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Bitcoin has rolled back from almost $70K to $43K, but the blockchain games market continues to triumph around the world. What is the reason for this success, and what obstacles does this market still have to overcome on the way to further progress? These questions will be answered by the specialists of Boosty Labs company, which specializes in Play-to-Earn games development.
After the Bitcoin exchange rate touched the $70,000 mark from below in August 2021, despondency reigned in the cryptocurrency market – only in the second half of January 2022, the downtrend was turned into a side trend, and everyone involved in the blockchain industry get used to the new reality. Those who are familiar with the cryptocurrency market know that BTC does not like to fall alone – when the largest digital asset becomes cheaper, the entire crypto market follows it.
At the same time, let's take a look at what is happening in the market for blockchain games, for which digital assets are "financial blood". According to a DappRadar recent report, the two most resilient industries in the cryptocurrency market are blockchain games and non-fungible tokens (NFTs), which have recently become very tightly intertwined, creating a new economic phenomenon.
A striking example here is the legendary game Axie Infinity, whose token rate rose above $160 last fall, providing the project with a capitalization exceeding $9 billion. During the same period, the daily audience of the game was approaching 2 million people. In December 2021, when BTC was already updating its lows, and the AXS token itself sank three times, the audience of Axie Infinity grew to almost 3 million people a day, and the transaction activity in its network increased 4 times. The gameplay of Axie Infinity is based on the development of a farm to grow monsters, which are then used in battles with other players and can be bought and sold on marketplaces as NFTs.
The fact that, despite the fall in token prices, blockchain games are becoming more popular is also confirmed by the authoritative publication CoinDesk – over the past year, the number of such projects where daily user activity is observed has doubled and reached almost 400. And the number of blockchain games associated with daily active crypto wallets grew to 1.3 million, which is 46 times more than at the end of 2020. Let's list the main reasons for such an unbridled growth in popularity.
The renaissance of browser games
A few years ago, it seemed that the death of Flash and the rapid development of mobile applications put an end to the once popular games that could be played right in the Internet browser. However, when the dust from the fall of this sector cleared, it turned out that everything was not so bad.
First, Flash has been triumphantly replaced by HTML5 and WebGL technologies, which have radically expanded the possibilities for developing browser-based games. Secondly, it quickly became clear that neither Apple nor Google was happy with the presence in their game stores, where the economy is built on tokens and there is the possibility of cashing them out. Expelled from stores, such games repopulated browsers, and at the same time provided the ability to connect crypto wallets and withdraw NFT assets to external marketplaces without any regulatory restrictions.
Lack of competition
In principle, it is easy to imagine a situation in which a tasty market with a real economy would quickly and casually “squeeze out” classic game studios that have incomparably more resources and competencies than small indie teams often behind blockchain projects. However, this is not happening, as the traditional games industry still treats blockchain as an obscure or even “toxic” story.
This gives small studios, which are not yet able to create large AAA franchises, a huge head start on development. The ability to quickly launch the in-game economy allows these developers to immediately fund the continued development of their game worlds, without getting into loans and without inflating working capital.
Differences in the nature of cryptocurrencies and fiat money
Unlike traditional games, blockchain projects have a much higher share of the audience belonging to the generations of millennials and Z. This is evidenced by all the same DappRadar data. Young people are more inclined to pay for “fan”, they easily learn the concept of NFT, and it is in blockchain games that transactions are much more comfortable in terms of user experience than in the world of traditional finance.
Community Quality
Due to the “underground” nature of cryptocurrencies, people who deal with them are much easier to unite and form very dense communities with a high speed of information signals. Hardly any of them have an account on bitcointalk.org, and fluctuations in digital asset prices synchronize fluctuations in emotional states within these groups.
All this forms a homogeneous communication environment that responds very well and quickly to any activity aimed at forming the core of the game's audience. Marketing here is not at all as intricate as in the world where you need to separately and targetedly process dozens or hundreds of different segments.
Lure for an investor
We acknowledge that the world of cryptocurrencies is a history of many get-rich-quick schemes. While the majority of digital asset holders are losing their money, some lucky individuals can become fabulously rich in a short time.
The holders of these "fast capital" are constantly looking for investment opportunities, boldly taking even a high level of risk. In the same Axie Infinity, to buy a minimum set of three monsters now you need to spend about 700-1000 dollars. And there is no shortage of those who want to.
A January report from DappRadar reveals that blockchain games received over $1 billion in funding in the first month of this year alone. The game Kingdom Harmony (JEWEL token) became the leader in terms of the number of transactions. Also, let's not forget that while the global stock markets are gloomy and inflation reigns, many people are looking for a way to turn their savings into assets that do not fluctuate in unison with the Dow Jones or S&P 500 stock indices.
The governments of different countries cannot agree on the status of cryptocurrencies. The current uncertainty allows blockchain games to develop without the oppression of all sorts of regulatory restrictions, which also gives the industry an excellent head start compared to traditional game developers. By the time cryptocurrencies are finally regulated, large blockchain projects will mature, gain experience and be ready to compete within the framework of the unified rules of the global economy.
A bunch of unresolved problems
It must be admitted that there are quite a lot of problems in the blockchain games industry, and an objective assessment of the situation is impossible without mentioning this.
Let's start with the fact that not a single example of a successful extension of the principles of blockchain games to serious game projects with a modern level of gameplay has yet been created. The stuffing under the hood of such platforms is too different, and the only hope is that the problem can be solved by talented specialists who are now fleeing from the world's IT giants.
The second disadvantage of blockchain games is the fact that the lion's share of their audience (54% or 22 million people) are very, very poor residents of developing Asian countries. For many of them, such games are the main way to earn money. Compare it with the shares of Europe (14% or 5.9 million) and the US (8% or 3.3 million). The ratio is changing in favor of developed countries, but this is not happening quickly.
The third problem is that there is still no debugged blockchain infrastructure for games. Different companies get out of the situation in different ways. Some people rely on Ethereum with its too expensive transactions, others choose the less trusted but much cheaper Binance Smart Chain, which can cause problems when scaling sharply. Blockchains such as Solana or Polygon are still too young and may experience stability issues, and homemade second-level (L2) add-ons on the same Ethereum blockchain often negatively affect the user experience due to various technical limitations.
Finally, it is impossible not to mention the threats typical for the entire cryptocurrency industry – the risks of hacking, including social engineering, and a large percentage of fraud, which is present literally at all levels. These issues are still waiting for their solution, which, to be honest, is not even visible yet.
Probably, one day there will be a reliable and trusted environment that will allow blockchain games to develop safely for users and the projects themselves. But when that day comes, the consequences of the advent of such technologies will no longer be limited to games and, quite possibly, will change the entire financial system, the entire Internet and, of course, our whole life.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.