UGC in web3: blockchain and generative AI

This article is one of the first in the series of how blockchain builds the economical layer, while generative AI builds the technological layer of the metaverse – all through the democratization of tools.

How UGC came to be


User-generated content (UGC) has been around for a long time, even before the term was made up. However, it didn’t become popular until 2005. UGC includes a wide range of digital media on sites like YouTube, Facebook, Twitch, Wikipedia, and video games. Platforms that support UGC usually offer a place for open collaboration and flexible licensing agreements to make it easier for people to make and find content. UGC is any kind of content that users post online, like pictures, GIFs, videos, text, music, in-game characters, changes to in-game content, etc.


Games that let players make their own content have changed a lot over the years. Now, many projects are being built from the ground up to give players a place to show off their creativity and, in some cases, even make money by taking part in a market for user-created content.



Traditional Games with UGC


One of the biggest areas of growth for UGC is the gaming industry. A Nimdzi report says that the market for localizing UGC in the player support area will be worth between USD 100 million and USD 180 million in 2020. It is expected to grow at a compound annual growth rate (CAGR) of 10% by 2024, while the industry’s total revenue of USD 134.05 billion is expected to grow at a CAGR of 12% by the same time. So, UGC games are still a small part of the industry as a whole and have a lot of room to grow.

Some of the first UGC came in the form of “Mods,” which changed the way games worked and how they looked by changing the software. Mods were often shared through independent channels, such as third-party forums. Other than Mods, there are two other types of UGC: “Machinima,” which uses gameplay from existing games to make animated content (like cinematics), and “Game Creation Systems,” which are platforms or software made available by game studios that let users create and develop their own gameplay content.




UGC has been good for a lot of big businesses. Roblox was the first company to do this, and it is still one of the leaders in the industry. Roblox focuses on building platforms and tools and gives the players the power and freedom to be creative. Roblox began in 2004 and slowly grew into what it is today. Just last year, it had more than 9.5 million game developers and 43.2 million daily users who play UGC games for more than 3 billion hours per month. Now, 40 million games have been made on Roblox. By October 2021, Roblox’s market cap will be 43.02 billion USD, making it the 450th most valuable company based on market cap.




In 2011, Minecraft was the second name to start a trend in UGC. Statista says that by 2021, the game will have sold more than 238 million copies around the world. This makes it one of the best-selling games of all time, along with Tetris and Grand Theft Auto V. Millions of people play Minecraft and make amazing, immersive worlds inside the game, which is a true “open world sandbox.” Many Minecraft players share their creations on the web, like on YouTube or social media. This brings in even more Minecraft players who are interested in the game.


Roblox and Minecraft


Then, many things can be said about why Roblox and Minecraft are so popular.


  • Available on multiple platforms:

The two games have a lot of ways to get online and play, like smartphones, tablets, PCs, multiple generations of Xbox and Playstation, and so on. This makes it easy for players to connect with each other and share their experiences.


  • Places for creativity to happen:

They let people use their imaginations and give them a way to build and make things. It’s great to see how much fun and interesting content is being added all the time.


  • Different ways to play:

The games and other users give players access to a lot of different game modes. This keeps the game interesting and lets players of all skill levels enjoy their worlds.


  • Sense of being part of a group:

One of the most important parts of gaming is interacting with other people. Roblox and Minecraft both have a huge number of people with whom you can play games and talk to. It’s a way to meet new people, talk about what you’ve done, find people with similar interests, and go on digital adventures together.


  • Diverse target audience:

Roblox and Minecraft are simple enough that a child can play them, but they are also complex enough that teenagers and even adults who want to go deeper will enjoy them. They made a game where both experienced gamers and people who have never played before can do well.


After 17 years, it’s almost impossible to stay away from UGC. A lot of other big names, like Fornite, Star Trek Online, Second Life, The Sims, etc., have added UGC features. Games and platforms that use user-generated content are now some of the biggest digital properties in the world. But Web2 UGC games could become out of date because they can only be played in their own universes and the community of user-creators can’t make money from them.


Web2 shortcomings for UGC


Web2’s current issues UGC Games Can’t have this kind of content: UGC is strong. Even though it might help expand the game universe, it only exists in one game universe and is limited not only by the rules of the game it runs on but also by technology, copyright restrictions, and other laws. If a game fails, everything that was built on it goes away. Also, even the most creative and complicated skins and mods belong to the game studio. The person who made them doesn’t own them and gets little credit or money for them.


is it game over for web2 ugc?


  • IP conflicts:

The game industry has been quick to incorporate user-generated content (UGC) into their business models and design priorities, but they haven’t been nearly as flexible when it comes to the legal and regulatory aspects of UGC. UGC is a popular market where casual players can make and share their own game content. However, there are still a lot of questions and concerns about IP rights and the legal status of UGC, as well as how players’ rights will be expressed and protected in virtual game environments that are mostly set up by corporations. For example, a player made a Pokemon mod for Minecraft. This wasn’t against Minecraft’s terms of service, but Nintendo, the company that owns the Pokemon IP, sued, and the mod had to be taken down.


  • No transparent environment:

Fairness and equality are important when users contribute content and when moderators check it. Creators should be paid fairly based on how well their work does, and rules should be applied fairly. Every user should have to go through the same amount of moderation. A clear, concise, and easy-to-find set of rules should tell all users how they should interact with the platform’s tools and with each other. However, this is not the case in many projects. Poor revenue distribution: In Web2 games, the game publisher or platform owner gets most of the money and revenue from the game economy. When you think about how big some game communities are, it’s clear that there is a big imbalance in how money flows. Players and users who add value to games don’t get the same share of income and revenue.


  • No incentive:

UGC is where the gig economy and the passion economy meet. Most of the time, it comes about because a person wants to express himself or herself. Traditional games don’t have a truly open economy that rewards users who create and add value to the project. Most of the time, all they get in return is credit, while the studio keeps all the money. This is how Web2 UGC models can be used to make money.

Blockchain takes user-generated games to a whole new level.

Web3 builds on what worked well with Web2. Centralization is one of the most important parts of Web2 systems. But Web3 is seen as the next step in the evolution of the internet. Web3 applications use blockchain technology to give people ownership over their data and the ability to make money off of it. With Web3, users will not only make their own content, but they will also be in charge of their own identities and how that content is used.

UGC entering web3 with generative AI


UGC is a powerful and popular part of Web2 gaming, but the publishers and platform owners haven’t been able to solve the problems it has. Soon, UGC will be able to reach its full potential because of Web3 blockchain games.

Developers might see UGC as a way to get creative work for free or at a low cost. Players and creators need to be able to connect and work together on projects in a fair and open way. In the form of NFTs, blockchain technology lets creators really own and control their content. Users can also keep ownership and control of their data and decide how to use or share it.



  • Content creation: 

Web3 will make extended reality (XR) experiences easier to find and more well-known. Sandbox games will soon become whole worlds with personal avatars, digital goods, and full experiences. This is clear from the fact that NFTs are becoming more and more popular and innovative. Creators of interactive NFTs can add to and customize them based on how people use them, and they can benefit from more secure and user-friendly content management systems.


  • Tradable: 

Any artist can make (or mint) an NFT of videos, photos, in-game characters, items, or any other kind of art. These can be traded on an open market as assets, which makes making money much easier. NFT markets like OpenSea, Rarible, and Nifty are giving creatives new ways to sell their work and giving them full control over it by setting clear copyright rules, making ownership clear, making transactions safe, and making sure royalties are paid.


  • Virtual world interoperability: 

Since NFTs are stored on blockchain infrastructure, tokenized items like avatar skins in games, weapons, accessories, characters, or real estate will be able to move easily between different virtual worlds once they are implemented at scale with deep integration. This will bring in more money for original NFT content through royalties, and it will lower the chances of an original game going bankrupt, which would kill user content on Web2.


  • Alignment of economic incentives:

Web3 gaming shifts the balance of power and profits from platform operators to platform users. Creators are paid in cryptocurrency, which can be traded for real money, for making NFTs and playing games. This gets people more involved and interested in the game’s metaverse, which leads to more unique and interesting content.


  • New ways to make money, get books out, and publish them:

Web3 games with play-to-earn mechanics that change over time will share the money made by players much more evenly. Some gamers work harder than others, and their hard work will be rewarded. This could also make people more interested and involved. Players are directly rewarded for staying in the game for a long time, grinding for rewards, and adding to the game economy. These tokens they earn can then be traded for other cryptocurrencies or sold for real money. 


  • Democratization of tools with generative AI – UGC in games with virtual lands

Many games available in the web3 scene today has introduced a form of virtual land gameplay. In some cases these serve as gateway to more content or access to higher levels. In other cases these lands invite creators to build on top of them. This however raises the question, how will community members with no coding experience or understanding what and SDK is build on top of these lands? Or even contribute value to any of the games?
Our answer is that they will do so through tools we can build with generative AI. Currently at AMG DAO a UGC Content Creation Suite with generative tech is under development to make it easier for the creators of web3 games to build and this we can democratize tools making them available to anyone, so more players will become creators of games, too.


  • Web3 open source nature – use other games’ NFTs to build you own

As a result of the open sourced nature of web3, players are able to build their own games using assets from various other games and IPs. This rewards both the game and the creator, as players who own the game’s NFT will be able to play with many more creative content, while the creator would be rewarded by either the game’s cryptocurrency paid by the developer or by the players who wanted access to given content.