The following report was commissioned by Forte, a member of Messari Hub . For additional information, please see the disclaimers following the article. 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. View full size 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 […]
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