Blockchain technology has been making waves in the gaming industry, and the growth of the blockchain gaming market is evidence of this. According to recent projections, the market is expected to grow from USD 4.6 billion in 2022 to a whopping USD 65.7 billion by 2027, with a Compound Annual Growth Rate (CAGR) of 70.3% (Markets and Markets, 2022). This rapid growth can be attributed to the rise in investments in blockchain games.
However, limited awareness about blockchain and Non-Fungible Tokens (NFTs) may pose a challenge to the market’s growth. In this article, we will delve into the growth and adoption of blockchain gaming, exploring the factors driving this market and the challenges that must be overcome to sustain its growth.
One of the driving factors behind the growth of blockchain gaming is the shift away from traditional games towards blockchain-based games. Traditional games are centralized, meaning that players cannot transfer or use their in-game items, such as characters, skins, weapons, or experience, in other gaming projects. Blockchain gaming, however, allows players to truly own their digital assets and use them across various crypto-gaming projects. Additionally, blockchain games provide players with the opportunity to earn real-world money through the Play-To-Earn.
What does the data reveal?
In 2022, the blockchain gaming and metaverse industries experienced significant growth, with a 59% increase in funding compared to the previous year. According to a report by the Blockchain Game Alliance and DappRadar, Web3 gaming sector raised a total of $7.6 billion, with a large portion, $2.54 billion, being invested in infrastructure projects. The report also highlighted the rapid growth in blockchain game on-chain transactions, which reached 7.4 billion, a 37% increase from 2021 and an astonishing 3,260% increase since 2020. Additionally, virtual land sales in these virtual worlds saw a 136% increase, estimated at $1.45 billion.
Unlike traditional games, where in-game items and investments have limited value and no ownership by the players, blockchain-based games offer a new level of engagement and opportunity for players.
The use of blockchain in gaming has several benefits, including increased security, real-time ownership of in-game items, and the ability for players to earn real rewards. This new level of engagement is expected to drive growth in the market and continue to change the way we think about gaming.
As the technology continues to mature and more games adopt blockchain, we can expect to see even more exciting developments in the future.
For years, players have been engaging in buying, selling, and trading in-game items and purchases. The gaming industry has seen substantial growth, with American gamers spending $35.8 billion on video game content, according to Statista, with no actual ownership of these assets. However, with the adoption of blockchain technology in gaming, players can now have assurance that their in-game purchases hold future value as the authenticity of these assets can be easily verified on the blockchain.
Recently, Geneva-based game developer EverDreamSoft made the move to “blockchainize” in-game collectible cards of its Spells of Genesis CCG game. EverDreamSoft realized that players invested so many hours collecting cards, loot, crates, and other items, and that blockchain is providing a way for gamers to see a tangible return on their investment.
The growth and potential of blockchain gaming is being hindered by regulatory challenges. Government bodies are still trying to fully understand cryptocurrencies and NFTs, which can discourage gamers and developers from fully utilizing these technologies. The introduction of a 30% tax on virtual digital assets in India, for example, affects the use of cryptocurrencies in blockchain gaming as players are taxed on their crypto income from rewards and in-app purchases. High tax levels can drive people away from blockchain gaming, potentially harming the industry.
Gameplay, Awareness & Accessibility
The challenge in the widespread acceptance of blockchain and NFT technologies in gaming is due to the limited awareness of these technologies among the general public. Although blockchain is considered a hot and intriguing technology, most people still struggle to understand the technicalities behind it. This is why the adoption of blockchain solutions is still not at the level it could be. To fully utilize blockchain, companies need to hire staff with in-depth knowledge of blockchain networks and applications.
Despite some people being familiar with the terms blockchain and NFT, they may not be aware of their benefits. This lack of understanding limits the attention blockchain-based games receive and the recognition of their unique benefits. A recent survey shows that 40% of gamers in the US, UK, and Indonesia are interested in blockchain games, but this potential is not fully realized due to the limited awareness of the technology. To reach its full potential, there needs to be a greater effort to educate the public on the benefits of blockchain and NFT technologies in gaming.
Blockchain Games: Activity Growth
Blockchain games have emerged as a popular and rapidly growing sector in the blockchain industry. The number of unique active wallets (UAWs), or players, interacting with blockchain games has seen a significant increase in recent years. According to data from DappRadar, a leading platform for dApp discovery, the number of UAWs interacting with blockchain games reached 912,000 in the quarter that ended in September 2022, representing 48% of all UAWs in the blockchain industry.
One of the key metrics used to measure the popularity of blockchain games is the number of UAWs. The more user wallets interacting with a blockchain game, the higher the ranking it receives on platforms like DappRadar. As the number of UAWs continues to grow, this presents immense opportunities for the blockchain gaming market to expand even further.
In addition to the growing number of players, blockchain games have also seen a surge in NFT sales. The quarter that ended in September 2022 saw in-game NFTs generate sales of USD 2.32 billion, which accounts for 22% of total NFT trading in the industry. The top two most played Web3 games, as of September 2022, are Alien Worlds and Splinterlands.
The third quarter of 2022 saw some interesting developments in the world of blockchain gaming. Alien Worlds emerged as the most played game in this quarter, with an average of 190,770 daily unique active wallets (UAWs). This represents an increase of 14% compared to the second quarter. Meanwhile, Splinterlands remained as the second most popular blockchain game with 159,522 average daily UAWs, which represents a 47% decrease from the previous quarter.
Another standout game in the third quarter was Benji Bananas, which saw a significant increase in the number of daily UAWs. This is attributed to a P2E gaming tournament, where in-game NFTs were offered as rewards for winners. This helped the Polygon-based game produced by Animoca Brands attract over 29,000 daily UAWs, representing a rise of over 2,400% in September. Benji Bananas have clocked over 50 Million downloads on Google Store.
Overall, the numbers highlight the growing popularity of blockchain gaming and the impact that in-game events, such as tournaments, can have on the number of daily active users.
Traditional Web2 Studios Actively Exploring Blockchain Games
Wildlife Studios has integrated blockchain technology in Castle Crush, its web2 mobile game with over 50 million downloads, allowing players to explore NFTs and in-game rewards within its gaming ecosystem. Blockchain technology has helped Wildlife Studios in consolidating a progression system in the game through NFT loot boxes.
Netmarble, the studio behind Ni no Kuni: Cross Worlds and Monster Arena, is launching a blockchain gaming ecosystem, MBX, and a blockchain wallet, Marblex Wallet, to facilitate a seamless game economy and experience in its popular web2 games.
Com2uS has integrated blockchain technology in its traditional game, the US$1.4 billion smash hit Summoners War: Chronicles. In addition, the studio launched its own blockchain gaming and NFT marketplace platform, C2X, which will promote interoperability between its web2 and web3 game franchises.
Square Enix, the developers of the Final Fantasy series, has partnered with the Oasys gaming blockchain to become one of its validators. This partnership makes Square Enix a pioneer in driving the innovation of blockchain technology into a more environmentally friendly and scalable solution for web3 games.
Bandai Namco solidified its NFT plans and is aiming to expand its blockchain endeavors by launching a vast network of games and interactive media starting with the Gundam franchise, a popular anime and video game series. Side-G is a Gundam-themed metaverse with colonies showcasing Gunpla models, esports and games, among others.
Epic Games has begun hosting Blankos, a web3 multiplayer multiverse game produced by Mythical Games, in its Epic Games Store. Despite the controversy surrounding the removal of NFT games from the Steam platform, the game has continued to see positive reception from the gaming community. Star Atlas, an upcoming AAA interstellar web3 game powered by Unreal Engine 5, also launched the alpha version of its game in the Epic Games Store where NFT holders automatically receive an access key to the game.
Blockchain Games — Ethereum
Ethereum is the leading platform in fast growing blockchain gaming market. In 2022, ETH is expected to hold the largest market share among blockchain platforms. The reason for its dominance is due to the security it provides to game developers and players. ETH dramatically reduces security risks, ensuring that clients’ money and data are kept safe.
CryptoKitties was the first NFT project on ETH, where players could collect digital cat collectibles backed by NFTs. This paved the way for many other games to be developed on the Ethereum platform. Some of the popular games on ETH include Axie Infinity, Gods Unchained, The Sandbox, Decentraland, and CryptoKitties.
Despite its dominance in the blockchain gaming market, ETH as a public blockchain faces its own challenges, causing game developers to seek out alternative platforms to resolve scalability and gas fees. This is expected to result in slower growth of ETH’s market share compared to other platforms like BNB Chain, Avalanche, Polygon, and Solana. However, the situation may change in the future as Ethereum is scheduled to receive network scalability upgrades in 2024.
Promoting Blockchain Gaming
Blockchain Game Alliance
Blockchain Game Alliance (BGA) is a member organization of over 300 members across 56 countries that promotes the adoption and development of blockchain games. BGA seeks to raise awareness and accelerate the adoption of blockchain technology in the gaming industry by encouraging the development of standards and sharing best practices. The alliance supports research and discussions on the identification, sharing, and recommendation of standards and best practices in the development and testing of blockchain technologies.
BGA’s mission is to advance the public’s understanding of blockchain games by providing insights into the benefits and limitations of blockchain technology. The alliance acts as a trusted expert in the industry, media, and society on blockchain and games, contributing to the improvement of public understanding. BGA also seeks to highlight the aspirational efforts in the blockchain games sector.
The alliance provides an open and inclusive platform for discussion and engagement between its members and key stakeholders. It creates and supports opportunities for members to communicate directly and openly with each other about relevant issues related to blockchain and its impact on people, businesses, and society. BGA aims to ensure that key stakeholders have the necessary knowledge, resources, and ability to participate fully in the development of blockchain games.
The BGA Board of Directors is comprised of major video game studios including Ubisoft and Animoca Brands, and ConsenSys, a leading Ethereum software technology firm established by Joseph Lubin, who is also a co-founder of Ethereum.
Asia Blockchain Gaming Alliance
The Asian Blockchain Gaming Alliance (ABGA) was established in 2021 with the aim of promoting the growth of blockchain gaming in the Asia Pacific region. The organization works to build a thriving blockchain gaming ecosystem by sharing industry knowledge, offering guidance to investors, and incubating and accelerating startups. With a massive gaming population in the region, the gaming industry is already a multi-billion-dollar market, making it an attractive target for blockchain game vendors looking to reach a large customer base.
The increasing favorable government regulations toward blockchain technology, such as the new guidelines released by the Japan Cryptocurrency Business Association for cryptocurrency custody operators, are further fueling the growth of the blockchain gaming market in Asia. These guidelines aim to help developers create blockchain-based games that comply with regulations and allow players to have greater control over their in-game assets.
The crypto space had a turbulent year in 2022, with a decline in NFT sales and a decrease in confidence following crashes such as FTX. Despite these challenges, the Web3 gaming space is thriving and continues to attract new projects. These projects are focused on creating a new generation of gaming experiences that combine immersive metaverse worlds, play-to-earn titles where players earn rewards for their time and achievements, and the ability to earn actual cryptocurrency.
The next iteration of gaming in the crypto space offers players the chance to explore expansive virtual worlds with others, while also providing real ownership rewards and the ability to earn cryptocurrency.
Blockchain has transformed the gaming industry, taking it from a simple pastime to a profitable pursuit for gamers globally. However, the technology is still in its early stages and requires further refinement and development. Although we’re just at the beginning, the initial results are very promising.
DISCLAIMER: The information contained in this article is for educational purposes only and does not constitute any form of advice or recommendation by Wheatstones, and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.