GameFi enters a cooling-off period, what will be the next theme?

We believe that the next phase of layout should focus on the following four directions: GameFi with stronger gameplay; "Steam for blockchain games"; gold-making guilds; and game auxiliary tools.

summary:

After nearly half a year of hot development, the GameFi track entered a cooling-off period after December last year. After adjustments, the market eliminated some low-quality speculative games that were just for show. Leading projects such as Axie are also facing a slowdown in user growth and reduced player revenue. The entire track is also looking for new narratives and growth points. First of all, we always believe that the GameFi track is an important way to attract non-circle players to enter the crypto field, and games are also the initial foothold of the metaverse. In addition, despite the bear market, there will still be players who want to entertain and make money by making money, so we are optimistic about the GameFi track in the long term. We believe that the next stage of layout should focus on the following four directions: 1. GameFi with stronger gameplay; 2. "Chain Game Steam"; 3. Gold Guild 4. Game auxiliary tools.

1. Market Overview

1.1 Transaction volume dropped sharply, and active users fluctuated upward

From the data, looking back at 2021, GameFi's transaction volume peaks were concentrated in early August and early November. The transaction volume reached about 220 million US dollars in the first week of August and the first week of November, of which more than 90% came from Axie Infinity. Other games with high transaction volume include Alien Worlds, Sorare, Aurory, Gods Unchained and Crypto Kitties. The transaction volume of these games continued to decline after November. By the first week of 2022, GameFi's transaction volume was about 44 million US dollars, which was more than 80% lower than the peak. Axie Infinity's transaction volume was only about 35 million US dollars, about 16% of the peak. However, despite the sharp drop in transaction volume, the number of active users of chain games has been fluctuating and rising, from 470,000 at the end of July last year to 1.53 million in early January this year. The number of active users has increased by more than 3 times in half a year. From this, it can be seen that although the transaction volume has dropped sharply after the market calmed down, new users continue to participate in GameFi.

GameFi NFT asset trading volume

Source: The Block

GameFi active users

Source: Dapp Radar

1.2 Multiple ecosystems are in full bloom

Since GameFi has high performance requirements for the network, it needs lower fees and faster transaction speeds. Ethereum sidechains, Layer 2, and other Layer 1 public chains can all be used as infrastructure for blockchain games. According to Dapp Radar's statistics on the top 100 GameFi Dapps in terms of transaction volume in the past 30 days, 57 of them are deployed on BSC, including 11 on Polygon, 10 on Wax, 7 on Ethereum, 4 on Immutable X, and 3 on Harmony. In terms of quantity, BSC's GameFi ecosystem is relatively large. BSC has been very keen on games in the second half of this year, from Crypto Blades in the middle of last year to a series of P2E games featuring gambling represented by Crypto Mines in November. Although people have mixed opinions on the quality of games in the BSC ecosystem due to the price of some games and the design of the economic model, GameFi has obviously become one of the main directions of BSC now. Low transaction fees and the support of the Binance ecosystem have made BSC one of the most suitable public chains for the development of GameFi.

In addition, there will be a phenomenon where a single GameFi project drives the development of the entire public chain ecosystem. Take Hive and WAX as examples. The card game Spnterlands has driven the development of the entire Hive. The number of active users of Spnterlands is always in the top five of the Dapp list, accounting for more than 90% of the total usage of the Hive network. And WAX also relies on Alien Worlds to promote the entire game ecosystem. Alien Worlds accounts for half of the activity of the WAX ​​network. The largest contribution to Harmony's GameFi transaction volume comes from DeFi Kingdoms, with a transaction volume of 1.76 billion US dollars in 30 days, making Harmony the public chain with the largest GameFi Dapp transaction volume. The development of the entire public chain ecosystem driven by a single game proves that the GameFi P2E track is continuing to grow and its influence cannot be underestimated.

The number of GameFi Dapps deployed on each chain and the transaction amount

Source: Dapp Radar, compiled by Hashkey Capital

1.3 Active investment and financing

The development and progress made by the GameFi track in 2021 attracted the attention of many venture capitalists. In 2020, the investment amount in blockchain games was approximately US$88.8 million, and the total investment in 2021 reached US$4 billion, an increase of about 43 times. As of now, the total investment amount in blockchain games is approximately 5.4 billion, with traditional investment (VC) accounting for 85% and blockchain investment accounting for 15%. The following table shows the blockchain game financing events sorted by investment amount:

Data source: blockchaingamer.biz, compiled by Hashkey Capital

Data source: crunchbase, Hashkey Capital

2. Layout direction

Through the analysis of the current market, we believe that the following four aspects are the layout directions that GameFi needs to focus on in the future:

2.1 GameFi with better gaming performance

We believe that the current play-to-earn GameFi has some game attributes compared to traditional games, but the playability is not strong enough. Whether in terms of narrative or image quality, this type of game generally values ​​"earning" and "play" is in a relatively secondary position. Many of the chain games currently seen on the market have this feature, and most of the participating users are also cryptocurrency players, and the quality of the games varies. After Axie Infinity, the November GameFi wave represented by games such as Crypto Mines, Wolf Game, and BNX can be seen that game props are basically obtained by opening blind boxes, and there are very few fighting and competitive scenes in the game. It emphasizes strategy and game more, and the economic model is also short-lived. Some non-circle players even regard this type of chain game as "online gambling." During this period, many high-risk GameFi speculators also appeared.

We believe that the GameFi track is one of the most effective means to attract non-currency users to enter the crypto field. The development of GameFi cannot rely entirely on crypto native players. It is crucial to attract traditional game players to join. High-quality blockchain games with stronger gameplay and playability will become the main direction of the GameFi track in the future. The nansen GameFi report also proposed that blockchain games need to develop towards the next generation of high-quality direction after play-to-earn. However, for investors, although the quality of 3A large-scale blockchain games that require large funds to produce and can only be launched after several years is guaranteed, and the probability of running away and non-delivery is not high, it still has certain risks, because the direction and speed of change of the GameFi industry are very fast, and the economic mechanism and gameplay design may change greatly within a few months.

Source: Nansen

We believe that the following three blockchain games have strong gameplay:

2.1.1 Thetan Arena

Thetan Arena is a MOBA game that many players call "League of Legends on the chain". It was developed by Wolffun, a well-known traditional game manufacturer in Vietnam. Wolffun was founded in 2014 and has created popular games such as Heroes Strike. Thetan Arena is like the chain version of Heroes Strike. The game has the following modes:

• Battle Royale (Single/Double): Be the one who survives after forming a group among twelve players. All players have the same mission, which is to attack the supply box and eliminate other enemies.

• Tower Defense: 4v4 team, win by destroying the opponent's tower

• Deathmatch: 4v4 team, players need to kill as many others as possible

• Superstar: 4v4 team, players need to win by accumulating points

There are two types of tokens in the game, one is the governance token THG, and the other is the in-game token THC. THG can be used to purchase blind boxes and upgrade heroes. Users can earn it through PVE, PVP battles, and tournaments; THC can be obtained by completing tasks and improving rankings.

This game has the following advantages: 1. It has diverse gameplay and strong playability, similar to League of Legends and Brawl Stars. Players can enjoy fun while playing and earning money; 2. It can be operated on mobile devices, supporting users to play games on PC, Android, and IOS; 3. The game time is short, one round takes about 3-5 minutes, and players can use fragmented time to play games; 4. It can be played for free and earn money. Users can experience the game and get rewards without investing money; 5. The team has a rich background in traditional game development and has developed several high-quality games; 6. There are many heavyweight partners and investors such as Animoca Brands, Mask, etc.; 7. It is very popular: there are more than 18 million current players, nearly 360,000 Twitter followers, and 320,000 Discord community members.

However, there will be lags in the actual operation of the game, and there are many restrictions on withdrawals. Both THC and THG tokens require players to create an account for at least 12 days. They can be collected once every 48 hours and a handling fee is charged when they are collected. There are minimum and maximum withdrawal limits, and the limits are related to the reputation of the account. Reputation is related to combat, ranking, purchase volume in the mall, etc., so this game is more suitable for players who want to play games rather than gold players.

2.1.2 Sidus Heroes

Sidus Heroes is a massively multiplayer online role-playing game (MMORPG) Sci-Fi game based on Ethereum. It is still in a relatively early stage. The official website only provides a Demo version, and the Market Place on the webpage is still under construction. There are twelve races set in the game, and the skills of different races are also different. These twelve races are all related to blockchain, such as Polygopus, Solantrum, Bitcoione, Polkacyon, etc. There are four modules in the game. The first is the PVP arena. Players can adjust strategies, match different skills and weapons, and battle with other players; the second is the planet exploration module. Players can buy spaceships to explore in space and occupy other planets through combat; the third is the land management module. Players obtain resources by purchasing assets or occupying planets, manage and build their own land, similar to RPG mode games; the fourth is the political module, which includes the election of parliament and parties, which is related to the future direction of the entire interstellar space. Players need to hold NFT to enter the game. The current floor price of avatar on Opensea is 0.7 eth, which is much lower than the similar Star Altas. From the perspective of the economic model, it still adopts a dual-currency model, with the in-game token Sidus and the governance token Senate.

The highlights of this game include: 1. Well-made, high-precision graphics, delicate image quality, and strong avatar artistry; 2. Rich game content, complete and detailed storyline; 3. The roadmap is compact, the plan is relatively long-term, very detailed, and a demo is provided. The few 3A games on the market only provide a small number of pictures and promotional videos. This is the only game where you can experience the gameplay; 4. The team's tokens have been locked for four years, and the team gives investors the feeling that they are seriously building this game; 5. Active social media: Twitter followers have reached more than 330,000, and Discord members are around 210,000.

However, we believe that the game also has certain risks. For example, the investment lineup is not strong enough for a 3A masterpiece, the team members lack experience in large-scale game production, and the development time is short.

Source: SidusHeroes Demo

Source: Opensea

2.1.3 Illuvium

The story background of Illuvium is that a spaceship discovered a mysterious planet in space sending a distress signal. After the spaceship crashed unexpectedly, people tried to explore the planet and conquer the mythical beasts illuvials on the planet. People can capture illuvials and bring them into their own camp. Capturing mythical beasts requires crystal balls, and players need to mine resources on the planet to synthesize crystal balls. The game also has pvp and pve modes. Illuvials have different rarity and five attributes: water, fire, earth, nature, and air. They also have different professions. Players need to use their own strategies to adjust the positions of mythical beasts. Some of them are similar to the thinking of chess and card games, but the battle scenes are also very well made. You can also create more powerful mythical beasts by integrating different mythical beasts. According to official disclosures, there are still some undeveloped plots in the game, which may be used for the development of other games in the future, or they may be provided to players to create games independently, thus forming a rich game ecology. Illuvium is expected to be publicly tested in Q1 this year. Currently, only the pledge of token ILV and the sale of NFTs are open. Mythical beasts, weapons, armor, skins, etc. are all NFTs in the game. The game also uses a dual-currency mechanism, with ILV used for governance and sILV as an in-game asset.

Several highlights of Illuvium are: 1. The artist's art and design are very sophisticated, with high-quality images, high-precision graphics, and strong gameplay (this is also the biggest highlight of the game); 2. It is built on ImmutableX, which is designed for NFT on Ethereum Layer 2, and players do not need to pay high fees; 3. The DeFi Staking mechanism was introduced before the game was launched to reduce selling pressure, strengthen investor confidence, and stabilize the currency price to a certain extent. The longer the staking time, the greater the APY coefficient (higher rewards are given to players who want to invest in the project for a long time); 4. There are many senior game developers in the team. Co-founders Kieran Warwick and Aaron Warwick are brothers with Synthetix founder Kain; 5. The investor lineup is relatively strong, including YGG; 6. Social media operations are strong, with nearly 250,000 followers on Twitter and about 250,000 members on Discord.

Source: illuvium promotional video

2.2 “Blockchain Game Steam”

The mechanism and gameplay design of blockchain games change quickly. A single game and a single economic system may cause slow user growth, lack of novelty in gameplay and mechanism, or decline in revenue, leading to user loss. On the contrary, we should pay more attention to the "Steam" in the blockchain game field, that is, the game ecosystem composed of multiple blockchain games. Compared with a single game, the multi-game ecosystem will bring more narratives (such as Metaverse). The token economy can also be applied in multiple games to form a cycle, and each game has stronger interoperability. Currently, the multi-game ecosystem projects worth paying attention to include Gala and Mobox.

2.2.1 Gala Games

Gala Games is both a game developer and a game aggregation platform. In addition to developing games themselves, the team will also vote for other manufacturers to develop games and attract other game studios to integrate. Gala Games' NFT prop assets and Gala tokens are all based on Ethereum, and in-game transactions rely on their own network maintenance. This approach not only ensures the security of assets, but also maintains the smoothness of the game. Gala's node ecosystem has exceeded 26,000. The founder's node is sold to the public, and the current price is close to 300,000 GALA. The GALA rewards obtained by the node are based on the following three consensus mechanisms: Proof of Stake (verifying network transactions), Proof of Work (providing computing power for the network), and Proof of Storage (providing storage support for the ecosystem). In general, the equipment requirements for the node are not high, and it only needs to run for six hours a day, but the node's payback period is longer, and the node's rewards will be halved every year. Nodes must also fulfill their governance responsibilities and can vote to select the games to be launched and the use of funds.

There are currently 8 games in the ecosystem. Currently, only the farm management game Town Star and the multiplayer online economy (MOBA) game Spider Tank have been launched. The rest of the games have only started selling props. GALA tokens can be used to purchase props for all games in the ecosystem in the GALA built-in mall. The sales of props in the ecosystem before they are launched are also relatively good. Now Town Star has also changed from only providing rewards for qualifying matches to introducing P2E, that is, completing daily tasks can get tokens TOWN. The two games launched by Gala have received a warm response. The future development of the ecosystem mainly depends on the quality of the games to be launched next. High-quality games will attract more users, and the increase in the number of users will bring in more high-quality games, thus forming a positive cycle to strengthen the ecosystem. However, in terms of the relationship between the games in the ecosystem, there is a lack of connection between the games. Both the narrative and the economic system are independent of each other. The token GALA only serves as a medium for transaction, and there is no introduction of DeFi gameplay. In the future, we will look forward to the diverse interactions of games in the GALA ecosystem.

2.2.2 Mobox

Mobox is a comprehensive platform that combines DeFi, NFT, and GameFi. The main goal of the project is to create a GameFi platform that players can easily play and earn money on while being developer-friendly. In November 2021, Binance Labs made a strategic investment in MOBOX and jointly established the game fund MetaFund.

There are currently four ways to make money on Mobox:

• Liquidity mining: Players can participate in liquidity mining by staking MBOX-BNB as LP. The current platform APY is around 100%. The advanced gameplay is that if you freeze MBOX to obtain veMBOX, you can accelerate the income of the pledged LP. Freezing is not equal to staking, and freezing cannot obtain additional staking income.

• MOMO NFT mining: The income from NFT mining depends on the computing power of MOMO NFT. If you form a team of MOMOs, you will get a 300 computing power bonus. MOMOs who have formed a team can not only participate in MOMO NFT mining, but also participate in P2E games to earn income.

• Subscribe to BOX Blind Box: Players can subscribe to BOX Blind Box, open the Blind Box, sell the MOMO that comes out on the market, and earn the difference. If a rare or legendary MOMO is opened, the player can get considerable benefits.

• Play to Earn: There are currently three P2E games on the MBOX platform - Coin Master, Block Wars and ChainZ Arena. You can get MBOX rewards by playing ranked matches in the game or renting MOMO to participate in the game. Block Wars has also obtained cooperation with YGG. The short-term goal of the project is to attract more high-quality games to the platform and become a leading game distribution platform.

• Block Wars

Source: MOBOX

It is worth mentioning that the MBOX token has a repurchase and destruction mechanism. 80% of the platform's profits will automatically enter the repurchase pool. When the MBOX price is lower than the average price within 72 hours, the smart contract will automatically purchase and destroy it from the secondary market. This mechanism will also play a certain stabilizing role in the token price.

In general, MOBOX uses DeFi as its infrastructure, empowers DeFi and GameFi through NFT, and deeply integrates the three. Players can earn MBOX through liquidity mining in the farm, and use MBOX to subscribe for blind boxes to open MOMO pets. The opened MOMO can help players make money in the game, and the MBOX earned by P2E can return to the liquidity pool again, forming a cycle within the ecosystem.

2.3 Gold Farming Guild

GameFi's play to earn is different from the play for fun of traditional games. In addition to game participants, a group of gold farmers have also emerged, which has also spawned some game guilds that provide game NFT props rental, game strategy teaching and training, breeding and cultivation, and scholarships. Guilds generally share the income from game gold farming with players through leasing NFT entry props, and also charge a certain service fee. Some game guilds such as YGG will also invest in GameFi projects, participate in the angel round and private round of the game, obtain project tokens or high-quality NFT props, and form their own game ecology. At present, game guilds are mainly concentrated in third world countries such as Southeast Asia. Chain game guilds have exempted players from the threshold of entering the game through leasing props, and have effectively improved the lives of local poor communities through training and gold farming. Most of the guilds were made by Axie Infinity. With the decline of Axie Infinity's income, the layout of other high-quality games is the transformation that game guilds have to face. In addition to the well-known YGG, other second-tier gold farming guilds are also worth paying attention to:

2.3.1 Avocado Guild

Avocado Guild completed its Series A financing with $18 million in November last year, setting a record for Series A financing for blockchain game guilds. Investors include Animoca Brands, QCP Soteria Node (QSN), Three Arrows Capital, Solana, Binance Capital Management, etc., and the post-investment valuation has reached more than $200 million. So far, there are more than 10,000 scholars, mainly concentrated in Southeast Asia such as the Philippines and Malaysia. Currently, Avocado Guild supports games such as Axie Infinity, Theta Arena, Cyball, REVV Racing, Sipher, Elpis Battle, and Big Time Games.

Avocado Guild Investors and Supporters

Source: avocadodao.io

Avocado players and the guild split the commission 50-50, which is different from the 30-70 and 40-60 splits of guilds such as YGG. Players get less revenue, but AG can still attract tens of thousands of scholars to join the guild. AG's main advantage is its excellent operation. AG's players are not only gold-making machines, but also pay more attention to the education of community members, including knowledge of blockchain, DeFi, etc., to form a mutually beneficial qualification, advocating gold-making for education and wealth. Avocado Guild will also organize offline activities and issue guild publications. Guild resources have also been used for some public welfare activities, so that community members have a stronger sense of belonging and stickiness, which in turn will contribute more to the community, ensuring the steady income of DAO, and thus forming a virtuous circle. The more positive the organizational image of AG is, the more trustworthy players can be recruited, rather than not following the guild's guidelines and stealing the guild account.

2.3.2 Achip & Achair Guild (AAG)

AAG is a new upstart in the blockchain gaming guild. At the end of November last year, AAG completed a private round of financing of US$12.5 million, led by Shima Capital, Trible Capital, Tess Ventures, and other investors include Republic Realm, Hashkey Capital, Portico Ventures, ViaBTC Capital, Harmony, etc. The biggest difference between AAG and other blockchain gaming guilds is that the P2E gold farming guild is only part of the business line. AAG's business lines include four in total:

• P2E Platform

AAG's vision is to establish a cooperative relationship with other guilds instead of competing with them. The P2E Platform is an interactive environment that brings players, investors, and guilds together. Specifically, it includes the game library that cooperates with AGG. AAG plans to

The self-built marketplace will also integrate with other markets such as Opensea. It will also integrate the game dashboard, such as overall revenue statistics, participation time statistics, etc. In addition, it will also include guild management tools including scholarship payments, performance monitoring and guidance tools, in-game Axie automated breeding tools, etc.

• AAG P2E platform

Source: aag.ventures

• P2E Guild

• AAG has 1,500 scholars playing Axie to make money in seven weeks, and currently has more than 2,000 scholars in seven countries and regions, mainly in the Philippines, Indonesia, Brazil, India, Colombia, Nigeria and Argentina. AAG and players split the profits 60:40, and players can get most of the income.

• Learn to Earn

• AAG hopes to open an L2E platform to help players improve their employability while making money. Players can earn AAG tokens by taking courses on the platform. Planned courses include basic education, finance, information science, civic health and social welfare. Some government entities or companies or non-profit institutions and organizations may be interested in L2E and support it.

• Foundation

• AAG Founsation is a non-profit, self-sustaining foundation established to promote charitable programs.

It is worth mentioning that the AAG wallet plan can convert any tokens obtained by players through gold farming into AAG tokens. The withdrawal process is relatively smooth and more friendly to novice blockchain players.

2.4 Auxiliary tools

The auxiliary tools for blockchain games are derivative products of the GameFi track. We believe that as the GameFi track grows, the role of auxiliary tools will become more important for players, developers, and project parties, such as: data monitoring panels, low-threshold game development tools, DAO operation management tools, etc.

2.4.1 Game Maker ( The Sandbox )

Game Maker is a game development program that comes with The Sandbox. It is a UGC game creation tool built for users. Players can create games without programming knowledge, using existing elements placed on LAND plots or directly building on the templates that come with The Sandbox. Game Maker is very friendly to independent and small team development. Game Maker provides a large number of high-quality elements and assets for players to build. Players do not need to spend too much time creating assets and can only focus on game development.

The $2 million Game Maker Fund was established in October 2019 to reward users who develop and produce games on The Sandbox platform. The fund is supervised by DAO, and many game projects have been put into production. The Sandbox also held the SAND Play game creation competition on December 24, requiring players to use Game Maker to create an experience related to sports, with a total prize of 50,000 SAND, in order to encourage more creators to participate. We believe that with the development of UGC games in the future, we can focus on simple and easy-to-use tools with low barriers to entry for game creation.

Source: Game Maker (The Sandbox)

Source: Game Maker (The Sandbox)

2.4.2 Gametaverse

Gametaverse is a dashboard designed specifically for GameFi. Currently, most of the data on GameFi in the market comes from the Game section of Dapp data websites, such as Dapp Radar, nonfungbile.com, etc. There is a lack of data statistics and analysis websites focused on the GameFi track. We believe that as the GameFi track continues to develop and grow, GameFi needs to have its own one-stop portal. Gametaverse's investors include Animoca Brands, Dragonfly Capital, YGG, YGG SEA, etc. The investor lineup is relatively strong. In addition, the project's advisors include the well-known KOL Mr. Block and YGG SEA's Co-Founder Brian.

Features of the Gametaverse platform include:

• GameFi token ranking: Token ranking can be sorted by increase, number of active users, transaction volume and market cap;

• Upcoming events: including project IDO, Airdrop, AMA, etc.

• Project reports, blogs: connected to Medium

• Profit Calculation: Users can enjoy the profit calculation function by connecting their wallet. Currently, this function supports four games - Axie Infinity, Farmers World, REVV Racing and Thetan Arena. We think this is one of the biggest highlights of the platform.

• Staking: You can stake the platform token GTA to earn income

Axie Infinity Profit Calculation