The Future of Blockchain Games: Prospects For Your Project
The Future of Blockchain Games: Prospects For Your Project Pixabay

- Stepan Sergeev Business development expert and Founder of OneWayBlock game studio

Just a year and a half ago, the blockchain games industry comprised a very small and niche part of the cryptocurrency market economy. However, the situation changed dramatically in 2021, and now successful projects are boasting billions of dollars in turnover, and millions of users are accessing their favorite games on a daily basis. In a few more years, distributed registry-based gaming applications will be able to claim that they have entered the big leagues, sharing the same stage as AAA tier projects. In his column for International Business Times, founder of the OneWayBlock game studio and business development expert Stepan Sergeev spoke about how this process will take place.

The best way to assess the current state of the blockchain-gaming market and its dynamics is to look at the latest BGA Blockchain Game Report 2021, which was released at the end of December last year by the analytical company DappRadar.

1.4 million crypto wallets (UAW) interact with decentralized gaming applications on a daily basis, which is equivalent to the same number of users in the world of traditional finance. The fact is that gaming projects account for 49% of the activities in the entire blockchain industry.

20% of the funds in the rapidly growing Non-Fungible Token (NFT) market, which was worth $23 billion in 2021, are attributed to NFTs that are in-game items, locations, etc. In absolute terms, this corresponds to a capitalization in excess of $4 billion.

Another $4 billion was provided to game studios in the form of venture capital investments last year, all aimed at developing games and their underlying infrastructures. In-game tokens have become one of the most successful and stable cryptocurrencies on the market. For example, at the peak of its price dynamics, the exchange rate of the GALA token exceeded its initial value at the time of listing by 31,500%. The values for the AXS token are slightly more modest, raking up a “mere” 20,800% in price increase.

In summary, it is possible to say that total user activity in blockchain games increased by 4,330% last year, compared to 2020. Let us examine some of the reasons for such traction.

New sources of income

The easiest way to attract users is by giving them the opportunity not only to have a good time, but also to earn money while doing so. Last year, the Play-to-Earn (P2E) monetization model demonstrated the breadth of its capabilities. It is based on the principle of income sharing between the developer company and its community, which gets a real opportunity to profit from their in-game activities.

It is still necessary to admit that for the most part in-game earnings are meager and are unlikely to become a powerful motivator for users from “first world” countries to exchange their full-time jobs for Play-to-Earn games. However, in Asia, where the standard of living is much lower, the opportunity to exchange a few hours of life for a few dollars attracts millions of people. Let us take the Philippines as a shining example. More than 7 million people are unemployed in the country and blockchain games are the only source of income for many of them or provide them with the chance to be able to pay for medical treatment.

According to DappRadar, 22 million players, accounting for 54% of the global audience of blockchain games, live in Southeast Asian countries, while the combined audience of the citizens from the US and Europe amounts to slightly more than 9 million, or 22%.

The annual Blockchain Game Alliance report states that 68% of its members surveyed around the world named the opportunity to earn money as the main driver for industry growth. The second driver responsible for the explosive growth of blockchain gaming alongside P2E is the metaverses and the new business models associated with them.

Metaverse activity spiked in the first half of 2021, fueled by $42.6 million in virtual land sales in the second quarter alone. This volume corresponds to direct purchases of territories available within games like Cryptovoxels, Decentraland, Somnium Space and The Sandbox. A number of other projects, such as VulcanVerse, Ember Sword, My Neighbor Alice, and others also offer players the opportunity to purchase land for further development in the form of NFTs, but they meet the definition of a metaverse to a lesser extent due to genre restrictions.

It is interesting to note that the US is leading the trend towards the widespread use of metaverses. This can be explained by the fact that the largest percentage of the audience for such projects are residents of the US. However, Asian traffic is growing faster than the market, so the gap is gradually decreasing. China has already climbed to second place, despite all the restrictions on internet activity in the country.

A couple of recent major deals can serve as examples of how the blockchain metaverse economy works. Last November, the Metaverse Group acquired a piece of land in the Decentraland game for 618,000 in-game MANA tokens, which at the time of the transaction was equivalent to $2.43 million. Another notable purchase took place around the same time, also carried out by a corporate entity, as the Republic Realm bought virtual real estate from Atari SA in The Sandbox game for $4.3 million.

Major league applications

The main threshold of growth that blockchain games need to overcome is the proverbial barrier erected between the decentralized project and traditional computer gaming worlds. The latter market is currently estimated at $229 billion and is expected to grow to $546 billion by 2028.

The telltale signals that both worlds are expressing interest in each other are manifesting rapidly. The abundance of news regarding deals involving seven-digit figures is not leaving the world’s gaming giants indifferent to the new industry, nor companies that were previously never uninvolved in games.

While Valve is banning NFTs on its Steam platform, Epic Games is looking for ways to cash in on digital assets. “Epic Games Store will welcome games that make use of blockchain tech provided they follow the relevant laws, disclose their terms, and are age-rated by an appropriate group,” as Epic Games CEO Tim Sweeney said recently.

Adidas Originals has acquired a plot of real estate in The Sandbox and plans to create a branded commercial zone there. In parallel, the fashion sportswear manufacturer is developing several NFT projects at once, working closely with many major players in the blockchain industry , including the Coinbase exchange.

The number of blockchain projects becoming attractive to “traditional” brands will grow, and this trend is being confirmed by numerous successful cases of seed investment rounds in the industry. For example, the Heroes of Mavia game alone received $5.5 million for development from the Binance cryptocurrency exchange in January 2022. The Vietnamese game developer Ancient8 raised $4 million. The NFX venture fund launched a separate line of seed investments for Crypto Gaming. Decisions on the allocation of funds to gaming blockchain startups are made in just 9 days within the framework of the project.

As a closing line, let's examine one last media release from the world of traditional finance. Japanese bank SoftBank invested $93 million directly in The Sandbox together

with a group of funds. The deal was not related to the purchase of virtual real estate, but rather to investments in the developer company.

Blockchain in every smartphone

Another impact vector on the industry comes from mobile games, which currently account for 52% of the global gaming market in monetary terms. The main problem of the sector is the presence of exuberantly high store commissions that apply to all in game purchases.

The notorious Fortnite scandal between Apple and Epic Games last year drew public attention to the fact that store owners charge 30% on any game transaction. Such an “economy”, of course, simply makes blockchain games in their current state non viable. However, there is hope that the challenge can be overcome through a bill known as The Open App Markets Act, which is currently being reviewed by the US Senate.

The document, according to The Verge, is designed to “blow up app stores”, as it provides developer companies with the opportunity to use their own payment processing in order to increase competition. In general, the changes proposed by the Open App Markets Act are much broader, and almost all of them should make it radically easier for blockchain game developers to access the 6.6 billion-person audience of smartphone owners. The game is just beginning!