2023 will see the death of games to make money
Games to make money enabled by blockchain technology have grown exponentially in just a few years.
Players have embraced the ability to collect cryptocurrencies or nonfungible tokens (NFTs) that have been produced in blockchain-based games.
Through the use of this new technology, players have been able to generate revenue by selling in-game NFTs or earning cryptocurrency rewards, both of which can be exchanged for fiat money.
Because of this, according to data from Absolute Reports, the estimated value of the GameFi industry will grow to $2.8 billion by 2028, with a compound annual growth rate of 20.4% over the same period. But such predictions may well turn out to be unfounded.
Given the rate of exponential growth in recent years, one might think that there was absolutely no reason to believe that the trend would not continue well into 2023 and beyond. Right? Error.
As we have seen with the grisly case of former crypto king Sam Bankman-Fried and the implosion of FTX, a castle built on a flimsy foundation of sand can easily be washed away as the tide comes in and out.
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Or, as the legendary investor Warren Buffett liked to put it: “Only when the tide goes out do you discover who has been swimming naked.”
We may be about to find out who these people are. The fact is that the play-for-profit gaming industry is not built on a solid foundation. The foundations are fragile and flimsy, and this could well mean trouble in 2023. The whole building seems to be collapsing.
The structure of the current GameFi market is token-centric, and this can create a number of problems. Project owners issue their tokens listed on exchanges first before announcing that they will build games. Games are a tool for the tokens they issue. So the tokens come first, and the content later. This is why the quality and design of games in the blockchain space is so underrated.
An environment has been created where the players are not that interested in games themselves, which is a strange situation for a games industry to find itself in. More and more of the players are in reality investors who want a return on investment.
The current structure creates the wrong type of incentives and this is one of the reasons why the system does not work as it should. I would argue that DeFi Kingdoms, which is one of the more famous play-to-earn blockchain games out there, has been driving tokenomics relentlessly by creating perverse incentives.
Now, generally speaking, the token market is in a downward trend and the speculative trading market is dead. An industry can survive for a certain time on promises, expectations and unjustified hype. But it can only do so for so long. Eventually, people begin to notice that they have not received what they have been promised. Patience is wearing thin. They get angry, they get frustrated and they start to withdraw. This starts as a trickle of the most knowledgeable players, but it can soon become a flood.
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Those who have planned to secure funds by listing their tokens need to reconsider. Many will be forced to shut down their projects due to insufficient funds. The situation is becoming so acute that even hitherto bullish crypto-venture capitalists (VCs) are also halting new investments.
So who will survive this investment drought? It seems unlikely that GameFi will do that. However, other blockchain games can do that.
One example is Ethereum-powered, NFT-based fantasy football league operator Sorare has become a Web3 unicorn. While many of its competitors are struggling, Sorare continues to grow users and revenue in its darkest period. Their daily auction volume is impressive, at around 300-400 Ether (ETH), and the number of users continues to grow.
Although the backend relies on blockchain, users do not perceive it as a GameFi project. They don’t issue their native tokens, but they deliver their content first on Ethereum, which looks very much like the way to go for the industry at large.
So GameFi may well die in 2023, but that doesn’t mean all is lost. Death is a necessary part of evolution. From there, new life can already begin to emerge.
Shinnosuke “Shin” Murata is the founder of blockchain game developer Murasaki. He joined the Japanese conglomerate Mitsui & Co. in 2014, running car financing and trading in Malaysia, Venezuela and Bolivia. He left Mitsui to join a second-year startup called Jiraffe as the company’s first sales representative and later joined STVV, a Belgian soccer club, as its head of operations and helped the club create a community token. He founded Murasaki in the Netherlands in 2019.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
