The Crypto Gaming Projects That Could Change The Game

The Crypto Gaming Projects That Could Change The Game
Jonathan Hobbs, CFA

almost 2 years ago4 mins

  • Blockchain games allow users to earn crypto and NFTs while playing. Generally, the crypto works as in-game currency, while the NFTs convey in-game status and offer utility to help players level up.

  • Blockchain games account for the most number of unique users and transactions of all crypto sectors. But the average volume of each transaction is minor compared to DeFi, for example.

  • VCs and other early-stage investors have poured money into building the crypto gaming space. If you’re going to invest in them, follow their approach by picking a spread of potential game changers.

Blockchain games allow users to earn crypto and NFTs while playing. Generally, the crypto works as in-game currency, while the NFTs convey in-game status and offer utility to help players level up.

Blockchain games account for the most number of unique users and transactions of all crypto sectors. But the average volume of each transaction is minor compared to DeFi, for example.

VCs and other early-stage investors have poured money into building the crypto gaming space. If you’re going to invest in them, follow their approach by picking a spread of potential game changers.

The world of blockchain gaming has been racking up high score after high score in the last couple of years, amassing both a steady stream of new players and record sums of cash from early-stage investors. And with the price of gaming tokens recently plummeting along with the rest of the crypto market, now might be the right moment to buy into this fast-growing sector. Here’s how.

How does blockchain gaming work?

Blockchain games are like online games, except you earn crypto in the form of in-game digital currencies and rare NFTs when you play.

The currencies give you more clout within the game, which you can use to buy NFT land, cards, and other rare in-game items that give you a better chance of leveling up. The NFT items also convey status, with different values depending on scarcity (how rare they are) and utility (how useful they are). You can trade the currencies back into bitcoin, ether, and US dollars on various crypto exchanges.

Blockchain games come in all sorts of varieties. Some are more like metaverse projects (i.e. virtual worlds where you interact with other players through your digital avatar), while others fall more into the play-to-earn bracket. No matter the game, they’re all built on the blockchain and use smart contracts to process in-game transactions.

How popular – and how profitable – is the sector?

According to DappRadar, blockchain gaming has more users than any other crypto sector right now. In fact, the number of unique wallets that interact with gaming smart contracts, shown in orange in the chart below, surpassed DeFi (dark blue) midway through 2021. It now has almost double the user count.

The number of wallet addresses that interact with smart contracts by crypto sector. Source: DappRadar.
The number of wallet addresses that interact with smart contracts by crypto sector. Source: DappRadar.

And when it comes to the sheer number of transactions, the gaming sector (again, orange in the chart below) is miles ahead of the rest – with almost 15 times more than DeFi (dark blue):

The number of transactions processed with smart contracts by crypto sector. Source: DappRadar.
The number of transactions processed with smart contracts by crypto sector. Source: DappRadar.

However, apart from the odd high-value digital land sale, those transactions do tend to be much smaller in size. The average daily volume of gaming transactions is at the lower end of the spectrum: gaming has around $10 million compared to DeFi with around $800 million.

Venture capital (VC) and other early-stage investors see crypto gaming as likely to flourish in the coming years, becoming a bigger part of the regular gaming industry. After all, they know Gen Z and Millennials spend a lot more of their time playing games than older generations do. And they know that game-play will only get more entertaining and realistic as time goes on.

Those investors plowed about $4.5 billion into building the blockchain gaming industry in the first quarter of this year alone – more than the $4 billion they invested in all of last year.

What’s the opportunity here?

Venture capital firms tend to have a 5 to 10-year investment time horizon. They buy into a spread of early-stage projects with large upside potential, expecting only a handful to realize it. And that’s a good mindset to have when buying into the crypto gaming sector.

Unfortunately, not all of us have access to crypto gaming funds that can invest in these projects before everyone else. But you can buy into the tokens of the most widely adopted crypto games on regular exchanges – and also play those games to earn more tokens. And right now, most of these are down 80% to 95% from their all-time-highs last year. Yes, these tokens could become even cheaper. But if you want to take a long-term bet on the sector, you could consider building up small positions around these levels.

To get started, look into the largest metaverse projects like The Sandbox (SAND token), Decentraland (MANA token), Alien Worlds (TLM token), and Apecoin (APE token) – the currency of choice for Yugo Lab’s much awaited Otherside. Each of these is trying to achieve something slightly different, but they’re all equally ambitious projects. The tokens can be used to buy and sell goods and services in their respective worlds, including plots of NFT land if you’re looking to become a virtual real estate mogul.

According to DappRadar, more people are playing Splinterlands (SPS token) than any other game right now. Here, they start with a pack of NFT cards, and each card is one of four levels: common, rare, epic, and legendary. You can use your card stack to battle other players and join quests – to earn more NFTs.

You’ll also want to understand which blockchains process the most gaming transactions, as those could see long-term growth if they continue to attract more gaming projects. Wax (WAX), Hive (HIVE), Binance Smart Chain (BNB), and Polygon (MATIC) are the top four chains by this metric right now (in that order). Solana is also in talks to seal the deal with traditional gaming giant Krafton (259960 KS) – the video game developer behind the extremely popular Playerunknown’s Battlegrounds (PUBG). The deal could see Solana NFTs traded within PUBG and other big-name games.

If you’re looking for a more traditional way to play the gaming sector (with the expectation that blockchain could infiltrate it further down the road), you might want to check out the VanEck Video Gaming and Esports ETF (ESPO).

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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