Blockchains: Changing the Game - The state of blockchain games in 2021
The gaming industry has gone through three main models: pay-to-play, free-to-play, and play-to-earn. While the pay-to-play model has one advantage that is “ Pay just one time; keep playing forever”. 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.
The newest model, Play-to-earn or GameFi, is enabled by blockchain technology. 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.
- Global gaming
Gaming is one of the most popular sources of entertainment and it is only expanding. In the 2 years that the world was under lockdown due to Covid-19, people spent more time playing games, either they were long-time gamers or just started playing. 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.
In 2021, 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 expect the gaming industry to revert 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.
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.
- NFT markets
Non-fungible tokens (NFTs) act 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 for incentivization and innovation.
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.
In hindsight, August was the peak monthly activity in 2021 with over $4.5 billion in NFT secondary sales. 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.
- Blockchain games
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 when the same metric showed only 350K wallet interactions.
In 2021, 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.
A recent study of 157 developers in the United States and the 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.
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.
Since Decentraland’s ICO in August 2017, virtual worlds have long been discussed as a potential application within the metaverse. 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.
Crypto Exchange Binance to Invest $200 Million in Forbes
Binance, the world’s largest cryptocurrency exchange by trading volumes, is making a strategic investment in the 104-year old magazine Forbes to improve consumer understanding of cryptocurrencies and blockchain.
Forbes and Magnum Opus Acquisition Limited, a publicly-traded special purpose acquisition company (SPAC), officially announced Thursday securing a $200 million strategic investment from Binance.
Binance’s strategic investment will be through Binance’s assumption of subscription agreements representing $200 million of commitments in the $400 million private investment in public equity (PIPE) that was announced along with Forbes’ intention to go public.
Binance founder and CEO Changpeng Zhao emphasized the importance of supporting media in the crypto industry as part of the company’s commitment to boost consumer knowledge and adoption of crypto, stating:
“As Web3 and blockchain technologies move forward and the crypto market comes of age, we know that media is an essential element to build widespread consumer understanding and education. We look forward to bolstering Forbes’ digital initiatives, as they evolve into a next-level investment insights platform.”
Terra injects 450M UST into Anchor reserve days before protocol depletion
In a tweet published early Friday, Do Kwon, founder of Terraform Labs, the entity developing the Terra Luna (LUNA) and Terra USD (UST) stablecoin ecosystem, announced the injection of 450 million UST ($450 million) into the Anchor protocol's reserves. The proposal passed a vote by the Luna Foundation Guard on Feb.10. Anchor serves as the flagship savings protocol of the Terra ecosystem, offering users up to 20% interest per annum on their UST deposits, paid for by borrowers.
The protocol's reserves had recently dwindled to as low as $6.56 million as there wasn't enough borrowing demand to keep up with an influx of lenders. When such an imbalance occurs, the protocol must tap into its reserves to pay lenders the promised yield. From the beginning of December to late January, Anchor's reserve funds fell by about $35 million.
At the time of publication, this gap continues to widen. In the past few weeks, total deposited funds have increased by approximately $480 million, while the borrowed funds have increased by approximately $180 million. However, because Terra also stakes borrowers' collateral to earn yields, in addition to interest payments, to compensate lenders, the two numbers do not have to equate to reach equilibrium.
Ukraine Legalizes Bitcoin And Other Cryptocurrencies
The Government of Ukraine has passed a law that legalizes Bitcoin and other cryptocurrencies. The law, which was voted mostly in favor, grants legal status to virtual assets. Under the draft of this law, both Ukrainian and non-resident enterprises can offer crypto-related services under Ukrainian law. The term “virtual asset” (the “VA”) is used to cover any sort of crypto asset.
The Draft Law defines a VA as merely an asset that cannot be used as a payment instrument or traded for other assets, products, or services. Virtual assets are divided into two categories in the draught law: secured and unsecured virtual assets.
A secured VA is an asset that verifies property or non-property rights, such as the right of claim on other objects, and is secured by fiat currency, securities, or any sort of offline asset. Stable coins (such as USDT, BUSD, and others), liquidity provider tokens, and securities are examples of this sort of asset.
All other sorts of cryptocurrencies and crypto-based assets, such as non-stable coins (Bitcoin, Ethereum, and so on), non-fungible tokens, and so on, are classified as unsecured VAs.
The move to legalize cryptocurrencies by the Ukraine Government might be related to the tension between buildings along its border with Russia. Cryptocurrencies have played an important role in funding Ukraine’s war efforts along the border. Elliptic, a blockchain analytics business, revealed that Ukrainians are increasingly using cryptocurrency funds to counter Russian pressure. Bitcoin has become a popular alternative funding option, allowing international donors to avoid financial institutions that reject payments to these organizations.
Uncertainty of the USA economy and tension between Russia and Ukraine keep the crypto market sideways.
In recent weeks, Mr. Biden has made personal appeals in his speeches to families facing higher prices for food, gasoline, and cars. Mr. Biden warned that energy prices could increase if Russia invades Ukraine.
New York Fed President John Williams and other officials pushed back against the prospect that they would begin raising interest rates next month with a larger half-percentage-point increase in their benchmark rate. Mr. Williams and several of his colleagues have suggested the Fed could raise rates in more measured, quarter-point increments unless inflation doesn’t diminish later this year as forecasters expect.
Early this week, both cryptocurrency and stock markets jumped up as tensions at Ukraine’s border eased slightly after Russian President Vladimir Putin said Russia had decided “to partially pull back troops” from Ukraine’s border. After the news, BTC climbed almost 3.5% and ETH jumped 5.77%. BTC was traded at $44,547 on Feb 16. However, BTC fell by 14% to $38,263.05 over the weekend.
The tension between Russia and Ukraine continues as Russia will extend its military drills with Belarus. Mr. Putin and French President Emmanuel Macron said after speaking Sunday that they agreed to continue seeking a diplomatic solution. Sunday’s developments on the diplomatic front indicated that Mr. Putin could be willing to step back from the brink of war, at least in the immediate future.
However, some U.S. officials are concerned that the extension of Russian military exercises in Belarus doesn’t signal a delay of a possible attack on Ukraine, but rather offers Moscow leeway for a prolonged military campaign against Kyiv and other cities located near the border with Belarus.