Is it game over for GameFi? Of late, this question may be top of mind among the crypto and blockchain community, given the dismal performance of play-to-earn (P2E) games. Having once captured the imagination of developers and gamers alike, by rewarding players with NFTs or game tokens which could be exchanged for cash, the P2E model appears to be in decline in recent months. 

Player numbers for once-popular play-to-earn games such as Axie Infinity, Decentraland and The Sandbox have plummeted by nearly 96% from November last year, according to a report by Arcane Research. Axie Infinity’s monthly active players plunged 72% from 2.7 million in January to 766,800 in July. The value of its in-game token, Smooth Love Potion (SLP), is down nearly 97% from its peak last May to $0.004989.

Similarly, move-to-earn game StepN, which rewards players with tokens when they run or walk outdoors, has seen its player numbers fall 75% since May to 170,000. Its GMT token has crashed nearly 80% to $0.90.

Reasons behind decline

A confluence of factors could be to blame for GameFi’s weak showing. While Arcane Research notes that the general crypto market sentiment and waning interest in metaverse and NFTs undoubtedly contributed to the downward spiral, it attributed the steep fall in active users to an unsustainable business model that overemphasized awards. Other developments that further impacted user confidence included a $600 million hack that affected Axie Infinity in March, and the more recent Solana hack that drained more than 8,000 wallets.

Shift to ‘Play-and-earn’

One way to restore GameFi’s shine may be for its business model to evolve to better address market needs – a shift to the play-and-earn model, which goes back to the basics by prioritizing gaming over earnings. This addresses the aforementioned Achilles heel of P2E, which relied too much on awards to its detriment when in-game token prices crashed.

The developers behind Axie Infinity have caught on to this trend by releasing a new version of the game called Origin, which highlights the gaming experience over in-game tokens. While this appears to have reversed the trend of decline, with new monthly accounts up from 4,030 in June to 5,387 in July, the jury is still out on whether this is a winning formula in the long run.

UniX Gaming is also embracing the play-and-earn model by introducing games that foster a community of gamers. As its Founder and CEO Mirko Basil told Blockworks: “In gaming and in crypto, the most important focus is community. The greatest feats of both industries are creating attractive and impactful communities.”

Gateway to metaverse

The next frontier for GameFi’s development appears to be the metaverse, which is fundamentally about the gamification of social interaction. With the growing number of virtual worlds that host games, there is a corresponding risk of increased fragmentation unless we find a way to unify the metaverse, to make it as seamless as the Internet. Imagine a metaverse where you cannot move freely and easily between different virtual worlds – such as games represented by The Sandbox and Decentraland – and the drawbacks become clear.          

In the Web3 era when people own their digital identity, users will want to unlock new experiences, access exclusive networks, or monetize digital creations. This is why a unified metaverse is key to fulfilling this vision. With its immense global user base and using blockchain technology, GameFi can not only unify but also grow the metaverse by promoting interoperability.

Regardless of the scenario or ecosystem, Huobi has always defined a successful project as one that can continuously produce applications with an excellent user experience and economic model, while building applications from a long-term life cycle point of view. From this perspective, it’s certainly “game on” for GameFi as it gets back on track to seek a reversal of its fortunes.

Photo by Sean Do on Unsplash

Disclaimer

This communication has been prepared solely for informational or educational purposes only and it is subject to change. This communication should not be relied upon as the basis for making any investment decision or be construed as a recommendation to engage in any transaction or be construed as a recommendation of any investment strategy. This communication is not a personal recommendation and does not take into account whether any transaction is suitable for a particular person. The information contained in this communication is based on sources considered to be reliable, but not guaranteed, to be accurate and complete. Huobi Global is not responsible for any information obtained or derived from third party sources or statistical services. Any opinions or estimates expressed herein reflect the position as taken as of this date (or date of publication), and are subject to change without notice. 

Posted by Editor