Blockchain games continued to make headlines while the decentralized finance (DeFi) space struggled in 2022. Even the start of 2023 is the same. But the question arises: can the hype and traction continue?
Blockchain games are an innovation in the genre of video games. These differ from traditional video games by allowing gamers to convert points into real money.
The ecosystem also rewards players for the time spent playing the game. Gaining massive popularity in developing countries, these games key into larger conversations about what the metaverse is, what the crypto marketplace looks like, and what it does for people, especially economically vulnerable people.
The business model for the blockchain gaming spectrum indeed stands out. This was one of the reasons why it has consistently performed well over the years. Especially when talking about the blockchain industry’s activity and the mass adoption rate of blockchain gaming. Both can be zoomed in by looking at the UAWs, or unique active wallets.
DeFi Space Lost out in 2022
Last year saw many twists and turns for the cryptocurrency and blockchain industry. The collapse of established multi-million dollar valued firms created a ripple effect across the space. Despite the losses, the decentralized application space saw some positives, thanks to the blockchain gaming industry.
DappRadar’s year-end report for 2022 paints an exciting picture.
As seen above, the decentralized finance space was significantly impacted by the fall of institutions, such as Terra’s stablecoin depeg and the FTX debacle. The drop in TVL, or the total value locked, amounted to $40 billion at the time of writing. In comparison, the TVL at the start of 2022 was around $150 billion, according to data from DefiLlama.
This is evident on the chart below.
A DappRadar executive told BeInCrypto at the start of 2022 that 80% of DeFi apps could disappear if the bear market continues for a year. A significant chunk of participants did see the exit gate.
The Rise of Blockchain Games
While this was the case for DeFi, the blockchain gaming space hasn’t deviated much from its path, accounting for an average of 1.15 million daily UAW.
“While [decentralized finance] and overall blockchain activity have been on the downside, game Unique Active Wallets (UAW) continues to rise, reaching almost 1 million daily wallets,” Pedro Herrera, DappRadar’s head of research, told BeInCrypto in an email.
This is indeed the case even at the start of 2022, as GameFi remained the dominant niche in the blockchain industry, accounting for over 50% of activity in the space. Polygon, Harmony’s DeFi Kingdom, Axie Infinity, and Splinterlands were some of the best-performing protocols in the sector.
Even at the time of writing, the difference remains significant between the gaming sector and DeFi. Delphi Digital, a crypto research firm, compiled the latest statistic to highlight the above narrative.
“Gaming has over 2x the unique active wallets than Defi,” the executive stated.
Meanwhile, in terms of the top games that made it to the top blockchain games list, Splinterlands was at the number one, recording around 300k in UAW over a week. Other big names within the same period were as follows:
And UAWs connected to gaming passed those connected to DeFi in 2021, accounting for 49% of the blockchain industry’s usage.
The unprecedented rise made many headlines. But the question remains, can the hype continue in 2023?
Matters of Concern
Opponents of blockchain games, mainly the veterans of the traditional gaming industry, believe these games may permanently damage the gaming industry. While proponents of blockchain games propose that NFTs allow gamers to own objects beyond the individual games, even if the games cease to exist, these assets can be moved and utilized in other games.
Traditional game designers argue that while this concept seems promising in theory, in practice this is not a plausible use case since each game has its environment, storyline, and ecosystem. Thereby rendering these assets from other games meaningless in foreign territories. Even if developers of blockchain games could build a collaborative ecosystem, a foreign object comes with the risk of bugs that might corrupt the host ecosystem.
Another area for improvement is the accountability of profits. Games companies build games to earn profits. With the movement of assets from within the games to an outside public ledger, it becomes challenging for companies to keep track of finances.
A gamer can earn thousands of dollars worth of assets in Game A, move to Game B and start selling these assets to players in Game B, possibly at lower prices than the game owners. Thereby undercut Game B’s developers, leading to a price war that the gaming industry would never accept.
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