Blockchains: Changing the Game

Executive Summary

The landscape of blockchain-based gaming is rapidly expanding behind the rise of NFTs and in-game currencies. Its growth can be seen as a continuation of a multi-decade iteration across monetization strategies and business models.

The rise of worldwide interest in video games and non-fungible tokens (NFTs) in the last few years serve as large catalysts. Globally, the number of video gamers is quickly approaching 3 billion with a projected 5-7% compound annual growth rate (CAGR) over the next few years. Meanwhile, NFT sales surpassed $15 billion for the first time ever in 2021. In fact, secondary sales of the NFTs found in blockchain games themselves accounted for 20% of total NFT sales – with dozens of smaller games consistently generating tens or hundreds of millions of dollars in revenue.

Finally, while the metaverse remains vague, it’s clear that gaming, in particular, has a strong presence in virtual worlds. Virtual world games, like Decentraland and The Sandbox, have generated nearly $500 million in cumulative NFT sales (virtual land and in-game assets). In 2021, virtual world NFT sales witnessed the largest growth, generating over $320 million in transaction volume. As the global understanding of the metaverse further contextualizes, it’s likely that some portion of this new digital experience will utilize blockchains as a core piece of infrastructure – something even more likely to occur as blockchain infrastructure continues to scale to meet the demands of developers and consumers.

This report will dive deeper into the growth of all three categories: Global gaming, NFT markets, and blockchain games. Though the industry remains in its infancy, understanding these trends will help provide insights into what the future of gaming may hold.

Introduction to Blockchain Gaming

Like its fictional characters, the business of games keeps evolving. The industry lies at the edge of disruption, where it has historically discovered innovations and adapted them to ever-changing demands.

Take the evolution of gaming business models as an example. The first mainstream games featured a pay-to-play system. We remember these games predominantly as arcade machines in malls or CD discs in computers or, later on, direct downloads onto machines. The advantage with pay-to-play was simple: Pay just one time; keep playing forever.

After pay-to-play came the freemium model of games. Gamers no longer needed to pay to start playing a game in this era. Rather, companies made revenue from players paying to unlock additional components of the game, or more commonly, from sales of in-game purchases such as expansion packs, platform subscriptions, and character cosmetics. For many, freemium games lowered gaming’s barriers to entry and the shift to freemium games helped grow the number of gamers around the globe.

That takes us to today, where the beginnings of gaming’s next monetization revolution lie around the corner: blockchain gaming. The blockchain gaming sector has earned other names like GameFi or play-to-earn indicative of the new monetization models of this gaming era. Blockchain gaming typically incorporates non-fungible tokens (NFTs) or other forms of tokenized assets as in-game content tradeable for cryptocurrencies – or fiat currency – on markets facilitated by the blockchain. Thus, this core monetization strategy occurs in the form of sales of tokenized assets and subsequent royalty proceeds. Game studios and players share aligned incentives in this new business model since both parties benefit when the game’s tokenized assets increase in value.

At the heart of this revolution is the idea that gamers should own the content they earn, or at least have more ownership in the digital worlds in which they spend a significant portion of their time and money. This creates two immediate advantages: (1) The longevity of in-game assets increases as those assets continue to exist in their owners’ wallets even after the game is turned off, and (2) both the interoperability and composability of assets – terms describing their portability – enable them to interact with other games, applications, or blockchains. Interoperability among different blockchains allows gamers to lend out their in-game assets, port them to another application, or gain access to real-world events. In addition, blockchains have the potential to offer gamers the ability to safely and efficiently buy, sell, trade, and create in-game assets with fiat or crypto even within the same application; gray secondary markets for games can be rife with fraud, and many emerging markets lack the payments infrastructure for gamers to seamlessly make game-related transactions.

While blockchain gaming can be a new monetization source for game studios, it should be warned that the decision to enter the world of blockchain doesn’t come without its own pitfalls. The recent announcement of Ubisoft Quartz, an in-game NFT marketplace of sorts, was met with skepticism from fans, leading to plans of including NFTs in the new game Tom Clancy Ghost Recon Breakpoint getting scrapped. This followed after the popular gaming community Discord saw similar pushback after hinting at integration with Ethereum. The main reasons behind the community pushback were sustainability, unclear user value proposition and the prevalence of rug pulls, among many others. Many if not all of these concerns could have been avoided or alleviated with more deliberate, thought-out rollouts alongside market education; introduction of NFT profile pictures by Twitter and Adidas’ foray into NFTs have shown an encouraging path forward for platforms and intellectual property owners to learn from.

The Global Gaming Market

Gaming is one of the most popular sources of entertainment and it is only expanding. Major franchises such as Fortnite and League of Legends now operate in the global pop culture arena. Fortnite, for example, has partnered with Marvel Studios, Star Wars, and John Wick in the movie industry, worked with Ariana Grande, Neymar, and other influential celebrities, and coordinated with popular brands such as Balenciaga, Ferrari, and Air Jordan. League of Legends, on the other hand, hosts an international-sports league drawing millions of fans.

Anecdotes aside, the global gaming market cannot be evaluated without taking the last two years into perspective. In 2020, lockdowns caused by the Covid-19 pandemic acted as a strong catalyst for the industry. Those who were already gamers found themselves with more time to play their favorite games. Meanwhile, individuals who didn’t play games found themselves with time on their hands to experiment with fresh hobbies. Consequently, global gaming revenue grew 15% in 2020. Mobile, PC, and console games each saw growth with mobile, in particular, surging 26% year over year.

Unfortunately, businesses in 2021 faced a different story. The pandemic’s prolonged disruptions began to highlight unexpected second-order effects in the global gaming market. Disruptions to manufacturing, freight, and logistics processes hindered the launches of next-generation consoles, and PC hardware faced chip shortages and delays on other high-end components.

Despite the ongoing increased interest in gaming seen in 2020, both PC and console segments saw slight decreases compared to 2020 and mobile was the only category to experience growth, due to these supply chain disruptions and tough comps.

Forecasts do expect the gaming industry to revert back to the previous levels of growth once the effects of Covid-19 subside. Predictions have the industry reaching $269 billion by 2025, a 53% increase from recent numbers. Over the upcoming three-year period, these fall in line with recent years’ historical 15% CAGR growth, driven by continued changes in consumer behavior post-pandemic and new revenue monetization models from streaming and professional esports.

Meanwhile, the number of total gamers worldwide is predicted to hit just under the three billion mark with 55% coming from the Asia-Pacific region. The main drivers for an ever-increasing user base remain an expanding internet population, better networking infrastructure, and easier accessibility to smartphones.

These three drivers outlined continue to be reliable for the short term, but as more of the world comes online in regions such as the Middle East, Africa, and Latin America and user growth slows, exploring new avenues to increase participants will be of interest to many companies. Blockchain gaming and its new token-based monetization models present a unique opportunity for game developers to generate more in-game revenue per customer, broaden their customer base, and explore new revenue streams.

Non-Fungible Tokens: Game Changers

Non-fungible tokens (NFTs) act as a core primitive for blockchain assets and as a key value proposition of various blockchain games. NFTs in blockchain games provide various benefits to games including asset ownership, asset programmability, and open new opportunities to incentivization and innovation.

Asset Ownership

In legacy games, in-game assets are controlled and owned by the game developer and effectively rented out to players. Comparably, in blockchain games, players retain genuine ownership over their digital assets, whether in-game currency or more unique assets like skins, account names, in-game land, or other assets.

Asset Programmability
Since NFTs are essentially software on blockchain networks, these assets can be programmed to have various qualities or built with in-game utility. NFTs can be designed with single-usage, unlockable content, issued to players that achieve a certain status, or programmed with a number of other unique use cases.

Incentivization and Innovation

Game developers are already amongst the most knowledgeable when it comes to incentives. NFTs offer an additional layer of economic incentives by enabling players to earn yield-generating assets, imbue gaming assets with real financial value, and build a more robust gaming economy via in-game currencies and NFT marketplaces.

Since blockchain networks are permissionless, they open up the doors to developer innovation. With NFTs, a single asset category can be automatically licensed to other companies or leveraged in other games. Sorare – the fantasy soccer NFT game – has licensed the usage of its NFTs with other game developers like Ubisoft.

Finally, NFTs also open new forms of monetization. For instance, NFTs issued by companies can earn royalties on all secondary sales producing a new revenue stream for digital asset issuers. Companies can choose to vertically integrate their own marketplaces and activities or integrate with third-party platforms like OpenSea.

The Growth of NFTs

Total NFT secondary sales in 2021 surpassed $15 billion across multiple blockchain networks. As a platform, Ethereum leads NFT sales. However, increased transaction costs on the network have paved the way for newer blockchains and Layer-2 scaling solutions like Solana, Ronin, ImmutableX, Polygon, and more.

Each blockchain or Layer-2 comes with its own set of tradeoffs, including scalability, existing infrastructure, users, and security among others. As such, there’s a variety of game developers building on different blockchains for different reasons. Games that require greater scalability might opt for blockchains like Solana while game developers desiring to utilize Ethereum’s
existing network effects may select Polygon, ImmutableX, or another Ethereum scaling solution.

In hindsight, August 2021 was the peak monthly activity in 2021 with over $4.5 billion in NFT secondary sales.

Although the last few months of 2021 still lagged compared to the peak, it’s important to realize the NFT secondary market is still multiples larger than where it was at the start of 2021. With a growing number of applications and marketplaces that integrate various forms of tokens including NFTs, the NFT secondary market will be poised to retest the level of engagement last seen during August 2021.

Note these charts represent secondary sales, meaning the sale from one person to another. This data, therefore, excludes the initial NFT sale from the gaming company to the first buyer, which can produce meaningful revenue. Secondary sales are a useful metric for gauging the health of both the overall NFT market and the health of an individual game. Increased secondary sales likely translate to a more robust gaming economy and since NFT collections often pass a perpetual royalty to the company at each sale, a healthy secondary market also directly corresponds to increased revenue for the NFT issuer.

Data shows Axie Infinity is the clear leader in secondary NFT sales, the vast majority of which occur on its sidechain Ronin. More recently, ParallelAlpha, another strategy card game, has grown in recent months in part due to its intriguing SciFi backstory and intellectual property. Overall, there exist several successful games with over $100 million in secondary NFT sales across multiple blockchain networks, showing that there’s still no clear consensus on which platform is best suited for blockchain-based games.

Also worth mentioning is the fact that most successful blockchain games today are predominantly card games, compared to the existing gaming industry which favors sandbox games, MMORPGs, and games with more robust gaming experiences.

Currently, blockchain games are not at the stage of development in which they can support both complex gameplay and economic primitives like NFTs at scale. However, in time, advancements in blockchain technology and user experiences – including improvements launching in the coming year – will open the doors for higher functioning games that operate on blockchain networks.

The Blockchain Gaming Landscape

As the blockchain-gaming sector gains momentum, the gaming infrastructure stack has also quickly evolved and is now composed of an ecosystem of studios, games, and key pieces of infrastructure.

Let’s break down the various layers of the blockchain gaming landscape.

Gaming Guilds

Guilds aren’t new to blockchain gaming. These social groups – guilds – have been utilized in role-playing games for decades. However, the combination of decentralized autonomous organizations (DAOs)—an entity formed by a community that is organized around a set of rules enforced on a blockchain, usually with no central leadership structure—and gaming enables these guilds to ingest and allocate capital which creates new models for gaming financialization and user acquisition. Well-capitalized guilds like Yield Guild Games, GuildFi, and Merit Circle have sponsored—delegated assets in exchange for part of the game rewards—hundreds of players for games like Axie Infinity.

Blockchain Games

The largest layer of the blockchain gaming landscape is the games themselves. To date, there exist a variety of game types. Some of the most successful categories include trading card games (e.g. Axie Infinity), MMORPGs(e.g. DeFi Kingdoms), Virtual Worlds (e.g. The Sandbox), and sports games (e.g. Sorare).

As the gaming landscape evolves, dominant blockbuster games will emerge from each sector. However, many games are currently under development and may take months or years to fully develop.

Marketplaces

As games issue assets as NFTs, general marketplaces like OpenSea offer access as well as blockchain-specific marketplaces like Metaplex, VIVE, and Magic Eden that facilitate transactions. Further, some pieces of gaming infrastructure like Enjin offer their own marketplaces for Enjin SDK-developed games.

Launchpads

Launchpads effectively help upstart game developers raise capital for game development. Often these launchpads raise capital for a specific gaming ecosystem (i.e. Polkastarter for Polkadot) or Magic Eden for Solana). Typically, launchpads enable fundraising through either an initial DEX offering (IDO) or liquidity bootstrapping pool (LBP), each of which enables the initial sale of tokens.

Gaming Development Infrastructure

Game development infrastructure like Forte and Enjin often have APIs and SDKs that enable game developers to quickly integrate NFTs or other crypto-economic activities. Building the entire blockchain infrastructure required for a game from scratch can be daunting and time-consuming for game developers. Just as blockchain developers leverage existing smart contract tooling and wallet infrastructure, game developers can leverage blockchain game development software (i.e. Stardust, Enjin, Forte) that supports modular components such as wallets, asset issuance, payments, and other foundational features.

Layer-2 Infrastructure

The NFT bull market of 2021 resulted in increased investment from Layer-2s into the gaming ecosystem. Axie Infinity chose to vertically integrate, developing its own sidechain, Ronin, and its own DEX, Katana. Elsewhere game development platforms like Enjin have chosen to horizontally integrate, recently securing a Polkadot parachain auction for Efinity. Still, many existing games are committed to building on Ethereum’s existing network effects, leveraging Starkware (e.g. Sorare), ImmutableX (e.g. Gods Unchained), Polygon (e.g. Zed Run), and others for their scaling needs.

Layer-1 Infrastructure

Layer-1 infrastructure serves as the core foundation for various protocols and applications. While some games are building higher throughput blockchains like Solana and Flow, most Ethereum games have migrated to Layer-2 solutions. The importance of Layer-1s comes from the other composable protocols that games will leverage, including guilds, financialization protocols(e.g. NFTX), identity solutions (e.g. ENS), marketplaces, and other applications or services.

Game Studios

Studios sit at the base layer of the landscape since they are often developers of games as well as Layer-1 and Layer-2 infrastructure. Dapper, Sky Mavis, and Animoca Brands sit as the most well-capitalized game developers with hundreds of millions in capital. Ultimately, not every gaming studio will survive. However, those that develop the next blockbuster games have the potential to become the next Electronics Arts of the future.

Blockchain Games Gain Interest

The first blockchain game was created in late 2017, but it wasn’t until the recent mainstream foray into NFTs that the subsector found substantial user engagement. With the popularity of games like Axie Infinity and mainstream collectibles like NBA Top Shot, blockchain-based games are now on the precipice of wider adoption.

User and Funding Metrics

Although blockchain gamers comprise a small percentage of the three billion global gamers, recent data released by DappRadar shows October 2021 was the first month where over one million unique daily active wallets interacted with decentralized gaming apps. This number reflects an almost 300% increase from four months prior where the same metric showed only 350K wallet interactions.

The monthly unique number of NFT buyers of blockchain games is also on the rise. To date, most blockchain games require an individual to own NFTs which places an initial capital burden on gamers, much like purchasing a console. While this model remains the most popular today, it’s likely that more games will experiment with free-to-play models in the future.

Following the Funding

Apart from wallets as an adoption proxy, another important metric to track is venture funding. Capital investments reflect many things: It reflects interest in the industry; it reflects, to some extent, the ambitions of founders in the space; and it reflects, to a greater degree, the resources at hand available to those challenging the status quo. It’s worth analyzing how the fundraising environment has changed this past year.

Not surprisingly, the numbers continue to further highlight the growth of this subsector. Total venture funding across game titles and ecosystem infrastructure increased more than 100x compared to 2020. The jump still represents a roughly 40x increase from funding in 2018, the year in which funding was at its peak prior to 2021.

Venture funding in 2021 came in such a stark contrast to previous years that multiple businesses raised rounds larger than the sum of all previous years combined. Examples include Forte, an end-to-end blockchain gaming development platform partnering with a host of gaming studios. Perhaps what’s notable about this data is the variety of products and services in this list: Both studios and infrastructure/tooling are represented, not to mention other components of the gaming stack including NFT marketplaces and various Layer-1 or Layer-2 blockchains.

Beyond fundraising amounts, the origination of funding also shifted this past year. Crypto-specific venture funds were no longer the sole game in town. This past year, those who have made investments in the space now include traditional tech funds such as Sequoia Capital, Andreessen Horowitz, and Lightspeed Partners, as well as hedge funds with established track records in growth investing, notably Tiger Global and Coatue Management. On a go-forward basis, this triumvirate of players – particularly the fresh participants – should continue to bring new capital into the ecosystem.

Developer Initiatives

Moreover, a recent study of 157 developers in the United States and United Kingdom found 72% of those surveyed have considered integrating blockchain technology into their games, whereas 58% of the same group have plans to do so in the next 12 months. Meanwhile, 47% of participants are already using NFTs in their games, highlighting considerable interest from the developer side.

While developers see an opportunity for new content, it should be reiterated that the technology behind such games remains nascent. Furthermore, current challenges around blockchain such as transaction costs, throughput speed, and general scalability limit gameplay mostly to turn-based, card-collecting games rather than the live-action and 3D graphics of AAA-rated games released by high budget studios.

Blockchain Game Case Studies

In the following section, we’ll take a look at the growth of three recognizable blockchain games, their models, and what they mean for the blockchain gaming ecosystem.

Axie Infinity

Widely recognized as the most popular game to date, Axie Infinity has facilitated over $3.5 billion in cumulative volume within its NFT marketplace. The premise of the game is similar to Pokemon. Players own and breed Axie champions, represented as tradeable NFT characters, who go on to either complete adventure levels or battle champions owned by computer opponents or other humans in the Axie Infinity realm.

Successful battles or conquests lead to in-game rewards, which can be sold for real-world currency. Axie Infinity spawned the global adoption of the play-to-earn business model. It is estimated 40% of total players are from the Philippines alone, where gamers can earn upwards of $500 per month from playing. Gameplay revolves around two crypto tokens: Smooth Love Potions (SLP) tokens and Axie Infinity Shard (AXS) tokens.

• SLP Tokens: SLP tokens are more widely used for practical in-game purposes and grant holders the ability to breed new Axie champions. The process consists of burning SLP tokens to birth a new Axie creature. SLP tokens can be earned through regular gameplay, bought on secondary marketplaces, or engagement with promotional offers.
• AXS Tokens: AXS tokens are the governance token for the Axie Infinity game. Those who own AXS tokens can stake the token inside the network to earn yield. These tokens are also used as currency within the game’s NFT marketplace.

Axie Infinity derives its protocol revenue from various fee mechanisms. The first such mechanism is marketplace fees earned as a percentage of sales facilitated through the NFT marketplace. The other main revenue stream comes from breeding fees paid by players to create new Axie creatures in the game. Two smaller revenue sources include fees earned from sales of in-game land and the original sale of first-generation Axie creatures.

In sum, the protocol has earned over $1.3bn in revenue from these four sources, with almost all of it occurring after June 2021. This timing coincides with Sky Mavis’s launch of the Ronin network, which helped decrease transaction costs for its users and boosted the game’s popularity.

Segmentation of revenue seems to support this conclusion. Over 99% of total cumulative revenue is derived from activity on the Ronin network. Ethereum merely accounts for 0.19% of the $1.3bn while including revenue earned from land sales and first-generation Axie sales, both of which are not available on the Ronin network. Thus, Ronin’s 99%+ revenue claim is another indicator of the incredible activity from breeding and marketplace fees alone.

The graph below demonstrates just how much growth occurred in the second half of the year. Surprisingly, revenue begins to tail off in the last few weeks of 2021. Potential explanations for this include the recent Typhoon Rai wreaking havoc in the Philippines (where 40% of total users reside) or shifting interest towards blockchain games with newer gameplay.

Although Axie Infinity's circulating market capitalization did fall in recent weeks as revenue growth slowed, a rough benchmark did find the game still comparable with many pure-play game studios. Notably, this methodology compares a singular game (Axie Infinity) with game studios that own multiple titles – further demonstrating how sizable this one blockchain game has become.

Axie Infinity lags behind the largest industry players such as Nintendo, Activision Blizzard, and Electronic Arts – all of which have triple-A rated game studios – but much closer to several others. In the benchmark below, Axie Infinity has a similar circulating market cap as Ubisoft, the creator of famous games like Assassin's Creed and the Tom Clancy series.

Sorare

Much like fantasy sports, Sorare offers its players the opportunity to blend real-world sports with digital games – only this time with the inclusion of blockchain technology. Think FIFA Ultimate Team with NFT cards as collectibles. Up to now, Sorare gameplay is limited to football (or soccer, in the United States) as the sport of choice, though the company recently raised $680 million in September to support its continued expansion.

Sorare tracks real-world football stats, rewarding players who own the NFT cards of high-performing athletes. Naturally the nature of the game draws a broad audience of football fans. As reflected above, first-time buyers of Sorare NFTs surged in the second half of 2021. The total unique monthly buyers of Sorare NFTs surpassed 20,000 for the first time in December 2021. Data presented here should be noted under a backdrop where, unlike Axie Infinity, gamers aren’t required to purchase NFTs to start playing. This likely means the total number of Sorare gamers exceeds those who made secondary NFT purchases.

Sorare is one of the most successful cases to date of NFTs merging with culture. The participation of influential football leagues, including some of the most popular in the world like the English Premier League, Spanish La Liga, and Europe’s top-tier Champions League, and willingness to lend their brand to a blockchain game, is a precursor for future games to come.

DeFi Kingdoms

Another blockchain game, DeFi Kingdoms, bears resemblance to a popular Internet classic, Runescape. Gamers of the latter may feel some nostalgia as virtual characters interact with one another within a retro pixel art world. Unlike Axie Infinity or Sorare, the gameplay of DeFi Kingdoms doesn’t revolve around collecting and battling with cards. Instead, the game incorporates heroes, quests, professions, and a broader array of actionable activities such as mining, gardening, farming, and fishing. The roadmap for the game is massively ambitious. Future gameplay will allow Heroes to join guilds, engage in peer-to-peer battles, hatch pets, and more. Having heroes participate in these various tasks boosts the gamer’s odds of accumulating resources tradeable on blockchain markets.

DeFi Kingdoms, as its namesake suggests, blends elements of gaming and decentralized finance (DeFi), with a larger focus on the latter than many predecessors. The game includes a decentralized exchange, liquidity staking, and native NFT marketplace – all services found in the crypto ecosystem but not traditionally within a blockchain game. In fact, the team behind the game took a reverse approach to that taken by Axie Infinity; instead of starting with the game, DeFi Kingdoms began with traditional liquidity mining incentives and is growing the game out with time.

The selected blockchain running the game is Harmony. What’s notable about DeFi Kingdom’s launch on Harmony is the sheer dominance of the project across the blockchain network. DeFi Kingdom owns approximately 68% of all Total Value Locked (TVL), a significantly larger share than the two main DEXs active on the network, SushiSwap, and ViperSwap. A launch of DeFi Kingdoms on Avalanche is also expected to be released within the next few months.

Usage data does seem to support the idea of the game gaining interest. Daily user count has continually trended upward since its launch. In early December, the game announced it would expand to Avalanche with the launch of a new realm called Crystalvale. On the date of the news, it was announced Avalanche DEXs such as Trader Joe and Pangolin would immediately begin providing liquidity for DeFi Kingdom’s new Avalanche-purposed in-game token; a few days later, the number of users active on Harmony jumped 64% before giving back some of those gains. Transaction volume also jumped 29% over the following two-week period.

The Metaverse

On a broader scale, much of what’s happening in gaming is moving in tandem with another major technology trend: the metaverse. Perhaps the metaverse has already touched your life – it wasn’t too long ago Facebook strategically rebranded itself as Meta – but if it hasn’t, odds are high it will over the next few years.

Defining the metaverse is a little unclear in part because the concept itself remains largely hypothetical. At its base, the metaverse represents a collection of virtual worlds (including AR, VR, and two-dimensional) where we can engage with each other in a digital format. But as it stands today, multiple worlds simultaneously exist, the ecosystem is fragmented, and competition is fierce among those vying to lay the framework for which world applications ultimately get built on.

Regardless of the metaverse’s final form, opportunities for in-game integrations are mostly unexplored. The metaverse widens the scope of gaming by unlocking new types of intellectual property, experiences, and behavior. One early example is Worldwide Webb, an interoperable massively multiplayer online role-playing game (MMORPG). Worldwide Webb allows users to import owned NFTs into the game to serve as digital identities, which marks one of the first
instances where NFT cross-application interoperability appeared in blockchain-enabled digital worlds.

Virtual Worlds Dominance

Since Decentraland’s ICO in August 2017, virtual worlds have long been discussed as a potential application within the metaverse. These virtual worlds are designed to be sandbox games (e.g. Minecraft, Roblox, etc.) where players can buy and build their own assets as well as socialize with other gamers.

The top four leading metaverse worlds are The Sandbox, Decentraland, Somnium Spaces, and Cryptovoxels. Each of these virtual worlds enables users to purchase scarce digital land and many of these also utilize their own in-game currency (e.g. The Sandbox’s Sand).

To date, some of these virtual worlds have gained notoriety for specific use cases. For instance, Cryptovoxels users have created 3D art studios and Decentraland hosts casinos and digital offices for various crypto companies.

Virtual worlds have generated nearly $500 million in cumulative NFT sales (virtual land and in-game assets). In 2021, virtual world NFT sales witnessed the largest growth, generating over $320 million in NFT sales.

The Sandbox led virtual worlds by a large margin with over $235 million in sales. Moreover, Decentraland and The Sandbox both experienced 490% and 739% growth in NFT sales in Q4 alone, respectively.

As awareness of the metaverse increases, synchronous virtual worlds have experienced increased speculation. Ultimately, these applications are in their infancy, still building content for gamers and trying to find their niche among potential users (i.e. social, gaming).

The unique value proposition of blockchain networks – asset ownership, permissionless innovation, incentive design, and programmability – likely ensures that these protocols will support the metaverse as a foundational layer or as crucial parts of infrastructure for the secondary and tertiary applications and services.

Conclusion

Over the past year, it’s undeniable that blockchain gaming experienced a watershed moment – a historical shift on which future development depends. The perception of blockchain gaming has changed because of successful games like Axie Infinity, the explosive growth of NFT secondary sales, and the broad growth of crypto adopters and more specifically the expansion of blockchain gaming users. In turn, this has catalyzed further funding into the blockchain gaming landscape across a variety of core pieces of infrastructure and dozens of new games and studios.

The tailwinds of the metaverse have also benefited the gaming industry, which makes up a significant portion of online activity today and will likely be an important area of growth and user acquisition for companies building in the metaverse.

Blockchain ecosystems like Ethereum are developing at an increasing pace, but scaling challenges and user experience issues persist. Still, there are many teams developing solutions for both consumers and game developers to enhance the experience of building and playing blockchain games. Although a common monetization model across blockchain games has yet to emerge, the experiments around issuing NFTs, vertical marketplaces, in-game currencies, and other crypto-economic primitives remain promising.

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