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Who doesn't feel nostalgic about games? Games remind us of the good moments we shared with friends and families. But quite recently, blockchain gaming has taken off, changing lives on the way. But what are the potent trends and narratives that lead the Gamefi space?
TLDR
→ The Emergence of Blockchain Gaming → Challenges in GameFi → Solutions and Way Forward → What Changed in 2022? → New Narratives
Gaming is a multi-billion dollar industry. In 2021 alone, Steam had around 10300 new games. That means nearly 28 games are added to Steam daily!
Since there are a lot of choices available for gamers, they hop from one game to another. So only a handful of games emerge winners in a year, and they constitute the lion's share of the gaming market. For example, one of the most played games in 2021, Genshin Impact, has generated over 3.5 billion in less than two years.
But will Genshin Impact be the same trending game in 2025? Unlikely. Games do not stay on the top for more than three years (Of course, Minecraft is an exception). Ultimately, a game loses traction, and players leave it for a new one. However, in the process, they lose quantifiable gaming memories.
But what are these gaming memories? We all know gaming is about fun, recreation, and team spirit. But when a gamer stops playing a game, what happens to the characters they configured and the items they collected? Usually, game studios control it, and gamers have no say over their collectibles (even for items they bought!). That means the tangible nostalgic value is often lost in the transition.
So what is the solution? Blockchain gaming is evolving to offer this transferability of collectibles. NFTs become the containers of nostalgic, intangible value for games. But apart from the nostalgic value, does the collectible command any monetary value? Yes! You will be surprised to know that some Baseball cards are sold for more than a million dollars.
So adoption of blockchain is a necessity for the evolution of the gaming market. But what is the reality of gaming standards in web3? In the early stages, blockchain games were mainly card games. Card games require minimal graphics and are the least complicated. A shortage of talented developers and designers with blockchain knowledge was the primary reason for the proliferation of card games.
Axie Infinity is a prime example in the card games category. Axie also was a beacon for gamefi and play-to-earn wave. Post-covid, the unemployment crisis was rampant in Asia. Sky Mavis, the parent company of Axie Infinity, realized the opportunity and kickstarted the Axie wave. In April 2021, the game gained 30,000 users, and in August 2021, the number rose to a million!
https://twitter.com/AxieInfinity/status/1593903144224067585
The main reason behind this exponential growth was the play-to-earn mechanics. Gamers in South East Asia, especially Phillippines, realized that they could potentially earn more by playing the game rather than going to regular work. The average monthly income in Phillippines is around $300, while Axie helped them to earn $800-$1000, three times the average income!
At its prime stage, 1 $AXS token traded for more than $100, and it made its All-Time High at $164 in November 2021. At the time, Axie Infinity occupied a market cap of $16.7 billion! It was a bubble waiting to be popped. Today, $AXS is trading at $11 with a $1.1 billion market cap. The interest in Axie was subdued with the falling token prices, but gamers get to keep their Axies.
In the later stage, more dynamic games were launched through various Initial Game Offerings (IGO). It was a phase of IGOs and launchpads, which launched with high valuations. Blockchain as an earning vehicle was a strong concept that fueled various walk-to-earn to sleep-to-earn projects. Games, NFTs, and the Metaverse became synonymous, and high-quality games entered the crypto space. Gaming projects powered by Unreal Engine were an instant success, even without the game. One of the first Unreal games, Star Atlas, performed 750X from its launch price!
The bullish momentum for high-quality games set a new precedent - graphic-intensive metaverses. Netvrk, Wilder World, and many other projects received so much attention, and their tokens replicated the hype. The stage was set for Gaming Studios and Ecosystems. Studios like Vulcan Forged and Verasity performed well amongst other contenders. All of a sudden, gaming was a hot topic among web3 communities.
Many realized the value of investing in a gaming ecosystem that can launch new games. The risk-reward ratio in investing in a single game was not appealing. Needless to say, gaming studios were the final blow on an unsustainable GameFi bubble.
The tokenomics models were also undergoing a significant change. In the initial days, projects launched with a dual token economy, emulating Axie's $AXS and $SLP. By default, one acted as a governance token, and the other was an in-game currency. The dual token model created unnecessary confusion among actual gamers. Most of them just wanted to play & earn and did not give much thought to the ideals of decentralized governance.
The play-to-earn concept has lured a lot of gamers into the space. Although the games were not fun to play, earning was a big incentive, especially in a lockdown-affected economy. It helped GameFi to flourish with VC investments, and Gaming IDOs performed 10x-50x on launch. However, most projects were just promises of amazing games to be launched in 2022. The promises were not respected, and most games died before the second half of 2022.
That points us to the biggest problem of all. Who will ensure the authenticity and responsibility of gaming projects? Game Aggregators and Game Studios should be the way forward. There should be multiple verification mechanisms in place.
The game plan and initial gameplay videos should be made public before any public fundraising attempts.
Game Aggregators shall verify the credibility of the team and the project.
Upon verification of an Aggregator, the project shall partner with a gaming studio, accept it as an advisor and provide a detailed roadmap and milestones.
If the team does not prefer to partner with a studio, they shall join a custodian platform to ensure the timely release of IGO or ICO funds upon meeting milestones. This way, the team will have an inherent incentive to continue development and deliver the game.
Gaming Launchpads and IGO platforms shall hold the IGO funds in a multisig smart contract. When the project wants to claim the funds, a governance call shall be made. The launchpad, the IGO investors, an independent auditor (Certik, hacken), and the game team shall vote.
Also, the influx of gamers is mainly because of financial incentives. This presents a multidimensional problem.
When a game stops being play-to-earn, the gamers will leave, and they will liquidate coins and NFTs. It will cause a price fall for the token and the eventual demise of the game.
When the game continues its incentives, they will have to mint more tokens and conduct various airdrop campaigns. It will cause inflationary effects and devaluation of the token. When the number of gamers goes up, and the reward value goes down, there is hardly any financial incentive to play the game.
So what is the solution? Build exciting games that can compete with the web2 gaming industry. Web3 games have a lot of advantages, but without good games, the advantages would seem too much hassle for gamers.
In short, gamefi has to ensure the sustainability and quality of games and in-game ecosystems. That itself is not easy to achieve. So, projects should look back at their fundamentals and users for gradual, tangible changes. Eventually, they need to generate revenue by transforming play-to-earn to a freemium model.
But that appears to be a long-term fix, and what can be done to stop the outflow of gamers?
Building an efficient community around the game is the key here. The community should be organic, personalized, and active. Although Discord offers the comfort of categorizing, it appears to be overkill. Reddit is a robust platform, but quickly losing prominence. On a separate note, there is a need for decentralized social networks in the crypto space.
Another problem is the high entry barrier for gamefi. There are psychological, technical, and financial barriers that intensify each other. What are the psychological barriers, and how to help gamers overcome them?
The notion that web3 gaming costs a lot of money. One of their friends claims that he paid $40 for a transaction!
No communities to hang out with and no actual events because everything happens on the blockchain.
Game launchpads have to take up the initiative of minimizing psychological barriers. There needs an absolute clarity on the web3 narrative before pushing for it. That means educating gamers about the web3 opportunities is crucial.
The technical entry barriers are wallets, gas fees, and NFTs. Guides, videos, and awareness can help to melt down the wall. The technical barrier is the primary psychological barrier, as most people are resistant to change. Gamers are no different, but they love a change when the change is attractive enough.
But why is the entry barrier high? We all thought the Guilds were working on it. right? Guilds and DAOs tried, and apparently, they failed at the first attempt. The most commendable initiative remains the Axie Guild, where people lend their axies to gamers and offered scholarships to play. The response was phenomenal, yet, it was just a patch to the leaking roof. Simply, DAOs and Guilds were not as effective as they first seemed.
Not all games could replicate the Axie saga, and most ended up as money grabbers. As a result, crypto traders started to view Gamefi tokens as super speculative, overvalued assets. And the rest went to dust!
For example, one of the most exciting games, Killbox, launched its KBOX token in 2021-November, with a Fully Diluted Valuation of $1.8 billion. Fast forward a year, and the valuation shrunk to $690K!
https://www.coingecko.com/en/coins/the-killbox-game
But the most crucial question remains. Why couldn't Guilds meet objectives?
Membership in a DAO or Guild is complex to manage. The onchain criteria, such as history, were too cumbersome for gamers. A simple solution of Google Forms + Client Repository + Discord was overlooked in pursuit of decentralization. Also, Guilds lacked the initiative to onboard crypto newbies. Guides on setting up wallets, interacting with dApps, and gas fees were absent too. When a simple google search couldn't yield the right results, inherent flaws in the decentralized approach became more evident. Decentralization is the future, yet that future is a gradual journey than a single leap. Optimized content and community mods are the keys to tackling the technical barrier. Consequentially, Guilds and their tokens collapsed.
But this isn't the end; on the contrary, just the beginning. Games and DAOs shall offer testnet accessibility for newcomers. There should be detailed guidelines to ensure retention. And well-qualified community mods to solve some natural doubts. People still struggle to add BNB Smart Chain to Metamask. Games should remember they are catering to gamers, not tech geeks.
Of course, the gaming experience was not the only one to blame for the lack of interest in blockchain games. Poor token design and token utilities overshadow the actual gaming experience. Token distribution should be innovative rather than repeating the same old 20% team + 40% treasury + 40% ecosystem - type distribution.
Another problem to solve is the illiquidity of NFTs. Most gaming NFTs are now illiquid, be they on Ethereum, Solana, or BNB. There is no proper mechanism to ensure exit liquidity. Gamers should feel comfortable buying and selling game NFTs without any worries.
Compared to 2021, gaming is receiving relatively higher funding in 2022. In August 2022 alone, gamefi received $750 million, which is impressive (this is a bear market). According to dappradar, more than 840K unique wallets played blockchain games. The number remains high compared to 2021 levels.
Interestingly, video game studios are giving up on the play-to-earn trend. The incentive shall be sweet memories or NFTs rather than ever-dumping tokens. Although gamefi is at its weakest in 2022, it still turns the heads of gaming giants. Bandai Namco and SEGA are two video game giants eyeing to move to blockchain gaming. Bandai Namco has developed beloved titles such as Tekken and Pac-Man. On the other hand, Sega is behind Sonic the Hedgehog. Yes, big players enter Gamefi with even bigger dreams, and our expectations grow with them.
Not to forget that A16Z has a $600 Million gaming fund, which shows the gamefi sector is still hot even in a bear market. We all agree that 2021 has seen a lot of short-term investments, which signaled a bubble. But the involvement of institutional investors in a bear market shows long-term engagement. Let's play the long-term games now!
Who doesn't feel nostalgic about games? Games remind us of the good moments we shared with friends and families. But quite recently, blockchain gaming has taken off, changing lives on the way. But what are the potent trends and narratives that lead the Gamefi space?
TLDR
→ The Emergence of Blockchain Gaming → Challenges in GameFi → Solutions and Way Forward → What Changed in 2022? → New Narratives
Gaming is a multi-billion dollar industry. In 2021 alone, Steam had around 10300 new games. That means nearly 28 games are added to Steam daily!
Since there are a lot of choices available for gamers, they hop from one game to another. So only a handful of games emerge winners in a year, and they constitute the lion's share of the gaming market. For example, one of the most played games in 2021, Genshin Impact, has generated over 3.5 billion in less than two years.
But will Genshin Impact be the same trending game in 2025? Unlikely. Games do not stay on the top for more than three years (Of course, Minecraft is an exception). Ultimately, a game loses traction, and players leave it for a new one. However, in the process, they lose quantifiable gaming memories.
But what are these gaming memories? We all know gaming is about fun, recreation, and team spirit. But when a gamer stops playing a game, what happens to the characters they configured and the items they collected? Usually, game studios control it, and gamers have no say over their collectibles (even for items they bought!). That means the tangible nostalgic value is often lost in the transition.
So what is the solution? Blockchain gaming is evolving to offer this transferability of collectibles. NFTs become the containers of nostalgic, intangible value for games. But apart from the nostalgic value, does the collectible command any monetary value? Yes! You will be surprised to know that some Baseball cards are sold for more than a million dollars.
So adoption of blockchain is a necessity for the evolution of the gaming market. But what is the reality of gaming standards in web3? In the early stages, blockchain games were mainly card games. Card games require minimal graphics and are the least complicated. A shortage of talented developers and designers with blockchain knowledge was the primary reason for the proliferation of card games.
Axie Infinity is a prime example in the card games category. Axie also was a beacon for gamefi and play-to-earn wave. Post-covid, the unemployment crisis was rampant in Asia. Sky Mavis, the parent company of Axie Infinity, realized the opportunity and kickstarted the Axie wave. In April 2021, the game gained 30,000 users, and in August 2021, the number rose to a million!
https://twitter.com/AxieInfinity/status/1593903144224067585
The main reason behind this exponential growth was the play-to-earn mechanics. Gamers in South East Asia, especially Phillippines, realized that they could potentially earn more by playing the game rather than going to regular work. The average monthly income in Phillippines is around $300, while Axie helped them to earn $800-$1000, three times the average income!
At its prime stage, 1 $AXS token traded for more than $100, and it made its All-Time High at $164 in November 2021. At the time, Axie Infinity occupied a market cap of $16.7 billion! It was a bubble waiting to be popped. Today, $AXS is trading at $11 with a $1.1 billion market cap. The interest in Axie was subdued with the falling token prices, but gamers get to keep their Axies.
In the later stage, more dynamic games were launched through various Initial Game Offerings (IGO). It was a phase of IGOs and launchpads, which launched with high valuations. Blockchain as an earning vehicle was a strong concept that fueled various walk-to-earn to sleep-to-earn projects. Games, NFTs, and the Metaverse became synonymous, and high-quality games entered the crypto space. Gaming projects powered by Unreal Engine were an instant success, even without the game. One of the first Unreal games, Star Atlas, performed 750X from its launch price!
The bullish momentum for high-quality games set a new precedent - graphic-intensive metaverses. Netvrk, Wilder World, and many other projects received so much attention, and their tokens replicated the hype. The stage was set for Gaming Studios and Ecosystems. Studios like Vulcan Forged and Verasity performed well amongst other contenders. All of a sudden, gaming was a hot topic among web3 communities.
Many realized the value of investing in a gaming ecosystem that can launch new games. The risk-reward ratio in investing in a single game was not appealing. Needless to say, gaming studios were the final blow on an unsustainable GameFi bubble.
The tokenomics models were also undergoing a significant change. In the initial days, projects launched with a dual token economy, emulating Axie's $AXS and $SLP. By default, one acted as a governance token, and the other was an in-game currency. The dual token model created unnecessary confusion among actual gamers. Most of them just wanted to play & earn and did not give much thought to the ideals of decentralized governance.
The play-to-earn concept has lured a lot of gamers into the space. Although the games were not fun to play, earning was a big incentive, especially in a lockdown-affected economy. It helped GameFi to flourish with VC investments, and Gaming IDOs performed 10x-50x on launch. However, most projects were just promises of amazing games to be launched in 2022. The promises were not respected, and most games died before the second half of 2022.
That points us to the biggest problem of all. Who will ensure the authenticity and responsibility of gaming projects? Game Aggregators and Game Studios should be the way forward. There should be multiple verification mechanisms in place.
The game plan and initial gameplay videos should be made public before any public fundraising attempts.
Game Aggregators shall verify the credibility of the team and the project.
Upon verification of an Aggregator, the project shall partner with a gaming studio, accept it as an advisor and provide a detailed roadmap and milestones.
If the team does not prefer to partner with a studio, they shall join a custodian platform to ensure the timely release of IGO or ICO funds upon meeting milestones. This way, the team will have an inherent incentive to continue development and deliver the game.
Gaming Launchpads and IGO platforms shall hold the IGO funds in a multisig smart contract. When the project wants to claim the funds, a governance call shall be made. The launchpad, the IGO investors, an independent auditor (Certik, hacken), and the game team shall vote.
Also, the influx of gamers is mainly because of financial incentives. This presents a multidimensional problem.
When a game stops being play-to-earn, the gamers will leave, and they will liquidate coins and NFTs. It will cause a price fall for the token and the eventual demise of the game.
When the game continues its incentives, they will have to mint more tokens and conduct various airdrop campaigns. It will cause inflationary effects and devaluation of the token. When the number of gamers goes up, and the reward value goes down, there is hardly any financial incentive to play the game.
So what is the solution? Build exciting games that can compete with the web2 gaming industry. Web3 games have a lot of advantages, but without good games, the advantages would seem too much hassle for gamers.
In short, gamefi has to ensure the sustainability and quality of games and in-game ecosystems. That itself is not easy to achieve. So, projects should look back at their fundamentals and users for gradual, tangible changes. Eventually, they need to generate revenue by transforming play-to-earn to a freemium model.
But that appears to be a long-term fix, and what can be done to stop the outflow of gamers?
Building an efficient community around the game is the key here. The community should be organic, personalized, and active. Although Discord offers the comfort of categorizing, it appears to be overkill. Reddit is a robust platform, but quickly losing prominence. On a separate note, there is a need for decentralized social networks in the crypto space.
Another problem is the high entry barrier for gamefi. There are psychological, technical, and financial barriers that intensify each other. What are the psychological barriers, and how to help gamers overcome them?
The notion that web3 gaming costs a lot of money. One of their friends claims that he paid $40 for a transaction!
No communities to hang out with and no actual events because everything happens on the blockchain.
Game launchpads have to take up the initiative of minimizing psychological barriers. There needs an absolute clarity on the web3 narrative before pushing for it. That means educating gamers about the web3 opportunities is crucial.
The technical entry barriers are wallets, gas fees, and NFTs. Guides, videos, and awareness can help to melt down the wall. The technical barrier is the primary psychological barrier, as most people are resistant to change. Gamers are no different, but they love a change when the change is attractive enough.
But why is the entry barrier high? We all thought the Guilds were working on it. right? Guilds and DAOs tried, and apparently, they failed at the first attempt. The most commendable initiative remains the Axie Guild, where people lend their axies to gamers and offered scholarships to play. The response was phenomenal, yet, it was just a patch to the leaking roof. Simply, DAOs and Guilds were not as effective as they first seemed.
Not all games could replicate the Axie saga, and most ended up as money grabbers. As a result, crypto traders started to view Gamefi tokens as super speculative, overvalued assets. And the rest went to dust!
For example, one of the most exciting games, Killbox, launched its KBOX token in 2021-November, with a Fully Diluted Valuation of $1.8 billion. Fast forward a year, and the valuation shrunk to $690K!
https://www.coingecko.com/en/coins/the-killbox-game
But the most crucial question remains. Why couldn't Guilds meet objectives?
Membership in a DAO or Guild is complex to manage. The onchain criteria, such as history, were too cumbersome for gamers. A simple solution of Google Forms + Client Repository + Discord was overlooked in pursuit of decentralization. Also, Guilds lacked the initiative to onboard crypto newbies. Guides on setting up wallets, interacting with dApps, and gas fees were absent too. When a simple google search couldn't yield the right results, inherent flaws in the decentralized approach became more evident. Decentralization is the future, yet that future is a gradual journey than a single leap. Optimized content and community mods are the keys to tackling the technical barrier. Consequentially, Guilds and their tokens collapsed.
But this isn't the end; on the contrary, just the beginning. Games and DAOs shall offer testnet accessibility for newcomers. There should be detailed guidelines to ensure retention. And well-qualified community mods to solve some natural doubts. People still struggle to add BNB Smart Chain to Metamask. Games should remember they are catering to gamers, not tech geeks.
Of course, the gaming experience was not the only one to blame for the lack of interest in blockchain games. Poor token design and token utilities overshadow the actual gaming experience. Token distribution should be innovative rather than repeating the same old 20% team + 40% treasury + 40% ecosystem - type distribution.
Another problem to solve is the illiquidity of NFTs. Most gaming NFTs are now illiquid, be they on Ethereum, Solana, or BNB. There is no proper mechanism to ensure exit liquidity. Gamers should feel comfortable buying and selling game NFTs without any worries.
Compared to 2021, gaming is receiving relatively higher funding in 2022. In August 2022 alone, gamefi received $750 million, which is impressive (this is a bear market). According to dappradar, more than 840K unique wallets played blockchain games. The number remains high compared to 2021 levels.
Interestingly, video game studios are giving up on the play-to-earn trend. The incentive shall be sweet memories or NFTs rather than ever-dumping tokens. Although gamefi is at its weakest in 2022, it still turns the heads of gaming giants. Bandai Namco and SEGA are two video game giants eyeing to move to blockchain gaming. Bandai Namco has developed beloved titles such as Tekken and Pac-Man. On the other hand, Sega is behind Sonic the Hedgehog. Yes, big players enter Gamefi with even bigger dreams, and our expectations grow with them.
Not to forget that A16Z has a $600 Million gaming fund, which shows the gamefi sector is still hot even in a bear market. We all agree that 2021 has seen a lot of short-term investments, which signaled a bubble. But the involvement of institutional investors in a bear market shows long-term engagement. Let's play the long-term games now!
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