Gamefi Research 2023

Researched GameFi a bit today.

• GameFi, emerging since 2020, combines gaming and decentralized finance (DeFi) through play-to-earn (P2E) model.
• P2E lets gamers earn income by collecting crypto-assets like NFTs while playing blockchain-based games.
• GameFi disrupts the traditional gaming revenue model by using NFTs instead of in-game purchases.
• Development in the GameFi sector has been tumultuous, with innovation and challenges like the 2022 bear market.

Key points:

1. GameFi Concept: GameFi is a growing sector of the cryptocurrency market that combines blockchain technology, NFTs, and gaming. It allows players to own in-game assets as NFTs and trade them for cryptocurrency or real-world money.

2. Blockchain and NFTs: Ethereum and similar blockchains enabled the development of GameFi by allowing the creation of decentralized apps (dApps) and non-fungible tokens (NFTs). NFTs are unique digital assets representing items like characters, weapons, and more in games.

3. Ownership and Trading: GameFi enables players to have true ownership of in-game assets as NFTs, allowing them to sell these assets to other players. NFTs have value due to their scarcity, and players can convert them into cryptocurrency or fiat money.

4. Market Growth: Despite being relatively new, GameFi has gained significant popularity, becoming the largest segment of activity among various dApp categories. Gaming activity on blockchain networks has surged, with a substantial number of active wallets reported.

5. DappRadar Stats: In September, there were around 912,000 unique active wallets engaging in GameFi and other blockchain-related gaming activities, underscoring the growing interest and engagement in this sector.

Overall, GameFi combines blockchain, NFTs, and gaming to offer players true ownership of in-game assets and the ability to trade them, resulting in a rapidly growing and popular market segment.

Market:

• GameFi market growth: Despite ups and downs, GameFi market has rapidly expanded, with a CAGR of 180%, reaching $22.04 billion by February 2022.
• User base growth: User base grew significantly, with a 29% CMGR in daily active users (DAUs) between March 2021 and February 2022, peaking at 1.4 million DAUs.
• Challenges during bear market: GameFi faced challenges during the crypto bear market, with DAUs dropping to 800,000 from over 1.3 million in the first half of 2022.
• Diversification of gaming blockchains: GameFi has diversified across various blockchains, with Wax, Hive, Solana, EOS, BNB, and Polygon becoming prominent platforms.
• Emphasis on quality and low costs: Gamers prioritize quality and affordability, preferring ecosystems like Wax and Hive due to low gas fees and high activity despite having fewer games compared to Ethereum.

Gaming Blockchain Selection Concerns:

• Secure operating history and interoperability are key factors in choosing a gaming blockchain.
• Hive offers fast transaction times of under three seconds.
• Ethereum’s network congestion leads to slow and costly transactions, impacting playability.

Investment in GameFi:

• Despite challenges, GameFi investments grew 84% YoY in 2022, reaching $5.4 billion.
• GameFi attracted the most investment in blockchain sub-markets.
• Investors see significant potential in the emerging GameFi sector as a disruptor of Web3.

GameFi’s Economic Opportunity:

• GameFi could create jobs and a virtual economy in emerging markets.
• Crypto and gaming redefine traditional job definitions, indicating potential for economic growth.

Future Outlook for GameFi:

• Optimistic growth projections for GameFi, aiming for a $50 billion market cap by 2025.
• Notable investment funds, like Andreesen Horowitz, indicate positive investment prospects.
• Andreesen Horowitz launched a fund in May 2022 to support GameFi development.
• Immutable X launched a blockchain platform for NFT trading and received funding to support Web3 adoption.
• Solana Ventures and Solana Foundation established a $100 million fund for South Korean GameFi and DeFi developers.
• Funds of $75 million and $110 million were raised in July and September to enhance the metaverse vision.
• The integration of GameFi with the metaverse is a significant opportunity for development, allowing interaction, income generation, and growth.
• The metaverse market was valued at $47 billion in 2022 and is projected to reach $678 billion by 2030, boosting GameFi’s growth.

Invesment:

• GameFi is targeting investment from metaverse-focused funds, leveraging the growth of the metaverse segment within the crypto industry.
• Traditional game developers are getting involved in GameFi due to the popularity of the Play-to-Earn (P2E) gaming model.
• Ubisoft partnered with The HBAR Foundation to explore the intersection of gaming and blockchain, indicating traditional developers’ interest in GameFi.
• Other gaming giants like Tencent and Electronic Arts (EA) are also entering the GameFi space, acknowledging its importance.
• GameFi developers are learning from initial challenges, emphasizing the need for enjoyable gameplay and user engagement to sustain success.
• EA and Ubisoft, major game developers, are entering the GameFi space with franchises like Apex Legends and Assassin’s Creed.
• The importance of cross-chain infrastructure in GameFi for better features, faster transactions, and wider blockchain options.
• Kyoko’s cross-chain asset lending platform (CCAL) enables borrowing and lending in-game NFT assets across different blockchains, enhancing liquidity and flexibility.
• Asset lending in GameFi allows players to rent in-game NFT assets, benefiting both borrowers and lenders.
• The potential market growth in GameFi’s asset lending is significant and largely untapped.
• reNFT platform rented 312 times, but potential seen in GameFi NFTs with utility.
• GameFi asset lending reduces entry cost for players, benefits Guilds’ scholarship programs.
• Challenges in the market include weak tokenomics, exemplified by StepN’s decline.
• StepN suffered from inflated hype, poor tokenomics, and high entry costs.
• Unlimited token supply and high entry costs slowed StepN’s user growth.
• Poor tokenomics led to a death spiral for the StepN token initially, despite recent recovery.
• Successful GameFi development requires attention to tokenomics sustainability and playability.
• High cost of entry is a challenge in GameFi due to the purchase or minting of NFTs for play.
• Axie Infinity’s popularity drove up the cost of entry for new players.
• Scholarship programs by Guilds offer a solution by sharing NFT assets, but also requiring reward-sharing.

Guild Functionality and Limitations:

• Guilds operate as businesses in GameFi but often lack resources to provide access to multiple games.
• Yield Guild Games (YGG) is the largest guild but faces challenges due to limited resources.

Isolation of Gaming Assets:

• Cross-chain interoperability is a challenge in GameFi.
• Players invest time and resources into assets that can be hard to liquidate.
• Transferring NFTs between gaming blockchains is inefficient, leading to isolated in-game assets.
• Layer 2 solutions are discussed for blockchain scaling and interoperability.

Importance of Interoperability:

• Interoperability is seen as crucial for mass adoption of GameFi.
• It is believed that gaming and in-game monetization through NFTs will drive adoption.
• Projects like Kyoko aim to offer solutions to interoperability challenges.

Kyoko’s Solution:

• Kyoko’s cross-chain asset lending platform addresses GameFi challenges.
• It focuses on issues like high entry costs and isolated assets across different blockchains.
• Cross-Chain Asset Lending (CCAL) enables transfer of investments between games on different blockchains.