The GameFi Ecosystem
The current trend is moving from a focus on infrastructure to a focus on users, as mature infra allows for the development of vertical applications such as DeFi, GameFi, and SocialFi. The future of these industries is centered on acquiring and retaining users. GameFi, in particular, is a vast ecosystem that encompasses more than just games and studios, so it’s important to analyze the landscape from a user’s perspective to understand the user and value flow. The GameFi landscape can be divided into 8 sectors: User-end Aggregators, Games, Multi-games Platforms/Publishers, Liquidity/Financial Tools, Blockchain Solution Providers, Game Engine, Developers/Studios, and Chains. With this article we want to show you these 8 sectors and tell you what projects we are excited about.
An intriguing trend in the GameFi space is the migration or cloning of projects to new chains, similar to what happened in the DeFi space. Currently, BSC, ETH, Polygon, and Wax are dominating the GameFi landscape, with over 80% of on-chain games being deployed on these platforms.
However, there are also ambitious new entrants led by Immutable X. Immutable X exclusive games and Immutable X-based multi-chain games received roughly $300 million and over $600 million in funding, respectively. With these investments, Immutable X passed Solana and Polygon to become the most funded Layer-2 Web3 game ecosystem in 2022. Immutable X grew from five games to over 100 throughout the year. Polygon followed Immutable X as a close second with a combined $850 million in funding. Polygon’s multi-chain gaming collected almost $750 million — nearly $150 million more than Immutable X’s multi-chain equivalent. However, Polygon-exclusive games performed relatively poorly, collecting just over $150 million the entire year.
Before the invention of game engines, game developers had to reinvent the wheel repeatedly. Every game required writing code from scratch and manual code checking, which was time-consuming and limited the ability to test and run code. However, developers soon realized that much of the code and graphic materials could be reused, streamlining the development process and saving time. This led to the integration of necessary code and assets into a set of development tools, giving rise to game engines.
Nowadays, most games, whether Web2 or Web3, are built using Unity and Unreal engines. Just as Unreal Engine was created by Epic Games, Web3 game studios like MetaEngine and Webaverse are developing their own Web3 gaming engines that enable developers to code complex logic and interactive gameplay.
Blockchain Solution Providers
Developers and publishers must integrate blockchain technology into their games once the gameplay is ready. This includes choosing blockchain partners, embeddable wallets, NFT minting, marketplace, compliant solutions, and token economy management services. The demand for this is increasing as players and their interests grow. However, traditional game companies often lack knowledge of blockchain, making integration difficult.
Solution providers can be divided into 8 subsectors based on their services:
- One-stop service providers offer a complete tech stack for blockchain integration, like Stardust.
- Web 3 integrated SDKs provide gaming-specific development frameworks and tools, like Alchemy.
- Studios’ SDKs are services offered by game studios, such as Gala Games, aimed at helping games go to market.
- System Simulation is used for Web 3 game design to ensure a healthy game economy, as seen with Almanak.
- Authentication providers like Unipass streamline blockchain adoption for mainstream players.
- Data API providers build real-time user data databases e.g. datawisp.
- Alchemy Pay an on/off ramp allow for buying and selling crypto in the game.
- Marketing/consulting services offer tokenomics design and branding support.
Developers / Studios
The core team behind games. Dapper Labs, who are named one of 50 world’s most innovative companies and #1 gaming company of 2022 are developing NBA Top Shot. InfiniGods was founded by Web2 and game industry veterans with the goal of leveraging the best of blockchain technologies to provide gamers opportunities to play, earn, and own. They have over 50 years of combined experience in building, scaling, and sustaining games across many different platforms to millions of users.
Multi-Games Platforms / Publishers
These publishers offering various genre games for players. Gala, Sandbox, and TreasureDAO are among the top players in this field.
TreasureDAO is creating a decentralized gaming console and publishing platform, ranked as the #1 gaming and NFT ecosystem on Arbitrum, with a community of 100K+ engaged players. Such a platform can provide the necessary infrastructure and environment to cater to independent developers and form a consistent economy through player activities, regardless of the short life cycles of individual games. This enhances the resilience of the ecosystem.
Liquidity / Financial Tools
Financial tools encompass lending, rental, investment derivatives, guild services, marketplaces, and more. Most of these services are still in their infancy, as each game has its own individual financial loop and the demand is unclear. For instance, building a rental protocol is simpler than a lending protocol, yet its demand is uncertain because:
- Big game studios are developing rental systems independently, making it easier to code, while small games have a shorter lifespan and a lower user base, making it challenging to support the demand for rentals;
- In-game NFTs are becoming cheaper as many games aim to lower barriers for mainstream users;
- Rental protocols typically use escrow accounts to rent NFTs, requiring approval and recognition by the games, which adds extra difficulty to this type of business.
reNFT is one of the first rental protocols, mainly offering white-label rental infrastructure for guilds and games. But with limited rental volume and around 600 total rental transactions of NFTs that are not related to GameFi.
Current crypto games can be categorized into 5 main genres, including RPG, Strategy, Simulation, Action, and Sports, with 11 subcategories in total. The following are some examples and explanations of each genre:
- RPG: This category includes MMORPG and Team Battle games. Bigtime, for instance, is one of the first Web 3 MMORPGs, where players work together to complete missions and earn NFTs and tokens. It has the largest Web 3 player community with over 400K members on Discord.
- Strategy: This includes games such as Card & Board & Autobattler, RTS & Tower Defense, Grand & 4X, DeFi & Gambling. Illuvium is a leading GameFi project that aims to release a series of interconnected games. It features open-world RPG with auto-battler combat mechanics.
- Simulation: This genre covers Farming, Space & Sci-fi, Life & Hypercasual & Casino games. Castaways is a popular fishing game where players drift on the sea to collect resources, fish, and survive on islands. It has gained a lot of popularity with over 70K daily active accounts.
- Action: This includes Shooter and Fighting & Other action games. Ev.io is a popular FPS game with 1.3 million visitors in April 2022 (averaging 550K in recent quarter).
- Sports: This genre includes games like MixMob: Racer 1, which is a unique card-battle racing game developed by experienced gaming veterans from FIFA, Halo, Battlefield, and more.
Ranking from financially driven to fun driven, there are three main types of GameFi users, excluding spectators:
- Web 3 users (Crypto-native users)
- Web 3 players (Crypto-native gamers)
- Web 2 users (Traditional gamers)
At present, the number of active unique addresses in Web 3 gaming is approximately 400K, which is still small compared to the 3 billion users in traditional gaming. To bring traditional gamers on board, user-end aggregators are crucial for providing a smooth experience. These aggregators can be categorized into eight types:
- P2E guilds/Scholarship — Led by YGG and its subDAOs, they have gained popularity due to the rise of Axie Infinity.
- Esports/Tournaments — Some guilds believe that the scholarship model may not be profitable in the future and are turning to building esports and tournaments for games. It’s still in the early stages in Web 3, but it’s mature and common in traditional gaming.
- Incubators — For example, Everyrealm incubates and develops gaming-related businesses, such as The Row, Fantasy Islands, Narcos: Metaverse, and Hometopia. It also operates Bedlam, an esports guild and tournament platform, and manages an investment portfolio with holdings in over 30 platforms and more than 4,000 in-game assets.
- Launchpad — A destination for players or investors to find and participate in games’ IGOs and INOs, acting as a one-stop-shop for game and metaverse discovery. Typically, players need to purchase NFTs to access the gameplay.
- Gamer Credential — A unified identity for Web 3 gamers to maintain their reputation across different games and experiences, promoting intense cross-game interactions and a high retention rate of true players.
- Content/Community — They bring gamers together and provide services such as content distribution, streaming services, KOLs or communities, education, and more.
We do believe, that not only gaming, but GameFi as a whole will play a big role this year. We hope, that we could give a good overview of the current GameFi ecosystem and present you some interesting projects within this vertical.
Who We Are
Moonrock Capital is a Blockchain Advisory and Investment Firm, incubating and accelerating early stage startups since 2019.
Disclaimer: None of the information contained here constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy.