Find out why Telegram’s Touch Unit is winning over investors.

The rapid rise of mining games on Telegram, powered by the Open Network (TON) blockchain, has attracted significant attention – and funding – from venture capitalists. Investors are betting big on Telegram's revenue-generating games such as Notecoin, Hamster Kombat and Katizen, which they see as the future of Web3 games.

But what exactly drives these investment decisions and how do investors envision the future of acquisitions? BeinCrypto recently interviewed Animoka Brand, one of the largest token verification providers, and Hashkey Capital, which has invested heavily and partnered with Katzen.

Investors see social experiences as the future of touch games.

Undeniably, one of the key reasons why venture capitalists are drawn to Telegram's monetization ecosystem is its vast and engaged user base. With 950 million active users as of July 2024, the platform offers an unparalleled audience for developers looking to launch and scale games. This type of organic reach significantly reduces user acquisition costs, which is a major selling point for investors.

Additionally, its crypto-native infrastructure sets Telegram apart from other platforms in the Web3 gaming space. The integration of the TON blockchain allows for seamless transactions, reducing the friction between the gaming experience and the user's wallet. This ease of use is particularly attractive to both developers and investors, as it enables rapid monetization without the barriers associated with blockchain adoption.

“Telegram is one of the few platforms where Web3 mechanics are baked into the experience. The ability to move from gaming to crypto transactions without leaving the app is a huge competitive edge,” explains Junbo Yang, investment manager at Hashkey Capital.

For investors, this combined experience makes Telegram a prime choice for future investment. The platform's low transaction fees, scalability, and growing list of small applications ensure that developers can acquire and retain users without the technical barriers that often plague Web3 adoption.

As the Toon ecosystem and tap-to-earn games continue to grow, investors are optimistic about the future of this segment. For example, Hamster Kombat alone has attracted over 300 million users in 190 countries.

Read more: What is Hamster Kombat?

Meanwhile, Katizen has successfully built a loyal user base while improving its monetization strategy. At the same time, Notecoin executed one of the biggest airdrops of the year, attracting more than 40 million global users, solidifying its position as a key player in the Ton ecosystem.

Both Hashkey Capital and Animoka Brands see the success of these games as a first. As developers improve game mechanics, they believe they will also find new ways to retain users, from simple rewards to social and immersive experiences.

Why Telegram Can Drive the Next Web3 Boom?

The investors also see these games as proof of concept, demonstrating the tap-to-earn model and its ability to retain users beyond the initial hype. This success shows great potential for growth and expansion in the sphere tap.

In a recent exclusive interview with BeinCrypto, Yat Siu, co-founder and CEO of Animoka Brands, strongly advocated the integration of blockchain games with Telegram. Built-in audiences allow games to be scaled quickly without expensive marketing campaigns – a critical factor for venture capitalists looking to maximize profits.

“The next 100 to 200 million users in Web3 will come from the Telegram and gaming ecosystem,” Siu commented.

Investors are primarily focused on three things: user acquisition, scalability, and retention. However, they are particularly excited about the potential for long-term income generation. Katizen stands out, for example by retaining users and increasing their lifetime value (LTV), demonstrating sustainable growth and a profitable acquisition model.

Junbo Young highlights how Katizen and similar games are setting the stage for future growth by prioritizing monetization and long-term user engagement.

“Katizen's early success in monetizing its user base provides a blueprint for how other developers can grow their game,” Yang said.

The views of these investors are consistent with the long-term views of the gaming groups. In an email to BeInCrypto, the Hamster Combat team revealed their plans to transition into a multiplayer platform.

“After the first airdrop, we're kicking off the second season with a massive expansion, allowing players to choose from multiple games to play. This will begin the transformation of Hamster Combat from game to game platform, similar to how Valve transitioned from launching cult-status games to Steam, the largest gaming marketplace for PCs.” They explained.

Turning setbacks into growth: Why investors remain optimistic despite tons of hiccups

While the tap-to-earn model has proven its ability to attract users, the main challenge is getting them engaged beyond the initial airdrops and rewards. Some critics complain about mercenary users – who join games just to earn tokens – but investors see this as a short-term challenge.

However, investors believe that as developers develop the tap-to-access model, they will also find ways to extend user lifecycles and improve sustainability. Yat Siu believes that while the tap-to-earn model is currently driven by rewards, it is laying the groundwork for a much larger gaming ecosystem.

“Tapping to find is just the beginning. Once users enter the ecosystem, Siu argues, the goal is to build community and social experiences that keep them engaged for reasons beyond token rewards.

In addition to sustainability concerns, the Telegram ecosystem has faced recent challenges. For example, in early August, BeinCrypto reported that Ton blockchain experienced an outage, which temporarily halted blockchain production for several hours. This incident has raised concerns about the network's future activities, especially as the number of users increases as it engages in games for revenue.

Addressing the issue, Yat Siew admitted to the setback but remained confident in Ton's resilience. Siu Ton believes that it is still in its infancy and that such challenges are part of the network's development process. Ton Capability will lead the development of the platform with an eye on the potential to become more than Telegram in the future.

“TON itself should remain a decentralized platform that can withstand censorship like other chains, but the projects and dApps themselves can implement measures to ensure stability,” he said.

Read more: Top 7 Telegram tap-getting games to play in 2024

Regardless of these challenges, venture capitalists remain optimistic about acquisition potential. The coming years will see this model secure its place as an enduring feature in Web3 games, but for now, investors are fully committed.