Let's talk about the state of crypto games also referred to as web3 games,
blockchain games, gameFy, play to earn games in this current crypto winter.
Delphi Digital quotes the market cap of game fi
at $6.15 billion on September 30th.
While checking the top gaming tokens on CoinMarketCap returns
a valuation of $6.6 billion on November 18th.
Regardless, there are only a handful of gaming tokens in the top 100.
So the crypto gaming sector, at least those with tokens, has been suffering too.
Things are looking better as far as online activity is concerned.
According to DappRadar, a full 40% of all on-chain activity comes from gaming
in Q3 2022, which is more than double the number that DEFI has.
This is further amplified by the CMC in Naavik Gaming Report,
which shows that the unique active wallets or UAW, although currently stagnating,
is any slow upwards long term trend broken down by blockchains.
Most demand for games is on wax over if we look at the supply of games.
Most games are actually built on the BNB chain, according to Binance Research.
However, only 33% of crypto games are live,
with many still in the development beta or alpha stages and actually
looking further into where players are actually playing.
Most crypto games are unsurprisingly on web browsers or mobile.
Finally, the popular genres of crypto games are action,
followed by some adventure collectibles strategy and RPGs.
But which games are players actually playing?
Yet again, it's not easy to precisely define which games
are the most popular in, particularly how many players are playing them.
But Binance Research lists the top five games
with the most active users in September of 2022.
There is Gameta, a web3 gaming platform that brings Web2 games
into the blockchain.
Alien Worlds, a Metaverse Game Set in space.
Benji Bananas, a hyper casual mobile game where players collect bananas.
Solitaire Blitz, a casual card game.
Splinterland, a card collection game.
Gameta has seen a stellar rise catapulting itself to the top spot
with almost 2 million unique, active users in September.
However, the most popular games are not necessarily
the most valuable ones,
although you can argue about which of those are actually crypto games
and which are metaverse and whether those two aren't in fact the same.
Here's the top five by market capitalization: we have The Otherside -
a metaverse by Yuga Labs, the team behind Board Ape Yacht Club
and Cryptopunks the Sandbox, a popular metaverse game
which allows users to create and play games.
Decentraland - a leading virtual world with different districts and user owned plots.
Axie Infinity - a play to earn pioneer. Stepn - the move to earn pioneer.
Interestingly, the most played games are nowhere near
the top five games by market cap when it comes to valuations.
Even though Metaverse is
are in the early stages of development and have relatively lower active users,
trading volumes for Metaverse, virtual land and NFTs are down over 90%.
Even if some of the bubble has popped, the market is still giving these projects
plenty of breathing space considering their stage of development.
But the two real games on this list, Axie and STEPN , are worth a second look.
Given how popular they were at their peak of their powers.
Axie Infinity experienced a meteoric rise.
At its peak,
the token was worth over $150, and its market cap was over $10 billion.
However, with the onset of the crypto winter these days, access trades below $10
and at a much more modest market cap of $900 million.
Furthermore, these CMC and Naavik Gaming Report
now posits that the unsustainable play to earn model
is in demise, with games moving to free-to-own (F2O) model.
Daily unique active wallets for Axie were down 86% in Q3 compared to Q2.
Still, the team had its first AxieCon conference this year
where they introduced their Land Project Kingdoms gameplay
alongside other gaming features like socializing, a token gameplay,
delegations, non land owner, gameplay, dungeons and more.
Stepn conquered the move-to-earn market in a flash. Stepn created
the move-to-earn marketing.
But just like Axie, in this case, the game is still popular,
but the monthly active user count is down significantly, and that may be due
to the rise of a formidable competitor in Sweatcoin.
We cover the details of SweetCoin previously, which has over 1.3
million active users and over 1.5 million transactions thus far.
Unsurprisingly, the trend is down after the initial hype
and SWEAT is suffering from the same kind of selling
pressure of most gaming or fitness tokens are suffering from.
But it's probably not the last iteration of move-to-earn games that we've seen.
The crypto games industry in 2022 is projected
to outperform the amount in 2021 by a solid 100%.
Most of these investments are seed rounds and pre-series, where crypto
gaming attracts the most money out of any sector.
And according to the block research, 35% of seed rounds
and pre-series investments go to NFTs and gaming
and that is almost triple the amount that DeFi gets.
Meanwhile, Delphi Digital shared
a few noteworthy funding deals in its September gaming insights overview.
Metaverse Go, a web3 gaming platform raised $4.2 million in a seed round.
Revolving games raised $25 million across two rounds to build Battlestar Galactica.
Animoca brands raised $110 million, bringing up its valuation to $5.5 billion.
Hadean supported by EAA raised $30 million to build a metaverse infrastructure
immortal game, raised $15.5 million to build each has focused game
featuring NFT Vulcan Forged raise $8 million
to expand its Web3 gaming platform and build a metaverse game.
GameFi’s Achilles Heel Building a Sustainable Token Model.
There's no two ways to go about this.
Crypto games definitely has not figured out
the Tokenomics model for sustainable games.
Access is down more than 90%, and so are all the guild tokens
that promise to build an entire field of employment around play to earn.
But what's going wrong?
And why is it so difficult to build a sustainable token model in a game?
Well, Nate Eliason has a fantastic essay on this called "Crypto Gaming is Broken.
How Do We Fix It?"
And if you're really interested in crypto
games, you should actually read the entire piece. For the lazy types
here are Nate's arguments summarized.
Number one, NFT set a bad precedent for games.
NFTs are all about their floor price and the number going up
and that is the wrong frame for the games to be in.
Number two, DeFi is set in a bad precedent for games.
Gaming shouldn't be focused on making a passive yield from staking.
Number three, most earnings are unsustainable.
Many games actually have poor economic designs where more
earnings increase earnings and thus increase selling pressure.
Number four, costs are actually too high for game
lifecycles, considering how long a game's popularity last.
At best, a few years.
What? Three games are ridiculously overpriced.
Number five,
much of the work is bullshit.
Play to earn is just clicking to actually
click a few useless buttons without meaning or any fun involved.
Number six, and too much power for people and capital versus time.
If you can afford buying a valuable NFT,
you can make your initial investment back quickly.
And this is unfair.
Number seven, to play-to-earn it sets the wrong expectations for players.
It shouldn't be play-to-earn, but play and earn.
But what about the possible solutions?
While the block research suggests that not all Web3 games
need to have a token to begin with, for example, hyper casual games
think of Candy Crush don't benefit from adding a token
because their only hook is to make players come back to keep their streak.
But without long term incentives,
the token will always be inflationary and thus sold immediately.
Nate also gives several suggestions on how to fix Web3 gaming, summarized
like this: number one, significantly reduce the cost to entry.
Regular games cost $60 to $80, but web3 games have NFT collections
worth thousands.
Number two, Create limitations on the power of new capital.
Games should actually have barriers for the rich
to not have an unfair advantage or starting advantage.
Number three, Prioritize rewarding play, not clicking.
Earnings should actually come
from playing the game and not just by clicking buttons to earn.
Number four, Get rid of Staking.
Staking is a DeFi element that has no place in games.
Number five, is build a fun game.
Games should actually be fun, you know.
Number six, is separate the external and internal economy as much as possible.
Players should actually have to check the price of the token
to actually decide what to do in the game.
Number seven, obscure the aura why earning mechanisms are fine,
but they should not be predictable.
Number eight, Reframe expectations around play-and-earn.
Players should actually expect to play first
and then earn second, not the other way around.
Number nine, is not limiting play time. Based limitation
should not stop the players from playing a fun game.
Of course, there is a whole long tail of design mechanisms like how many tokens
to include and which tokens sink to built into the game.
But armed with these suggestions, developers already have a long laundry
list of things to improve. A CMC Naavik Blockchain Gaming Report
also echoes some of the most aforementioned points,
adding that the crypto gaming sector has seen the transition from the unsustainable
play-to-earn model across various stages to the free-to-own (F2O)
model. Afterwards dramatically lowers barriers to entry by offering NFTs
for free and not getting game access with sometimes absorb only high
NFT purchase prices.
Naavik actually believes that this could be an important catalyst
in accelerating the mass adoption of crypto games.
So the old the crypto gaming is dead, long live the new crypto gaming or
something like that.
Gaming is still one of the most promising verticals for blockchains
to actually break into the mainstream.
You'll models were nice to experiment with
but were never going to work out for the long run.
And to be fair, a lot of new games do look promising, but have a long way to go
before they can actually compete with legacy games.
Many traditional gamers or gaming companies remain hostile to NFTs
and crypto gaming concept.
They see it as a quick cash grab by companies and a way of blockchain
encroaching on someone else's turf without actually improving anything.
And so far they've actually been right about that.
Still keep an eye on the gaming space because it's not going anywhere
anytime soon.