Few sectors of the crypto industry have generated as much noise, excitement and sometimes even anger as the GameFi (Game and Finance) sector.
However, the current bear market has seemingly cooled the excesses of the sector as well as the ardor of investors. Footprint Analytics, a tool for discovering and visualizing blockchain data, including NFT and GameFi data, has released an in-depth report with CMC Research on the state of the GameFi industry in 2022.
But before going into the details of the state of the industry, let’s go back to the basics for a moment to put things in perspective.
What is GameFi?
First of all what is GameFi and how does it work? GameFi refers to blockchain-based games that allow users to gain real financial benefits; the diversity within GameFi ranges from simple lottery-based games to complex MMOPRGs.
GameFi encompasses and implements the concepts of “Gamification”, “Play-2-Earn” (P2E), Non-fungible tokens (NFTs), and Decentralized finance (DeFi).
Consider, in the near future, the possibility of earning money solely from playing video games. Not money in the game, but real money that can be used to pay bills and put food on the table.Consider the prospect that all of a game’s assets-characters, clothes and weapons-can be bought and sold in real life.
That, in a nutshell, is the promise of GameFi, one of the hottest Web3 sectors. And this prospect is not far from becoming a reality, according to some of the most active players in the sector.
How do Pay To Earn games work?
Currently GameFi – a distillation of “game” and “finance” – defines blockchain games that offer financial incentives for playing them, otherwise known as “Play-to-Earn” (P2E) games.
Typically, players can earn in-game rewards by completing tasks, fighting other players, or advancing through different levels of the game. Many P2E games are based on an operation in which players must spend a lot of time performing repetitive tasks to advance or unlock prizes, crypto tokens or NFTs.
Like crypto-currency and tokens, NFTs exist on the blockchain, which means they can be removed from a game and traded or sold on a market.
In summary, GameFi offers a variety of features that allow players to earn rewards. Some games also allow players to generate passive income without playing, either by “staking” or by lending their game assets to other players.
What about GameFi in 2022?
Now let’s look back at the state of the GameFi industry in 2022.
The Footprint Analytics / CMC Research report concludes that GameFi has tried to balance the fun side of gaming with the financial incentives to make money, but that this has not always worked. The report also indicates that projects built on hype and an unsustainable P2E model are among those that have collapsed the hardest during this recession.
The report also shows that the general hype during the bull market was not a good indicator of sustainability or future success. For example, neither Axie Infinity nor STEPN, two of the most hyped titles, were the games that retained the most players during the bear market. That title went to Alien Worlds and Splinterlands.
In addition, GameFi projects still do not have a reference chain. WAX and Hive leading in the number of transactions but too dependent on a single game. BNB Chain is the third largest chain used by the industry, but has yet to launch a notable title.
As far as GameFi tokens are concerned, valuations have of course fallen sharply. The report concludes that many tokens, Green Satoshi Token (GST) being a prime example, could not control the dumping pressure and this was partly due to wacky tokenomics.
However, VCs (Venture Capitalists) continue to be interested in the sector and the share and volume of investments in GameFi has increased year after year.
GameFi now attracts almost twice as much investment as the Metaverse sector.
For the second half of 2022, Footprint highlights games like Illuvium (ILV), Phantom Galaxies, and Big Time and presents them as the must-have games of the moment. Two of these are launching on Ethereum, and Footprint sees the latter as the channel to watch for the rest of 2022.
For more information on the current P2E games please check out our P2E guides, you will discover a multitude of exciting games.