How is GameFi Growth during the Bear Market?

Over recent years, blockchain gaming has gained massive popularity. It’s easy to speculate its growth based on sheer popularity on social media but looking at the numbers, the growth is quite significant. This industry’s growth is substantial primarily based on the growth of its users & blockchain games that turn up progressively.

Notably, blockchain gaming outperforms both the DeFi sector & NFT market since nearly 60% of all blockchain activity in Web 3.0 comes from gaming. Blockchain gaming has so far held its place in the Web 3.0 space.

Just this July 2022, the sector saw $857 million in transactions while also maintaining almost a million daily active users. Despite DeFi being the dominant sector initially last year, GameFi took over DeFi as far back as August 2021.

Source: Dappradar

It’s clear that GameFi is widely enjoyed by the Web 3.0 market. Blockchain gaming allows players to take characters & objects in the game and exchange them for fiat-denominated stablecoins on a decentralized exchange.

GameFi combines the fun of games with financial incentives to give players the option to earn while playing. It’s also important to note that although profit-driven mechanics can bring in an explosion of users, the long-term success of P2E games has been attributed to great gameplay as opposed to monetary incentives.

Historically, early games like Second Life & World of Warcraft (WOW) pioneered in-game currency & transaction of virtual items to the real world although in a much primitive form. However, CryptoKitties was the first big NFT game, conducting 3.2 million transactions with CryptoKitties smart contracts.

It was so successful that it overwhelmed the Ethereum network on multiple occasions and the highest price paid for a single CryptoKitty NFT was $1.34 million or more than 600 Ethereum. The bottom line is that data suggests that P2E gaming really took off in 2021 during the COVID-10 pandemic. Since people were forced to stay at home, P2E became a source of income for some, especially for users from developing countries.

How did GameFi users grow?

Starting off in the year 2021, decentralized Apps(Dapp) overall had significant growth. Unique Active Wallets (UAW) linked with Dapps reached a total of 2.7 million at the end of 2021. That’s roughly the country’s population of Puerto Rico. 2021 was also big for NFTs when they generated $23 billion in trading volume. The metaverse narrative went mainstream last year, with blockchain virtual worlds generating over $500 million in trading volume.

For P2E games, 2021 was the year of revolution. The sector saw a 50% UAW connected to blockchain games which meant half of Web3.0 user activity is with the GameFi sector.  As mentioned before, GameFi overturned DeFi as the dominant sector in August that year. The entire Web 3.0 industry was dominant in 2021.

Source: Dappradar

Binance Smart Chain(BSC) was one of the top drivers of the GameFi surge with games like Alien Worlds & Axie Infinity that were cemented as the top game options in July last year along with Crypto Blades. CryptoBlades became the most played in terms of UAW with its peak of 406,000 UAW last August.

When discussing user growth, it’s hard to ignore the contribution of the powerhouse P2E game Axie Infinity, especially on its impact on its users from the Philippines. Research shows that gamers in the Philippines were able to earn a monthly salary in 2020 by playing the game during the hardships of the COVID-19 pandemic. Axie’s AXS token price exploded in value last year donning an all-time high of $164.90 in November.

The game famously generated around 20,000 daily active users in March last year and one of Axie’s land plots sold for $2.3 million with the genesis land plots nearly $4 billion in total sales.

Source: Dappradar
Source: Coingecko

Splinterlands became the most-played game in 2021 with over 350,000 daily UAW based on on-chain activity. With the introduction of its main token, Splinterland’s player bases increased by 1,406% and transactions jumped by 448% reaching 1.65 million transactions in Q3. Similarly, Alien Worlds also had a surge in terms of users after the introduction of its token reaching 235,000 daily UAW.

The abrupt and massive surge of these games explains the overturn of GameFi as the dominant sector in the Web3.0 industry, overtaking DeFi within the year 2021. Additionally, factors such as the COVID-19 pandemic might play a part since people were mainly at home and thus were much more susceptible to playing mobile games.

Game Growth

There are 15 blockchains that have NFT games. The top 5 blockchains with the most NFT games are Binance Smart Chain (BSC), Ethereum, Polygon, Solana & WAX. The Binance Smart Chain (BSC) towers over other blockchains in terms of sheer numbers since  BSC accounts for 43.80% of total games per blockchain. After BSC, Ethereum goes on second with 492 games, making up 23.92% of all blockchain games. Polygon, Solana, WAX & Avalanche follow suit in that order.


In 2021, BSC became the driver of growth in the P2E sector with the huge hit of Axie Infinity alongside the top 5 blockchain games in that year. According to Cointelegraph research, Axie Infinity, Alien Worlds, DeFi kingdoms, Splinterlands & Bomb Crypto dominated the GameFi space in 2021. These games are similar in the sense that they provided a hype phase of initial rapid growth that follows a longer plateau of growth in terms of users & volume.

Source: Dappradar

Evidently, the number of blockchain games increased per blockchain. The growth of the number of games is interesting due to per year all blockchains more than double & triple their games, indicating that bullish sentiments were really pouring into the P2E industry.

Initially, in 2020, Ethereum was the leading blockchain games house but in 2021 Binance Smart Chain overturned Ethereum and till 2022 maintained its dominance as the top blockchain game provider.

Source: RMG

2022 Market volatility

We can see through data that along with the outstanding growth of Decentralized Apps, GameFi not only followed suit but rather dominated the sector with the combination of fun & earning mechanics. However, the first month of 2022 was not as friendly as the remaining months of 2021. 

The blockchain industry is facing its harshest challenge yet. The industry is facing its crypto winter with macroeconomic factors that involve a global pandemic & International political conflicts. Already established volatility was exacerbated amid the unfortunate events in the industry like the Terra incident that sent ripples through the industry that led to failings of CeFi protocols and large Venture Capitalist firms.

The Terra collapse sent shockwaves toward the entire ecosystem. UST, the third largest stablecoin at the time, was abruptly halted having lost its peg to the dollar which forced the Luna Foundation Guard (LFG) to regain its peg back. They were forced to sell 80,000 BTC which created sell pressure for Bitcoin to lose 23% days after the incident.

LUNA crashed by 99%. The Luna ecosystem left $40 billion along with numerous dapps left alone. After the event, fear enwrapped the markets & entire industry which led to other unfortunate circumstances. The incident also damaged DeFi’s reputation & the idea of stablecoins as an alternative form of finance to traditional ones.

Because of the Terra incident, CeFi platforms like Celsius were forced to pause customer withdrawals. Market fears caused users to withdraw their money but there the liquidity was not enough to accommodate the sheer number of withdrawals. BlockFi, Babel Finance, and Voyage along with other CeFi players also battled with liquidity challenges during the period of high volatility.

Investors & VC organizations like 3AC & Hashed lost billions in Terra assets. Hashed lost around $3.5 billion while 3AC’s $560 million buy was reduced to a mere $700. VCs were over-leveraged and over-exposed. This reduced DeFi’s TVL back to levels of early 2021 despite already being in Q2 of 2022.

GameFi growth during economic hardship

The collapse of the Terra ecosystem led to the tumbling of miserable events across the Web 3.0 industry. But out of the entire industry, Blockchain games have endured harsh market conditions so far. Dappradar indicated the total UAW activity dipped throughout gaming, DeFi & NFTS but gaming only dipped by 7% compared to DeF’s 17% and NFT’s 24%.

When compared to Q2 of 2021, blockchain gaming activity has rather increased by 232% despite indications of slowing down due to market volatility.

As per average UAW, Wax blockchain became the most prominent in the quarter with 393,933 average UAW. Solana continued to grow this quarter by 612%. It’s also important to note how almost all experienced a similar dip at the end of Q1 with Wax blockchain soaring off the dip. 

Source: Dappradar

Investments in the Industry are also doing well with $2.5 billion invested this quarter.

The forecast for this year’s total investments increased to 12 billion. Venture funds such as A16 Investments also announced a $4.5 Billion crypto fund which is a series of investments raised to promote the growth of the Web 3.0 industry.

Though resilient, the year hasn’t been exactly smooth sailing for blockchain gaming. Binance Smart Chain (BSC), although has been a dominant force in blockchain gaming, lost 32% of its userbase last quarter. Several GameFi & Metaverse tokens also plummeted. Axie experienced a 90% price reduction and Decentralized & Sandbox tokens experienced an 83% reduction in their value. The drop in price of many native game tokens also negatively affected the price of various in-game NFT assets.

Source: Dappradar

Overall, despite the ups and downs so far with GameFi, the data suggests bullishness moving forward in the Industry. Investments are still going steady and despite negative sentiments that persist, positive sentiment is growing among users.

Additionally, developers like Blizzard & Activision are looking to transition to the Web 3.0 industry and with companies like Epic Games diving deeper into the space, innovation is still waiting to happen in gaming. 

But more importantly, the resiliency of GameFi suggests or re-affirms the idea that blockchain games are more than the appeal of monetary rewards, but rather they provide an appeal far beyond just money. They tap into the innate human nature’s desire for play and fun which could be the reason why despite profitability being down, gameplay & enjoyment keeps users glued to the blockchain industry.

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