Play-to-win games enabled by blockchain technology have grown exponentially in recent years.
Players have taken the opportunity to collect cryptocurrencies ornon-fungible tokens (NFTs) that have occurred in blockchain-based games.
With the advent of this new technology, players have been able to generate income by selling in-game NFTs or earning cryptocurrency rewards, 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 exponential growth rate 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? Wrong.
As we have seen with the ignominious case of former cryptocurrency king Sam Bankman-Fried and the FTX implosion, a castle built on a flimsy foundation of sand can easily be washed away when the tide comes in and rise again.
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Or, as legendary investor Warren Buffett liked to say, "It's only when the tide goes out that you find out who's been swimming naked."
We may be about to find out who these people are. The fact of the matter is that the "play to win" gaming industry is not built on a firm foundation. The foundations are brittle and flimsy, and this could well spell trouble in 2023. It looks like the whole building is going to collapse.
GameFi's current market structure is token-centric and this can create a number of problems. Project owners issue their tokens which are listed on exchanges first before announcing that they are going to create games. Games are a utility of the tokens they issue. So, the tokens come first and the contents after. This is why the quality and design of games in the blockchain space are so underrated.
An environment has been created where players are not as interested in the games themselves, which is a strange state of affairs for the gaming industry to find itself in. More and more players are actually investors who want investment returns.
The current structure creates the wrong kind of incentives and this is one of the reasons why the system is not working as it should. I would argue that DeFi Kingdom, which is one of the most well-known play-to-win blockchain games, has been playing with its tokenomics relentlessly by creating perverse incentives.
For now, generally speaking, the token market is in a downtrend and the speculative trading market is dead. An industry can survive for a certain amount of time on unwarranted promises, expectations, and exaggerations. But, you can only do it for so long. Eventually, people begin to notice that they have not received what was promised. Patience begins to wear thin. They get angry, frustrated, and begin to withdraw. This starts out as a trickle from the smartest players, but can soon become a flood.
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Those who have planned to secure funds by listing their tokens will have to re-evaluate. Many will be forced to close their projects due to insufficient funds. The situation is becoming so acute that even hitherto optimistic crypto venture capitalists (VCs) are also pausing new investments.
So who is going to survive this investment drought? It seems unlikely that GameFi will. However, other blockchain games could.
One example is the Ethereum-powered NFT-based fantasy football league operator Sorare, which has become a Web3 unicorn. While many of its competitors struggle, Sorare continues to increase its users and revenue during the darkest period. Its daily auction volume is impressive, around 300-400โ Ether (โETHโ)โ, and the number of users continues to increase.
Although its back-end is based on the blockchain, users do not perceive it as a GameFi project. They don't provide their native tokens, but they do provide their content first on Ethereum, which seems to be the way to go for the industry in general.
So GameFi may well die in 2023, but that doesn't mean all is lost. Death is a necessary part of evolution. From it, it is possible that a new life is already beginning to emerge.
Shinnosuke "Shin" Murata is the founder of blockchain game developer Murasaki. He joined the Japanese conglomerate Mitsui & Co. in 2014, and is engaged in auto financing and marketing 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 director 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.
