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| “Affirmations are our mental vitamins, providing the supplementary positive thoughts we need to balance the barrage of negative events and thoughts we experience daily.” ― Tia Walker |
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In today's issue: You've heard of blockchain games, but have you actually played one?
Of course not! You're too busy!
That's why today's report on the state of blockchain gaming also has videos of the most popular blockchain games, so you can see how they work.
Extra credit: Which blockchain game is pictured at the right? Read on. |
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| Premium Power-Ups Level up your crypto investing game. |
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| | | Must Read Today's most important story for crypto investors. |
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Excellent recap of the drama that has engulfed the crypto space over the last few days.
TLDR: CoinDesk ran a spurious article questioning FTX's finances, and Binance's CEO added fuel to the fire. When it looked like FTX would not survive the ensuing bank run, Binance offered to buy FTX (the deal is not finalized yet).
Investor takeaway: We have long been believers in Binance, running numerous deep dives on the company and its BNB token (which we believe is like investing in Binance "stock"). The deal, if it goes through, will cement Binance's leadership as the largest global crypto exchange, and they'll get FTX at fire-sale prices.
(Of course, Premium members knew this since last year when we included BNB as one of the four holdings in our Future Winners Portfolio.) |
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| | | What Investors Need to Know About Blockchain Gaming by Anatol Antonovici |
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Summary: The promise of blockchain gaming is that players can benefit from the same technology that powers crypto, which means true ownership, transparency, borderless transactions, and the ability to win items that may grow in value. The overlap with Metaverse and Web3 technologies makes blockchain gaming even more exciting for investors.
Blockchain games are in a league of their own for two primary reasons: They involve a lot of decentralization. Gamers can earn while playing.
Traditional games are centralized. All in-game items, the game story, and the code come from a single company (i.e., Electronic Arts or Blizzard).
Blockchain-based games, while still developed and released by central companies, give players more control over their in-game items, which can be traded on secondary markets. There are even promises of transferring items between games.
Blockchain games introduce new economic and monetization models that aren’t available with traditional games. These involve a combination of non-fungible tokens (NFTs) representing in-game items and other assets, along with proprietary cryptocurrencies that fuel the in-game economy.
The play-to-earn (P2E) model is very popular across blockchain games, Web3, and Metaverse applications. It enables gamers to generate income by actively playing and taking part in different tournaments and other events.
While gamers can, in theory, earn lots of money by playing traditional games (DOTA 2’s prize pool for the international championship was$40 million in 2021, and FIFA 22 playerscan earn rewards in the tens of thousands), blockchain games involve more democratic reward systems, benefiting a wider range of casual gamers.
More importantly, in blockchain games, the value and potential rewards are directly tied to in-game items like land, characters, and weapons. |
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Axie Infinity (click to watch)
Benefits of Blockchain Gaming
Games based on blockchain technology have surged in popularity because of several major benefits:
Ownership – players can own in-game assets in the form of NFTs, which cannot be faked. They can monetize assets like land, virtual spaces, weapons, and avatars by selling the NFTs on secondary markets or renting them in the game world.
Improved security – blockchain games leverage decentralized public networks that have no single points of failure, which makes player interactions more secure. Thanks to blockchain, sensitive data like a player's ID or transaction history are stored securely.
Transparency – all transactions on public blockchains can be monitored freely by anyone, making blockchain games transparent. Once a transaction is finalized, it cannot be reversed or tampered with, and anyone is able to see it online.
Potential to make money – besides selling or renting NFTs on secondary markets, blockchain gamers can monetize their efforts as many games integrate the P2E model, which incentivizes players to actively participate in various tournaments, complete quests and missions, and engage in other activities.
In 2021, the Blockchain Game Association (BGA)surveyedover 200 gamers worldwide and found most of them (85%) considered asset ownership the most significant advantage of blockchain gaming as decentralized ledger technology enables users to have true ownership of their in-game assets through NFTs.
Other mentioned benefits were new revenue models, transparency, and decentralized project ownership. |
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Image via Blockchain Game Alliance
Early Investment Is Huge
As blockchain gaming is still a new and unexplored market, it comes with risks and challenges. However, that hasn’t stopped venture capital firms and other institutional investors from getting involved in this new sector by pouring in hundreds of millions of dollars.
Blockchain research firm Delphi Digitalfound institutional investor interest in blockchain gaming remained high in the second quarter of 2022 despite token valuations falling significantly amid the crypto winter. |
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Image via Twitter
Earlier this year, DeFi-oriented venture capital firm Framework Venturesraised about $400 million for its third fund FVIII, with half being dedicated to blockchain games. Co-founders Michael Anderson (ex-Snapchat) and Vance Spencer (ex-Netflix) are betting big on crypto games:
“I believe the next stage of the blockchain industry will be entirely about onboarding new users, and we think gaming is by far the biggest top-of-funnel opportunity. As the economics of play-to-earn models converge with triple-A games that are actually fun to play, we expect an explosion of growth for this sector.” - Michael Anderson, Framework Ventures
In mid-October, Framework led a funding round to help Stardust (which provides developer tools for creating blockchain games)raise $30 million.
Elsewhere, Horizon Blockchain Games, the developer of blockchain game Skyweaver,raised $40 million in a series A funding round led by Brevan Howard Digital and Morgan Creek Digital.
In all, early investments in blockchain games remain high despite the harsh conditions of the crypto market. |
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The Sandbox (click to watch)
Popular Blockchain Games
Blockchain gaming is surging rapidly, with many new games competing to attract players and investors. However, some complain the "fun factor" is still missing, as blockchain games haven’t evolved to the level of traditional AAA games. |
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Decentraland (click to watch)
Even so, there are well-established games that still have the potential to grow. Some examples are the Metaverse games Sandbox (with its token SAND) and Decentraland (MANA).
Other game tokens on the rise are STEPN, the native token of a Web3 lifestyle app, and MAGIC, the token of the first profile picture (PFP) MMORPG called Legions of Crypto. |
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Legions of Crypto (click to watch)
There are several newcomers that may grow rapidly. For example, Calvaria might be the best new crypto game leveraging a high bandwidth network. The public sale of its RIA token started in November 2022. |
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Calvaria (click to watch)
Battle Infinity, a fantasy sport gaming platform hosting P2E games integrated in a Metaverse world, is another candidate with great potential. Its native IBAT token was launched in September 2022. |
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Battle Infinity (click to watch)
Addressing Ongoing Challenges
While blockchain gaming is a promising industry, there are several challenges that may hinder its expansion and competitiveness with AAA games.
The first is security. During the first half of 2022, Axie Infinity, one of the most popular blockchain games,suffered a massive hack that caused total losses of over $600 million. The US found the attack was organized by a North Korea-backed entity known as Lazarus.
For this reason, developers should consider building on well-established blockchains like Ethereum. This may reduce the possibility of similar attacks, and investors would also be wise to look for games hosted on developed and secure blockchains.
Other challenges that need to be addressed are the limited awareness of NFT and blockchain technologies across the wider gaming community, accessibility barriers, price volatility, and complexity.
Price volatility is a double-edged sword. It can augment the value of rewards thanks to token price appreciation, but there's a risk of losing money. For example, the price of AXS (the native token of Axie Infinity) dropped dramatically following the hack. The token collapsed from $70 in March 2022 to $10 by November 2022.
However, these are challenges experienced by any emerging sector, and most players agree blockchain gaming is here to stay.
“Over the next few years, we predict that blockchain gaming will become one of the largest forms of employment in the world, with billions of people attracted to the allure and access of better economic opportunities found in entirely new digital universes.” - Michael Anderson, Framework Ventures |
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Gods Unchained (click to watch)
Investor Takeaway
Blockchain gaming comes with many opportunities for investors. There are three main ways to gain exposure to crypto games:
1) Invest in the project itself by taking part in seed financing rounds. This approach is suitable for institutional or accredited investors.
2) Buy the tokens that fuel the game. Examples include AXS for Axie Infinity, SAND for The Sandbox, MANA for Decentraland, and GODS for Gods Unchained. If you analyze the fundamentals of a game you like, you may benefit from purchasing (or earning) the native token, and selling when the game attracts more users or when the price goes up.
3) Play P2E games and get rewarded for participating in tournaments and events. You can also accumulate NFTs representing in-game items and sell them on secondary markets.
Due diligence is mandatory before earning or investing given blockchain gaming is a nascent sector. You may not get rich playing these games, but it's a way to have fun while learning about them. |
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| You're not exactly going to get rich playing blockchain games. |
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Bitcoin Market Journal is a daily newsletter that makes you a better crypto investor. It's created by John Hargrave, Nick Marinoff, Steve Walters, Anatol Antonovici, Ben Burn, Preetam Kaushik, and Daniel Joel.
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