2022 has been a tough roller coaster for blockchain games - to say the least. It’s just a little over a year since the bull run (or more like rush) began Animoca, Immutable X, and Forte all raised hundreds of millions of Dollars from top-tier venture capitals for a business that promised to revolutionize the gaming industry. 

Then came 2022 and the wheels fell off. The biggest names in the industry turned out to be Ponzi schemes. Prominent companies like Luna, Celsius, and FTX all collapsed. And much touted “Web3” games failed to attract a player base. It also turned out that a big Discord channel is not indicative of success. What seemed like an endless pool of venture capital turned into an investment desert overnight. The Crypto Winter had begun and no one knows when the sun will shine again on the scattered blockchain pieces. 

But let’s be objective. Not everything is bleak and hopeless. New teams like Plai Labs and Fenix Games were spun out of already existing ones with war chests that would make even the 2021 teams jealous. Whispers of “the second wave of blockchain gaming” began as teams started sharing their progress instead their whitepapers and early mints. 

There is a lot to talk about with blockchain gaming. So without further ado, let our very own Ahmetcan Demirel review what happened in 2022 and predict what this year will look like.

A tale of two halves: H1 and H2 of 2022

During the last quarter of 2021, almost every successful blockchain game had one thing in common: They were developed by crypto native teams who were well versed in the blockchain technology, but lacked experience in game development. These games’ effect lasted for most of the first half of 2022 which caused an intense period of investing money into the space for a lot of blockchain games out there. People who haven’t already exhausted their savings investing in blockchain games and NFT collections in the last quarter of 2021 continued investing in those games for another month or two. Large and well-established VCs were much eager than individual players/investors and they poured money into the games they deemed worthy.

Those games were called “The first wave of blockchain games” by many, referring to the fact that most of them originated because of the crypto market’s hype. They all had elegant websites, dozens of pages long whitepapers (remember them?), and crowded roadmaps. What they lacked was genuine entertainment value that could only be provided through an actual game. They were more like DeFi apps experimenting with blockchain technology rather than games that would have real players in a sustainable manner.

The investment volume rapidly decreased after May, which coincided with the Luna Crash that caused huge turmoil in the whole crypto market. It is hard to say if the Luna Crash was the sole catalyst, but one thing was sure. Those “first wave” games were confronted with a tough reality: They needed to provide inherent value through actual gameplay or they would not survive. Most of them were basically Ponzi schemes that depended on more and more people to invest. They were able to thrive on the token sales and NFT mints long before releasing any game, but now most of their earnings in crypto lost their value, and they still didn’t have anything resembling a game. This, in turn, showed that blockchain games were subject to the same standards as any other game out there. So, teams and projects focusing on gameplay more than anything became the most valuable asset in the market.

Although those game-first teams became much more valuable, they haven’t been exempt from the fluctuations in the crypto market. One of the most important things to keep in mind while evaluating blockchain games is that they are not evaluated solely based on their quality. 

There is also the fact that the crypto market’s performance has a huge effect on how people view blockchain games. It is like criticizing Roblox by saying “The stock prices are down, so the game has less value now.” which doesn’t make sense at all. However, when a game’s economy is built based on a cryptocurrency, the fluctuations in that crypto currency’s value have a big effect on how people perceive the game. Since every game uses at least one cryptocurrency to sell its NFTs and other types of tokens, the whole economy is affected by the trajectory of that cryptocurrency.

So, when cryptocurrencies with the highest volume lost their value significantly (some of them by almost 95%) during 2022, every blockchain game was affected by that. People are right in saying that a game “is worthless” when its token loses value. However, this is a problem of structuring your whole economy on top of an existing cryptocurrency. When people buy your game assets, they shouldn’t expect their value to fluctuate based on the crypto market. The only market I should be aware of as a player should be the marketplace of that game, which should be affected only because of the changes inside the game. There seem to be only two ways out of this: either using a cryptocurrency that isn’t expected to fluctuate too much or not using a cryptocurrency at all.

Of course, talking about how things “should be” is different from reality. Blockchain games are powered by those crypto currencies who provide strong and big communities that are already using that currency for many other things. Like with many other decisions in life, choosing to work with a crypto currency for your blockchain game has its own trade offs. You gain the reach to a large community and the support from a bigger organization that runs a whole currency while accepting the fact that any fluctuation in that currency’s value will affect your game directly.

New year new me: The trends of 2022

Just like the fluctuations of the crypto market, fluctuations of the trends among blockchain games were also a big theme for 2022. You can never have a list that can cover all of them, but here are a few of the most important ones.

Guilds

Since blockchain games still belong to a very niche market, a crash course about guilds is overdue. Guilds are basically organizations who invest into blockchain games through buying their NFTs or other types of tokens. In the case of buying NFTs, they also run “scholarships” to rent them to players. This was mostly based on getting the most out of every game through buying NFTs and making the scholars “work” in the early days. Since those days of “working” for games are over, guilds are now acting as investment arms that also bring their community of players with them.

At the beginning of the year, guilds were thought to be among the most important elements of a blockchain game. I think they still have an important place with their ability to attract large communities for games they are invested in. However, they will no longer be able to have those massive scholarship programs with people practically working inside a game. Instead, we will see them investing in games that they really think are fun since those games will be the ones that will make the most money in the long run.

Free mints

Although blockchain games still have a very fast changing environment and it’s hard to talk about anything in certainty, one trend was very strong throughout the year: Free Mints. It is true that selling 10,000 high priced NFTs in 15 seconds was one of the most important reasons for a lot of teams to start developing a blockchain game. However, everybody realized how unsustainable that was since you needed to justify the incredibly high prices of those NFTs. The F2P (Free to Play) model was there from the beginning for every game developer, but it seems like everyone was waiting for one successful example which came with Digi Daigaku. Gabe Leydon adapted the F2P model and turned it into F2O (Free to Own) with the free mints of their game which saw a huge success. The marketing was mostly centered around Gabe’s personality and the FOMO he created. Nevertheless, they still are able to create interest for a game that is not even playable yet.

Going mobile

Of course, F2O is not a benevolent act from well funded games trying to give it back to the community. One of the biggest problems of blockchain games is not reaching a mass audience efficiently. Those games are trying to acquire users through free mints, taking a page out of the F2P playbook. However, if blockchain games want to be relevant in a scale that matters, they need to take the front page out of that book: existing in mobile devices. The mobile gaming market is estimated to be around 3 billion which sounds like a dream to blockchain game developers. Existing in mobile devices means that your game will be accessible to those 3 billion players. It will make life much easier for blockchain game developers as they will be able to test their games much more efficiently while acquiring users way cheaper compared to now.

Existing in mobile devices is almost another way to say that your game is in the app stores of those devices. The first step towards that is taken by Apple’s guideline updates which we previously discussed in our newsletter. It is still not clear what Apple means by the specific statements in their guideline, but at least blockchain game developers have a starting point. They know they need to go by the IAP rules when they want to sell an NFT for their game. Nevertheless, the real question is around the secondary sales which Apple did not specifically target yet. It is important for blockchain game developers to test those rules by experimenting with their games to see how Apple is going to react.

Predictions for 2023: What comes next?

There is still a huge prejudice against blockchain games (both from players and developers), and not without a reason. The fact that crypto currencies are not a well-regulated space made it easy for a lot of “projects” to sell hopes and dreams then just run away with millions. Just Google “rug pull” and you can see how a generations old idiom became synonymous with a certain scam mechanism in the crypto space. However, as the space is getting crowded and more credible teams are entering it, those scams become easier to detect and harder to execute. I don’t think they will ever cease to exist, but I think it’s getting very hard to see any games or projects that scam people by simply running away.

On the other hand, there are people who expect blockchain technology to revolutionize the world. Some of them think that by decentralizing the decision making process, everything will become more democratic and transparent. I don't know whether a product/service using the blockchain technology will change the world or not, but I think it’s not going to revolutionize gaming. Blockchain games will not replace the current games that people play. I also don’t think it’s going to become a dominant platform by itself like mobile, PC or console. It’s really important to understand what we should expect from blockchain games and I think it will be added value on top of everything that we already have.

It might even be the case that “blockchain games” will cease to exist as a standalone term. We might see teams that use the blockchain technology just to manage their secondary markets and incentivize their players to spend more time and effort inside their games. I don’t expect a scenario like this to happen anytime soon, since the UX issues with the blockchain technology are still not resolved. You need to jump through several hoops before you set up a wallet which is only the beginning of the journey. However, we may see that technology being used under the hood without being mentioned once the current UX problems are solved.

Prediction #1: Local optimals will be found

If a team wants to develop a mobile, PC or a console game, it is very easy to find an infinite number of resources on how to develop, market, and sell those games. People have been working for more than a decade on these topics, so there are many best practices to follow. However, it is not the case if you want to develop a blockchain game simply because “We are still early”. Yes, we are still early and building together, but it’s time that we have clearer answers to some basic questions. I don’t think blockchain games will have a significant amount of “best practices” anytime soon. Nevertheless, some local optimals that can lead to having those best practices have already started emerging. For example, it’s hard to find someone saying that a game should have a token right from the beginning. People have suffered enough with token launches and there almost seems to be a consensus around this topic. Working with a marketplace for selling NFTs also seems to be a common practice among many games. In the end, there are so many things a single team can tackle.

Of course, it’s hard to predict the topic or theme of those local optimals. However, I think there will be a much clearer picture about how to onboard users for blockchain games, for example. Helping players play a blockchain game without any hustle is already an important issue for a lot of teams. It’s hard to assume that any game can reach a mass audience while requiring their users to spend 30 minutes just to start playing it. There are many tools that try to simplify the user journey for a blockchain gamer from setting up wallets like Venly to allowing fiat payments like MoonPay. Once we start seeing games that gain an advantage over the others by improving their player onboarding, the others will follow.

Prediction #2: F2O FTW

Although we have seen free mints long before Digi Daigaku, it was their free mint that brought the concept to the attention of the larger blockchain gaming space. Since then, we have seen other projects experimenting with the concept and using it as a way to acquire more users easily and more efficiently. At the end of the day, it is obvious that free mints make it easier to attract more attention and bring more players into your game in the current market conditions. We already talked about the sharp decrease in the investment rate into blockchain games. So, you simply cannot ask people to invest thousands of dollars before giving them anything in return except a single NFT. With this in mind, I think it will be a very rare thing to see a blockchain game starting their journey with a priced mint. Instead, we will see new projects go with free mints right from the start.

On the other hand, there are games that already had priced mints and sold NFTs for a hefty price maybe a year ago. Adopting F2O and doing free mints are definitely harder for those games, but not impossible at all. We have all seen how successful Champions Ascension’s free mint was compared to their initially priced mint last year. They were able to sell only 76% of the total supply with their first mint which was not free. This time, they had a free mint and they sold out as soon as it was available to the public. Of course, we have still yet to see how much difference they are priced and free NFTs will have for players. Nonetheless, this is proof that other blockchain games that started with a priced mint can do free mints down the road and reach a wider audience.

Prediction #3: Crypto metrics out, gameplay metrics in

Due to those “first wave” games being developed mostly by crypto-native teams, blockchain-centered metrics were given a lot of importance. People were following the number of on-chain transactions on a daily basis in addition to the ups and downs of the token price. Since the token price for almost every game had only downs for a long while, we are seeing them being mentioned less than ever. The shallow community metrics like members in a Discord server or the number of followers of a Twitter account will also be given less importance. This doesn’t mean that having a Discord server with 100k people is not important, but it doesn’t give an accurate idea about your game. Instead, we will see games mentioning their engagement metrics like early retention or session times. This may seem like a no-brainer for a seasoned game developer. However, that initial hype in the space attracted everyone’s attention to metrics that are shiny from the outside but empty from the inside…

Prediction #4: The use of fiat currency will increase even more

We already talked about how different companies were trying to make things easier for the end user. One of the surest ways to do it is by letting them pay via fiat currency, a.k.a., USD. Some of the biggest Web3 marketplaces like OpenSea, Magic Eden, and Fractal have already started letting their users use their debit cards to make payments. In the race to improve user experience, the ones that still require only cryptocurrencies will definitely be on the losing side for the long term.

As an extension of this, I think we should start seeing projects making NFT sales based on stablecoins, cryptocurrencies pegged to USD. This might sound counterintuitive at first since it is a move away from cryptocurrencies. As mentioned above, every cryptocurrency has its own community literally “invested” in the space. Moving away from cryptocurrencies is a hard decision from that perspective. There is also the fact that you should choose your stablecoin wisely in this situation since it hasn’t been very long since we last saw the collapse of a stablecoin. The discussion of different types of stablecoins and the danger of the algorithmic-based ones is a lengthy yet necessary discussion if you are planning to take this bold step.

The upside of not using a cryptocurrency but a stablecoin is, you will not be affected by the crypto market fluctuations! As a game developer, you have absolutely no effect on the changes in the crypto market. Then, when everything is falling down, your game and everything on your game’s secondary market lose value proportionally. So, instead of worrying about something you cannot change, you can simply design your whole economy on a stablecoin as long as you do that lengthy yet necessary research well enough.

Written by: Ahmetcan Demirel