2024 Web3 Gaming Industry Trend Depth Insights

Web3 games have always been seen as a key track to unlock the next traffic entrance in the Web3 industry. As the cryptocurrency market gradually warms up, Web3 games are showing some new development characteristics. For example, projects are improving in the direction of enhancing gameplay and playability; the types of Web3 games are continuously innovating and expanding; projects are gradually evolving towards platformization and ecological development, enhancing their risk resistance capabilities, etc.

This article provides an in-depth analysis of the new features and talent trends of Web3 games in 2024, aiming to provide valuable references for readers interested in the industry.

1. Industry Overview: A Three-Year Review of the Web3 Gaming Industry (2021-2023)

The years 2021-2023 mark the first prosperous period for the Web3 gaming industry, characterized by rapid user growth, continuous innovation in business models, and large-scale capital influx, all of which have driven the rapid development of the industry.

1. Market Size: The "blockbuster" effect drives rapid growth in trading volume, with users accounting for over half of the industry.

In 2021, a certain game became one of the most profitable games on Ethereum, exploding in popularity and attracting a large number of users into the gaming sector. The number of users in blockchain games increased from 80,000 in early April 2021 to 1.33 million in October, with a monthly average growth rate of over 270%.

According to the report from the data platform, during the period from 2021 to 2023, the trading volume in the blockchain gaming industry remained relatively stable, with explosive growth in the first quarter of 2024. In 2021, the number of daily unique active wallets for Web3 games exceeded 1.4 million, accounting for 49% of the total wallet address usage in the entire cryptocurrency industry, a figure that even surpassed DeFi; in 2022, Web3 games attracted 1.15 million active wallets, with the percentage remaining unchanged; as the total usage of wallet addresses in the cryptocurrency industry increased, the percentage of Web3 game UAW showed a decline while maintaining stability; however, in the first quarter of 2024, the number of daily active wallets reached a historical high, averaging over 2 million daily, with the number of game-related active wallets accounting for 30% of the industry total. Although the proportion has decreased, the absolute number has consistently shown a fluctuating upward trend, aligning with the overall increase in wallet address usage in the cryptocurrency industry.

In 2023, there are over 3 billion game users worldwide, with a market size close to $2.1968 trillion, among which the revenue from Web3 games is $5.2 billion. Although the number of users participating in Web3 games is still negligible compared to traditional Web2 games, the growth potential of the Web3 gaming market is enormous with continued growth and the arrival of the bull market in 2024.

( 2. Development History: From "卷"Fi to "卷" Game Mechanics and Playability

The focus of Web3 games has shifted from the early emphasis on "Fi" and "material rewards" to now more frequently mentioning "gameplay" and "playability."

Game mechanics refer to the process and experience of player interaction with the game system, focusing on the core gameplay and the player's engagement, enjoyment, and long-term appeal in the game; playability emphasizes the assessment of the game's ease of play and user-friendliness, focusing on aspects such as interface design, controls, tutorials, and guidance.

Compared to early Web3 games, today's Web3 games focus more on: long-term appeal to players and user-friendliness. As for why this development trend has emerged? One can glimpse a clue from the development history of Web3 games.

According to the development history, Web3 games can be divided into four categories:

• Focused on early Web3 games in Fi, with the core in Fi, collectively referred to as GameFi;
• Users participate in daily activities in the game to earn material rewards in the X to Earn)X2E### game;
• AAA games that focus on high-quality graphics and playability to attract players.
• Build metaverse games that create virtual worlds.

GameFi combines the asset allocation principles of DeFi with game elements. In the early stages, it was overly focused on financialization, attracting a large number of investors. However, both the game design and graphics lack the depth and playability of a true game, failing to attract genuine gamers. For example, in early GameFi's typical representative games, players were only concerned with profits rather than the gameplay itself, which often resulted in user retention rates being significantly lower than those of typical games. According to data from a platform, a certain game has currently entered a stagnation period, with only about 9,000 active users daily, compared to millions of active users during its peak, resulting in a user retention rate of only about 10%.

Therefore, to develop a successful GameFi ecosystem, it is necessary to go beyond the basic principles of DeFi, develop a complex in-game economy, and prioritize user experience in game design. X2E games have emerged as a result. The X in X2E can be defined as any human behavior such as gaming or mobile, and earning rewards through these behaviors. Unlike early purely profit-driven games, X2E places a high emphasis on community culture and values, often using meaningful real-life or creative actions as core game mechanics, with the most representative game being a certain mobile application. This application gamifies real-life activities through sports, featuring a more user-friendly game mechanism: encouraging users to engage in sports activities, achieve specific goals, and submit proof of completion through the app, motivating users to maintain healthy activities.

3A games focus more on gameplay and user base based on X2E, significantly improving game quality. With a rich game background and excellent game mechanics, a certain game has inherent advantages in product quality and player experience.

Based on this, the core of the project party's user retention strategy has gradually shifted from emphasizing gold earning to enhancing the playability and intrinsic quality of the game.

( 3. Financing: A massive influx of funds drives industry boom.

Between 2021 and 2023, the Web3 gaming industry attracted a large amount of investment and financing. Among them, 2021 can be considered the inaugural year of Web3 gaming financing, as traditional venture capital firms, cryptocurrency funds, angel investors, and others actively participated in investments in this industry. In 2022, global Web3 gaming financing reached a historic high, with financing amounts nearing ten billion dollars.

In addition, some Web3 gaming platforms have also started fundraising by issuing platform tokens or conducting initial coin offerings ) ICO ### to raise funds to support the development and operation of the platform. This type of fundraising model has also attracted the attention of investors.

( 4. Challenge Risks: Sustainable development faces numerous challenges such as excessive gamification and lack of user experience.

From the perspective of the game itself, although Web3 games have started to focus on enhancing gameplay and playability, the high-quality game content in the market from 2021 to 2023 is still lacking. The excessive Fi-ization of games makes it difficult for the industry to cope with market fluctuations and the risks of speculative behavior. The lack of usability and a friendly user interface also limits the participation and adoption of mainstream users. How to "break the circle" remains to be explored.

According to research data, currently, more than half of Web3 games are developed by independent producers or small teams, while AAA or AA level productions account for only 6%. Some projects focus too much on technical and economic aspects, neglecting the excellence, innovation, and diversity of game design. This may lead to player attrition and the risk of market saturation, limiting the industry's long-term development. In addition, market competition may lead to the risk of over-investment and financial bubbles. If there are too many similar projects in the market, while user demand and market capacity are limited, it may result in some projects' failure and financial losses.

In addition, issues such as the scalability of blockchain, transaction speed, and transaction fees also limit the fluidity and user experience of Web3 games. To compete with Web2 games, Web3 games urgently need to address user experience issues. For example, convenient and fast digital wallets and trading tools are needed for smoothly managing and trading game assets. For the vast majority of Web2 users, participating in Web3 games may still involve a certain learning cost, and the lack of usability and a friendly user interface may restrict the participation of Web2 users, becoming a challenge for games to break through the barriers of different user groups.

2. Industry Ecology: Web3 Game Ecosystem Panorama

From the perspective of the industrial chain, the upstream of the Web3 gaming industry includes game content creation and research and development infrastructure, the midstream includes all To B service providers, the downstream covers all To C service providers, and the terminal consists of all players and paying users.

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( 1. Upstream - Infrastructure: The gaming public chain is divided into three parts, and a certain trading platform chain performs exceptionally well.

Game public chains, as the most important infrastructure, are accelerating their layout and presenting a flourishing state. Currently, the public chains supporting Web3 games can be mainly divided into three types: General-Use Networks ), Application-Specific Network Frameworks ###, and game-specific chains.

• General public chains refer to public chains that can support large-scale gaming applications and access. They can be classified into general L1 public chains and general L2/L3 public chains, among which general L1 public chains include Ethereum, EVM Sidechains, and Non-EVM Layer1;
• Appchain refers to networks designed and optimized specifically for certain games, applications, or ecosystems, such as some chains built specifically for gaming. These public chains not only have advantages in scalability and speed but are also customized and optimized for gaming, making them more suitable for building games.
• A game-specific chain refers to a public chain created specifically for a certain game, such as a unique chain for a particular game.

Refined to the data level, the three types of game public chains exhibit their own strengths in terms of scale, user participation, and transaction levels. The number of on-chain projects can reflect the attractiveness and developmental vitality of public chains. Currently, the top three on-chain Web3 games are from a certain trading platform chain ( 28.9% ), Ethereum ( 22.6% ), and Polygon ( 14.8% ), with their total accounting for 66.3%, representing half of the Web3 games.

The number of active users on the chain is one of the important indicators of user engagement. Generally speaking, a higher number of active users indicates that the public chain has a wide user base and an active community. From the daily user data, the Web3 game users on the public chain are mainly divided among a certain game's unique chain ( 27.35% ), Polygon ( 16.92% ), Near ( 12.58% ), and Klaytn ( 8.56% ). From the performance data in the first quarter of this year, the unique chain of a certain game and Polygon have long occupied the first and second positions in terms of daily active users in Web3 games.

Transaction volume can indicate the liquidity and trading activity of an asset. A higher transaction volume suggests that the public chain has a large amount of value transfer and trading activities occurring. From the perspective of the overall industry trading volume in recent years, the trading volume peaked in the third quarter of 2023, then declined, and fell below the average level of 2022. Although the trading volume in the Web3 gaming market has significantly decreased compared to 2022, the number of transactions has not dropped significantly.

From the perspective of trading volume share, the four chains with the best trading performance in the sector are a public chain specifically built for games (76%), Hive (8.2%), Sui (2.8%), and a trading platform chain (2.3%). As a public chain specifically built for NFTs and games, the public chain built specifically for games is leading by an absolute advantage, far surpassing the 2nd, 3rd, and 4th places.

Overall, the gaming public blockchain is showing a situation of three factions. A certain trading platform chain using the EVM Sidechains model, Avalanche, along with the sidechain and Layer 2 solution Polygon, and a public chain specifically built for gaming, Hive, have all shown impressive performance.

A certain trading platform chain and Polygon have attracted a large number of games due to their good performance, low Gas fees, and support for EVM.