- GameFi has been hit hard by the current bear market, with declining project volumes and investments
- While many are suggesting that GameFi projects ought to pay credence to building up gameplay and visuals, work still has to be done to remedy the games’ tokenomics
The current bear market has not been kind to most crypto investors, with Bitcoin down nearly 50% in recent months from its peak in November, and Ethereum following suit as well. The unpegging of TerraUSD, or UST, which was initially tied one-to-one with the U.S. dollar, together with the collapse of Three Arrows Capital and increasingly hawkish federal inflation rates have sent shockwaves throughout the crypto space. GameFi projects have also clearly not been unscathed by the onslaught. The total volume in GameFi dropped 40% to reach an all-time low since the beginning of the bear market, according to a report provided by Cryptoslate.
GameFi, or blockchain games, are often characterized by Play-to-Earn economic models where players are financially rewarded for investing their time and effort into playing the game. An amalgamation of the terms “game” and “finance”, GameFi generally rewards players for completing in-game tasks such as battling other players, creating original content, or progressing through the game. Often, GameFi projects require new players to purchase or own an initial collection of digital assets before they can begin playing the game. Players wanting to get in on leading GameFi project Axie Infinity for instance, had to first purchase three “axies”, or in-game creatures in NFT form, before they could even fathom the idea of monetizing their gaming experience.
To find out more about how GameFi is faring in the current bear market, we spoke with Corey Wilton, the Co-Founder and CEO at Mirai Labs. Pegaxy, the first title launched by the game studio, is primarily a skill-based horse racing game that features a competitive PvP (player versus player) format that rewards players for winning races using Pega that they own, which feature futuristic styling inspired from mythology. Players compete against up to eleven other racers in an attempt to secure a top-three placement in any given race, and are rewarded with VIS tokens, which serve as the platform’s native utility token.
“The bear market is going to remove the ones who are just here for a quick money grab for sure,” Corey says. “But I think for the ones who really want to build something good and sustainable for the industry and actually care for their player base, I think they should be able to make it. If they’ve sorted out their tokenomics and funds, of course.”
“They [gaming studios] have their backs to the wall in this current market, because they can’t really predict the future or see what’s going to come,” Corey tells us.
“With good leadership, the team can perform well. But if the leadership loses trust or they decide that they don’t believe in the project anymore, that’s when things can begin to spiral.”
Indeed, as much as industry visionaries may tout the phrase “winter is the time to be building”, GameFi projects are struggling to do just that right now. A report by Cryptoslate in September indicated a sharp decrease in investments within GameFi, which saw funding fall from $0.448B in August to just $0.133B in September this year. VCs (Venture Capitalists) that we spoke to also shared similar sentiments, particularly when concerning GameFi.
“We only invest in serial entrepreneurs who have experience in growing a company, exiting, and fundraising,” Kelly Choo, CEO at Kreation Ventures tells us. “We would love to see GameFi projects that utiltise existing IPs that are renowned. Because if they can secure IPs, it shows that the IP trusts them, and that would help us (venture capitalists and investors) evaluate the company. Otherwise, it would just be another big risk in the bear market.”
Alvin Kan, the Director of Business Operations for Binance’s BNB Smart Chain, echoes Kelly’s sentiments as well:
“GameFi proejcts need to look for additional revenue sources such as advertising revenue, as investors will be looking for alternate streams of income flowing into these projects as opposed to just having new users coming in to buy the project’s NFTs.”
Indeed, GameFi projects have often been labelled as “pyramid” or “ponzi” schemes due to their reliance on onboarding new users while rewarding them with virtual tangible assets, or NFTs, that do not have any intrinsic value. Comparatively, investing in the stock market holds a closer attachment to the real world, wherein investor funds are poured into a specific company which in turn manufactures or improves products that have real-world utility and benefit.
Corey is quick to respond to this, however.
“Game studios, either web3 or otherwise, still need money to survive,” he says. “GameFi ecosystems specifically, sustain the inflows and outflows of money in an open loop and decentralized way. But I can see how there is this impression of having money being pumped in one second, and disappearing the next.”
Within the GameFi ecosystems exist Gaming Guilds, collectives of players who participate in the game under a shared banner. Often, these guilds provide players with some much-required initial capital, such as the minimum required NFTs to begin playing the game, while also providing them with the necessary expertise and strategies to best capitalise on their time spent in the game. In exchange, the guild collects a portion of the rewards each player earns from the game. However, the behaviors of certain guilds and their players have raised eyebrows from those within the GameFi space.
Slash and burn tactics, as they are coined, involve members from these guilds exhausting the tokens from a GameFi project through meticulous and strategic farming, before selling these toke