- A recent report has looked at the state of blockchain gaming, in which players can earn assets with real-world value.
- This type of gaming aims to replace, or at least rival, the popularity of traditional games.
- The study shows that take-up of these games is still low, and mainstream adoption is some way off.
The recently published 2022 Blockchain Gaming Report analyzed the state of the blockchain gaming industry across this year, looking at four major topics: the rate of mass adoption of blockchain gaming; the fall of the play-to-earn model; key funding trends in blockchain gaming, and where the path forward lies for the industry. This four-part series dives deep into each section of the report to distill the key insights for readers. In this first part we cover the mass adoption of blockchain games.
There is no doubt that GameFi – a type of gaming based on blockchain technology, in which players can earn assets with real-world value – is aiming to replace, or at least rival, traditional games in prominence and adoption. According to the report, however, there's still some way to go before these games become mainstream.
Looking at the state of blockchain gaming after Q3 2022, three things stand out:
1. Macro-economic factors have bruised the GameFi industry but it has the potential to bounce back.
2. Activity and trading volumes are still tiny compared with traditional games.
3. Activity on non-Ethereum blockchains is increasing.
Looking at macro-economic factors, the Ethereum (ETH) merge, which changed the basis for the ETH blockchain, was a resounding success. While the price of ETH didn't reach the heights some had hoped for, it noticeably decoupled from declining equity markets. ETH and Bitcoin also showed signs of recovery, which bodes well for Web3 games, and the wider crypto market. The demand for blockspace exceeds what ETH can supply, resulting in an increase in market share of other chains like ImmutableX, Polygon and Flow. Despite a lack of high-quality games entering the market, many reputable teams are building in the background, looking to satisfy the pent-up demand.
Mass adoption metrics for blockchain gaming
The report goes on to look at three important blockchain gaming mass adoption metrics.
1. Unique Active Wallets
Unique active wallets (UAWs), the metric used to measure participation in a blockchain, hovered around the one million mark for Q2 and Q3. While the long-term trend shows a gradual and non-linear increase, the current trend is one of stagnation. However, 2023 may see an increase as many games are in alpha and beta phase.
It is important to note that UAWs do not conclusively tell how many users a game has, since a user may have multiple wallets or might be playing without using a crypto wallet. But it appears that speculative activity has found a floor. Many games have been quietly building behind the scenes and will continue doing so.
For now, blockchain games are stuck in a transitory phase. Hence why many casual and hypercasual games are having success — the likes of Solitaire Blitz, Trickshot Blitz, and Gameta have been plugging the decline in demand elsewhere.
What is the World Economic Forum doing about the metaverse?
Experts believe that the metaverse will come to represent the next major computing platform, transforming consumer experience and business models across industries.
Fashion brands are one example. Over years, apparel companies have perfected the design, manufacture, and distribution of clothing to anticipate consumers’ wants and needs in line with seasonal changes. But today, most of their revenue is surpassed by the $3bn worth of sales of digital cosmetic items in Fortnite, which have a cultural significance that extends far into the physical world.
This is one of the economic opportunities of the metaverse - the possibility to “assetize” digital content, creating a framework of digital ownership for users. If it is replicated at scale and across sectors, then entire industries will be reshaped by changes to their traditional value chains.
However, the promise relies on the advancement of several key technologies, including augmented, virtual and mixed reality (collectively known as XR), as well as blockchain, connected devices and artificial intelligence. How should these be governed in a way that promotes their economic upsides while protecting individuals’ safety, security and privacy?
The World Economic Forum is bringing together leading voices from the private sector, civil society, academia and government to address this precise question. Over the next year, it will curate a multistakeholder community focusing on metaverse governance and economic and social value creation.
It will recommend regulatory frameworks for good governance of the metaverse and study how innovation and value creation can be strengthened for the benefit of society. Updates will be published on the World Economic Forum website on a regular basis.
2. Non-fungible token (NFT) transaction volumes
NFT transaction volumes suffered a major drawdown during the bear market, but saw a much smaller decline in transaction volumes in September. This could signify that most (but not all) of the speculation in the NFT market has dissipated, which could mean a bottom is nearing.
An increasing share of the activity in this transition phase has been happening on Ethereum’s competitors, which have been eating into the leading blockchain’s market share. The share of NFT sales on blockchains other than ETH has increased, both since the start of 2022 and quarter-on-quarter.
Solana was the biggest beneficiary. Polygon seems well-positioned for the long run thanks to a few notable business development wins in Starbucks, Meta, Adobe, and Stripe. Still, for now, the blockchain is getting outperformed by its closest rivals. Other notable chains include Ronin, which was affected by the winding down of Axie Infinity Classic (its volume is down over 95% from the peak) and Flow, which is slowly building up a user base thanks to two newly-released Blitz games, Dimension X and Chainmonsters. Another strong competitor is ImmutableX, which grew its transaction volume by 500% thanks to activity on its AAA game Gods Unchained.
3. Number of blockchain games
Overall, blockchain gaming is still in the early stages. According to DappRadar, fewer than 2,000 gaming applications currently use the blockchain. Comparing that to the number of games on the app store indicates just how early it still is for blockchain games. A game’s development cycle is likely to take years, and is highly dependent on the “infrastructure, development tools, distribution channels, and product design best practices,” before an explosive growth will be witnessed. This shows that mass adoption is still some distance away.