What happened to the sphere that made millions of people buy virtual sneakers?

Executive summary

The GameFi market, which is a subcategory of the blockchain and crypto space, is a new and exciting opportunity for gamers to earn rewards in the form of crypto tokens while playing games. However, the market is highly volatile, with many projects failing to sustain their initial success. In this market research, we analyzed the current state of the GameFi market, key projects, growth potential, and risks.

Our research shows that GameFi is a fast-growing market (CAGR 27.2%), with a size of $11.3 billion, in 2023. We conclude that while the GameFi market is still in its early stages, it has the potential for growth if developers can address the challenges and create sustainable business models.

Intro

The world of gaming has evolved rapidly in recent years, with blockchain technology and cryptocurrency opening up new possibilities for gamers and developers alike. GameFi, or Gaming Finance, has emerged as a new and exciting subcategory of the blockchain and crypto space, offering gamers the chance to earn rewards in the form of crypto tokens while playing games. However, the GameFi market is highly volatile and short-lived, with many projects failing to sustain their initial success. In this market research, we aim to investigate the GameFi market in depth, analyzing its current state, trends, and potential for growth. We seek to determine whether GameFi is a sustainable and profitable market, or whether it is just another bubble waiting to burst.

Computer gaming market

History of games

Computer games, since their inception in the 1940s, have evolved alongside technological advancements and changing consumer preferences. The development of mainframe technology in the 1960s and 1970s marked the beginning of arcade gaming with games like Spacewar! and Pong. The 1980s saw a surge in popularity thanks to personal computers, introducing text-based and graphical adventures.

The 1980s and 1990s are often considered The Golden Age of Arcades, with iconic games like Pac-Man, Donkey Kong, and Street Fighter gaining global appeal. The 1990s brought a revolution in console gaming with the introduction of advanced consoles like NES and Sega Genesis. The 2000s witnessed the rise of Massively Multiplayer Online Games (MMOs) with internet connectivity and multiplayer gaming.

The 2010s saw a mobile gaming explosion, with titles like Angry Birds, Candy Crush Saga, and Pokémon Go becoming global phenomena. In recent years, eSports has gained significant popularity, attracting millions of viewers and generating $1,38 billion in revenue. Major eSports games include League of Legends, Dota 2, Counter-Strike: Global Offensive, Overwatch, and Call of Duty, among others. Professional eSports players dedicate from 30 to 80 hours per week to practising, often forming teams or joining established organizations. They undergo rigorous training regimes and possess excellent hand-eye coordination, strategic thinking, and teamwork abilities. eSports events are often held in large arenas or stadiums, where spectators can watch the game on big screens. Some of the most prestigious eSports tournaments, such as The International in Dota 2, have prize pools in the millions of dollars. The growth of esports has also led to the development of esports organizations, sponsorships, and streaming platforms. Professional players and teams often have lucrative endorsement deals and partnerships with brands.

The gaming market now

The computer games market is growing at 13.54% yearly and has an estimated size of $246,14 billion in 2023.

The Top 5 games in 2023 by MAU are the following:

1. Roblox: A global platform where millions of people gather together every day to imagine, create, and share experiences with each other in immersive, user-generated 3D worlds. MAU: 214 million.
2. Minecraft: A sandbox game where players can build and explore virtual worlds. MAU: 140 million.
3. Fortnite: A massively multiplayer online game where players battle against each other in a constantly shrinking battlefield. MAU: 80.4 million.
4. Counter-Strike 2 & GO: A first-person shooter video game developed by Valve Corporation which is a part of the Counter-Strike series. MAU: 49 million.
5. Call of Duty: Modern Warfare II/Warzone 2.0: A first-person shooter video game that serves as a sequel to the original Modern Warfare II and Warzone.

The new entrants in the gaming industry face a lot of pressure. They compete for user’s attention with well-known franchises and studios with seemingly unlimited resources, but there are still a lot of independent games as playing is one of the most common ways to spend time.

Entry barriers

Although new games appear daily, the market is highly competitive, and there are barriers that new entrants typically face:

• Piracy: The computer games market is susceptible to piracy, where unauthorized copies of games are distributed and used without purchasing them legally. A recent survey shows that around 10% of all gamers have illegally downloaded or played pirated games in the past three months. This leads to significant revenue losses for developers and publishers.
• Economic downturns: During periods of financial instability, consumers reduce spending on entertainment, including computer games. This can result in decreased demand and lower sales.
• Dependence on specific platforms: Many computer games are developed for specific gaming platforms, such as PCs, consoles, or mobile devices. Overdependence on a particular platform can be risky if the platform loses popularity or faces technical difficulties.
• Social risks: Gaming addiction is becoming more common among younger generations. There are also popular opinions that violent video games might lead to psychological problems. Such statements can harm both the whole market and individual projects.
• High development and production costs: Developing a computer game requires significant investments in terms of technology, software, hardware, and skilled personnel. For instance, the cost to make a AAA video game can be anywhere from $50 million to $300 million. These costs can be prohibitive for new entrants with limited resources.
• Marketing and distribution: Promoting and distributing computer games requires substantial marketing efforts and partnerships with established platforms, such as gaming consoles, app stores, or online marketplaces. According to industry reports, the average CAC for promoting video games can range between $10 to $50 per customer.
• Quality expectations: Gamers have high expectations when it comes to the quality and thoughtfulness of computer games, so new entrants need to demonstrate the ability to deliver compelling graphics, immersive gameplay, and bug-free experiences to gain traction in the market. But it takes about 2-3 years to make an AAA game.

Customer analysis

The games are something universal in their essence. There are 3.09 billion active video gamers worldwide. Users of all ages and backgrounds can enjoy games alike, although there are some boundaries in terms of technical availability.

Countries: Computer game users can be found all over the world, with some countries having a larger gaming community than others. Russia is Europe's biggest games market by population, almost a quarter of Russians play video games, and the same situation is in Ukraine. The rise of professional gaming and eSports has contributed to the increasing popularity of gaming in these countries, as over 15 million people in Russia are e-sportsmen. In the USA there are 67% share of the population playing video games, and more than 3.7 thousand active competition players, as some of the most followed eSports tournaments took place in the USA. Among the other countries that, have a significant gaming population, we can name China (52.6%, South Korea (74%, and Germany (71%, although there are many more.

Age: Computer games attract users of all ages. While there is no specific age that defines the average user, the industry caters to a broad range of demographics with different products. Most gamers are among people aged 18 to 34 years - 38%. The second largest group is people under 18 years - 20%. The average gamer is 35 years old.

Reasons to play: People play computer games for various reasons, including entertainment, stress relief, social interaction, competition, skill development, and escapism. Some individuals play games for leisure and enjoyment, while others may see it as a serious hobby or a profession.

According to surveys, the average spend per paying gamer in the US was about $200 - $912 a year: $500-$2,500 on consoles and gaming accessories,$23.87 per month on video games, and $10 on in-app purchases. This figure is much lower in low-income countries. It also has to be noted that the surveys focus on the people who consider themselves gamers, while most of the ones playing mobile games casually won’t. To approximate, the global spending among all the players is equal to 83$ per year.

Computer games' problems

What are the most common problems users face?

• Cost: Some computer games, especially the popular and high-quality ones, can be quite expensive. Gamers may need to invest in a gaming computer, gaming console, or other hardware to play the latest games.
• Compatibility: Not all games are compatible with every computer, gaming system, or mobile device. It is necessary to check the minimum system requirements of a game before purchasing to ensure that the computer can handle it.
• Difficulty spikes: If a game suddenly becomes significantly harder without providing the necessary tools or guidance, players may struggle to progress beyond a certain point. This may lead to fraud and the use of cheat codes.
• Wasted time: Gaming is often regarded as a waste of time, especially when one dedicates hours to playing every day. Only a tiny number of gamers become professionals and earn money. The attention of users is being sold by game developers if the game itself is free.
• Isolation: Rewards and progress from one game remain within that game only with no option to transfer, and thus cannot be used in others. There is also usually no way to sell the assets and return the investment should one decide to leave the game. The sales of accounts are deemed outside of the rules in most games and might lead to bans.

The gaming industry grapples with criticism on both social and economic fronts.

In the social sphere, gaming addiction stands out as a significant concern. Excessive gaming often leads individuals to neglect real-life responsibilities, resulting in social isolation and withdrawal from society. This addiction is not unique to gaming but is exacerbated by the use of addictive mechanics aimed at maximizing user engagement and, consequently, financial gain. Online services, including games and social media, employ similar mechanisms to increase user interaction, sometimes leading to economic and educational impacts.

Health problems stemming from a sedentary gaming lifestyle are another interconnected issue. Studies suggest a correlation between playing violent computer games and increased aggression, potentially straining relationships with friends, family, and peers.

There are also issues on the socio-economic front:

• Players express dissatisfaction with pay-to-win mechanic, which leads to imbalances and unfairness in gameplay.
• Unethical practices, like a lack of transparency in in-game purchases or exploitation of psychological triggers to encourage excessive spending.
• The use of such freemium models makes it very challenging to play without additional purchases.

"‎Black" markets and Cybersports winnings

Just like in regular economics, popular computer games also suffer from black markets. Driven by a myriad of factors such as scarcity and restricted access, black markets emerge as ecosystems where goods and services take alternative channels of distribution. The same is true for computer games. Over the years, the industry has attracted more money, causing some players to trick the system in search of financial benefits. The "‎black" market in gaming exists because there are many new players, who would like to have faster progress and not start from the beginning (buyers) and there are experienced players, who have achievements on sometimes multiple accounts and they’d like to monetise them (sellers). There is also a part of gaming that is appearing on the news more and more often, the cybersport tournaments. What was considered "just a game" a couple of years ago can now make a talented player rich fast. Cybersport is becoming more like a traditional sport, inheriting the issues of the latter (match-fixing, cheating, boosting, etc.)

Controversy in esports

• MMR boosting services are available for customers to get a specific rating increase. Professional boosters are used to up the player’s account by playing on their behalf. Prices for MMR boosting are ranging from $290 to $5,000 and above. Dailiantong (one of the boosting platforms) claims to have received 30 million orders in the past five years, which were carried out by over 500,000 boosters. That means that there are at least 30 million players, who paid to up their stats.
• In 2018, the Indian professional player Nikhil "‎Forsaken", Kumawat was caught cheating during a match at the Extremesland Asia CS:GO 2018 tournament. Tournament officials found suspicious software on Forsaken's computer during a routine check, and upon further investigation, it was discovered that he had been using a cheating program that helped him aim more accurately and see through walls. This incident led to Forsaken receiving a five-year ban from competitive gaming.
• Lee "‎Life" Seung Hyun, a South Korean professional StarCraft II player, was involved in one of the biggest match-fixing scandals in esports history. In 2015, it was revealed that Life had intentionally lost matches in exchange for money from illegal gambling organizations. He confessed to his involvement in match-fixing and was subsequently banned for life from professional gaming. This incident raised concerns about the integrity of professional esports and the measures taken to prevent cheating and match-fixing.

The above challenges prompt discussions within the industry about ethical practices, transparency, and the need for more player-friendly gaming experiences.

How and why GameFi appeared

What is GameFi and how it works

GameFi is the fusion of gaming and decentralized finance (DeFi).

Key ideas of GameFi include, first of all, decentralised ownership. GameFi leverages blockchain technology and NFTs to provide players with true ownership of in-game assets. The second idea is the play-to-earn model: players' time, skills, and achievements are directly translated into real-world value, creating economic opportunities within the gaming ecosystem.

In the ideal world of decentralised reputation, the in-game assets will not be game-specific: players could use their acquired items in multiple games, enhancing the overall gaming experience and fostering a cohesive virtual economy. Another attractive feature is the community governance, which allows players to actively participate in decision-making processes.

How is GameFi different?

• Asset ownership: players own their in-game items through NFTs. They are free to trade them on the market, even outside the gaming platform.
• Interoperability: Games allow for the transfer of the experience, assets, etc. In between platforms, the blockchain takes on the role of an intermediate unbiased ledger.
• Revenue sharing: the users can earn real money from the game.

Although the term ‘GameFi’ wasn’t in use until 2020, the games with similar technology and aspects date back to 2013 (when a Minecraft server Bombermine allowed monetising the experience by integrating BTC).

Several factors contributed to the rise of the industry, but the most prominent is the technical one. The adoption of blockchain technology, particularly on platforms like Ethereum, laid the groundwork for GameFi. Smart contracts enabled the creation of verifiable in-game assets, offering transparency and fostering ownership through blockchain verification. The rise of Non-Fungible Tokens (NFTs) introduced a paradigm shift in digital ownership. Gamers could now own, trade, and sell in-game assets as unique tokens on the blockchain, providing tangible value to virtual items and enhancing the gaming experience.

GameFi market

GameFi is a fast-growing market (CAGR 27.2%), with a size of $11.3 billion, in 2023.

Currently, India boasts the largest GameFi fan base, with 34% of surveyed respondents saying they played P2E games. These games are also popular in Hong Kong and the UAE, with 29% and 27% of gamers engaging in GameFi in these regions, respectively. Only 9.4% of those surveyed in the United States reported trying P2E games. In terms of age, people in their 20s are the most loyal GameFi fans. This population has a lot of free time, technical knowledge, and skills to benefit most from P2E gaming. Some of them go further and adopt gaming as a career. This advantage explains why GameFi is a rising trend in developing countries with limited employment opportunities.

The problems solved for gaming

Why GameFi become popular? Why gaming executives are mentioning it in their addresses and speeches?

• Ownership of in-game items: GameFi allows one to save the achievements and items beyond the game itself, providing possible interoperability with other games.
• Secondary market liquidity: the assets are not just saved beyond the game, it is also possible to sell them on the secondary markets if the user decides so (to make a profit, or upon quitting the game — the initial investment becomes returnable).
• Earning possibilities: the games are structured in a way so that the rewards a user earns in the game have value in the real world.
• On-chain reputation: the progress and ‘coolness’ in the game are now safely stored on blockchain, which creates a universal rating for everyone to see.

The offered advantages are what drew many players to DeFi, but it didn’t go as smoothly.

Rise and fall of play-to-earn

The setup of GameFi promised endless possibilities, in both the experience and financial mechanics. Indeed, after a subtle period of growing in the dark, the field erupted with several projects gaining a huge customer base at once. The most famous example is arguably StepN, the "move-to-earn" platform. The gamers saw GameFi as a new industry, a fresh idea that was free from the flaws of regular games.

Advantages that make P2E unique:

• Ownership
• Interoperability
• Immutability

The loud rise was followed by an even louder fall — the black swan events disrupted the field, but not in a positive way. One after another, inner economies collapsed, and, what’s surprising, because of different reasons. Some of them just didn’t have a sustainable inner economic system, some were straightaway Ponzi schemes. Others failed as a game — they were not engaging but boring, which made the gaming more like actual work.

We will now take a closer look at the examples of GameFi projects, and study their flaws and advantages.

Failures and successes

Axie Infinity

Company description:

Axie Infinity is a non-fungible token-based online video game, in which you buy creatures – called Axies – and use them to battle, explore, thatand breed with other Axies.

Active daily users: 18,777

Case description:

Axie Infinity is a community-driven digital pet game that, allows players to earn money while battling, breeding, raising, and trading digital pets called Axies. Axies fall into one of nine categories that are similar to Pokémons. Each Axie has six of 500 possible body parts. Each of the body parts has three genes: dominant, and recessive. To start you need to buy 3 Axies from the Axie Infinity marketplace to start playing. The cheapest Axie w/o abilities logging in with MetaMask → downloading the application itself, on desktop or mobile. currently costs $200 which implies a minimum $600 investment. Users can opt to borrow Axies from managers and pay them a portion of their earnings. By participating in the game, players earn AXS and SLP tokens.

The game became popular in developing countries that used it to earn revenue after being displayed by COVID-19.

Positive aspects:

• Engaging Gameplay
• Play-to-earn: Axie Infinity enabled players from the Philippines to earn more money than they did at their offline jobs.

Negative aspects:

• Dependence on the influx of new players: Axie Infinity's economic structure was unsustainable: the value of SLP necessitated new players continually buying in, much like a Ponzi scheme. Sky Mavis' team even acknowledged in its white paper that the game was "‎dependent on new entrants".
• Decline in interest in the game
• Using real money instead of standard in-game currency (In March there was a hacker attack as a result of which $620 million was stolen from the blockchain network)

Case result:

Axie Infinity had a monthly average of about 2 million players for 8 consecutive months starting from October 2021 to May 2022. However, since May – the average dropped drastically, down below the 1 million mark, and by November, the monthly player count slipped below 700,000.

My DeFi Pet

Company description:

My DeFi Pet is a play-to-earn virtual pet simulation game that combines decentralized finance (DeFi) and NFT aspects into a mass-adoption blockchain game.

Case description:

My DeFi pet consists of:

• Collection: Where players collect NFT pets.
• Summoning: They purchase eggs with three DPET tokens from the shop and summon the pets from a marketplace. New monsters are spawned every hour.
• Bidding: A new pet is born hourly. Users can partake in auctions to either sell or purchase new pets. A user wins by topping the bidding war. Each bidding session lasts for 24 hours.
• Breeding: This gaming activity requires users to own at least five DPET tokens and two pets. Players breed pets in the Northwest section of the game.
• Evolve: Because the pets are at various stages of evolution, gamers can use DPET tokens to feed them, improving their stats, energy, capabilities, and appearances.
• Season reward: Gamers partake in this activity by having ten legendary fully evolved pets that meet the contract’s criteria. The prize for the first season was 100,000 USDT which will be sent using the winner’s smart contract.
• Battle: In this gaming section, players let their pets fight each other for a trophy given to the winner. Naturally, the more evolved your NFT pet is, the better your chances of winning combats. In addition, the server gives special prizes to players with the highest rank when the season ends.
• Trading: All pets and the other tokens in the game are NFT assets that players can trade in the marketplace for profits. They can also exchange them for new ones. Every beast has a unique feature that distinguishes it, like destruction, combat, HP, speed, attack, night vision, and others.

There are several ways of earning cash as a player.

• Trading your NFT pets and the items in the marketplace.
• Upgrading your pet and partaking in battle tournaments.
• Completing missions and seasonal events.
• Sending out your pets to hunt for DEPT tokens and food.

Positive aspects:

• Unique NFTs: DeFi Pet offers a wide range of unique Non-Fungible Tokens (NFTs) in the form of pets.
• Play-to-earn: Unlike traditional games, DeFi Pet allows players to earn real value by playing. Through in-game activities and battles, players can earn tokens, trade them on decentralized exchanges, and potentially make profits.
• Decentralized Ownership: The game is built on blockchain technology, meaning that players truly own their pets and game assets. This provides transparency and eliminates the risk of losing items or pets due to game closures or server issues.

Case problems:

• Slow progress of game updates and several serious bugs.

Case result:

• Even though the platform is trying to update the game project features, the number of active users and the number of new users has not been able to grow.

The Sandbox

Company description:

The Sandbox is a virtual world where players can build, own, and monetize their gaming experiences and assets inside an immense virtual world.

Case description:

• The Sandbox is a game in which players can buy digital plots of land, called LAND.
• The Sandbox allows you to create and experience content in a safe environment.
• They can make the games available for others to acquire in an open marketplace.
• Artists and creators can create items using a system of tokenization. This system allows them to create anything they want by exchanging tokens for goods or services.
• In addition to the SAND coin, the LAND token(non-fungible token) is the proof of the ownership of digital plots of land.

Positive aspects:

• Creative Freedom: The Sandbox provides a platform where users can unleash their creativity and imagination.
• Learning and Skill Development: Through The Sandbox, users can learn various skills such as designing, coding, and game development. The platform offers educational resources, tutorials, and tools that enable users to acquire and enhance their digital skills.
• Entrepreneurial Opportunities: The Sandbox allows users to monetize their creations through the sale and purchase of digital assets using its native cryptocurrency called SAND.
• Cross-platform Compatibility: The Sandbox is designed to be accessible across various devices and operating systems, including computers, smartphones, and virtual reality devices. This makes it convenient for users to access and enjoy the platform from different devices.

Case problems:

• Low "‎Block-Resolution" for Avatars & NFTs.
• Restriction on creation: Only verified creators can create playable worlds, which narrows the possibilities of games.

Case result:

• The Sandbox platform continues to evolve and improve, providing endless entertainment and creative opportunities for players.
• Sandbox co-founder Sebastien Borget says the metaverse sector is thriving in Hong Kong, Korea,, and Japan.

StepN

Company description:

• Built on Ethereum competitor Solana and created by app developer FindSatoshi Lab, StepN is a smartphone app that lets users earn money by walking, jogging, or running for a narrowly delineated time period that refreshes every 24 hours.

Case description:

• Just like other fitness apps, all you have to do is open StepN before walking, jogging, or running, because the app uses GPS to track your movement.
• Before you start moving, you’ll have to choose a digital sneaker that matches your planned activity level.
• If your speed exceeds or falls below the activity range of your selected sneaker, you’ll stop earning tokens, so choose your shoes carefully.
• During your exercise, you’ll earn StepN’s native in-game spending token, GST (Green Satoshi Token), for every minute of movement.
• Your earning time is limited by your Energy, which determines how long you can use the app and earn GST in a single session. Energy depends on the amount and kind of sneakers you have.
• If you have higher Energy and a higher Luck score on your sneaker, you have a higher chance of getting something called a Mystery Box at the end of a run.
• These boxes contain gems that add features to your sneakers, like increased Efficiency. You can also sell these gems on the StepN in-app marketplace.
• Resilience determines how quickly your NFT sneakers degrade. If you’re not using GST to repair your sneakers from time to time, they’ll lose their earning power and eventually become defunct.

Positive aspects:

• Positive Environment
• Mental Health Focus
• Purposeful Use of Technology
• Personal Growth Opportunities

Negative aspects:

• System unsustainability
• Dependence on the influx of new players: StepN is criticized for relying too heavily on Ponzi economics, arguing that M2E games rely on unlimited user growth and spending on in-game assets like NFTs, leading to excessive wealth accumulation.

Case result:

• Stepn loses its money and users: for a long time, StepN's popularity was growing — even despite a June 2022 cyber attack. At its peak, the app had more than 700,000 monthly active users, respectable numbers for such a young NFT project. As of May 2023 though, the number of monthly active users is right above 30,000.

Decentraland

Company description:

• Decentraland is a software running on Ethereum that seeks to incentivize a global network of users to operate a shared virtual world. Decentraland users can buy and sell digital real estate while exploring, interacting and playing games within this virtual world.

Case description:

• Decentraland is a digital game that mimics reality in a three-dimensional format. This 3-D, user-owned, Ethereum-based virtual reality world platform, or open-world metaverse, is a combination of virtual reality, augmented reality, and the internet.
• It allows users to be part of a shared digital experience in which they play games, exchange collectibles, buy and sell digital real estate or wearables for avatars, socialize, and interact with each other.

Positive aspects:

• Engaging Gameplay: CyBall GameFi offers an immersive and exciting gaming experience. It combines elements of traditional sports with futuristic technology, creating unique and captivating gameplay.
• Rewards and Incentives: CyBall incorporates a rewards system that provides players with tangible benefits for their achievements and progress.
• Community and Social Interaction: CyBall brings players together, fostering a strong community and encouraging social interaction.

Case problems:

• Low viewership
• Glitchy builds
• Limited functionality
• Flawed governance system
• Lack of innovation in events

Case result:

• In-game tokens are declining in value due to the low level of daily active users.

CyBall

Company description:

• CyBall is a futuristic football-themed (US: soccer), NFT-based game where users can collect and form a team of CyBlocs and face off against other teams online, or trade and mentor new CyBlocs within the CyBall's ecosystem.
• 70,000 signups.
• 17,000 daily active users.

Case description:

• CyBlocs are the main NFT characters in CyBall. The rarity of the Cyblocs is categorized into five classes: Bronze, Silver, Gold, Platinum,, and Legendary. The class determines the range of CyBloc’s starting Skill and subsequent growth potential.
• Traits are the skills of each CyBloc that can be inherited or mentored (bred) to offspring Cybloc. Each CyBloc can possess one to three traits; the greater the traits are, the higher the potential is to win more games.
• CyBlocs are the main NFT characters in CyBall. The rarity of the Cyblocs is categorized into five classes: Bronze, Silver, Gold, Platinum, and Legendary. The class determines the range of CyBloc’s starting Skill and subsequent growth potential.
• Each CyBloc has skills that can be upgraded whenever it gains 100 experience points.
• For PVP gaming, users can either play casually with other users in Exhibitions or join matches in Leagues and Tournaments. CyBloc Battery Token (CBT), the utility token of CyBall, and CyBall Token (CYB), its governance token, are both in-game rewards.
• Cyball’s economy revolves around three currencies: Cyboc Battery Token (CBT), Batteries, and Cyball Token (CBT). Each currency differs in utility to serve the Cyball community the best it can. CBTs are earned in the PVP matches and are used by Cybloc owners if they choose to put their heroes up for rent. This token is used for mentoring (breeding) and hire-a-coach (passive levelling up of CyBlocs) mechanics.
• The CyBall NFT marketplace allows users to buy and sell NFT game assets: CyBlocs, Stadiums, CyBloc body parts and wearables.
• CyLoans is an automated feature that allows users to loan out their extra CyBlocs to other users who may not afford to buy their team but want to play the game and earn to be able to purchase their own CyBlocs.
• CyDex is CyBall’s decentralized exchange (DEX) for users to be able to trade their CBT and CYB.

Positive aspects:

• Advanced AI technology: Cyball is equipped with advanced AI technology that allows it to understand and respond to human emotions and behaviors.
• Versatility: Cyball can be used in diverse settings and for various purposes.
• Accessibility: Cyball aims to be accessible to everyone by being affordable and available on multiple platforms.

What went wrong?

CyBall was affected by the FTX debacle that had thrown a spanner in the works and changed their plans for the future of the game and its development.

Case result:

• Coin98 Labs has acquired CyBall and now CyBall has become one of the projects that Yunero Studios will incubate. Despite the setback caused by the FTX debacle, CyBall remains a popular and successful game.

Splinterlands

Company description:

Splinterlands is an online collectible card game using blockchain technology. Every card in the game is owned as a non-fungible token (NFT) and is traded using similar features to cryptocurrencies like Bitcoin and Ethereum.

Case description:

• At the start of each battle, players are tasked to create a combination of cards that are available to them.
• Each card has a unique feature or attribute, making characters stronger and more likely to win.
• Once the deck is finalized, the battle will be played and the one with the victorious combination will enjoy the rewards.

Positive aspects:

• Strategic gameplay: Splinterlands offers a highly strategic and competitive gameplay experience.
• NFT collectibles: Each card in Splinterlands is an NFT (non-fungible token), making them unique and valuable digital collectibles. Players can buy, sell, and trade these cards, giving the game an additional layer of depth and excitement.
• Play-to-earn model: Splinterlands allows players to earn crypto rewards by participating in battles and tournaments.
• Multiple game modes: Splinterlands offers a variety of game modes, including ranked battles, tournaments, and guild wars. This ensures that players have a diverse range of gameplay options to choose from and keeps the game fresh and engaging.

Case problems:

• The card values go down with no real outlook for older cards that are rare to become worth a lot more.

Case results:

• Splinterlands is one of the heavy hitters, attracting more than 479,000 unique active wallets.

Lessons learned summary

So, as we see, the most common problems with GameFi include the following:

• Ponzi-like inner economy, or an economy not, in advance.
• Lack of communication with customer base.
• Updates in the game that change the gameplay or other important features and make users leave.
• Quality of the game (bugs, glitches, low resolution, etc).

Among something that went well, we can identify

• The concept of move-to-earn in its goal to fight a sedentary lifestyle

Reincarnation into play-and-earn

Play-and-earn is a newer concept, which highlights its goal — to play and gain rewards as a nice bonus. The focus of it is the game itself, and the belief, that GameFi should prioritise Games over Finance after all. The key difference is in the playing mechanics, which are more of "have fun‎" than ‎"earn as much as possible". The other development is more careful and thoughtful economics inside the game. Nobody wants to repeat history, so it's vital to position the project away from failed games. This can be done by highlighting the economic system within, making it transparent and easy to grasp.

GameFi problems

There are still drawbacks since the field is recovering from the downfall of big projects and is finding a newer form and meaning. While solving some of the traditional gaming problems, GameFi brings some of its own

• There is still not so much interoperability between projects: every game has its own distinct NFT collections which are not usable anywhere else.
• The trust is bent: after depreciation in StepN and other projects, users can feel like the whole industry is a scam.
• High entry barriers (pay-to-play): there is typically a need to purchase an NFT to start playing. These NFTs are an initial investment, which can be much more expensive than a regular $60 PC game.
• Still a ,pay-to-win model in most cases: the bigger your investment (better and more NFTs that allow earning), the more you earn. This is reminiscent of pay-to-win models where players who pay in the game have higher chances of winning.
• Crypto UX issues: using crypto wallets, signing transactions and other crypto actions might be difficult for the new users. There are higher chances of being attacked by scammers, phishing, and other crypto-related thefts when a user is new to the crypto.
• Scalability: with the growth of the user base the network costs and processing time increase. Developers should keep this in mind, as speed is a crucial element of a good gaming experience.

The most prominent risk in GameFi is that of the fall of crypto in general. In times of bear market, the values drop, rewards shrink and players leave. The past years have shaken the industry, but now we are witnessing a slow rise once again.

There also has not been a project that can prove that GameFi is here to stay — viral enough to be known by a broader audience (like StepN) and stable enough to deliver on the promises (unlike StepN).

Current top GameFi projects

MetaTrace

MetaTrace is a GameFi on a real-world map. The player controls an NFT avatar, searches for hidden reward boxes and collects prizes.

As MetaTrace states on its website, "We're pioneering a sustainable digital economy. Players can even start playing without buying any NFTs, gain invaluable gaming experiences, and unlock earning opportunities through interaction with our network of partners and advertisers".

Key features:

• It’s possible to play without an initial investment.
• The game is set so that your NFT avatar is syncing with your real movements, making it a Pokemon-Go kind of game in crypto.
• The game allows to earn real-world money: tokens like Matic, USDT, TRC, NFTs, etc.
• There is an opportunity to pay with fiat, either through in-app purchases or through buying crypto in-app.
• Upon sign-up, every user gets a non-custodial wallet.
• The game has two tokens, TRC and ACE.

The game is in closed beta, and a satellite project, Trace Quest is already functional.

Space Catch

Space Catch GameFi is a thrilling game where players play as space explorers tasked with capturing and collecting interstellar objects. They navigate through asteroid fields, meteor showers, and debris, aiming to capture rare objects like space crystals and alien artefacts. The game combines arcade excitement with resource management, with players upgrading their spaceships for better capture.

Key features:

• Exclusive Interstellar Gameplay: Space Catch 3 offers players a unique interstellar gaming experience.
• Varied and Challenging Levels: Space Catch 3 offers a wide range of levels with increasing difficulty. Each level presents unique challenges and obstacles that players must overcome to advance.
• Upgrade and Customize Spaceships: As players advance through the game, they have the opportunity to upgrade and customize their spaceships.

MOBOX

MOBOX is a gaming platform that combines yield farming and farming NFTs to create a free-to-play and play-to-earn ecosystem.

Key features:

• Play-to-earn model: MOBOX utilizes a play-to-earn model, where users can earn rewards by playing games within the MOBOX ecosystem.
• NFT marketplace: MOBOX has its own NFT marketplace, where users can buy, sell, and trade various digital assets, including in-game items, cryptocurrencies, and collectibles.
• Cross-chain compatibility: MOBOX is built on the Binance Smart Chain (BSC), but it also supports cross-chain compatibility with other popular blockchains such as Ethereum.

Illuvium

Illuvium is an open-world exploration, monster collector, and autobattler game built on the Ethereum Blockchain, released on PC and Mac in 2022.

Key features:

• Immersive Graphics: Illuvium features stunning, high-quality graphics that create a visually captivating and immersive gaming experience.
• Dynamic Battle System: The game offers a dynamic and strategic battle system where players can engage in real-time combat against various creatures and mythical beings called Illuvials.
• Collectible Illuvials: Illuvium focuses on collecting and evolving a diverse range of Illuvials, which are powerful creatures that can be summoned and controlled by players. Players can collect, trade, and breed Illuvials to create a formidable lineup.
• Play-to-Earn Economy: Illuvium has an innovative play-to-earn model, where players can earn in-game rewards and cryptocurrency by participating in various activities within the game.

Gods Unchained TCG

Gods Unchained is a digital trading card game with fast-paced gameplay and strategic deck building. To succeed in the game, players must align themselves with one of six gods, build decks of 30 cards, and use strategic gameplay to outsmart, subdue, or decimate their opponents.

Key features:

• Ownership and tradability of digital cards: Gods Unchained TCG allows players to truly own their digital cards through the use of blockchain technology.
• Immutable game cards and rarity system: Each card in Gods Unchained TCG is minted as a non-fungible token (NFT) on the Ethereum blockchain, making it unique and immutable.
• Competitive gameplay and tournaments: Gods Unchained TCG offers a highly competitive gameplay experience that includes regular tournaments and events.

Conclusion

In conclusion, the GameFi market is a new and exciting opportunity for gamers to earn rewards in the form of crypto tokens while playing games.

While the market is highly volatile and short-lived, there is immense potential for growth if developers can address the challenges and create sustainable business models.

There have been several failed GameFi projects in the past, highlighting the need for developers to ensure sustainability and attractive rewards for gamers. They are gradually being replaced by, new entrants, offering more transparency and clearer economics.

Overall, the GameFi market is still in its early stages, and it will be interesting to see how it evolves in the coming years. We see a bright future for this field.