The State of GameFi in 2024

The Current GameFi Market

Despite the GameFi market being projected to reach $2.8 billion by 2028, growing at a 20.4% CAGR from 2022 to 2028, in 2024, it has gained insufficient traction to be a notable contender for a seat at the top narratives table. But is this lack of attention warranted? From some venture capital firms to the majority of retail investors many believe the sector is “dead”. Although this perspective largely depends on what metrics you look at. Throughout this analysis we will delve deep into numerous metrics and explain the current state of GameFi in 2024.

Throughout 2024 and late 2023 GameFi has exhibited a noteworthy shift in maturity. The sector was previously known for its undeserved hype-driven growth, leading to significant disappointments both in quality of game and quality of economic incentivization models. Currently the sector has clearly matured towards a more balanced sector that properly manages expectations. Additionally, it has extended its reach and has become largely available not just on PC, but on the other platforms: mobile and the Xbox & PlayStation consoles.

Despite the aforementioned belief that the industry is “dead,” GameFi has been consistently active in terms of daily active users (DAU), with some great statistics such as BNB reporting that 40% of its DAUs were engaging with a gaming dApp. Moreover, major gaming institutions have been entering the industry over the last couple of months, gaming giants like Ubisoft and SuperCell have been entering the space behind the scenes; meanwhile, little attention is being paid by retail. This collaboration between blockchain platforms and seasoned game developers will also likely to attract other established gaming studios into entering Web 3. The entry of  these triple-A game studios into the blockchain ecosphere will drive higher quality games being onboarded and created, ultimately giving gamers a more immersive experience which has been lacking previously. 

Furthermore, there has been an intense focus on interoperability that will fuel the development of cross-chain assets and games. Solutions such as Account Abstraction have solved numerous issues experienced by GameFi projects in relation to game adoption by making onboarding, wallet processing, and fees much more seamless if not eradicating any friction entirely. 

Let’s dive further into the data.

GameFi Data Analysis

In terms of market cap, GameFi remains one of the top narratives in all of crypto, sitting at a $19B+.  

The daily active users playing Web3 games is steadily growing on each and every chain, with the Ronin chain seeing the most significant growth of all the chains, evidenced in the chart below. Additionally, GameFi has an immense amount of daily active users actually playing the on-chain games with over 3M as of May 2024. It is clear that in contrast to the sentiment, GameFi may be, as the data below showcases, one of the most lively parts of the crypto industry in terms of users actually using the dApps. 

Below we see a long term chart which showcases the growth of the GameFi industry in terms of games created since its inception in 2017. We see a slight drop off in May, not due to the fact there is a lack of interest, but rather due to the fact that we are currently only halfway through May. 

Comparative Narrative Analyses

While doing a cross-analysis of numerous narratives (as seen in the charts below), it becomes clear it is relatively true that GameFi as a whole has been underperforming in comparison to some of the other top narratives such as AI and Memes. 

In terms of price action and ROI, GameFi has underperformed most other narratives over the past 8 months (October 2024 - Present). This counts not only in terms of ROI on average GameFi projects but also in terms of the sum of projects that outperformed BTC. 

NOTE: Although the charts may look different, they are all weighted against Bitcoin (BTC). Therefore, when assessing the charts don’t look at the amount they have gone up in terms of their price action in line charts, but at the percentages in relation to BTC as shown on the right side of each chart respectively. Admittedly, for some of the narratives there are many more projects listed in the chart than are for GameFi, which from a purely visual standpoints makes these charts look busier and therefore they may come across more bullish.

In a comparative analysis of the total percentage of transactions spent in all of the crypto industry, GameFi only takes a small share. Indicating that the GameFi industry indeed is relatively inactive in relation to other competing narratives in terms of traded on-chain volume. Extrapolating the exact reason for this is difficult; it could either be due the fact that traders don’t like to speculate on GameFi as an asset class, which would indicate the majority of on-chain transaction related to GameFi are actual users playing the games. 

That being said, by assessing the chart below further it is clear that GameFi isn’t in a bad spot at all. In fact, it has marginally less transactions than DeFi blue chips, is close behind the super popular AI narrative, and actually surpasses the equally popular RWA narrative.

AI comparison

As seen in the charted data above, AI has been significantly attracting attention and outperforming the market average both in terms of price action gains and volume traded. 

Despite the intense outperformance in market gains the actual users on AI protocols remains limited. Especially in contrast to GameFi’s 3M+ daily users AI crypto’s real userbase is extremely low sitting at about 15k active daily users as seen in the chart below. 

This indicates that despite the lack of interest in GameFi in terms of trading volume and token price appreciation it remains one of the most vibrant communities in terms of real active users.

RWA comparison

RWA, another top performing narrative in terms of price action and hype, as indicated by the volume per narrative chart above, similarly has a very low sum of real active users. Sitting at only 1k active daily users collectively active on the RWA protocols listed in the Dune data provided below. 

Once more reinforcing the fact that comparatively GameFi is one of the primary narratives with real users actively using the protocols. 

Analysis of GameFi Economies

Gala Games’ $GALA

The Gala Ecosystem is powered by GalaChain, which offers a secure platform for gaming. Central to this ecosystem is the $GALA token, designed to foster growth, sustainability, and community empowerment. $GALA facilitates seamless payment, settlement, and incentivization among participants. 

Key points

The $GALA tokenomics model is designed to ensure that as the ecosystem grows, the value of $GALA increases:

• Dynamic Emission Rates: Adjusted to balance supply and demand.

• Token Burns: Reduce total supply, increasing token scarcity and value.

• Incentive Structures: Align rewards with ecosystem health and growth, ensuring sustainable value appreciation.

Genesis and Distribution

$GALA tokens are generated through the operation of Gala Games Founder’s Nodes, ensuring fair distribution with a 50:50 split between Founder’s Node Operators and the Gala Conservatorial Entity. This structure aims to support ecosystem maintenance and growth while laying the groundwork for future decentralization. $GALA’s emission tranches align with milestones in the total supply, facilitating automatic halving events that adjust the emission rate based on demand. This promotes decentralization and empowers Founder’s Nodes operators to shape the ecosystem’s future.

Supply Dynamics

$GALA is capped at a maximum of 50 billion tokens. The daily emission rate is dynamically adjusted based on the circulating supply, balancing rewards with downward pressure on the total token quantity in circulation. This responsive supply system is supposed to ensure long-term sustainability and value for the token. 

A significant aspect of $GALA’s tokenomics is its approach to token burns. These burns impact the total supply without affecting the max supply, refining the economic model of the ecosystem and increasing the value of remaining tokens by reducing overall supply.

Burns

In May 2024 Gala Games burned 21 billion $GALA tokens to avoid future sell-offs and maintain community trust. This burn, worth approximately $637 million, was part of a broader effort to stabilize the token's value and strengthen the ecosystem.

With the launch of GalaChain and the onboarding of external developers, Gala Games aims for significant growth while maintaining a maximum supply of 50 billion $GALA tokens. The platform's tools facilitate easy development on its versatile L1, and despite challenges, Gala Games is committed to becoming the first blockchain to reach a billion users.

Despite this burn, the token economy is not built upon a deflationary model where buybacks or burns are deeply built into the Gala games ecosystem as evidenced below by the borderline pathetic imbalance of 120x more minting than burning. Although Gala is burned from gas fees, the biggest impact come from manual burns like the one mentioned above; however, this is a temporary solution to a bigger problem.

Gala Performance

Gala Games built significant hype during the 2022 GameFi craze and rallied substantively. Since then, the token has slowly bled despite the decent token economy and game releases by Gala games. The possible catalyst for this was the constant token releases, although currently only 30B/50B $GALA is unlocked according to CMC. 

Sandbox’s $SAND

The Sandbox is a virtual metaverse where users can develop, trade, and monetize decentralized land parcels using various monetary means. Central to its ecosystem is the $SAND token, an ERC-20 utility token that plays a crucial role in the platform’s economy in relation to marketplace trading, governance, and gas fees.

Key Points

• Utility Token: Central to trading, governance, and transaction fees within The Sandbox.

• Supply Cap: 3 billion tokens, fully vested by February 2025.

• Vesting Schedule: Gradual release to maintain market stability.

Price Action and Market Dynamics

How the token economy works:

• Platform Access: Players use SAND to play games, buy equipment, and customize avatars, potentially earning SAND through gameplay. Creators spend SAND to acquire ASSETS (NFTs), LANDS (NFTs), and through staking. Artists use SAND to upload ASSETS to the Marketplace and buy Gems for defining rarity and scarcity.

• Governance: SAND holders can participate in governance decisions through a DAO structure. They can vote on key platform elements, such as grant attributions and feature prioritization, either directly or by delegating their voting rights.

• Staking: SAND allows for staking, providing passive income on LANDS and yielding additional SAND. Staking is also the exclusive method to obtain valuable Gems and Catalysts needed for in-game asset creation.

• Fee Capture Model: 5% of all transaction volume in SAND is redistributed with 50% going to the Staking Pool as rewards and 50% to the Foundation which is made to support the Sand ecosystem and drive further adoption through grants etc. 

The Sandbox economy appears to be facing a decline in player interest. The token economy is heavily dependent on players actively engaging with the game and staking their tokens for in-game assets; when this activity decreases, the token value collapses, given that the buy pressure declines whilst the rewards still inflate the existing supply. 

The absence of effective burn mechanisms or token buybacks reducing supply exacerbates the problem. When players unstake and stop transacting, the token price falls, further discouraging staking as rewards become smaller in USD terms. Consequently, the staking pool diminishes due to low return, creating a downward spiral. 

Although there is a burn mechanism in place, it has had minimal impact due to the limited implementation of actual token burns.

Sand Performance

Historical token unlocks have shown significant sell pressure post-unlock, influencing $SAND’s price. For example, after the August 2022 unlock, sell orders dominated the market. Additionally, strategic moves, such as early token releases ahead of major announcements, have further impacted market behavior.

Yuga Labs’ $APE

ApeCoin (APE) is an ERC-20 token used for governance, utility, and access to various benefits within the ApeCoin ecosystem. This ecosystem integrates video games, art, entertainment, and real-world events, all centered around the renowned Bored Ape Yacht Club (BAYC) and other Yuga Labs projects.

Key Points

• Utility Token: Facilitates governance, transactions, and access within the ApeCoin ecosystem.

• Supply Cap: One billion tokens with no additional minting or burning mechanisms.

• Governance: Managed through the APE DAO, APE Foundation, and ApeCoin Board.

• Value Drivers: Diverse utility, staking rewards, ecosystem growth, and exclusive access.

• Vision: Integrates web3 and physical realms, expanding utility through gaming, events, and branded goods.

ApeCoin has a hard-capped supply of one billion tokens. At launch, approximately 30% of the supply was in circulation, with the rest scheduled to be released over several years. 

ApeCoin Crypto Governance

• APE DAO: Open to all APE holders for voting on project rules, payments, and partnerships.

• APE Foundation: Manages weekly operations and executes DAO decisions.

• ApeCoin Board: Oversees the APE Foundation, with members serving six-month terms initially, followed by annual elections by DAO members.

ApeCoin’s Vision

ApeCoin seeks to blend web3, gaming, internet culture, ecommerce, and NFTs with physical goods like clothing and books. Yuga Labs, in partnership with Animoca Brands, is building a library of play-to-earn (P2E) games featuring APE crypto payments and rewards systems, further enhancing the token's utility and value.

Ape Performance

Despite the major bull move at its initial release, rallying to over $17, it has hit as low as $1 in October 2023. One of the major concerns in regards to the Ape token is the fact that Yuga Labs hasn’t built any substantial tech with the token at its center. Yuga Labs games Dookeu Dash and the ‘Otherside’ MetaVerse were supposed to be built on the Ape token but no substantial game releases have occurred since Ape’s release, driving the token price down significantly. Thus far the Ape token has been a token with little real utility or an ecosystem in which to thrive. This underscores the importance of not just having decent tokenomics in relation to vesting periods and unlocks, but following up on the token’s true ecosystem development.  

World of Dypians’ $WOD

The WOD token is the primary currency within the World of Dypians (WoD), establishing a sovereign token economy. The token’s value and market capitalization are designed to grow in tandem with the expansion of the World of Dypians. The key utilities are in-game purchases, NFT minting, and NFT trading.

Key Utilities

• Gaming: Users purchase items, bundles, events, PvP trading, subscriptions, and upgrades using the token. 

• DeFi: staking, farming, WOD locker, vault; done via partners.

• Marketplace: Users buy, sell, customize, and mint NFTs using WOD tokens.

• Operations: Users use WOD for environment building, events, advertising, and integrations.

Token Value Flow

The WOD token gains value within the World of Dypians ecosystem through its diverse utilities in the Metaverse, DeFi, NFT, and business sectors that act as token sinks; the value accrual happens naturally as users purchase tokens from exchanges and spend them in the game.

Tokens collected from these activities flow into the treasury and fee structures. The treasury either simply keeps these tokens or uses them for platform growth, marketing, and forging new partnerships that will bring even more buy pressure. This continuous investment and reinvestment ensure the token’s value appreciates as the ecosystem expands and user engagement increases.

Future

Fundamentally, a good game with a plethora of real users is something most other projects, like the ones mentioned above, are missing. Whilst WOD hasn’t launched yet, the closed beta is already proving World of Dypians to be a successful game, which, when combined with the potential for a token with so many sinks and very little faucets, is something we’re very bullish on. 

Conclusion

In conclusion, despite the GameFi market having been shown relatively little attention over the past few months, it remains one of the top most active industries in the crypto space in terms of actual users. Additionally, most of the “poor performances” seen by GameFi projects in terms of token returns can be largely accounted for by poor token economies that don’t drive real value to the token; poor economies are simply GameFi’s worst enemy. With the aforementioned major Web2 players slowly entering the GameFi space, there is an increasingly high RR in GameFi investments as long as the chosen investments are built on sound economics. 

Ultimately, none of this is investment advice but merely a long list of observations culminating into a thesis which highlights a more positive backdrop for GameFi than is the general consensus on the current state of GameFi.