Disclaimer: The data in this article are obtained after comprehensive consideration of the annual reports and other research reports of each platform, and the reference standards may be different.

DeFi and NFTs Cultivate the Soil for GameFi Development

DeFi and NFTs Lay the Foundation for GameFi

Since the launch of the Ethereum mainnet on July 30, 2015, the Web3 era has officially begun. The smart contract deployment feature of the Ethereum mainnet supports the design and operation of DApps (decentralized applications). On this basis, a large number of popular DeFi (decentralized finance) projects have emerged. For example, Uniswap achieves DEX (decentralized exchange) through automated market making, and MakerDAO enables contract-based lending. These DeFi projects attract substantial capital inflows with their high investment returns, transparency, strong privacy, and complete openness. The total market value of the DeFi sector has grown from $50 million in 2015 to $100 billion in 2023.

Figure 1 DeFi market capitalization growth

As DeFi flourished, capital began to explore the potential for combining decentralized finance with other fields. During this period, the NFT market experienced a significant boom. In 2017, CryptoKitties, an Ethereum-based NFT project where players could buy, breed, and trade digital cats, gained widespread attention and is often regarded as the starting point of the NFT explosion. The total market value of the NFT sector increased from several million dollars in 2018 to $8 billion in 2023.

Figure 2 NFT market value growth

If DeFi brought a continuous flow of capital to the crypto market, NFTs directed blockchain’s focus towards entertainment and gaming. Together, they provided fertile ground for the development of blockchain games. Under this foundation, GameFi, which combines DeFi and blockchain gaming concepts, began to emerge.

The starting point of the GameFi dream

In the second half of 2019, MixMarvel’s Chief Strategy Officer Mary Ma first introduced the concept of GameFi—“gamified finance” and “new gamified business.” This concept combined elements of gaming and finance, aiming to introduce new business models and economic systems to the gaming industry through blockchain technology. According to Mary Ma, future games would not only serve as entertainment tools but also as financial instruments. Blockchain technology could transform virtual items in games into valuable digital assets, allowing players to acquire, trade, and appreciate these assets through gameplay. In this model, game companies and players could engage in economic activities within a decentralized environment, achieving mutual benefits.

However, due to the immaturity of blockchain technology and its application paradigms at that time, the concept of GameFi did not immediately gain widespread attention and adoption.

The beginning of the GameFi explosion

In September 2020, Yearn.finance founder Andre Cronje elaborated on his understanding and vision of GameFi in a speech and public statement. With Andre Cronje’s authority in the DeFi industry, the concept of GameFi began to truly enter the public eye. Many of Andre Cronje’s views on GameFi also clarified the future development direction of GameFi.

In Andre Cronje’s view, the DeFi industry is in the “TradeFi” (trade finance) stage, where users’ funds are mainly used for trading, staking, and lending, without reflecting the distinctions between cryptocurrency and traditional finance. GameFi, however, would be the future direction of DeFi development, where users’ funds would have actual application value in virtual game worlds. Users could earn substantial token rewards through activities in these virtual worlds, similar to working in real life.

Since then, the GameFi sector has begun to experience its first wave of growth!

Figure 3 GameFi promotional image

GameFi reshapes the gaming track

GameFi is a blockchain technology that combines DeFi, NFTs, and blockchain games. It operates game assets and some logic on blockchain smart contracts, managed by DAOs (decentralized autonomous organizations) to ensure users’ ownership of in-game assets and governance rights over the game. GameFi focuses on building a complete financial system, supporting activities like trading items using native game tokens. Users can earn token rewards through gameplay, sharing in the benefits of the game’s development.

Completely solve the shortcomings of traditional games

In traditional games, items like weapons and skins have inherent value, which is already widely recognized. For instance, CSGO’s annual average sales of items exceeded $420 million from 2018 to 2023, with a yearly increase. In League of Legends, annual sales of skin items grew from $1.4 billion in 2018 to $2.5 billion in 2023. In Honor of Kings, annual sales of skin items even reached an impressive $2.74 billion in 2023. Both domestically and internationally, the market for game items is vast.

Figure 4 Annual sales of CSGO props

Figure 5 Annual sales of League of Legends props

Figure 6 Annual sales of Honor of Kings props

However, due to the impact of item trading on game publishers’ profits and its potential legal issues in certain regions, game developers often adopt two main strategies: one is to monopolize the item trading market, as seen with CSGO and Steam, which charge high transaction fees; the other is to control item supply and prohibit account trading, as implemented by games like League of Legends and Honor of Kings, by providing unlimited items through a unified purchasing channel.

As a result of these restrictions and local regulations, black market sales of game items have become a highly profitable business. With increasing efforts by game developers and local regulations to combat black market trading, the supply of black market items decreases, leading to higher profit margins for these illicit sales.

Figure 7 Rough curve of the relationship between private trading profits and transaction difficulty

GameFi, built on blockchain technology, naturally incorporates DeFi attributes, effectively addressing the issues of publisher monopolies and black market activity in the gaming industry. GameFi is both a game and a market, where game skins and items exist as NFTs, and all transactions follow market principles and strive to maintain transparency.

Additionally, DAO governance in GameFi allows all players to share in the governance of the game. This is a significant feature, as current game publishers often manipulate lottery probabilities or reduce the prices of previously expensive items to boost sales, negatively impacting existing players. Protests against such practices are often suppressed by these tech giants through traffic control. DAO governance can disrupt the current state of absolute authority held by game publishers, allowing users to enjoy the benefits of overall economic improvements in game development without constant concern over detrimental changes.

Perfectly in line with the development history of the game

Looking at the development history of games, key factors often include advancements in computer technology, hardware upgrades, and innovations in game design.

1. Early Computer Games Era (1970s-1980s): This initial stage of video game development was mainly centered around laboratory and university environments. Notable early games include Spacewar! and Pong, with Pong marking the beginning of commercial video games.
2. Home Console Era (1980s-1990s): Nintendo released the NES home console, bringing classic games like Super Mario Bros. to the forefront.
3. 16-bit Console Era (1990s): Sony introduced the PlayStation, ushering in the era of disc-based games, with Final Fantasy VII sparking a gaming craze.
5. 3D Game Era (Late 1990s-early 2000s): Valve released Half-Life, which earned widespread acclaim for its deep storyline and immersive experience.
6. Online and MMORPG Era (2000s): Blizzard Entertainment released World of Warcraft, becoming one of the most successful MMORPGs and advancing the development of online multiplayer games.
7. Mobile and Social Games Era (2010s-present): Supercell launched Clash of Clans, a highly successful mobile strategy game, while Niantic released Pokémon GO, integrating augmented reality (AR) technology with mobile gaming and sparking a global phenomenon.
8. Online Gaming and MMORPG Era (2000s): Blizzard Entertainment releases World of Warcraft, which becomes one of the most successful MMORPGs and promotes the development of online multiplayer games.
9. The era of mobile and social games (2010 to present): Supercell released Clash of Clans, which became one of the most successful mobile strategy games, and Niantic released Pokémon GO, bringing augmented reality (AR) technology to mobile The combination of games has triggered a global craze.

Figure 8 Traditional game development line

In the past, the development of games mainly relied on three major elements: computer technology improvement, hardware upgrades, and game concept innovation. Now GameFi is a powerful combination of DeFi and NFT, representing one of the most cutting-edge and interesting technologies in the blockchain; it is also a combination of computers and finance. The cross-integration of disciplines has a novel “play-to-earn” game concept; at the same time, it provides an example for financial market research; it can be said that GameFi perfectly conforms to two of the three major elements in the development process of games and conforms to the history of game development.

GameFi has developed rapidly in recent years, proposed novel concepts and designs, and birthed many top projects.

1. Early Exploration (2018): Decentraland was launched. As one of the early GameFi projects, Decentraland allows players to purchase, develop and trade virtual land, using blockchain technology to achieve true ownership. Gods Unchained has launched a blockchain-based trading card game that allows players to buy, sell and trade cards, demonstrating the potential of NFT in gaming.
2. Concept Proposal (2019): Mary Ma proposed the concepts of “gamified finance” and “new gamified business”, marking the birth of the GameFi concept. In the same year, Axie Infinity launched by Sky Mavis began to enter the public eye.
3. Initial rise (2020): Yearn.finance founder Andre Cronje reiterated the concept of GameFi in September 2020, predicting that DeFi will develop into a gamified financial stage in the future, and user funds will be used as equipment in the game. At this time, the DeFi and NFT markets also ushered in a golden period, paving the way for the explosion of GameFi.
4. Explosive Growth (2021): Axie Infinity has been a huge success, attracting millions of players, reaching $1 million in daily trading volume in August, and enabling players to earn money through games through a “play-to-earn” model. During the epidemic, it became the main source of income for hundreds of thousands of residents in Southeast Asian countries; in the same year, The Sandbox exploded, allowing users to create, own and trade virtual assets and land, and was sought after by a large number of venture capital institutions.
5. Traffic has fallen off a cliff (2022 to present): Affected by the overall downturn in the encryption market, GameFi’s popularity has declined severely. Axie Infinity’s daily active users have plummeted from 740,000 in August 2021 to 35,000 in August 2022. At the same time, many GameFi are facing Due to serious inflation problems, the number of DeFi Kingdoms tokens has increased from 60 million in early 2022 to 100 million in the middle of the year.

Figure 9 Game vs GameFi

The explosive growth of GameFi has also propelled the concept of the metaverse. The essence of the metaverse is to create a virtual shared space enabled by AR (augmented reality) and VR (virtual reality), incorporating decentralized technologies like blockchain. It encompasses not only gaming but also various aspects of daily life. GameFi’s flexible ecosystem construction has made it a synonym for the metaverse in many contexts.

During 2021 and 2022, numerous traditional tech companies began to engage with GameFi and metaverse concepts:

Facebook rebranded as Meta, reflecting its long-term vision for the metaverse.

Tencent established TiMi Studios to focus on developing metaverse-related games and invested in The Sandbox and Decentraland.

Microsoft acquired Activision Blizzard for $68.7 billion, planning to combine popular traditional games with blockchain technology to create a new generation of GameFi.

Goldman Sachs and SoftBank increased their investments in GameFi, endorsing well-known projects like Axie Infinity and The Sandbox.

Overall, the market value of GameFi has risen from $200 million in 2018 to $24.52 billion in 2023, with a growth rate of 733.3% from 2020 to 2021.

Figure 10 GameFi market value growth chart

Figure 11 GameFi market capitalization growth rate

Although GameFi currently faces some challenges, the strong involvement of traditional tech companies and the gradual maturation of technology suggest that the future holds limitless possibilities.

A narrative that combines the strengths of various approaches

GameFi itself is a combination of DeFi, NFTs, and blockchain games. It breathes life into the previously monotonous DeFi sector and provides practical use cases for NFT technology that lacked application scenarios. Additionally, GameFi’s governance model offers an opportunity for the implementation of DAO organizations. With the current popularity of concepts like the metaverse, AR and VR are also expected to become integral parts of major GameFi projects. Therefore, GameFi represents a significant application area that deeply integrates blockchain technology with virtual technologies.

DeFi+NFT token economy, building an independent financial ecosystem

The financial characteristics of GameFi distinguish it from traditional blockchain games. While blockchain games focus on using blockchain technology to enhance game transparency, fairness, and asset ownership, GameFi integrates a complete financial system into the game, creating a blockchain game with financial attributes. Thus, while blockchain games can be simple blockchain applications, GameFi necessarily includes financial functions and economic systems.

From a technical perspective, the uniqueness and indivisibility of NFTs give each game item unique value. By limiting the issuance of NFT items, scarcity can be created, enhancing their value.

From a rights perspective, in GameFi, the project team acts solely as game developers, bug fixers, and decision-makers. Initially, they sell tokens and NFT items to players and delegate most of the power to ordinary players. Decisions regarding game updates, development, and profit distribution are made by a DAO organization composed of players and the project team.

From a mechanism perspective, the “play-to-earn” model in GameFi allows players to earn NFT items or tokens through time and financial investment in the game, which can be exchanged for real-world currency, generating economic benefits.

Integrating financial systems into games is not unique to GameFi; some traditional games already have complex financial systems, proving the feasibility of this approach. For instance, the MMORPG EVE Online is known for its intricate financial system, simulating real-world markets with elements like production, trade, and resource management. It features over 40,000 items, allowing players to mine resources, manufacture goods, establish companies and alliances, and even manipulate markets. The game’s developer, CCP Games, employs economist Eyjólfur Guðmundsson to study and regulate the in-game economy, preventing market collapse.

Figure 12 Promotional image of “EVE Online”

Figure 13 Some game props in “EVE Online”

Currently, the financial systems in GameFi are not as complex as those in established games like EVE Online, World of Warcraft, or Second Life. However, GameFi’s decentralized nature ensures that players have true ownership of their assets, eliminating the risk of having to trust game publishers.

Cross-chain asset interoperability + multi-platform operations create a large financial circle

Single GameFi projects may face issues such as low user numbers, low activity, and unstable funding. Cross-chain asset interoperability and multi-platform operations might help address these challenges. Each GameFi is an economic entity, and when GameFi projects are interconnected, they can form a large economic market. This requires the integration of various technologies, including cross-chain, cross-platform compatibility, data synchronization and consistency, and decentralized account management.

Cross-chain technology: Allows users to perform direct transactions and communication between different blockchains through cross-chain bridge technology or interoperability protocols.

Cross-platform compatibility: Ensuring that GameFi can operate across different hardware and software environments from the start of development. Using high-compatibility game engines like Unity and Unreal Engine, along with standardized APIs, is crucial for achieving cross-platform compatibility.

Data synchronization and consistency: State Channels technology allows users to complete transactions off-chain and only submit the final state to the blockchain for information synchronization, reducing data transmission pressure.

Decentralized account management: When supporting cross-chain and multi-platform operations in GameFi, decentralized identity (DID), single sign-on (SSO), and distributed account storage become important. These technologies can ease the burden of account management for users and enhance security.

A unified and effective financial cycle can not only improve the liquidity of funds within the cycle but, as Andre Cronje envisions, could potentially become a future direction for DeFi development. Additionally, the financial cycle in GameFi will simulate financial behaviors between countries and regions in the real world, providing a model for further economic research.

Integrating AR and VR technologies, “Ready Player One” is no longer a fantasy

Benefiting from the explosive growth of GameFi in 2021, the concept of the metaverse once dominated hot stocks in both the A-share and U.S. stock markets. During this period, fraudulent activities under the guise of the metaverse concept were rampant. Against this backdrop, GameFi gradually came to be seen as the hope for carrying forward the metaverse concept.

At the same time, AR and VR technologies associated with the metaverse began to flourish. By 2023, the global AR and VR market size had exceeded $70 billion and is expected to surpass $400 billion by 2030.

Figure 14 Estimated market size of AR and VR

Many projects are now dedicated to integrating blockchain with AR and VR technologies at the foundational level, making it possible for future GameFi to combine AR and VR, bringing the vision of “Ready Player One” closer to reality.

Render Network: Provides distributed GPU rendering services, supporting high-quality 3D rendering for AR and VR. Many applications, including Apple Vision Pro, already offer this service.

Ozone: Offers multi-chain and cross-chain supported 3D applications and cloud computing services.

IOTX: Provides a secure, privacy-protecting, and scalable blockchain platform to connect and manage IoT devices.

Given the future demand in the virtual market, it has gradually become a consensus that GameFi combined with AR and VR technologies will create the next generation of AAA games.

GameFi 1.0 era, a fast Ponzi game

CryptoKitties, crazy cats start the GameFi 1.0 era

On November 28, 2017, CryptoKitties launched on the Ethereum blockchain, becoming the first viral DAPP. Its appearance demonstrated that Ethereum was not just for token issuance but could also support simple and fun NFT games. CryptoKitties introduced a series of innovative gameplay features:

1. Users could purchase their own cat NFTs using ETH in the CryptoKitties marketplace.
2. Each cat had a unique genetic code, allowing users to track each cat’s parents, siblings, and past activities on the marketplace.

Figure 15 CryptoKitties information

Two cats could breed to produce a new generation of kittens. After breeding, the cats would enter a cooldown period, which would lengthen with each subsequent breeding. The new generation of kittens would inherit the cooldown period. Players could rent out their cats for breeding, gift them to others, or auction them in the marketplace.

CryptoKitties’ innovative gameplay and high earning potential quickly attracted speculators. One cat, named “Dragon,” sold for 600 ETH (around $170,000), setting a historic record. The CryptoKitties project spun off from its original company, Axiom Zen, and secured $12 million in investment from top venture capital firms a16z and USV.

As of 2024, the CryptoKitties project has conducted over 700,000 transactions, with a total transaction volume of 67,818 ETH, equivalent to approximately $115 million. However, since mid-2018, the transaction volume has plummeted, and the project is no longer a market hotspot.

Figure 16 Changes in CryptoKitties transaction volume

Although the intent behind the CryptoKitties project was not to create a Ponzi scheme but to explore more avenues for Ethereum’s future development through an NFT game, it inadvertently caused a significant economic bubble.

Fomo3D – a pure gambling game

The brief popularity of CryptoKitties sparked an early explosion of Blockchain projects, although most of these lacked any real innovation. Among the most infamous of these projects was Fomo3D. Fomo3D was a simplistic speculative game with four main types of gameplay. Its core mechanism was a treasure hunt, augmented by team dividend mechanisms, referral reward mechanisms, and lucky candy mechanisms to increase profitability.

The treasure hunt mechanism targeted gamblers. In Fomo3D, each game round included a 24-hour countdown. During this countdown, players spent Ethereum to buy in-game tokens called “Keys.” Each purchase of a “Key” would add 90 seconds to the countdown (not exceeding 24 hours). The player who made the final purchase of at least one “Key” before the 24-hour countdown ended would win 48% of the prize pool. To ensure that the game would eventually end, Fomo3D dynamically adjusted the price of “Keys.” With each purchase, the subsequent price for a “Key” would increase, leading to a situation where the countdown could outpace the 90-second increment, eventually concluding the game.

Figure 17 Fomo3D “Key” price changes with purchase quantity

It is clear that Fomo3D is a typical Ponzi scheme game, where everyone hopes to be the last winner while most end up losing everything.

Games like Fomo3D are characteristic of the GameFi 1.0 era, which were predominantly Ponzi schemes that involved shifting funds from new users to reward old ones. The fragile balance under high returns was easily disrupted by factors such as the sale of native tokens, declining interest, or a decrease in new users. Additionally, these Blockchain Games could not match traditional games in terms of entertainment value. Thus, fundamentally, these early Blockchain Games lacked a complete financial system and cannot be considered true GameFi.

GameFi 2.0 era, inspired by “play-to-earn”

The GameFi 2.0 era represents a period of significant growth for the GameFi concept. It marks a transition from the “play-to-earn” model to a broader “x-to-earn” approach, gradually incorporating various financial elements such as community, trading, combat, and market mechanisms into the Blockchain financial system.

Axie Infinity kicks off the “play-to-earn” model craze

Unlike previous Blockchain Games, Axie Infinity was the first to combine the “play-to-earn” concept with complex financial mechanisms, creating an engaging NFT-based world where players can collect, breed, battle, and trade creatures called Axies.

Early Stage (2018): Axie Infinity was launched by the Vietnamese startup Sky Mavis. Inspired by Pokémon and CryptoKitties, the team aimed to create a player-governed fantasy world.

Initial Development Phase (2019–2020): Axie Infinity went live on the Ethereum blockchain, allowing players to purchase and breed Axies, and trade them on the market. The introduction of PVP modes and adventure systems further enhanced the game’s playability.

Explosive Growth (2021): The game’s “play-to-earn” model attracted a large number of players, and a documentary titled “Play-to-Earn: NFT Gaming in the Philippines” brought the game’s potential to wider attention.

Expansion Phase (2022–Present): Axie Infinity has continued to grow with several new developments, including Axie Infinity Origins, Axie Infinity: Homeland, Axie Classic, Axie Infinity: Raylights, Defenders of Lunacian, and the Project T prototype.

Figure 18 Axie Infinity game mode

In the Axie Classic version, players need to purchase three Axies to start battles or breeding. Each Axie is unique and entirely owned by the player. When Axies are created, they are assigned random attributes such as health, skills, speed, and morale, and have different breed traits that can provide specific advantages or disadvantages in battles. The detailed game rules of Axie are extensive and not covered here.

The Axie Infinity token governance model uses a dual-token system, with AXS serving as the governance token and SLP as the in-game token.

AXS Token Usage

AXS holders have voting rights on the governance of the Axie Infinity ecosystem, including decisions on future development and major changes. Players can stake AXS tokens to earn rewards. A portion of AXS is used to pay for breeding Axies. AXS is also used as a reward token in in-game events.

SLP Token Usage

SLP is primarily used for breeding Axies, with the required amount increasing with each successive breeding. Players can earn SLP through completing daily tasks, participating in PVE (adventure mode), and PVP (arena mode).

Unique Scholarship Mechanism

Axie Infinity features a unique scholarship system where Axie owners can lend their Axies to scholars. Scholars use these Axies to battle and earn SLP, while Axie owners receive a share of the earnings. This system allows players who are diligent and knowledgeable about the game to enter without initial investment and continuously earn AXS and SLP, growing their Axie teams. During the pandemic, many people in the Philippines used Axie Infinity to support their basic livelihoods, making it one of the few blockchain projects that has genuinely improved people’s lives.

Axie Infinity’s innovative achievements are reflected in its MAU (monthly active users), transaction volume, and revenue. In August 2021, Axie Infinity’s total transaction volume exceeded $2 billion, and monthly revenue reached $364 million, surpassing “Honor of Kings” for the first time. By the end of the same year, its monthly active users exceeded 2 million.

Despite its groundbreaking role in GameFi, Axie Infinity has been affected by economic bubbles and overall market downturns. Its active user base dropped from a peak of 2.7 million in 2021 to 400,000 in 2023, with current monthly users around 100,000. Its transaction volume also fell from $4 billion in 2021 to $200 million in 2023.

Figure 19 Changes in active users of Axie Infinity

Figure 20 Annual sales changes of Axie Infinity

Despite experiencing a significant economic bubble, Axie Infinity has withstood the turbulence and continues to maintain a leading position in GameFi. In the past 30 days, Axie has seen 387,232 transactions with sales totaling 1,083.3 ETH, approximately $4 million. This is a remarkable achievement for a game that has been around for six years.

Figure 21 Axie sales overview in the past 30 days

Axie Infinity implemented GameFi’s concepts and models through the “play-to-earn” model for the first time, and successfully attracted people who really like the game through PEP and PVP models. It is a successful example in GameFi.

The Sandbox shapes the virtual world

If Axie Infinity is considered a casual game within GameFi, then The Sandbox is undoubtedly its grand masterpiece. The Sandbox originated from two popular sandbox games, Sandbox and Sandbox Evolution, which collectively had over 40 million downloads on iOS and Android. In 2018, the publisher Pixowl decided to transition this successful user-generated content game IP and its large creator community from mobile devices to the blockchain ecosystem. By providing real intellectual property rights through NFTs and rewarding community contributions in the form of tokens, The Sandbox emerged as this remarkable project.

Figure 22 The Sandbox promotion

From a technical perspective, The Sandbox builds on the UGC (User-Generated Content) ecosystem model of past sandbox games and provides a comprehensive design experience through three integrated tools: VoxEdit, MarketPlace, and Game Maker. It also supports blockchain and smart contracts for copyright protection of successful designs.

From a token model perspective, The Sandbox utilizes three types of tokens to ensure economic circulation within the game: SAND, LAND, and ASSETS.

SAND follows the ERC-20 standard and is used for acquiring assets, purchasing land, and publishing content in The Sandbox. It also has governance functions and allows for staking to earn additional SAND.

LAND follows the ERC-721 standard and represents in-game land assets. Each LAND parcel is 96x96 units in size. Players can add games and assets to LAND and set their own game rules. Multiple LAND parcels can combine to form larger ESTATES, suitable for creating more expansive and content-rich sandbox games.

ASSETS follows the ERC-1155 standard and are tokens created by users to prove ownership of content. These can be sold on The Sandbox’s front-end platform.

The Sandbox has attracted significant capital due to its strong IP effects, innovative game concepts, and open financial system. In 2018, Animoca Brands acquired Pixowl and provided long-term support for The Sandbox’s development. In 2019, The Sandbox raised $2.5 million in seed funding led by Hashed. In 2020, it secured $3 million in Series A funding from True Global Ventures, Square Enix, and other institutions. In 2021, The Sandbox’s strong ecosystem, which differed from inferior blockchain games, was recognized by SoftBank, leading to a $93 million Series B funding round led by SoftBank.

The Sandbox has lived up to investor expectations. Since LAND sales began, the average price has steadily increased, and the floor price on the NFT marketplace OpenSea currently stands at 0.12 ETH.

Figure 23 LADN average selling price changes

Additionally, many prime LAND locations have been sold at astronomical prices. In November 2021, virtual real estate investment firm Republic Realm purchased a piece of virtual land in The Sandbox for $4.3 million. The following month, a neighboring LAND parcel owned by Snoop Dogg was sold for approximately $450,000.

Figure 24 Partial map of LAND land distribution

Since its ICO, The Sandbox’s market value has experienced significant fluctuations, peaking at $6.8 billion. It currently remains high at $700 million, and the profits for venture capital firms that invested in The Sandbox are substantial.

Figure 25 Changes in market value of The Sandbox

Overall, The Sandbox has set a benchmark for the integration of traditional IP with blockchain technology and demonstrated the powerful wealth accumulation effect that high-quality GameFi can achieve.

In the GameFi 3.0 era, how to explore the future GameFi market

Mini Game is not GameFi

The simple operations of Not have led to viral community growth, achieving tens of millions of users in a short period. Since its launch in January 2024, Not has seen over 30 million participants and an average daily active user count of 5 million. Notcoin also successfully completed its ICO on multiple exchanges, including Binance, with a price increase of over 400% within seven days.

However, these games are hosted on Telegram and can be classified as Mini Games. They lack a comprehensive financial system and have limited IP effects and playability. Their popularity is largely supported by the concept of “fair launch.” Unlike similar mini-games on WeChat, Telegram Mini Games are not restricted by platform limitations, making their benefits a form of extension from Web2 to Web3.

Revisiting GameFi

The market remains a blue ocean despite the diverse range of game formats.

The period from 2023 to 2024 has seen rapid development in the variety of GameFi game formats. The market now includes several types such as Farming/Mining Games, Card Games, Move-to-Earn Games, MMORPGs, Metaverse Games, and Auto Battles. Despite the diversity in game formats, the market remains a blue ocean with significant opportunities for growth and innovation.

Figure 26 GameFi game forms and typical games

On DAppRadar, the top-ranked GameFi by UAW (Active Users) is Matr1x, an MMORPG. In the past 30 days, it has reached 1.92 million active users, yet its circulating market value is only $49 million. Currently, market trends are focused on foundational areas such as Layer 1 and Layer 2 development. GameFi, which leans towards integrated technological applications, still holds potential for a secondary surge as breakthroughs occur in foundational fields.

Figure 27 DAppradar GameFi ranking

Full-Chain Games

Full-chain games operate and store all game logic, data, and assets on the blockchain. Unlike GameFi 1.0 and GameFi 2.0 games, which typically only have assets or partial logic on-chain, full-chain games emphasize complete decentralization and transparency, effectively mitigating issues like game cheating. Autonomous World is a prime example of a full-chain game, where the entire virtual world is built on blockchain technology, allowing for the monitoring of rules and operations. The future goal of GameFi development will likely be full-chain games.

GameFi+?

In the current market, standalone GameFi projects struggle to gain traction. Combining GameFi with technologies like AI and the Internet of Things (IoT) might offer a breakthrough. Several GameFi+AI projects, such as Colony, Nimnetwork, Futureverse, Palio, and Ultiverse, are breaking new ground. Palio, for instance, received $15 million in investment from Binance Labs to develop and integrate AI technology, showcasing strong VC interest and support for GameFi+AI projects. Additionally, combining GameFi with IoT and cloud computing is also a promising development path.

From the perspectives of technology, IP effect, and playability:

Axie Infinity, inspired by the game “Pokémon,” developed a pet battle game on the blockchain, while The Sandbox is a blockchain migration of “Sand” and “Sand Evolution,” demonstrating the infinite development potential of traditional IPs in the blockchain space. Despite experiencing severe economic bubbles, both Axie Infinity and The Sandbox still have valuations of $800 million and $700 million, respectively, proving their ability to attract real users.

Additionally, several game companies plan to integrate blockchain technology into classic games.

Atari is collaborating with The Sandbox to bring classic games like “Centipede” and “Pong” to the metaverse platform, allowing players to use SAND tokens to participate in and create experiences based on these classics.

Square Enix plans to bring its renowned game IPs, “Final Fantasy” and “Dragon Quest,” to blockchain platforms.

Capcom is exploring ways to introduce its well-known games, such as “Street Fighter” and “Resident Evil,” into the blockchain gaming sector.

In the traditional gaming realm, MOBA games like League of Legends and Honor of Kings often signify the peak of game development. In the GameFi space, the current breakthrough method is to create a game with high playability and a complete financial system. The first to successfully integrate excellent game IPs will have a chance to gain a competitive edge.

Summarize

GameFi is essentially a combination of DeFi, NFTs, and blockchain games, representing a new stage in the application of blockchain technology and game development.

GameFi has evolved through phases 1.0 and 2.0, transitioning from early Ponzi schemes to creating game ecosystems that genuinely attract real users. Currently, the blockchain industry’s focus is on foundational infrastructure like Layer 1 and Layer 2, while GameFi is still in a phase of buildup.

The development trends for GameFi 3.0 include “full-chain games” and “GameFi+?” Combining GameFi with emerging technologies such as AI or IoT is a promising direction.

Investing in GameFi requires attention to aspects like intellectual property (IP), playability, and technical robustness. Only GameFi projects that can genuinely engage players will have long-term development potential.

statement:

1. This article is reproduced from [PANews], the copyright belongs to the original author [Trustless Labs], if you have any objections to the reprint, please contact the Gate Learn team, and the team will handle it as soon as possible according to relevant procedures.

2. Disclaimer: The views and opinions expressed in this article represent only the author’s personal views and do not constitute any investment advice.

3. Other language versions of the article are translated by the Gate Learn team and are not mentioned in Gate.io, the translated article may not be reproduced, distributed or plagiarized.