Since the summer of 2020, the DeFi landscape has seen tremendous growth, with pundits terming it as a pivotal moment in the history of finance.
Indeed, the growth was unlike any other in the world of finance as the sector speedily grew 10 times larger, with a total value locked across the entire sector moving from a value under $1 billion to a peak of nearly $250 billion.
Blockchain games are here to stay
Blockchain games incorporate play-to-earn models that allow gamers to generate income while playing. Furthermore, in these games, in-game assets like heroes, land plots, vehicles, weapons, or skins are represented as non-fungible tokens (NFT). It means that players own their assets, in contrast to traditional games.
In spite of these advantages, some skeptics criticize blockchain games because they think crypto and NFTs are just hype that will soon disappear. However this has not deterred investors, who are pouring money into crypto gaming start-ups.
The recent growth of GameFi
When discussing blockchain gaming, we should look at the numbers of the GameFi industry because it connects blockchain gaming with other relevant key concepts like decentralized finance, NFTs, and the metaverse. All these concepts together merge into a booming sector.
The industry is attracting more and more users. According to the 2021 research by Blockchain Game Alliance (BGA), a total of 1.4 million unique active wallets were connected to blockchain games on a daily average 49% of all blockchain usage came from games. Metaverse-related activities also exploded in 2021; at the end of November, it reached an all-time high of $4.6B.
Crypto.com analyzed 230 GameFi tokens listed on Coingecko. The analysis indicated that over four years, from 1 January 2018 to January 2022, the compound annual growth rate of the total GameFi market cap was 180%. At the time of writing this article, per crypto.com data, the total market cap of GameFi tokens is $53.42B.
In January and February 2022, we kept seeing promising developments. DappRadar’s January 2022 report showed that gaming dapps (decentralized applications) accounted for 52% of all dapp industry activity. The popular blockchain game DeFi Kingdoms generated over $1.6 billion in transactions in January alone. Another well-known game, Crazy Defence Heroes, attracted a daily average of over 41,000 unique active wallets.
Investments in blockchain games and infrastructure
We should emphasize that the growth is not only on the side of the daily users. Investors are also excited about infrastructure projects which include layer 2 solutions for blockchain, dedicated NFT marketplaces, and leasing protocols. Per BGA 2021 report, venture capital companies invested $4B in blockchain games and their underlying infrastructure. The total capital invested in 2021 is 5,000 times higher than the previous year, which was only $80M.
The blockchain games and infrastructure projects raised $1B in January 2022. In February 2022, the capital invested in the industry was $720M. Although it decreased compared to the previous month, it’s still almost half of the total amount raised in 2021 during the same period.
Perfect case for NFT utility and ownerships
Apart from growth in daily users and raised capital in the games and the infrastructure, the NFT utility aspect will also affect the future of the blockchain gaming scene. Because games are perfect use cases for the advantages of NFTs.
Gamers can not only use NFTs directly in the games, but they can also trade them in the NFT marketplaces for profits. Moreover, the NFT ownership concept already converges with other DeFi applications. For instance, holders can stake their NFTs or use them as collateral for financial benefits.
Some genres are meant for blockchain gaming
When used along with NFTs, some game genres make particular sense. In role-playing and card-trading games, for example, game progression depends strongly on having the required game cosmetics or cards. NFT ownership allows players to buy or lease them from other players. And when they don’t need them anymore, they can sell them to another player.
A key role in mainstream crypto adoption
Above all, the most important fact is that the audience of blockchain games are gamers who are already digitally native and technically savvy. They’re knowledgeable about concepts like in-game tokens and investment in assets. That’s why we expect that the pace of adoption will be much higher than other blockchain applications.
There are more than 3 billion gamers worldwide. The global game market is valued at US$198 billion, and it is expected to reach $340 billion in 2027, according to a report by Mordor Intelligence. Blockchain gaming had only around 1% of the total market value in 2021.
A growing trend is to invest in blockchain gaming guilds concerning adoption. They play a crucial role in attracting non-crypto players by providing scholarships and investing in the game assets. We observe great venture capital and private investor interest in these companies. For instance, Yield Guild Games raised $2.6M from Andreessen Horowitz. GuildFi secured $6M in a seed round co-led by DeFiance Capital and Hashed. Another blockchain gaming guild, Merit Circle, closed a $4.5M seed round from reputable investment firms like Mechanism Capital and Spartan Group.
Conclusions
We believe that recent advancements in the industry signal a positive outlook for blockchain games. Although GameFi is still in its infancy and the rules are yet to be set, it has excellent potential to attract non-blockchain gamers into the crypto world.
Many people earn their first crypto in play-to-earn games; we think this trend will continue and broader adoption of blockchain gaming is very close. The recent consolidation of the user base of the top blockchain games and the growth in investments validate this expectation.