The Web3 Gaming Ecosystem

New players on the block

AUG 2, 2022

Web3 games caught on in 2021. Play-to-Earn (P2E) mechanics and NFT in-game assets, which empower users to earn during gameplay and own their avatars, enabled developers to craft unique experiences that clearly resonated with early users. The Web3 gaming space grew 20x and saw $2.5 billion invested across the ecosystem last year. In Q1 2022 alone, 1.17 million unique wallets connected to Web3 games.

While Web3 gaming still pales in comparison to traditional gaming (~94.45 billion market in the US alone), it’s growing quickly. And despite game variety closely mimicking traditional games (adventure, arcade, FPS/TPS, sports), Web3 games can cultivate stickier users due to their clear financial incentives for engagement.

The Web3 gaming space spans multiple high-profile blockchains and L2s, including Ethereum, Solana, Polygon, Binance, WAX, Avalanche, Hive, and Immutable X, among others. Binance currently has the most Web3 games on its chain (646), with Ethereum+Polygon (597) and Solana (109) rounding out the top-3. Binance became the early leader in Web3 gaming due to its developed infrastructure, cheap transaction fees, and fast processing times. However, according to DappRadar’s Q1 2022 Games Report, only 2/10 of the top game dapps (measured by average UAW) are built directly on Binance, signaling a lack of sustained user engagement and an oversaturation of dormant games. On the other hand, the Ethereum ecosystem (including Polygon, a side-chain designed for scale), has enjoyed steady growth, both in terms of number of games and percentage of games in the top-10 (40%). Solana’s gaming ecosystem is up-and-coming, fast-growing, and flush with capital. Recent developments both on-chain and across its infrastructure ecosystem suggest that Solana is well-positioned to take the top spot in the coming years – and the data backs it up. WAX and Avalanche also offer uniquely flexible infrastructure that might enable them to command more market share, too.

Games by Blockchain, PlayToEarn
Top 10 Game Dapps, Dapp Radar

Below, we’ll dive into a comparison across the top-5 gaming chains (Ethereum, Binance, Solana, WAX, and Avalanche) and explain why the recent movement towards Solana, WAX, and Avalanche might have staying power.

Web3 Gaming Ecosystems

The Basics (Top-5)

Infrastructure Comparison (Top-3)

Solana, though facing concerns surrounding network stability, stands out due to its low transaction fees, fast processing times, and significant daily user activity. Notably, while Solana only has 7% of total games, it has nearly as many daily active wallets (DAWs) as Ethereum+Polygon and Binance.

Ethereum+Polygon has the largest market cap, an outsized percentage of top-10 games, and a comparable number of total games to Binance; however, the chains, even in tandem, have the fewest daily active wallets in the top-3. Binance has the most DAWs and the most games available; however, the chain features slower and more expensive transactions than Solana and the fewest active metaverse platforms. WAX owns an outsized percentage of total Web3 games with respect to its small market cap, while Avalanche lags behind in nearly all categories measured.

New Players on the Block

While the Solana gaming ecosystem remains smaller than Ethereum and Binance, some signs point to a convergence of infrastructure and capital headed to the chain. This isn’t to say that Solana is or will be the leader in gaming; the Web3 space is incredibly volatile and we’re currently experiencing an unpredictable bear market. However, the data doesn’t lie and it’s worth pointing out where things currently stand. Let’s start by diving in to the recent movement towards Solana:

Solana game developers have recently taken advantage of uniquely accessible infrastructure for game development and in-game asset creation and distribution. Here are a few examples:

Solana has welcomed an enormous and coordinated flow of capital into its gaming ecosystem over the last 6 months.

This Spring, Solana also enjoyed positive headlines surrounding innovative Web3 games built on the chain. STEPN, a Web3-enabled health and lifestyle P2E game, is a relevant example. See Forbes and Cointelegraph. These, and other, positive headlines have helped attract money, developers, and users to the chain.

Lastly, at NFT NYC, Solana’s leadership announced that it would be building a blockchain-enabled mobile phone (Solana Mobile Stack). If successful, this innovation will help introduce play-anywhere Web3 gaming experiences to a larger audience.

Solana’s growing Web3 gaming market share, recent coordinated investment onslaught, accessible infrastructure for game development and in-game asset distribution, low fees, fast processing times, and upcoming experiment with mobile Web3 gaming positions the chain well to compete with the top slot – especially as Ethereum and Binance specialize in related but distinct verticals.

Notably, Avalanche and WAX offer promise for garnering a larger market share, too.

WAX has a remarkably high number of DAWs and owns nearly 6% of games, all while having a market cap well below every other chain on the list, which suggests that users have flocked to its gameplay experiences and largely stayed the course (so far). WAX is uniquely positioned to play a strong supporting role across the gaming ecosystem due to its early advances with interoperability – at the end of 2021, WAX launched “Blockchain Brawlers,” a new game that offers NFT assets that can be transferred cross-chain (in this case, with Binance). WAX also announced in early June that it raised $10m to further develop its ecosystem.

Avalanche is also a highly-flexible chain that allows developers and users to take advantage of unique customization opportunities – Avalanche is sometimes referred to as “the flexible Ethereum competitor.” Avalanche has also seen an influx of new infrastructure developed on the chain. For example, SparkWorld, an AVAX-based NFT marketplace, recently launched and offers unique features surrounding whitelists and randomizing minting.

Interoperability Looms Large

At this stage of development in the nascent Web3 space, chain comparisons are critical for unearthing larger trends and predicting future user behavior. But interoperability can, and probably will, change everything.

Infrastructure providers, developers, and investors alike are obsessed with the concept of cross-chain experiences, a world in which infrastructure, assets, and games aren’t siloed. Imagine if you could buy a wearable NFT tuxedo in Axie Infinity and use it to dress your avatar in Solana’s portals, or wear your STEPN sneakers to a Sorare simulation. Interoperability (and the open data landscape that would follow) would further empower users to create their own experiences (or assets) within a given game or platform. This greatly democratizes access to game-development resources, ensures stronger diversity of gameplay experiences, and decentralizes game creation. This chain-agnostic, interoperable vision is a long way away; multi-chain wallets, further developed sidechains, on-chain/off-chain oracles, and asset bridges are necessary first steps. But these capabilities are coming, and they will drastically alter the Web3 landscape when they do.

Regardless, successful game development and sustained user activity will always be a positive indicator (and revenue generator and talent attractor) for a blockchain. As the web3 gaming ecosystem continues to mature with the advent of immense capital pools and improving infrastructure designed around the needs of developers and wants of users, it will be exciting to watch the landscape evolve.

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