The first of this four-part series breaks down the extensive CoinMarketcap and Naavik 2022 Blockchain Gaming Report, looking at key mass adoption metrics.
The recently published CoinMarketCap and Naavik’s 2022 Blockchain Gaming Report analyzed the state of the blockchain gaming industry across this year — looking at four major topics: the rate of mass adoption of blockchain gaming; the fall of the play-to-earn model; key funding trends in blockchain gaming, and where the path forward lies for the industry. This four-part series Blockchain Gaming Under The Microscope dives deep into each section of the report to distill the key insights for readers.
Part 1 covers the mass adoption of blockchain games.
There is no doubt that GameFi is aiming to replace — or at least rival — traditional games in prominence and adoption. According to Naavik, there's still some way to go. Looking at the state of blockchain gaming after Q3 2022, three things stand out:
- Macro has bruised the GameFi industry but hasn't knocked it out.
- Activity and trading volumes are a far cry from traditional games. but appear to have bottomed out.
- Activity on non-Ethereum chains is increasing.
Take macro factors of the wider crypto environment into account:
- The Ethereum Merge was a resounding success. While the price of ETH didn't reach the heights some had hoped for, it noticeably decoupled from declining equity markets.
- ETH and BTC also showed signs of recovery, which bodes well for web3 games, and the wider crypto market.
- The demand for blockspace exceeds what ETH can supply, resulting in an increase in market share of other chains like ImmutableX, Polygon and Flow.
- Despite a lack of high-quality games entering the market, many reputable teams are building in the background, looking to satisfy the pent-up demand for quality games.
The report then proceeds to look at three important blockchain gaming mass adoption metrics.
Unique Active Wallets
Source: CoinMarketCap and Naavik 2022 Blockchain Gaming Report
Unique active wallets (UAWs) hovered around the one million mark for Q2 and Q3.
While the long-term trend shows a gradual and non-linear increase, the current trend is one of stagnation. However, 2023 may see an uptick as many games are in alpha and beta phase.
It is important to note that UAWs do not conclusively tell how many users a game has, since a user may have multiple wallets or might be playing without using a crypto wallet. But it appears that speculative activity has found a floor. Many games have been quietly building behind the scenes and will continue doing so.
For now, blockchain games are stuck in a transitory phase. Hence why many casual and hypercasual games are having success — the likes of Solitaire Blitz, Trickshot Blitz, and Gameta have been plugging the decline in demand elsewhere.
NFT Transaction Volumes
Source: CoinMarketCap and Naavik 2022 Blockchain Gaming Report
NFT transaction volumes suffered a major drawdown during the bear market, but saw a much smaller decline in transaction volumes in September. This could signify that most (but not all) of the speculation in the NFT market has dissipated, which could mean a bottom is nearing.
An increasing share of the activity in this transition phase has been happening on Ethereum’s competitors, which have been eating into the leading blockchain’s market share. The share of NFT sales on blockchains other than ETH has increased, both since the start of 2022 and quarter-on-quarter:
Source: CoinMarketCap and Naavik 2022 Blockchain Gaming Report
Solana was the biggest beneficiary. Polygon seems well-positioned for the long run thanks to a few notable business development wins in Starbucks, Meta, Adobe, and Stripe. Still, for now, the blockchain is getting outperformed by its closest rivals. Other notable chains include Ronin, which was affected by the winding down of Axie Infinity Classic (its volume is down over 95% from the peak) and Flow, which is slowly building up a user base thanks to two newly-released Blitz games, Dimension X and Chainmonsters. Another strong competitor is Immutable X, which grew its transaction volume by 500% thanks to activity on its AAA game Gods Unchained.
Number of Blockchain Games
Source: CoinMarketCap and Naavik 2022 Blockchain Gaming Report
Overall, blockchain gaming is still in the early stages. According to DappRadar, fewer than 2,000 gaming applications currently utilize the blockchain. Comparing that to the number of games on the app store indicates just how early it still is for blockchain games:
A game’s development cycle will likely take years, and is highly dependent on the “infrastructure, development tools, distribution channels, and product design best practices,” before an explosive growth will be witnessed. This shows that mass adoption is still some distance away.
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