A Glimpse Into The Future Of Gaming


mikkelwilliam

One question that continues to pop up during the crypto bear market is “How will the next 100 million new crypto users be onboarded?” In our view, crypto gaming answers this question.

In a crypto bear market that has seen trillions in digital assets valuations disappear, crypto gaming continues to attract significant early-stage funding. Depending on the report, blockchain gaming raised anywhere from $874 million to $4 billion in 2021.1 As a percentage of funds raised in the crypto ecosystem, gaming has taken a considerable market share in 2022. It seems many early-stage investors agree with the thesis that the next 100 million new crypto users will be onboarded to crypto via leisure activities like gaming.

Considering the broader landscape of crypto segments (including DeFi, Infrastructure, Payments), we believe that gaming may present the path of least resistance for two main reasons:

  1. The total addressable market (TAM) in traditional gaming is massive. According to Newzoo, nearly 3.2 billion people in the world will play a form of digital games in 2022.
  2. Gaming is a digitally-native activity, and in-game items (aka digital assets) are already being bought and used by hundreds of millions of gamers around the world.

Even among crypto-focused analysts and thought leaders, gaming can sometimes be dismissed. At a recent crypto event, the author used Fortnite as an example to argue how a traditional game could onboard millions of new crypto users by launching an NFT. To our surprise, we were told Fortnite was “too niche” of a platform to pull it off. We believe this is flawed logic, and want to reiterate that in many ways, gaming represents a ready-made platform to onboard the next generation of crypto users and advocates.

All it would take is one of the below games offering an NFT package as a one-off digital item to get millions of users to create their first crypto wallet.

“Niche” Traditional Video Game Average Monthly Players
Game Average Monthly Users
Fortnite 253,565,010
Roblox 203,856,011
Garena Free Fire 190,522,602
Call of Duty Mobile 56,750,114
Grand Theft Auto V 16,897,566

Source: activeplayer.io as of 9/30/2022.

An Introduction to Crypto Games: The Landscape Today

The crypto game narrative has been heavy on hype and light on delivery. One of the sector’s first mainstream success stories, Axie Infinity, suffered a 620 million-dollar hack in March of 2022, which led to a mass exodus of users and a roughly 85% decline in the game’s token AXS. Popular “move-to-earn” game STEPN’s GMT token is down 85% from its peak as the game lost half the number of users since this summer. Without sustainable fun and a compelling “sink” for in-game tokens (discounts on real products or use in DeFi), most have failed to find sustainable product market fit.

Just like traditional gaming, crypto gaming is filled with a variety of games. These include auto-battlers, card-based, idle, move-to-earn, first-person shooters, role-playing, arcade, MOBA, and mobile, which is comprised of its own mini-universe of game types.

Below is a selection of the top games according to unique active wallets and a breakdown of the gaming universe by category.

Top Played On-Chain Games (Last 30 Days)
Game Blockchain Genre Description 30-day Unique ActiveWallets (thousands)
Alien Worlds Wax Mining/TCG Mine $TRILIUM and stake it to Planet DAOs or acquire cards for missions/battling. 608.91
Sweat Near Move-2-Earn Get rewarded with $SWEAT for every step you walk. Users can redeem $SWEAT for in-app deals or swap for other tokens. 643.54
Benji Bananas Polygon Mobile Casual Swing throughout the jungle collecting bananas to pass the level & earn $PRIMATE. 418.11
Trickshot Blitz Flow Mobile Casual Play 8-ball pool and earn $RLY tokens when you win. 335.41
Splinterlands Hive Collectible TCG Collect various cards and defeat opponents in an auto-battler format. 331.43

Source: DappRadar as of 10/19/2022.

Weekly Users by Genre

Weekly Users by Genre

DappRadar, Dune as of 9/30/2022.

We see a few key takeaways when examining the most popular current games and categories as they stand today:

Mobile is the largest segment, just like in traditional gaming. Mobile gaming has grown to be a massive category for traditional gaming and has generated the majority of growth in revenues over the past few years. It is encouraging to see crypto gaming leaning into the same high-growth distribution platform that has served traditional gaming well. Casual mobile games, in particular, have helped to bring non-gamers into the fold, and convert them into paying customers.

On-chain dynamics create opportunities for new types of games. Move-to-earn, in particular, represents a completely new form of gaming that rewards players who participate in activities like walking or exercising. While video game-based exercise games have existed for years, on-chain games actually pay users crypto tokens, which incentivizes new users to start and continue playing.

Category gaps exist between traditional and crypto games, creating white space for growth. First-person shooters, open-world RPGs, and sports games are some of the top categories of traditional gaming, which are not currently represented in the top crypto games or categories. This indicates that the crypto gaming industry has the opportunity to grow into these very popular categories and potentially steal market share from the traditional gaming industry from the hundreds of millions of gamers who are already playing these types of games.

EV.io: A Hybrid Gaming Model

We think that a hybrid gaming model that prioritizes gameplay first, with crypto as a secondary feature, could lead to a massive onboarding of new crypto users. EV.io is a Solana (SOL-USD) NFT-enabled game developed by a small team operating under publicly-traded Enthusiast Gaming. EV.io exemplifies this “game first, crypto second” approach to gaming by incorporating NFTs as a secondary feature on top of a fun, playable game. Unlike the crypto games listed above, EV.io is not played on-chain, meaning that the majority of gameplay is not logged on a blockchain. While certain EV.io NFTs do provide utility in the form of earned crypto, the game stands on its own without crypto integration. Because EV.io is not completely on-chain, it does not show up as a game on popular crypto data platforms like DappRadar. According to similarweb.com, EV.io boasts approximately 619,000 visitors per month, with over 400,000 registered users and 6,366 NFTs. While not an apples-to-apples comparison with unique active wallets, it’s clear that a large number of people are actively playing the game.

What Makes EV.io Unique?

Accessibility. EV.io is a browser-based game, meaning there is no installation required to play. According to its developer team, EV.io was designed to play on any computer, meaning it will work even if the gamer is playing “on a 10-year-old Chromebook.” This allows gamers who don’t have an Xbox, PlayStation, or gaming PC to play as long as they have an internet connection. This lower cost of entry echoes the success of the mobile gaming market, which allows anyone with a cheap smartphone to play games, effectively broadening the total available market to the majority of the world.

Accessibility also refers to the characteristics of the accompanying NFT ecosystem. Unlike some crypto games which have a prohibitively high cost of entry, NFTs are not required to play EV.io. If a gamer plays EV.io and wants to purchase a skin or weapon on EV.io, they can mint an NFT or buy one on a secondary marketplace. Crucially, these NFTs have much lower price floors, meaning gamers can purchase an NFT for roughly the same price as a new AAA-game ($60 USD).

Fun to play. For anyone familiar with classic games like Halo and Call of Duty, EV.io is immediately playable and fun. The VanEck team recognized the familiar mechanics of a well-designed first-person shooter after booting up EV.io for the first time. The game reminds us of our glory days in college, staying up until 4 am playing Halo in the dorm room.

Crypto mechanics are secondary to gameplay. EV.io was originally launched without NFT capabilities on the classic flash-game website addictinggames.com. It is first and foremost a standalone game in which developers have then incorporated NFT and blockchain (P2E) mechanics. This is a key differentiator between the majority of crypto games that are on the market. To play most of these other games, first, the gamer has to fund an NFT wallet, buy the NFTs required to play, and then actually play the game. This forced march is prohibitive to growth in a gaming environment. Gamers are leery of developers looking to further divide up content into smaller and smaller ‘micro-transactions.’ As we’ve discussed before, NFTs and crypto can be considered bad words within the traditional gaming community, and many prominent gamers and influencers are decidedly anti-crypto.

Revenue Model, Rewards, and Growth Strategy

EV.io generates revenue by selling ad space within the actual game to companies who want to target the EV.io demographic. Brands have been using in-game advertisements to reach certain demographics for years, and this strategy continues to attract brands and organizations looking to extend their reach. Advertising revenues fund the game’s ongoing maintenance, marketing, and development, in addition to funding the rewards pool for NFT holders.

Owners of certain utility NFTs can earn “e” by owning an EV.io NFT and completing specific in-game tasks. A gamer’s “e” can then be converted to Solana. Gamers are incentivized, but not required, to own an NFT to fully participate in the game.

In contrast to some of the more popular crypto games available, EV.io does not lean on earnings potential or investing as a main way to attract new players. The top EV.io player has earned the $USD equivalent of roughly $629,2 but some of the top players are earning more by competing in various tournaments. According to EV.io, over $100,000 in prize money has been paid through P2E and tournaments in 2022.

This leads us to the project’s growth strategy going forward. Esports is a major part of the game’s plan for discovering new players. The game’s parent company, Enthusiast Gaming (EGLX), also owns Luminosity Gaming, an esports and entertainment platform. EV.io’s connection with Luminosity Gaming creates natural synergies, including leveraging some of Luminosity’s popular influencers to advertise the game on their streams. EV.io’s first esports tournament with Fractal had 240,000 views on Twitch,3 indicating the potential for a captive audience on the largest streaming platform.

Closing Thoughts

We believe that crypto gaming has the potential to onboard millions of new crypto participants. Traditional gaming is a multi-billion dollar global industry, supported by billions of players from around the world. Despite its potential for massive global adoption, we see shortcomings in the current offerings that new crypto games (like EV.io) are addressing directly. By providing an accessible, fun game that prioritizes gameplay over crypto mechanics, we believe that EV.io is forging a new, unique path that could potentially lead to growth within the crypto gaming segment.

Important Disclosures

Sources:

1 Cointelegraph, Blockworks.

2 EV.io as of 9/30/22.

3 EV.io.

Please note that VanEck may offer investments products that invest in the asset class(es) or industries included in this blog.

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts, and other forward-looking statements, which do not reflect actual results, are valid as of the date of this communication, and subject to change without notice. Information provided by third-party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third-party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.

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Original Post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.



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