Aug 2022#GameFi#MarketResearch

Outlook Analysis GameFi industryJune - July 2022

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Authors

Ksenia Alikova

Ksenia Alikova

Market Researcher & Analyst

Marat Gizatullin

Marat Gizatullin

Market Researcher & Analyst

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Key Findings

  1. The GameFi market is growingBoth the number of implemented projects and the number of active players are increasing. The active growth phase should continue for at least three years.
  2. Multi-blockchains and cross-platform are the key trends in the development of the sector at the present time. Developers are trying to release GameFi projects simultaneously on several blockchains and platforms in order to reach a larger number of users. It is likely that the rapid spread of projects by traditional companies will lead to an increase in the number of games that require relatively higher computing power.
  3. RPG is the most common genre among users. At the same time, users of games of other genres - strategy and casual - have a particular demeanor: they make fewer transactions, as they are focused on the long term. Games in these genres have high potential.
  4. Revenue factor and conversionPlatforms — desktop, browser, mobile and others — attract different numbers of users, which is why they are a factor influencing the size of capitalization and the number of wallets. Implementation of projects on new platforms can expand the capabilities of existing projects.

Gaming Industry: A Brief Overview

The gaming industry has been growing continuously for many years: industry researchers estimate the size of the entire gaming industry from $175–200 billion 1) to a whopping $300–335 billion 3) at the end of 2021.

One of the reasons for the increase in the size of the gaming sector is the growth in the number of players, annually updating historical highs: from 2015 to 2021 the number of active players increased by more than 45% and reached 3 billion ( 5). The bar chart below shows that by 2024, new players are expected to grow by 100-130 million people annually.

Dynamics of the number of active players worldwide from 2015-2024 Source: Statista.

The latest trends and facts

  • Mobile gaming is the most popular form of gaming in the world today, ahead of PC and console gaming ( 12). According to the analytical portal Statista, the annual revenue growth rate of the mobile games segment will be 8.74% in the next four years ( ).

Mobile games revenue dynamics from 2017–2026 Source: Statista.

  • According to Unity Technologies, in-app purchase conversions from 2016-2020 increased by about 7.7%. At the same time, 3.3% of men and 4.5% of women who play games pay directly in the application ( ).
  • Africa and Asia are the main triggers for the growth of the gaming industry in the coming years ( 1). By 2026, the annual growth of the gaming market is expected to be 13.88% in the Middle East, 12% in Africa and 8.5% in Southeast Asia ( 91011 ).

Leading regions in terms of the future growth of the gaming market.

  • The GameFi market has the potential to grow more than 100% ( ) due to the expansion of the traditional games market from 7% to 15% ( 12371213 ).

Analysis of Games by Genre: Statistics and Perspectives

From $3-10 billion - the total volume of trade of GameFi projects in April 2022. The total market capitalization of the entire market exceeded $55 billion and continues to grow. DappRadar expects investment in blockchain games to grow by 150% or more this year compared to last year as the industry raised over $2.5 billion in the first three months of 2022 ( 14 ).

This forecast may seem overstated, but it is based on a significant increase in attention to the GameFi sector not only from representatives of the crypto industry but also from classic gaming companies such as WeMade and Atari ( 15 ).

The key growth factor for the GameFi sector is the increase in the number of active players. According to statistics, the average daily number of users is 1.2 million, and at the peak of growth in December 2021, it exceeded the value of 1.3 million. Despite a short-term decrease, a gradual increase in the user base was observed in the first quarter of 2022 ( 14 ).

Dynamics of user activity and transaction volumes from November 2021 to May 2022. Source: dappradar .

Introducing quality innovations — modifying the NFT and Web3 mechanics — and attracting additional investment can be an important driver of userbase growth, even though the number of players in GameFi currently lags far behind traditional games ( 8 ). Many influencers also point to the high growth potential of the user base. Thus, one of the founders of YGG and the founders of Oasys predicts an increase in the user base by more than 7 times ( 16 ).

To date, the market capitalization of the three most successful projects - Axie Infinity, The Sandbox, and Decentraland - has crossed the $3 billion mark.

Top 10 games by market capitalization (as of early June 2022). Source: Chain Play .

One of the factors behind the growing user base is that GameFi titles are represented in a huge number of genres. The top 3 genres by the number of games sold include RPG, Action, and Strategy.

Statistics on traffic, the number of games sold and the total turnover among GameFi projects. Source: ChainPlay and DappRadar.

Explanation: small genres are grouped. Traffic is the total number of wallets interacting with the project contract on the blockchain. Projects - the number of games within the same genre.

High genre diversification does not guarantee uniform financial returns in every genre. At the moment, the largest number of users and the amount of money are associated with RPG projects. The number of players in the Strategy genre is significantly smaller, but this does not prevent these projects from attracting a comparable amount of money turnover.

Distribution of the total number of registered wallets and turnover by genre based on 1845 GameFi projects. Source: ChainPlay and Dappradar.

An analysis of on-chain metrics from a large number of GameFi projects leads to the following conclusion: the more in-game transactions per user per day, the smaller the average size of each transaction.

The figure above also shows that there are projects that, although they show a significantly lower amount of total turnover, have a significantly higher value of transactions (in monetary terms) per wallet: for example, games in the Move To Earn genre.

The number of daily transactions is another criterion for ranking GameFi projects. The highest number of transactions per player per day is observed in the following genres: Card Game, Collectible, AR, Metaverse, PVP and Action. The smallest is in Move to earn, Strategy and Casual.

On average, $4 transactions go through one wallet of a player in the Strategy genre per day, with a relatively low number of transactions. One reason may be that users are looking for long-term solutions and do not speculate to the extent seen in other genres with higher transaction rates.

The distribution of game genres by the number of transactions and the turnover of funds passing through one wallet based on 1845 GameFi projects Source: ChainPlay and Dappradar .

Features of the distribution of games by genre presented above in Fig. 6 are largely due to the modern specifics of games and the requirements for their development. For example, strategy, card and casual games do not require significant investments in graphics and engines. In the future, the situation may change dramatically due to the emergence of new projects that will bring new competitive features. The drivers of change could be the games created by the classics that will hit the market soon.

At this stage, the majority of users of GameFi projects use browser and mobile platforms, while more advanced platforms that allow the use of a much larger amount of computing power are not in high demand and act as additional supporting resources.

Distribution of implemented GameFi projects by type of platforms used based on 1005 games. Source: Chainplay.

The figure above shows the distribution of GameFi projects by the type of platforms used. It is important to note that each project can be implemented simultaneously on several platforms, so the sum of the indicators can be more than 100%. Many games in the RPG, Action, Casual and Strategy genres are initially targeted at an audience that uses both browsers and mobile applications - more than 75% of users opened games using a browser.

Platform distribution of games of various genres based on 1845 GameFi projects. Source: ChainPlay and Dappradar.

Note that users of other projects — arcades and casual games — use desktop and mobile applications more often.

Distribution of the number of wallets of users of games of different genres by platforms based on 1845 GameFi projects. Source: ChainPlay and Dappradar.

Despite the fact that many games are presented on a large number of platforms, only some of them are the most popular among users. For example, the capitalization of projects in the Strategy and RPG genres is mainly formed by computer versions of games.

Distribution of capitalization of games of different genres by platforms based on 1845 GameFi projects. Source: ChainPlay and Dappradar.

Blockchain Analysis of GameFi Projects

The prevailing number of GameFi projects are implemented on the basis of one blockchain: more than 85% of games. The remaining 15% are multi-blockchain projects. The most popular blockchains are Ethereum (32%), BNB Chain (28%) and Polygon (6%).

Distribution of games by type of blockchain used based on 1845 GameFi projects. Source: ChainPlay and Dappradar.

The key trend is the growing popularity of GameFi projects that simultaneously use several blockchain contracts.

Dynamics of the number of wallets on different blockchains used by the project, based on 1845 GameFi projects. Source: ChainPlay and Dappradar.

Game turnover dynamics within the used blockchain based on 1845 GameFi projects. Source: ChainPlay and Dappradar.

The graph above clearly demonstrates that over the past 24 months, the turnover of games using multiple blockchains was not inferior in size to the turnover of projects on the BNB Chain blockchain.

Figure 16. Dynamics of game transaction values within the used blockchain based on 1845 GameFi projects. Source: ChainPlay and Dappradar.

A significant increase in the number of transactions through alternative blockchains indicates that players are actively looking for new ways to make payments. One reason for this behavior is the relatively low fees of these blockchains.

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