, some project teams have designed a dual-token system during development to ensure the stability of the game's economic system. In addition, in order to enhance the liquidity of the in-game economy, opening a secondary market has become one of the important factors affecting the operation and development of blockchain games.

 

Recently, the 76th Mankiw Afternoon Tea organized by Mankiw Law Firm invited senior practitioners of Web3 games to discuss compliance issues faced by Web3 games at various stages, including discussions on the secondary market.

Currently, the industry generally adopts cooperation with third-party platforms to establish a secondary market. However, Lawyer Mankiw has also received many inquiries about self-built secondary markets. Based on this, Lawyer Mankiw wrote this article to explore different strategies for self-built and third-party cooperation secondary markets, and provide corresponding compliance suggestions.

 

Why establish a secondary market?

 

The secondary market is a platform that allows players to freely trade in-game assets (such as NFTs, virtual items, etc.), providing players with the opportunity to generate value from rare items or virtual assets.

 

The role of the secondary market in Web3 games mainly has the following four points:

 

Comparison of advantages and disadvantages between self-built and third-party

 

The secondary market is crucial for the sustainability of Web3 games. So, how should the project team choose the appropriate way to build for both self-built and third-party paths?

 

A complete Web3 game secondary market mainly includes four dimensions: front-end User Interface, back-end management system, smart contract layer, and blockchain network. We can visually compare the two through the table below.

 

It can be seen that the core advantage of building a self-built secondary market lies in the project party's complete control over the platform From market rules, cost structure to User Experience, the project party can customize the design according to their own needs. This flexibility enables the project party to deeply integrate branding strategies, enhance user loyalty and market stickiness. For example, the previously popular Starshark, building a self-built secondary market helps the project party build brand perception, provide User Experience highly consistent with the main brand, and increase users' sense of belonging and interaction frequency.

 

However, the complex compliance requirements faced by self-built secondary markets, such as the formulation of trading rules and fund review, will lead to a sharp increase in the cost of technology and resources invested by the project party. Under the addition of multi-layer contracts, market liquidity will be correspondingly limited. Without stable buyers and sellers, asset prices may fluctuate significantly, affecting user trust and leading to an increase in customer complaints. In addition, project parties building self-built secondary markets need to solve the underlying chain and external asset and information transmission, and create cross-chain bridges, which further increase technical costs.

 

In comparison, cooperating with third-party secondary markets can significantly reduce legal and compliance risks. Isolating the core business of the project party from the secondary market can avoid direct involvement in currency transactions. In this way, once price fluctuations or losses occur, users are more likely to regard them as market behavior rather than the responsibility of the project party, thereby reducing the risk of safeguarding their rights. This approach keeps the project party at a certain distance from secondary market trading activities in law, especially in terms of potential criminal liability, reducing the possibility of being pursued. At the same time, market isolation can also prevent future legal issues, especially those involving virtual

Risks of proposed currency trading and regulation. Large platforms such as OpenSea and Magic Eden have established mature KYC and AML compliance systems and bear most of the regulatory responsibilities. In addition, large platforms usually have a sound copyright protection mechanism, which can quickly handle potential infringement disputes and reduce the risk of project parties directly facing copyright issues.

 

Although cooperating with third-party platforms means that there are certain restrictions on market rules, fee structures, and User Interfaces, making it difficult to fully customize according to their own needs, large third-party platforms have a wide user base and a complete trading ecosystem. At the same time, the platform generally supports multiple public chains. By cooperating with these platforms, project parties can quickly obtain market liquidity and expand market coverage using existing client bases. This cooperation model is particularly beneficial for projects in the early stages of development, which can quickly enter the market without building a liquidity foundation alone.

 

Review by Lawyer Mankiw

 

Projects suitable for self-built secondary markets

Self-built secondary market is suitable for projects with strong technical teams, abundant resources, and the desire to deeply control the brand and User Experience. For projects that already have a large number of users and the ability to bear compliance and operational pressure, self-built secondary market is a worthwhile choice. However, it should be noted that in the process of customizing transactions, it should be avoided to involve RMB exchange, whether it is the official provision of cashing channels for game points or tokens, or allowing cash transactions between users, all of which involve extremely high criminal risks.

 

Projects suitable for cooperation with third parties

For projects in the early stages of development, prioritizing the need to reduce compliance risks and quickly obtain market liquidity, cooperating with third-party platforms is a more secure choice, which is currently the practice of most blockchain game project parties. This model can not only quickly enter the market, but also reduce technical and operational burdens and initial investment costs. However, it is worth noting that when operating blockchain game projects on third-party platforms, users may think that the project party is related to the platform. The project party can define the independence of both parties through clear user agreements and cooperation statements, thereby reducing misunderstandings.