Nansen Research: The blockchain gaming market is growing rapidly, let’s talk about the future of GameFi

Original Title: Exploring the Future of GameFi in Web3
Original Source: Nansen Research

"Games are a way of communication and a bridge that connects people. Like a rope, it connects people tightly." - Hideo Kojima, creator of Metal Gear

Introduction

The blockchain gaming market is growing rapidly, and is expected to achieve a compound annual growth rate (CAGR) of approximately 68% between 2024 and 2030, reaching a market size of $301.5 billion by 2030. This growth is mainly due to the decentralized nature of blockchain, which allows players to truly own in-game assets such as NFTs and tokens. This ownership makes GameFi a stark difference from the traditional gaming ecosystem, bringing a unique experience that combines entertainment with economic incentives, which is difficult for traditional gaming platforms to match.

While all types of GameFi are expected to thrive in the next decade, role-playing games (RPGs) are particularly well suited to leverage GameFi's decentralized model. RPGs emphasize character growth, immersive worlds, and the construction of in-game economies. In traditional RPGs, players often invest a lot of time to develop characters, obtain rare items, and explore complex storylines, but these achievements do not bring substantial benefits outside the game ecosystem. GameFi enables players to truly own and trade these assets, such as rare items and characters, in the form of NFTs. This gives real-world value to in-game achievements and enhances player engagement through additional growth incentives. Game7's report released in 2023 also further confirmed the strong synergy between RPGs and GameFi, noting that RPGs are the most popular Web3 game type, accounting for 22% of all Web3 games, followed by action games at 17%.

Web3 Games by Type

Source: Web3 Games by Type

Another indicator of the growth of the Web3 GameFi space is the rise of AAA and AA games. AAA games have a minimum financing of $25 million, are backed by publishers and have experienced teams backing them, and offer unprecedented quality and immersion. Currently, AAA games only account for 1% of Web3 games in GameFi, while AAA and AA games combined account for 6%, which is more than the 4% of AAA and AA games on the traditional Web2 platform Steam. This growth is likely driven by a variety of factors, including the complexity of Web3 builds (with additional understanding of blockchain and smart contracts) and the fact that 71% of Steam users interact with AA or AAA games on a daily basis. This shows a preference for games with high production values, which means that AAA games in GameFi can meet market demand.

In addition, this report explores the growth of RPG and action games and comparative metrics between major games and chains.

Core Differences of Web3 Games

Illuvium, Axie Infinity, and Seraph demonstrate the combination of high-quality gameplay and decentralized economic systems.

Illuvium focuses on creating a visually stunning 3D world that combines PvE and PvP mechanics; Axie Infinity popularized the "Play to Earn" model, allowing users to earn real-world income through games, but faced challenges in user retention; Seraph stood out by introducing items with different rarities and a loot box system, introducing randomness so that players can get high-value rewards regardless of the size of their investment.

This common "degen" reward structure can stimulate player excitement and encourage users to continue to participate. As a loot-based game for PC and mobile, Seraph integrates NFTs to verify rare virtual assets obtained or purchased through the game, enabling free trading and monetization, promoting a good participation cycle and enhancing player engagement.

The following is an example of a dynamic reward system provided by Seraph, with the luck value reflecting the significant difference in reward rarity.

Source: Seraph, Mystery of Chaos

Comparison of economic mechanisms of different games

In successful Web3 games, the structure and mechanism of the in-game economy are key factors in driving player interaction and participation. One of the most famous dual-token economic models is Axie Infinity, which is composed of Smooth Love Potion (SLP) and Axie Infinity Shards (AXS).

SLP is a utility token earned through gaming that is used to incubate new Axies, forming a circular economy where players are rewarded for participating. SLP can also be traded on secondary markets for real-world value, enabling players to monetize their in-game efforts. AXS, on the other hand, is a governance token that enables holders to vote on important decisions about the future of the game and participate in staking for additional rewards.

Illuvium operates on a robust NFT marketplace where players can trade rare assets such as Illuvials. By combining a collection component with a “Play to Earn” model, Illuvium adds value and depth to its economy.

Seraph uses a single token model where utility tokens are stored off-chain. This strategy promotes a stable cycle of the economy, enables players to easily transfer funds, and concentrates users’ capital and participation in the same currency.

Source: Comparison of In-Game Economies of Seraph, Illuvium, and Axie Infinity (2024)

Social Factors

In Web3 games, community engagement on social platforms is critical to building a strong player base and maintaining user interest. X, Discord, and Telegram are key tools for developers to provide upgrade information, interact with players, and foster a sense of belonging within the game ecosystem. The popularity of a game and the activity of its community are directly related to its continued success in the future, especially in a blockchain-based decentralized ecosystem.

With 869,000 followers on Twitter and 591,000 members on Discord, Axie Infinity has one of the most active communities in the space. This active community helped drive Axie Infinity’s early adoption and prior relevance.

Seraph also maintains a strong community presence on social media, with 374k Twitter followers, 321k Discord members, and 92k Telegram members. This active community engagement has contributed to Seraph’s rapid growth.

While Illuvium is slightly smaller, it still has 399,5k Twitter followers, 116k Discord members, and 17k Telegram members, highlighting the need to maintain active communication channels. While all of the major competitors have impressive follower counts, Seraph has stood out in recent growth, adding 52k followers on Twitter in the past month, while Axie Infinity and Illuvium have grown by 1,900 and 2,100, respectively.

Source: Social Impact of Seraph, Illuvium, and Axie Infinity (2024)

Having a large and active audience across multiple platforms allows the game to stay in touch with players, keeping them informed and engaged with upcoming features. At the same time, the recent follower growth shows that the game has successfully captured the attention of players in the short term.

Quantitative Metrics Comparison

Despite the challenges facing the entire crypto market, daily transaction volume of blockchain games rose by 8.94% in August 2024. In 2024, Seraph’s daily active wallets (DAW) reached 537,000, significantly exceeding Illuvium’s 200+ and Axie Infinity’s 154,000.

However, Axie Infinity still dominates the NFT market in terms of market capitalization, with a market cap of $34 million to Seraph’s $15 million and Illuvium’s $2.8 million. In terms of NFT trading volume, Seraph far outpaces Axie Infinity’s $22 million and Illuvium’s $3.1 million with $65.5 million.

Seraph’s high DAW may stem from its 66% 7-day retention rate during the preseason, indicating that many new users remain active.

Source: Metric comparison of Seraph, Illuvium and Axie Infinity (2024)

Source: DappRadar, Footprint, CryptoSlam, Immutable.com, ActPass

Comparing Top GameFi Chains

Evaluating the performance of leading GameFi chains such as opBNB, Ronin, Polygon, and Immutable X requires focusing on key factors such as gas fees, transactions per second (TPS), and scalability. These metrics are particularly important for NFT-based gaming ecosystems, as fast and cost-effective transactions are key to meeting high transaction volume demands.

Source: Key Metrics of Top Game Chains: opBNB, Ronin, Polygon PoS, and Immutable X

Here is a breakdown of key metrics:

· Gas Fees: Gas fees are critical in GameFi, as frequent small transactions and NFT trading are at the core of the ecosystem. opBNB offers the lowest median gas fee among the top chains at only $0.0001, making it extremely cost-effective. The median gas fee for Ronin is $0.00179, Polygon PoS is $0.00293, and Immutable X waives gas fees for NFT minting and transfers.

· TPS: High TPS is critical for handling real-time multiplayer games and frequent asset transactions. As of October 2024, Ronin leads with 100,000 TPS, surpassing Immutable X's 9,000 TPS and Polygon PoS's 7,200 TPS. opBNB also ranked among the top with a performance of 10,000 TPS, ensuring the scalability of large-scale NFT transactions.

· Average TPS: While the theoretical maximum TPS can reflect network capacity, actual usage is often different. Currently, opBNB's average TPS is 97, far below the theoretical upper limit of 10,000; Ronin's average TPS is 20, Polygon PoS is 33, and Immutable X is only 0.02. This shows that the actual TPS is far below the theoretical maximum, so scalability is not an imminent issue. However, with the development of the gaming industry and the popularity of Account Abstraction (AA), especially in complex gaming ecosystems, high TPS becomes critical in order to effectively manage the increased load and ensure a smooth user experience.

Fast transactions, low gas fees, and good scalability are key for GameFi Chain to meet the growing needs of the NFT gaming economy. opBNB tops the list with an average TPS of 97 in 2024, further demonstrating its ability to handle a large number of transactions. As GameFi continues to expand, these chains will play a key role in shaping the future of blockchain gaming.

Evaluation Metrics for GameFi Chains

To evaluate the success of a blockchain network in the gaming industry, key performance indicators include daily active wallets (DAW), TVL, and the number of games on each chain. Comparing opBNB, Ronin, Polygon, and Immutable X will show how these metrics reflect the activity and user engagement of the ecosystem. In addition, security is extremely important as hacks on major blockchains can undermine user trust in the GameFi platform.

Source: Game-Specific Key Metrics: opBNB, Ronin, Polygon PoS, and Immutable X

Source: DappRadar, Footprint, Defillama, Crypto Briefing, CNN

We found that:

· Daily Active Game Wallets: opBNB’s DAW achieved a 72% month-over-month growth to 1.36M DAPs as of October 2024, highlighting its scalability and performance in the gaming space. In contrast, despite being a widely used platform, Polygon’s DAW is only 68K, indicating a decline in its gaming user base. Ronin and Immutable X show stable DAWs of 923K and 173K, respectively, maintaining steady participation within the ecosystem.

· TVL:Polygon leads with $972M TVL, solidifying its importance in the gaming space. Ronin and Immutable X follow closely behind with $135M and $132M, respectively. Meanwhile, as a newer Layer 2 solution, opBNB is quickly gaining traction with $25M TVL.

· Number of Games:Polygon leads with over 480 games, solidifying its position as a developer hub. opBNB follows closely with over 20 games, demonstrating rapid expansion in the GameFi space. Ronin and Immutable X have over 20 and 30 games, respectively, focusing on specific gaming niches, such as Axie Infinity on Ronin and NFT-driven titles on Immutable X.

· Major recorded hacking incidents (loss amount):opBNB and Immutable X have not experienced any recorded hacking incidents and maintain a good security record. Polygon faced potential vulnerabilities, but a white hat hacker discovered the bug and reported the technical flaw to the team in a preventative way. Meanwhile, Ronin faced significant challenges from security vulnerabilities, and suffered a $600 million hack that allowed the attacker to crack private keys to verify network transactions. After the hack, Ronin implemented security upgrades such as increasing the number of validators and adding hardware security modules (HSMs) to prevent future attacks.

Conclusion

In summary, the GameFi ecosystem is entering a critical expansion phase, with a market value expected to reach $301.5 billion by the end of the decade. This rapid growth is due to the decentralized ownership of in-game assets such as NFTs and tokens, which provide players with real-world value and unique economic incentives that traditional gaming ecosystems cannot provide. Despite today's tough market conditions, the 8.94% increase in daily active wallets in August 2024 further highlights the resilience of the current GameFi sector.

As blockchain infrastructure continues to improve, it provides greater transaction capacity, lower gas fees, and better scalability. This improvement has created a good development environment for GameFi projects, especially those with NFT-driven economies and significant social impact, which are expected to flourish. Leading chains like opBNB, Ronin, and Immutable X stand out for their balance of speed, cost, and scalability, attracting the attention of developers and players.

Source: Comparative MatrixKey Features: Seraph, Axie Infinity and Illuvium

Disclaimer

Nansen and Slice Analytics produced the following report pursuant to an existing service contract with Seraph (the client). Although Seraph has the right to review and provide feedback to Nansen, Nansen maintains full editorial control over the publication of this report. All views are the independent opinions of Nansen’s research analysts (the report authors). This report is provided for informational purposes only and does not constitute investment, financial, professional or other advice. For further information, please refer to the Disclaimer at the end of this report and our Terms of Service.

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