CoinMarketCap Alexandria analyzes the state of blockchain gaming in 2023 — and its future potential.
Remember this? Back in March 2022, huge hype and anticipation surrounded Pixelmon — a blockchain gaming slash metaverse project — and its NFT collection. Then, this dropped.
Of course, Crypto Twitter went on a rout.
Despite this, the Pixelmon collection went on to rake in $5.8 million in trading volume a week after launching. Does that mean investors believe in the potential of blockchain gaming, or is this just a game of highly speculative musical chairs?
Widely regarded as a potential path toward the mass adoption of cryptocurrencies and blockchain technology, the blockchain-enabled gaming sphere is one of the most diverse crypto sectors, with many believing in its long-term potential.
But while early blockchain games initially achieved meteoric success, few have managed to maintain interest in the face of growing competition and a weakening crypto economy.
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The Failure of Play-to-Earn
The value proposition is simple — by playing (and/or winning) regularly, users earn rewards in the form of cryptocurrency tokens. These tokens could then be either used in-game or sold via external exchanges to earn a real-world income.
Driven by the promise of financially incentivized gameplay, Axie Infinity reached a peak of 2.7 million active users by November 2021, and kickstarted the play-to-earn industry.
But given the profitable nature of P2E games, the industry fueled what can best be described as mercenary-like behavior, with a large chunk of players moving between games based on profitability rather than gameplay.
Recent Innovations in Blockchain Gaming
Despite the clear attractiveness of play-to-earn games and the benefits that blockchain technology can bring to gaming, few blockchain games have managed to develop a substantial player base.
The Metaverse Future
The Metaverse is widely expected to power the next generation of gaming, with current and upcoming metaverses set to host games of increasing complexity and appeal.
But even the metaverse is suffering from major growing pains. Despite clocking in around 300,000 monthly active users back in December 2021, it was recently revealed that Decentraland has just 46 unique active wallets interacting with the DApp each day (a proxy for daily active users).
The image looks slightly better when focused on more comprehensive metaverses like The Sandbox, which currently has 400 unique wallets active each day or 12,000 active each month — equivalent to 0.2% and 6% of all holders respectively.
But these figures are still a far cry from what non-blockchain enabled metaverses like Fortnite and Roblox pull in — clocking in an estimated 30 million daily active players apiece.
Meanwhile, the gaming company behind Fortnite, Epic Games, is worth $32 billion as of April 2022, when it last raised $2 billion. This represents a valuation of approx $1,000 per daily active player (ignoring its other IPs). When applying the same methodology to Decentraland, the figure comes out to a staggering $1.63 million per daily active user.
What Games Need to Succeed
The vast majority of blockchain games today are centered around play-to-earn mechanics, and few are able to attract players by virtue of their gameplay alone.
Unfortunately, this has led to a stark lack of variety in the blockchain gaming space, with most games following the same simple usage model: buy NFT, stake NFT, use NFT to participate in gameplay, claim rewards and use/trade rewards — albeit with various gameplay mechanics layered on top.
As a result, only the earliest movers or most ambitious and differentiated blockchain games have managed to carve out their own niche. To stand the best chance at success, future titles will need to overcome several key challenges plaguing most options today. These include:
- UX issues: Interacting with Web3 applications can be challenging — doubly so when there is a mandatory minimum investment as with most NFT-enabled games. Future titles will likely resolve these challenges by keeping the blockchain technology behind the scenes, using human-readable names as wallet addresses, and implementing a free-to-play option.
- Unsustainable tokenomics: Play-to-earn games almost invariably suffer from incredibly inflationary tokenomics, stemming from team and investor vesting to gameplay rewards, and development spending — this can crush the token price and drive away players. Future blockchain games will dramatically cut token emissions by restricting which players can and do earn rewards.
- Correct infrastructure: As has been shown time and again, massively successful blockchain games have the potential to crash or congest the underlying blockchain. Newer titles will likely need to rely on high throughput blockchains or alternative scaling solutions to support millions of simultaneous players.
- Fun: Despite being technically defined as video games, most blockchain-powered games fall short on gameplay, and most would have few to no users without their play-to-earn mechanics. But the first wave of gameplay-first titles is already in development, including the likes of Star Atlas and Illuvium.
Want to dive deeper? Check out the CoinMarketCap and Naavik: 2022 Blockchain Gaming Report — New Frontiers And The Path Forward.
It is likely that the next generation of popular blockchain games will have successfully tackled most, if not all of these current challenges.