“Experts say gaming will be the first real use case for blockchain, revamping the industry and making games more immersive than ever. How gaming navigates the remaining hurdles will become a case study for other industries considering mass blockchain adoption.”
The gaming industry represents itself as one of the most exciting and innovative advancements that have leveraged the developments in the technology sector to provide users with a truly immersive real-time experience.
Gaming has made the world a global village and has been successful in pushing the boundaries of entertainment and offers a totally thrilling experience to anyone that has a screen. Our team at Tradedog has put together insights from the Blockchain Gaming Industry.
The global video game market size was valued at $151.06 Bil. in 2019 and is expected to grow at a CAGR of 12.9% from 2020 to 2027 as per the market research and consulting company, Grandviewresearch. The forecasted market opportunity will further expand with the wide-scale adoption of the cryptocurrency as it would enable buying and selling of crypto assets without being dependent on any fiat currency.
As blockchain implementation requires a base layer of technology so the esports industry which is projected to be worth $2.97 B by 2026 growing at an impressive CAGR of 18.35% over the forecast period 2019- 2026 is the target market for blockchain. Newzoo, an e-sports analytics and market research firm predicts that the audience will be approximately ~646 million, that is, ~30% increase in 3 years from the current audience size of 496 million.
As the estimated average per capita expenditure has increased by ~42% in the past 3 years (2017- 2020), this increase in consumer spending coupled with the forecasted user base will increase the revenue of the esports industry manifold to 1598.2 M from 950.3 M, a cosmic increase of ~68% in the period (2020- 2023) as per Statista.
Thus, e-sports offers a humongous market opportunity. This has been well spotted by the ecosystem and its popularity in the VC ecosystem validates this hypothesis.
Evolution of the Gaming industry
Before we delve into further details, let’s first go through the timeline of the evolution of the Gaming Industry.
Arcade Games (the Early 1970s)
A coin-operated entertainment gaming machine that gained prominence in the late 1970s and mid-1980s. Games like Pac Man (400K units sold) and Space Invaders (360K units sold) are some of the most popular games that still cherish our elders with their childhood memories.
Video Game Console (the Mid 1970s)
Video game consoles represent a specific type of home computer for playing video games built with the underlying objective to be an inexpensive product that is open to the general public. They came to prominence in the 1970s and games like Magnavox Odyssey and Atari 2600 sold about 350K and 30M units respectively.
Online games (the Mid 1980s)
With the availability of high-speed internet to users around the globe, the online gaming industry utilised this opportunity to bring about a paradigm shift in the gaming space. Online gaming drastically transformed the gaming experience of the users by allowing people to play and connect together, therefore revolutionising the gaming culture.
With 4.66 billion active internet users as of October 2020 (59 per cent of the global population) having access to the internet, revenue is forecasted to grow at 8.2% CAGR during 2020-2025 and reach a milestone of $31.3 Mn.
Gaming on blockchain
The emergence of the first peer to peer electronic cash (Bitcoin) Blockchain technology began the era of disruption. The characteristic traits of Blockchain – speed, trust, transparency and decentralisation has solved the problems faced by online gaming.
The primary use of blockchain in the gaming industry, is, in a word, Liquidity. Implementation of Blockchain brings in value to the game as these intangible virtual in-game assets do not hold any monetary value outside the game. The success of Epic Games’ Fortnite could be a premonition of blockchain’s success with gaming.
Fortnite earned $2.4 billion in 2018, making it the highest-grossing game in history. Free-to-play games, in general, made up 80% of all global gaming revenue in 2018; on consoles, free-to-play titles clocked 458% more in 2018 than in 2017.
Other than asset tokenization, blockchain could potentially solve a number of related problems: eliminating fraudulent items, creating scarcity, and incentivizing more purchases by making items transferable across games.
According to a survey by Worldwide Asset eXchange (WAX), a blockchain platform focused on virtual items, 62% of gamers would be more likely to invest in digital assets if they were transferable between games; 84% of developers would create in-game items for the same reasons.
If games like Fortnite adopts blockchain, then undeniably, gaming will be the tipping point for mass adoption of blockchain. The market value of in-game virtual assets is forecasted to be around $189.76 billion by 2025 as per Digitalconqurer. Till Mar 25, 2021, assets worth $532.9 M has been transacted as reported by Nonfungible.com.
Market Capitalisation of the gaming sector stands at $7.43 Bn and the 24 Hr volume of the sector is ~$2.57 Bn and currently, the dominance of the gaming sector in the crypto ecosystem is merely 0.46%.
Thus, there presents a huge opportunity for the gaming projects that are operating on blockchain to revolutionise the gaming industry and it will also open the revenue source for the users as now they can sell their in-game earned assets.
As the evolution of NFT has helped Gaming industries to monetize in-game assets, NFT has acted like a propeller for the gaming ecosystem developing the use case of earning while playing.
Top 10 Gaming Projects on Blockchain(As of Mar 25, 2020)
Enjin Coin has established itself as the top blockchain gaming platform in terms of market capitalisation ($1.8 B), followed by Decentraland ($1.3 B). As the sector’s market capitalisation is worth $7.43 B, it corresponds to a minuscule 0.46% of the global market capitalisation of the cryptocurrencies as of writing the report.
This depicts that there is an enormous growth potential that could be tapped and the chunk captured by the cryptocurrency gaming projects in terms of market share could drastically increase in the foreseeable future.
With the development of scalable blockchain solutions and linking the gaming assets with the DeFi ecosystem, it allows the gamers to value their time and effort deployed in the game and be rewarded for it.
As per the above chart, we can conclude that The Sandbox is the best contender to rally to new highs as it enjoys the 24 Hr Volume/ Market Cap ratio of 0.6 followed by Enjin Coin and Decentraland. The ratio suggests that the 24 Hr Volumes of The Sandbox is ~62% of its market capitalization. The bullish move supported by high volumes depicts the price may continue to move to new highs.
The graph below depicts the returns offered by the top Gaming Coins in terms of market capitalisation over a period of the last 7 days and 30 days. Enjin Coin has yielded more than 2x returns in the past 30 days followed by Decentraland.
This humongous growth can be understood as the kickstart of the blockchain gaming ecosystem. With its market cap being less than 0.5% of the total market cap, blockchain has all the traits to magnetise the traditional game developers to build on them while allowing the users to freely trade their assets and earn money.
Funding raised by Gaming dApps
As mentioned above, venture capitalists like Animoca Brands, ConsenSys, Hashed and Boost VC have shown interest in the Blockchain gaming ventures. The influx of money being poured into the blockchain gaming space by these big names quantifies the future market opportunity and presents the potential to transform the whole gaming landscape of the contemporary world. The above-listed projects have been successful in raising funds worth ~$92 Mn.
Gaming Projects with Most Activity
Axie Infinity (a marketplace to buy, sell, and trade Axies) has witnessed the most activity garnering 7d volumes of $1.5 M while its all-time volumes (~$14.7 M) is the highest among all the decentralised gaming assets In the past 7 days, Axie Infinity has also accomplished sales of 5155 assets which cumulates to ~307K all-time sales at the time of writing.
Crypto Gaming Projects Leaving their Footprints
Vulcan Forged is an NFT gaming studio featuring its dApp platform to help the developers realise their ideas to life. It presents itself as a user-centric platform with 10+ games live to date and offers a unique proposition wherein NFT can be minted without any gas fees. The platform has a trading volume worth $6 Mn and has also amassed the support of 12K+ users.
The Private Sale of its native token, PYR was 8x oversubscribed and is going to hit the grounds at Uniswap on April 5 with an initial Mcap of $8 Mn.
Axie Infinity is a Pokemon inspired NFT game currently operating on the Ethereum blockchain. It offers a gaming experience to the community wherein the players collect, battle, breed, raise, and trade their digital pets known as ‘Axies’. Each Axie being an NFT collectible is unique and therefore derives inherent value based on their scarcity and unique characteristics.
CryptoMotors, a digital automaker powered by the Ethereum blockchain allows users to create 3D digital vehicles. As the designers are only able to produce digital vehicles, this prevents any scalability issue on the Ethereum blockchain. These NFTs derive their value by hours of professional design work.
Alien Worlds, a decentralized finance metaverse is the second-largest NFT blockchain game in the world with over 4K unique users per hour. It has recently raised $2 Million in a private sale of its utility token, Trillium (TLM). In the game, planets serve as DAOs wherein they receive Trillium, its distribution is decided by the governors. The land is being sold as NFT. The planets host only 3,343 Land NFTs making it a scarce asset.
In the past 30 days, $93.08 M worth of transactions has been conducted by 43.5 K users. This refined to ~$213 was transacted by every user on average.
Sorare, a fantasy game of soccer, built on Ethereum blockchain allows players to buy, sell, trade, and manage a virtual team with digital player cards (each card being an NFT). Players compose teams of five soccer players. Teams are ranked based on the performance of the players in the live matches.
In the past 30 days, Sorare served 6.1 K unique users and has handled 127.3 K worth of transactions.
Games have been an integral part of human life as it is a source of entertainment and allows people to relax from their daily routines. For some, the world it creates serves as a platform allowing people to fulfil their fantasy or dreams which they wanted to achieve in their life but could realise them. Eg- Modern games like PubG intrigues people who once wanted to join the army, allows them to live their dreams to kill their opponents using highly modernised guns.
With the conglomeration of NFT, Gaming, leveraging the blockchain technology to store the unique digital identity of NFTs, these assets being the Only One present in the world have garnered them the status of Rarest of Rare.
For the gaming industry, NFTs have unlocked the unrealised potential as their properties prevent digital assets from being altered and allow gamers to trade these digital assets developing a virtual gaming economy.
The below chart depicts the inflow of users and volumes on gaming Dapps. If we analyse the data for the trailing 6 months, (Sep 26, 2020- March 24, 2021), volumes started rising while the users too increased steadily.
With the Beeple’s NFT Everydays- The First 5000 days sold out for a staggering ~$69 Mn, it made NFT the hottest trend. As a result, gaming platforms such as Axie Infinity and Decentraland offering NFT in their games rose to all-time highs. At the time of writing, the volumes are quoting worth $786.6 K and the users have also more than doubled in the past 6 months.
The Blockchain Gaming ecosystem is poised to reach new heights and is currently in its infant stage. With the development of scalable blockchains and rising crypto adoption across the globe, gaming projects may soon be the upcoming Decacorn.
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