BGA Blockchain Game Report Q2 2021

State of the Blockchain Game Sector

During the second quarter of 2021, blockchain-powered games have found a wider audience, driven by the success of gamified finance, the Wax blockchain, and Axie Infinity. The industry now offers more options for developers to launch their products on different blockchain platforms, as the multichain paradigm also slowly moves into the gaming space. Play-to-earn as a business model has gained attention within the industry itself, but also from the mainstream. Above all, consumers have the ability to interact with gaming dapps, without having to worry about transaction costs.

Contents

Key takeaways

• During the second quarter of 2021, the number of active wallets interacting with blockchain games increased 599% when compared to the previous quarter.
• Wax blockchain has become a market leader thanks to a quarterly increase of 1,082% to 306,707 daily active wallets interacting with blockchain games
• Axie Infinity packs the most value, transacting $124 million in NFT trading in June alone.  
• Alien Worlds, R-Planet and Upland see the most crypto wallets connected to their games per day. When combined these three games are good for 301,000 connected wallets per day. 
• $42,6 million invested in land NFTs across a variety of virtual worlds
• NFT collections like CryptoPunks, Meebits, VeeFriends and Bored Apes successfully create community, and were good for $380,7 million in trading volume. 
• Marketplaces that offer cheaper NFTs and don’t require any transaction costs, have seen an increase in NFT sales during Q2 2021.

Gaming audience has grown 7x 

At the end of March a little more than 51,000 daily active wallets connected with gaming-related smart contracts in the blockchain ecosystem. During the second quarter this number skyrocketed to 359,284 daily active wallets across all blockchains. That’s an increase of 599%. It’s important to note that we’re talking about wallets that interact with smart contracts on the blockchain. Depending on the game this would require many interactions per playing session or only a single one to claim rewards.

During the past three months, there has been a lot of attention for play-to-earn gaming. This bump in interest was driven by accessible NFT collecting and farming games on the Wax blockchain, and the battle game Axie Infinity.  Currently the daily active wallets for blockchain games is around 375,000 wallets per day.

Most of the gaming activity took place on the Wax blockchain, which saw it’s daily active wallets grow 1,082% quarter-over-quarter to 306,707. Thanks to the rise of gamified finance, or GameFi, Binance Smart Chain (BSC) saw its gaming-related daily active wallets increase 412% to 8,641 in June. In third place we have Ronin, the Ethereum-sidechain created for Axie Infinity, with 7,897 daily active wallets.

Even though transaction fees have dropped on Ethereum, the gaming segment isn’t gaining ground. Instead, developers look for other solutions that offer cheaper and faster transactions. That’s the reason Sky Mavis made their own Ronin sidechain for Axie Infinity, but that’s also one of the reasons why gaming on Wax blockchain has gained so much popularity. Making an account on Wax is as simple as connecting a social media account, creating a very accessible ecosystem. 

Despite its initial growth in the first quarter, Polygon hasn’t increased its stronghold in the gaming ecosystem. Compared with the first quarter, the gaming audience on Polygon only grew 2% in the second quarter. However, Polygon has been attracting a variety of projects, including Decentraland, Ember Sword, F1 Delta Time, and The Sandbox. As these projects integrate Polygon’s services, the second half of 2021 might paint a different picture. In July Polygon already announced their focus on gaming, by establishing Polygon Studios.

Value in gaming strong on Ronin

While Ethereum still holds the most total value locked (TVL) in the DeFi sector, the leading blockchain is being surpassed when it comes to value in gaming. As soon as Axie Infinity moved their entire economy to the Ronin sidechain, NFT trading generated an incredible amount of value. In June 2021 we’re talking about $124,2 million, against $16 million for gaming NFTs on Ethereum. 

Over the entire quarter, the migration to Ronin started during the last days of April, Axie Infinity generated more than $162 million in NFT trading volume. The entire Ethereum gaming ecosystem combined, without Axie Infinity, was good for $64,4 million in NFT trading volume. 

Ronin is the only blockchain solution with more NFT trading volume than Ethereum in the gaming segment. In the second quarter Wax recorded $26,6 million in trading volume, while Polygon stayed behind with only $3 million.

As interest in Axie Infinity keeps growing, value on Ronin will increase. At the same time it’s in the line of expectations that the value of gaming NFTs on Polygon will also increase. A variety of projects have already announced their transition towards the sidechain solution, suggesting an influx of users in the months to come.

Wax blockchain high activity

With many games moving to low-fee blockchain environments, gaming has a chance to thrive. Gamers are now capable of sending each other cheap NFTs without having to worry over exorbitant gas fees. Axie Infinity’s shift from Ethereum to Ronin is probably the best example of that, as the game’s trading activity increased 1,409% to 574,653 sold NFTs in the past quarter. 

In addition, Immutable launched Immutable X, allowing gamers in the trading card game Gods Unchained to transfer cards without any fees. Later this year Immutable X will open up to more projects, including War Riders and Guild of Guardians.

However, in terms of numbers there’s one blockchain that really stands out: Wax. The Wax blockchain is the self-proclaimed King of NFTs, and allows users to collect all kinds of digital assets from famous brands, artists or games. With Alien Worlds and R-Planet there are two games that stand out from the crowd, while Colonize Mars and many others are knocking on the door. 

In the past quarter players transferred more than 2 million NFTs within the Alien Worlds ecosystem. During the same time period R-Planet had 43,000 NFT transfers. In recent weeks, activity surrounding R-Planet has been increasing, as new game features are opening up. With its cheaper NFTs and lack of transaction fees, it’s no surprise that the Wax blockchain has seen the most NFT trading activity. 

In the past quarter, Wax saw 2,3 million NFT sales transactions, outpacing Ethereum and Ronin’s combined 779 thousand NFT sales with ease. As more gaming projects embrace sidechain alternatives, layer-2 solutions or other blockchains, we expect gaming activity to drop further on the Ethereum mainnet in the months to come.

Biggest games for Q2 2021

The most prominent games in the blockchain gaming ecosystem all saw their audience grow. It’s definitely worth noting that each of these games runs on a blockchain solution that doesn’t demand gamers to pay transaction fees. Wax, Ronin, Hive, and EOS all allow users to transact NFTs freely, without paying for gas fees. 

The biggest story of this month, without a doubt, has been Axie Infinity. The developers at Sky Mavis launched their own Ronin sidechain and migrated the entire ecosystem over from Ethereum to Ronin. The moment that happened, activity skyrocketed. Axie Infinity has seen 7,894 active wallets per day interacting with their smart contracts in June. That’s an increase of 848% compared with March 2021. 

However, we only measure interactions with smart contracts. The user base of Axie Infinity has skyrocketed to more than 300,000 players per day. That means that roughly 2,5% of the players claim their SLP prizes on a daily basis. That’s also why Axie’s numbers are lower than for example those of Alien Worlds, a game that interacts with smart contracts all the time. 

In April, the space mining game Alien Worlds went through hyper-growth. The Wax-based game went from 18,922 daily active users in March to 258,728 daily unique active wallets (DUAW) in June. With its play-to-earn mechanics, simple gameplay, and easy onboarding, Alien Worlds grew its audience 1,267% over the past three months. It’s very important to note that it’s easy, and allowed, for one player to open multiple accounts for Alien Worlds. It’s therefore likely that players have two, three, four or perhaps dozens of accounts.

Alien Worlds is followed by R-Planet, another NFT-based farming game on the Wax blockchain. This game grew its audience 340% to 13,151 active wallets per day. At the same time, Upland performed very strongly, growing its user base 77% to 29,386 daily wallets in June. Among the top gaming dapps, Splinterlands had the smallest success, growing 13% to 8,614 daily active wallets. 

Virtual land in the metaverse in high demand

During the past quarter we’ve seen an increased demand for real estate in the metaverse. The metaverse is a network where users can freely exchange value and data. Within this metaverse there are a variety of virtual worlds, and users can login to these using their crypto wallets. Within these virtual worlds they can acquire a piece of virtual land. Demand for this virtual real estate is increasing, and in the past quarter we’ve seen $42,6 million in value transact in this business. 

However, it’s becoming increasingly difficult to categorize products as a virtual world. There are other gaming worlds out there that offer mechanics where users acquire land NFTs to build something. Think about gaming worlds like VulcanVerse, Ember Sword, My Neighbor Alice and so on. However, for now we only look at Cryptovoxels, Decentraland, Somnium Space and The Sandbox. These virtual worlds allow users to build freely without limitations based on game mechanics or story. 

The four virtual worlds have seen a combined NFT trading volume of more than $42,6 million. That’s an increase of roughly 63% compared with Q1 2021, when these worlds had a combined NFT trading volume of $25,6 million. 

Mainstream attention for virtual worlds peaked early in the quarter, as CNBC labeled the innovation ‘fake land’. However, demand has been increasing, signalled by a variety of high-profile purchases of $500,000 or more. We’ve seen these purchases for big plots of land happen in Decentraland and The Sandbox. At the same time utility for these virtual land plots increases, as developers and communities add new functionalities. Somnium Space now lets users drive cars inside the virtual world, while Decentraland allows users to purchase physical products directly from their game world. 

As mentioned earlier, demand for virtual land goes beyond these four worlds. During the past quarter, both My Neighbor Alice and Ember Sword had their own land sales, selling millions worth of land plots to enthusiastic gamers and community members. Aavegotchi will launch its own game world, the trading card game Dark Country did it, while Upland has been selling virtual real estate for quite some time as well. 

Collectors spent big on avatar NFTs

In the first quarter of this year NFT collectors spent $229,5 million on NFT avatars like Hashmasks and CryptoPunks. These digital artworks portray a face and are often used as profile pictures on social media. Increasingly these types of NFTs become avatars in the metaverse, an extension of their owner without revealing their true identity. Demand for these types of NFTs had increased, and in the second quarter people spent $380,7 million on these avatar NFTs. 

Arguably CryptoPunks are the NFT collection that started this trend. Even though CryptoPunks weren’t the first NFTs, it’s a pioneering NFT collection. As a result these pixelated punks have become extremely valuable, resulting in for example a $11,8 million sale of the Alien Covid Punk by auction house Sotheby’s. However, other collections have risen to the occasion.

A new trend emerged when Hashmasks launched in February 2021. Similar to CryptoPunks and Hashmasks, there’s now a variety of avatar or profile-picture-based NFT collections that have become the latest hype in the NFT sector. During the second quarter of this year Artvatars, Meebits, VeeFriends and Bored Ape Yacht Club launched, creating vivid communities where NFT ownership means you’re a member of the community. 

In these instances, the value of the NFT isn’t only driven by its looks or rarity, but also by its social aspects and the content it unlocks. Meebits NFTs can become 3D avatars, Bored Apes give access to exclusive merchandise, and RTFKT Studios made unique physical shoes for owners of CryptoPunks. VeeFriends NFTs even give owners exclusive access to a physical event. The result of these different NFTs is that they create fans, supporters and builders, each creating value for their particular ecosystem.

Trading volume doesn’t tell the whole story. Meebits launched with tremendous success, but has seen its volume drop over time. During that same weekend Bored Ape Yacht Club launched as well, and their volume has been increasing. Therefore the trend paints a different picture.

Here we see the incredible trading volume of Meebits during its opening days. After that volume dropped, only to see a small uptick during the last days of June. However, Bored Ape Yacht Club saw a different trend with a low value initial sale and trading volume increasing over time. Two weeks after the sale, hype surrounding the Bored Apes increased and value flowing into the NFT collection went up.

A shift in popularity for NFT marketplaces

All NFT sales happen through NFT marketplaces, and we’re noticing a trend during which more sales happen through marketplaces that don’t require any fees. Because we will compare the first quarter to the second quarter, we will leave the Axie Marketplace on the side. However, with more than $500 million in its past 30 days, the Axie Marketplace is a force to be reckoned with. 

In February and March 2021 the NFT collectibles from NBA Top Shot made their first mainstream appearance. Basketball collectibles featuring NBA star players sold for thousands of dollars. Compared with the first quarter, this marketplace lost 67% of its volume from $467 million to $153 million. We can attribute this to the initial hype cycle that died down, while Dapper Labs was dealing with scaling problems. 

During the same time frame OpenSea and Atomic Market have seen their volume go up 60% and 968% respectively. Out of these marketplaces OpenSea actually processed the most value, good for $218 million. Atomic Market processed $12,2 million in NFT trading volume. 

What’s interesting about the comparison between the first and the second quarter of this year, is that we’ve seen a shift to NFT marketplaces that offer free transactions. People are okay with buying cheaper NFTs, either as collectibles or to be used for DeFi or games. 

Despite the drop in trading volume for NBA Top Shot, the number of sales on the platform went up from 3 million sold NFTs to more than 3,8 million NFTs sold. Atomic Market, which only registered $12,2 million in volume, handled 1,78 million NFT sales. That’s an increase of 806% compared to the previous quarter.

Buying NFTs was never meant as a technological innovation only available for those who can spend millions of dollars. That’s an absurd idea. Instead the technology provides a shift in how we think about ownership and the value of digital assets. Value can be $1 or $10,000, and NFTs can be available in all kinds of price ranges.

What’s important for lower value NFTs, is that these can be transferred without paying gas fees. When gas fees are as high as the value of an NFT, the act of selling or buying becomes pointless. The rise of Atomic Market on the Wax blockchain underlines that idea, and shows the direction the wider market is going: NFTs will become available in a wider range of prices, across different platforms and with the ability to be transferred freely.

Rise of gamified financial services

For consumers banking in traditional finance is a passive endeavour. On the blockchain however yield farming makes things a lot more active. Good yield farmers need to optimize their earnings, and move their funds around to enjoy the best returns on their investments. That’s why yield farming on its own, is already a bit of gamification of finance. Gamified DeFi or simply GameFi, adds another layer of gamification.

The development of GameFi is clearly shown on blockchains like Polygon and Binance Smart Chain, where projects like Mobox, Cometh and Aavegotchi combine gaming with yield farming. As a matter of fact, these dapps on BSC aren’t that much different from  Alien Worlds, for example. These are projects that combine passive gaming elements with NFTs and yield farming, resulting in a new type of financial entertainment product. Some might argue that the future of financial institutes lies in the implementation of gamified elements. In that case these GameFi projects are true frontrunners. 

Mobox exists on the Binance Smart Chain and embraces elements like yield farming, NFT staking and gaming. Similar to the release of many DeFi projects, its initial launch made a big impact, transacting more than $26 billion in value in its first month. This includes for example users adding value to liquidity pools, removing that value, or staking tokens. As Mobox became a serious product, its trading volume dropped. In June, it had $55,6 million in trading volume, a number more similar to Aavegotchi’s performance. 

Aavegotchi launched on the Polygon blockchain in March, and recorded $14,6 million that month. During the second quarter, Aavegotchi presented lots of plans for the future, including the introduction of new Gotchi ghosts and an entire MMORPG game world. With its current features, Aavegotchi recorded $8,7 million in trading volume during the second quarter. 

Mobox and Aavegotchi are just two examples of a bigger trend: gamification of financial services. However, we could also turn this trend around and talk about adding financial services into games. The rise of play-to-earn gaming blends entertainment with financial services, and as a result there are many gradations. Sometimes we talk about play-to-earn games and at other times about GameFi, but ultimately these products are all part of a much bigger trend where gamification is being used to entertain, attract and bind users into a product. 

Closing thoughts

Blockchain gaming is at a crossroads. The rise of usable technology makes it easier for developers to incorporate blockchain technology into their games, while players get improved user experiences. Cheap and fast transactions are important elements of the user experience, something for example Wax, Polygon and Immutable X pride themselves on. However, gamers will also want quality gaming experiences, and in the long run this will require the onboarding of traditional gaming companies. 

Increased demand for virtual land and the hype surrounding avatar NFTs, suggest that consumers have become willing to stake their claim into the metaverse. The metaverse itself slowly emerges, and presents itself as a renewed version of the internet. There individuals own digital assets ranging from community memberships to game items and virtual land. All this tied together by crypto tokens, becomes a virtual economy that spans across the entire industry and empowers every gamer. 

In the months to come, it will be interesting to keep your eyes on the development of GameFi and play-to-earn gaming. These blockchain-powered models will allow consumers to generate value through gamified participation. The amount of interactivity will determine whether we’re talking about gamified DeFi or a blockchain-powered video game with a play-to-earn business model.