Overview of Blockchain Games: A Review of 2023 and a Look Ahead to 2024

Author: lesley@footprint.network

Data Source: Blockchain Game Annual Report

Key Points

• This year, Bitcoin (BTC) market capitalization has rebounded strongly from last year's low, while the growth of the blockchain gaming market has been relatively modest, but it has also seen a significant upward trend by the end of the year.
• Only 6% of games this year have more than 1,000 active wallets, down from 10% last year.
• In 2023, although the overall trading volume has decreased from the peak in 2022, the number of transactions has remained relatively stable.
• The blockchain gaming industry is developing in 2023, and AI is profoundly changing this industry. Layer 2 blockchains are also developing rapidly, but established blockchains like BNB Chain still dominate the market.
• The market is anticipating the emergence of top blockchain games, and GambleFi may see growth, but it still faces regulatory challenges.
• In user acquisition, leveraging social platforms like Telegram and X (Twitter) to reach a large user base has become a trend.

Blockchain gaming is an important catalyst for the popularization of Web3, playing a significant role in simplifying complex concepts and helping people understand blockchain technology. Unlike other fields, the existing concepts of game currency and items in traditional gaming make blockchain games a more understandable and acceptable Web3 popularization solution for the general public.

Despite a significant decline of 83.8% in trading volume in the blockchain gaming market in 2023 (from $20 billion to $3.2 billion) compared to 2022, developers in the gaming sector remain actively preparing for the anticipated bull market, focusing on enhancing the security, scalability, and transaction processing capabilities of games and their infrastructure. Additionally, developers are actively exploring strategies to attract more players through collaborations and learning from traditional gaming giants.

According to a16z predictions for 2024, blockchain gaming is transitioning from a purely play-to-earn model to a play-and-earn model that emphasizes gaming enjoyment. At the same time, artificial intelligence is not only improving productivity but also bringing new possibilities to blockchain gaming.

Given these significant developments, we anticipate explosive growth in the blockchain gaming sector in the coming years. Our report provides a detailed analysis of the performance of blockchain games in 2023 and offers a forward-looking discussion on trends for 2024, aiming to provide important references for the market.

2023 Game Data: Decreased Trading Volume, but Stable Transaction Count

Blockchain Game Market Capitalization

This year, Bitcoin (BTC) market capitalization has rebounded strongly from last year's low, reaching $828.35 billion, with an increase of 159%. In contrast, the growth of the blockchain gaming market has been relatively modest, but it has also seen a significant upward trend by the end of the year.

Active Game Wallets

Despite the increasing number of games in the market, user engagement has seen a significant decline. In 2023, the number of games in the market increased from 2,070 to 2,780, but only 6% of this year's games have more than 1,000 active wallets, down from 10% last year. This reflects the challenges blockchain games face in attracting users, and the quality of games has declined compared to last year.

Monthly Trading Volume & Transaction Count

Major industry participants believe that the market downturn in 2023 is only temporary, so they are spending time optimizing game infrastructure while waiting for the bull market to arrive.

In 2023, although the overall trading volume has decreased from the peak in 2022, the number of transactions has remained relatively stable, highlighting the determination of industry participants to improve on-chain infrastructure and optimize user experience. For example, SUI has successfully addressed concerns about blockchain processing capacity through games like SUI 8192. In July 2023, the daily trading volume on the SUI chain reached an astonishing 20 million.

We can see that the blockchain gaming industry is making strategic adjustments to seize opportunities when market sentiment improves.

2023 Market Review: The Gaming Industry is Developing, but On-Chain Data is Not Optimistic

The Gaming Industry is Developing, and AI is Profoundly Changing This Industry

• Play-to-earn is evolving into Play-and-earn
• More and more Web2 game studios are embracing Web3 technology
• The integration of AI and the blockchain gaming industry has taken a crucial first step

Data from Footprint Analytics indicates that although the number of active players in Web3 games decreased in 2023, the industry as a whole is still moving towards mass adoption and enhancing user experience. The entire industry is gradually shifting from focusing solely on crypto-native players to a broader mainstream market.

2023 Annual Game Token Growth Ranking

With the anticipation of a bull market, the development of the gaming industry has not stopped. In 2023, four game tokens achieved over 500% growth, with Nakamoto Games performing the best, with its token increasing an astonishing 1931.55%.

Additionally, tokens from gaming platforms like HYTOPIA, Fabwelt, and Merit Circle also grew by over 500%. Even during difficult market conditions, projects with strong ecosystems continue to perform well.

A notable trend in 2023 is that blockchain gaming's play-to-earn is evolving into play-and-earn. Many Web2 companies are increasing their focus and investment in blockchain gaming, leveraging their capital and experience to invigorate this emerging field. HYTOPIA is a successful example, with its token growing by 1086.75% this year. This game originated from the traditional gaming field of Mojang Studios' sandbox game Minecraft.

Moreover, the well-known AAA game Illuvium has also partnered with several mainstream Web2 entertainment companies. Web2 studios are highly interested in entering the blockchain space. Even traditional gaming giants like Ubisoft and Square Enix are exploring this new field.

Looking ahead to 2024, the trend of integrating AI into games will become more pronounced. AI is not only significantly improving productivity, enabling small teams to efficiently create high-quality games, but it also has the potential to quickly adjust game balance and mechanics through player data analysis and real-time feedback, better responding to player needs.

Although AI is still in its early stages of development and its comprehensive impact on the gaming industry remains to be explored further, its potential is promising.

Layer 2 Blockchains are Developing Rapidly, but Established Blockchains like BNB Chain Still Dominate the Market

• Layer 2 blockchains are developing rapidly, attracting the attention of the entire gaming industry
• Games on established blockchains like BNB Chain, Polygon, and Ethereum still account for 80% of all active games, dominating the current market

2023 has been significant for the development of Layer 2 blockchains, with several major projects emerging. In July, SUI demonstrated impressive results, proving the strong potential of Layer 2 blockchains to handle large volumes of transactions. Following this, in August, Base combined social and entertainment elements to launch friend.tech, quickly becoming a hot topic in the industry. By November, due to the outstanding performance of Axie Infinity and the launch of Pixels on the Ronin chain, Ronin also quickly attracted industry attention.

Layer 2 Overview

As of December 31, 2023, Rollup technology has made rapid advancements, with the total locked value (TVL) of Arbitrum and Optimism combined accounting for as much as 83% of the market share. Optimistic rollups are particularly popular in the DeFi space due to their user-friendliness. Game-focused Layer 2 blockchains are still striving to find direction and capture a larger market share.

Active Games on Each Chain in 2023

In 2023, established blockchains like BNB Chain, Polygon, and Ethereum still hold 80% of the active games in the market, demonstrating that established blockchains continue to dominate.

2023 Investment and Financing Situation

Ranking of Major Financing Events in 2023

In 2023, investment in the blockchain gaming industry slowed sharply due to the impact of the FTX incident and regulatory challenges. Throughout the year, the gaming sector completed 131 financing deals, totaling $983.9 million, a significant decrease from $2.6 billion the previous year. In the market environment of 2023, investors have become more cautious than before.

Annual Financing Amount in the Gaming Industry

Among these investment events, a highlight comes from gaming giant Nexon, which is currently valued at $27 billion. Nexon invested $100 million to expand its Web3 intellectual property project MapleStory Universe.

2024 Outlook: Emergence of Top Games, More Web2 Users Entering Blockchain Gaming

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#### The Market is Anticipating the Emergence of Top Blockchain Games

As the market's expectation for high-quality games like AAA games continues to grow, the blockchain gaming industry is poised for a breakthrough.

The development cycle of games typically exceeds two years. Therefore, following the significant capital injection in 2022, it can be inferred that many games should have made substantial progress in development.

Web2 giants are gradually entering Web3, and as the bull market approaches, they will have a profound impact on the blockchain gaming industry. These game studios with traditional game development experience can inject their expertise into Web3, creating better blockchain games. At the same time, the integration of blockchain technology is expected to enhance the transparency of in-game assets and economic cycles, improve game security, and bring more opportunities.

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#### GambleFi May See Growth, but Still Faces Regulatory Challenges

Rollbit

In the context of a presidential election year, along with the continuous development of the sports betting industry, platforms like Rollbit are expected to achieve significant success. Reports indicate that its revenue reached approximately $300 million in 2023. The platform uses on-chain burning methods to track revenue, a practice that has raised concerns, but its accuracy remains to be verified.

Despite facing regulatory challenges, GambleFi has become one of the highest-earning applications in the crypto space, demonstrating the enormous growth potential of blockchain-based gambling platforms.

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#### Many People are Developing Crypto-Based Games on Traditional Social Platforms to Acquire Users

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Animoca Brands

The blockchain industry has always sought to incorporate more users. This year, leveraging social platforms like Telegram and X (Twitter) to reach a large user base has become a trend. The collaboration between Animoca Brands and The Open Network (TON) blockchain is an important case in this field. As the largest validator of TON, Animoca Brands will help Telegram users transition to Web3. This collaboration not only reaches more users but also brings real value and utility to Web3 applications.

Blockchain gaming continues to develop, fully utilizing the advantages of existing large platforms and combining them with the innovative capabilities of blockchain technology, which will play a key role in promoting the popularization of the blockchain industry and the future development of the sector.

Footprint Analytics is a blockchain data solution provider. With cutting-edge AI technology, we offer the first no-code data analysis platform in the crypto space and a unified data API, allowing users to quickly retrieve over 30 public chain ecosystems' NFT, Game, and wallet address fund flow tracking data.

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