With broader cryptocurrency markets in the doldrums, at least one area of the digital-asset industry appears to be mostly unaffected and has continued to grow: blockchain-based gaming. Although token prices for leading blockchain games like Axie Infinity have fallen recently, the user metrics are up.
There are now 398 active blockchain games, defined as having at least one active wallet in the past 24 hours within the game, according to the data tracker DappRadar. That’s a 92% increase from a year ago. The total number of blockchain games, including those that are inactive, has climbed by 71% over the past year to 1,179.
Modesta Massoit, finance director at DappRadar, said that the growth looked impressive given that “it takes time to build great games, and in traditional industries, it takes two to four years to build a great game.”
User statistics show the rapid pace of adoption of blockchain gaming. According to Massoit, the number of daily unique wallets interacting with game-related smart contracts surged to 1.3 million last year, a 46-fold increase over the 28,000 at the end of 2020.
Meanwhile, venture capital firms have invested $4 billion to support the development and creation of blockchain-based games and their underlying infrastructure, according to Massoit.
And the fast expansion shows few signs of slowing: “2022 is going to be huge for crypto and gaming,” says Gerald Votta, director of GameFi research for Quantum Economics. “Look for the number of games in the space to more than double over the next few years.”
The popularity of “play-to-earn” – gaming powered by cryptocurrency rewards – picked up in 2021 with the Pokémon-inspired Axie Infinity leading the way (and its AXS tokens racking up impressive gains). The play-to-earn game is ranked the second-largest game using blockchain technology on DappRadar by user base, becoming a hit among lower-income populations in the Philippines and Venezuela. It reached a record-high of $2.5 billion in trading volume in September and surpassed sales records of NBA Top Shot and CryptoPunks, according to a report by the Blockchain Gaming Alliance.
Ranking first on transaction volume is DeFi Kingdoms, a play-to-earn, metaverse-based blockchain game. DappRadar data shows that the number of users on the game has nearly quadrupled just in the past two months.
GameFi adoption unaffected by recent market trends
Bitcoin and the broader cryptocurrency markets in 2022 have suffered one of their worst-ever starts to a year and remain far off their all-time highs. Bitcoin is down 12% year to date and Ethereum’s native cryptocurrency, ether (ETH), is down 15%.
Non-fungible tokens (NFTs) and gaming appear less affected by macroeconomic events and tend to trade more independently, according to a study by DappRadar. The firm attributes the sector’s rising adoption and popularity over the past year to narratives like play-to-earn or the metaverse. (Remember Facebook’s rebrand?)
The trend has firmed as more traditional gaming companies like Ubisoft and EA Originals join the ranks of play-to-earn and NFT gaming, said Votta of Quantum Economics.
Jeff Holmberg, head of investments at Yield Guild Games, a play-to-earn gaming guild, says adoption of blockchain games has been driven in part by the ability of players to have digital ownership over in-game assets.
“This is a huge shift away from the typical centralized Web 2 models that have dominated the industry to date,” Holmberg said in an interview with CoinDesk. The most successful games are those with a strong community, robust play-to-earn mechanics and guild features, because they have higher chances of attracting players, he said.
Sebastien Borget, co-founder and chief operating officer of The Sandbox who serves as president of the Blockchain Game Alliance, said that there’s a growing diversity of games involving blockchain, NFTs and play-to-earn mechanisms.
“This is a great indicator of the overall growing interest of the industry,” Borget said.
Traditional game players are still skeptical
One obstacle to further adoption: the reputation of cryptocurrencies among many traditional video game players.
The blockchain gaming industry has faced criticism from traditional gamers, and many think that gameplay for these projects has a long way to go.
Lennard Neo, head of research at Stack Funds, acknowledged that blockchain gaming has been one of the core themes of last year and thinks that will continue into 2022, but he noted that the next phase of growth might come only after existing games deliver and the infrastructure evolves further.
The tokens of several play-to-earn games have suffered large price drops this year as broader cryptocurrency markets have trended downward. (Maybe they don’t trade so independently after all.)
AXS, an Ethereum-based token that powers Axie Infinity, is down 40% in the past three months, Yield Guild Games’ YGG token is also down by 40%. The Sandbox (SAND) is down 16% over the past seven days, but is still up 400% over the past three months.
