In May, we witnessed some of this year’s continued prevailing downward trends, with most web3 gaming metrics on the decline. Unique Active Wallets (UAWs) declined once again after the temporary surge brought on by Iskra (a web3 multi-game platform). At the same time, newer releases like Oath of Peak have essentially disappeared from the radar. It's also concerning that if we discount the bot activity that sustains the relatively stable figures for games like Alien Worlds, we would have seen an even more drastic drop in UAWs. 

However, it's worth noting that UAWs don't account for the entirety of web3 gaming activity. The metric only tracks wallet-to-smart contract interactions. This count could decrease despite increased player activity as games transition to a “games-first, wallet-optional” model. Furthermore, games that offer custodial wallets could increase the overall sum of gaming UAWs with the downside of increasing the number of unique wallets a player uses, further skewing the difference between UAW and player.

The volume of NFT secondary market transactions across most blockchains has continued to fall as the hype dies down. Bitcoin NFTs, however, compensate for this drop by sparking an initial speculative bubble in a new space for NFTs on the original blockchain, which previously wasn't capable of supporting them. We may see a boom-and-decline pattern akin to Ethereum's as rapid growth and congestion start to impede accessibility. Still, Bitcoin and Ethereum both have a strong potential for long-term viability that other blockchains might lack. Regrettably, given the finite pool of money in circulation, the growth of one blockchain often comes at the expense of another until another bull market occurs and demand for blockspace accelerates. 

Web3 game fundraising was practically nonexistent this month, save for a solitary follow-up round for Illuvium. It's apparent that interest in funding game projects has migrated towards other areas, such as tech infrastructure and AI, although there are whispers of modest interest in smaller, token-driven game investments. Although VCs are aware that many of their bets might not pay off, there should still be a smattering of investments throughout the summer aimed at discovering the next potential model. However, valuations and investment sizes for web3 games will likely continue trending downward for the time being.

Now, let’s dive into May’s notable web3 game releases, UAW stats, transaction trends, and funding announcements.

Notable Releases

Grit

Grit launched in May, becoming the second web3 game to debut on the Epic Games Store, following Blankos Block Party and the third full game release by Gala Games after Town Star and Spider Tanks. Grit, a Wild West-themed third-person battle royale (BR) game, adheres to many BR standards while incorporating some unique twists and web3 elements. Although developer Team Grit is still fine-tuning its earning system and has delayed a litepaper release, the game comes complete with a wealth of cosmetic content, a battle pass, playable NFT characters, and purchasable consumable NFTs for in-game use. 

However, the absence of bots means it will require time and user acquisition efforts to reach a critical mass of players, particularly across all three core regions (North America, Europe, and Asia). While the game is free and NFTs are optional there is an NFT based Battle Pass, which is often considered a must for many gamers. Most of the game's cosmetic content can be unlocked through gameplay, which generally proves enjoyable provided a lobby has sufficient players to commence a match. Unfortunately, the BR genre is saturated and GRIT might be late to the party. Yet, as a web3 game on the Epic Games Store with at least some play-to-earn (P2E) elements, GRIT has potential to garner attention. With a delay in launching the earning components and litepaper of the game there hasn’t been any huge interest in jumping in just yet, which has also led to weak initial NFT sales.

Other noteworthy releases:

• Run Legends from Talofa Games is a mobile fitness game that turns walking or running into missions using spatial audio in headphones for immersion. The game is unique in having multiplayer co-op aspects that allow players to work together in real-time to complete missions and boss fights. Unlike StepN, the game focuses more on normal in-game progression and its economy than financial earnings. Talofa has given out NFTs to early whitelist users but doesn’t yet have its blockchain integration live for the full web3 experience. Run Legends will be using the Sui blockchain, which launched this month and is in the process of trying to onboard a number of launch titles.
• Blocklords released the community beta of its fairly anticipated free-to-play medieval simulation strategy game. The beta is primarily focused on the farming role of the game, but it provides a solid tutorial and a small taste of what the full game will be like for certain roles. Blocklords provides a free NFT to get started and there is a good amount of NFT integration in the beta so far. The beta also provides a good opportunity to provide feedback to the developer on both gameplay and economic design. While it’s not the full game yet, what is provided is a solid and somewhat polished slice of the game.
• Battle Bears Heroes soft launched on mobile in Asia, Australia, and LATAM with a global release planned for the summer. The game has multiple modes like a 3v3 mini-MOBA, deathmatch, and a battle royale (as a revamp of the 2010 top down game Battle Bears GO). The game is notable for being one of the first third-party games releasing on the Ronin blockchain in partnership with Sky Mavis. The timing of the release also coincides with Axie Infinity: Origins also finally soft launching on iOS in a few select countries.

Unique Active Wallets

• According to DappRadar, the number of daily unique active wallets (UAWs) in May saw one of its largest declines since June 2022, down  24.8% from April, with a huge part of the drop right at the start of May. A significant portion of this reduction can be traced back to Iskra (a web3 multi-game platform and ecosystem), which reverted to its March statistics (345,000 UAW for May versus 305,000 UAW for March), down from a fleeting high of 2.48 million UAW in April. Although this downward shift affected several of the top 10, some new entrants emerged to fill the gaps.
• Other games like Oath of Peak (an anime-themed mobile web3 RPG) experienced substantial drops in UAW. The game appeared to have reached its nadir in daily UAW by the end of April, but fell even further as May drew to a close. Given that the game registered 93,000 UAW in April, a decline to single-digit daily UAWs represents a notable loss. A comparison with data.ai further demonstrates a downward trend in active users since its February peak of 43,000 daily active users (DAU), plunging to a mere 8,000 DAU by the end of May. For reference, DappRadar showed a peak in daily UAW at 18,000 that plummeted to just 9 by May's end. There is some possibility of a disconnect between the game client and smart contracts as the decline was extremely sharp, going from about 11,500 UAW on the 23rd to just three on the 25th.
• Compounding these issues, the game seems to have closed its Discord server, and users within the Yeeha! Games parent Discord voiced complaints about an egregious 80% exchange tax rate and a sudden consolidation from 18 servers to just one. Pinpointing the exact reasons behind this project's failure is challenging, but seeing a game with seemingly decent production values falter so rapidly is regrettable.
• As a reminder, UAWs are not a perfect indicator of a project’s user base. A user can have multiple wallets, potentially overestimating actual user activity. Conversely, a user can play a game but not transact with a blockchain over a period of time — potentially underestimating actual user activity. Bots are also common across many web3 games as a result of the inherent financial incentives of P2E games and as a result will show up in UAW numbers.

Top Games by Unique Active Wallets

• Iskra has slipped to second place after shedding nearly all of the UAWs it accumulated the previous month. The primary game, Three Kingdoms Multiverse (3KM) on Android, has seen a drastic decline in DAU since the last week of April, struggling to recover. However, updates released in mid-May and improved app store marketing began to bring players back. 
• According to data.ai, the game's DAU ended the month slightly higher than it started, but the damage to Iskra is already done. On the upside, Iskra launched its second game, World of Win: P2E Social Casino on Windows, on May 31st, showing some signs of recovery in the first week of June. Alongside the new game's launch, Iskra conducted an initial token offering and debuted initial NFTs for their next game, Norma in Metaland, a mobile cooking game. The overall Iskra lineup, featuring a Pokemon-like RPG, an idle RPG, and a match-3 game, isn't particularly revolutionary. The platform could appeal to a dedicated audience, but maintaining a robust player base might be challenging if 3KM is an indicator.
• Alien Worlds (a web-based sci-fi-themed resource mining game) managed a 9% gain, though daily UAWs have remained fairly static since late March, consistently hovering between 200-300K. The price for its Trillium ($TLM) token experienced fluctuations over the past year and has mostly been declining since November 2022 despite a small spring surge. So far, weakening rewards hasn't seemed to deter players, but if the stable players mainly consist of bots, it would make sense to see little price sensitivity as long as there's still profit from running them. The game's subreddit appears active, but nearly every thread from the last three months was created by an Alien Worlds admin, and most comments are from bots. In short, the player base is primarily bots at this point, so even though the game continues to rank highly, it’s hard to be optimistic about its prospects.
• Benji Bananas (a casual rope-swinging mobile game) continues to lose players, and interest is waning. Given the game's limited depth, it relied heavily on earning mechanisms to generate interest. However, the value of its $PRIMATE token has been gradually declining since its debut a year ago. The game's daily UAWs are at an all-time low, and it’s unlikely to regain interest without significant promotion. Realistically, its shallow gameplay has no chance of significant retention even with strong promotion.
• Splinterlands (a transaction-based auto-battling collectible card game) continues to lose players due to waning interest and continuing economic design changes that seem to favor Splintershard (SPS) governance token staking over all of the game’s initial design. Land development and SPS staking mainly cater to hardcore dedicated players and whales, while the majority of players are leaving the game. The daily UAW chart on DappRadar for the game has shown a clear pattern of spiking every two weeks as each season ends and the size of that spike relative to the other 13 days of a given season cycle has been diminishing heavily since mid-march to the point of almost not being noticeable now. This is one of the clearest indicators of general drop-off in play, especially during a lull between card sets. The Splinterlands team has also been torn in multiple directions with two new games to launch on top of the constant economic earthquakes being dropped on the game.
• Pixels (a 2D pixelated social virtual world) began being tracked by DappRadar on May 12th, hitting a peak at 51,000 UAW just a week later. Rather than being a pure game, it serves as a low-resolution 2D virtual world social hangout with land ownership and farming elements. The UAWs track contracts tied to land and the $BERRY token. However, a rapid decline from 51,000 to 5,000 UAW in less than a month doesn't bode well for the project. Although its 258,000 total UAW for May earned it a place on this month's charts, it's unlikely to remain there unless it can revitalize interest.
• Carrom Blitz, a web3 version of the Indian board game Carrom, debuted more widely with earnings in place in the last week of April. While the launch seemed strong, it pales in comparison to the launch metrics of Solitaire Blitz and Trickshot Blitz, which reached over 60,000 and 88,000 daily UAWs at launch, respectively. Carrom Blitz peaked at just over 5,000 daily UAWs. Joyride Games had previously sacrificed its user acquisition for Solitaire Blitz when Trickshot Blitz came out, leading to a stronger initial pull. If Joyride tried the same trick this time, it didn’t have nearly the same effect. Furthermore, the blockchain network these games are built on, Flow, hasn't exactly taken off, and the game may have a limited audience outside of its home country, which could hinder its success compared to more universal games like billiards or solitaire.
• Hippo Dash from Gameta (but developed by “Green Umbrella” according to Google Play) made a big splash in the second half of May. The game is a simple mobile endless runner that was initially released on March 24th. The game is part of Gameta’s “Hippo Club” which relates to its $HIP token and Hippo NFTs. The game functions as part of a high score-related P2E system for earning $HIP tokens, but requires Hippo NFTs to qualify for earning, with the more expensive NFTs increasing earning potential. The game description on Google Play links to a site where free mints of the NFTs were available for a short time. The NFTs on secondary markets are sold for BNB tokens and peaked at approximately $43 for a basic Hippo NFT, but sit at a $25 floor at the time of writing. According to data.ai, the game has around 3.8K DAU on average, although that is only based off a few days of data towards the end of the month. Dappradar shows UAW contract activity picking up in mid-May as Gameta started some NFT activity and then peaking on May 28th at 19,000 UAW. The actual earnings from the game come in the form of mystery chests whose contents will be revealed later. Like Benji Bananas, it’s unlikely this game will be able to sustain itself for a long period of time. 

Transaction Volume

• NFT secondary market transaction volumes rose 11% in May over April, with varying performances across different networks. An essential caveat to this growth is the inclusion of Bitcoin NFTs on Cryptoslam, which were driven by the success of the Ordinals NFT system ushering NFT markets into the Bitcoin sphere. With an impressive $195.7 million in secondary market volume, Bitcoin NFTs have already surpassed every network, except Ethereum. However, excluding Bitcoin's contribution, the secondary market volume actually fell by 18%.
• As of now, Bitcoin NFTs aren't employed for gaming; their sole use is for collectible PFP/art type projects. While some may eventually get involved in games, such as the DigiDaigaku ordinal chibi's, Bitcoin is not the most suitable network for web3 gaming due to its high transaction fees and inefficiencies. Despite this, the initial Fear of Missing Out (FOMO) has driven considerable volume. We're categorizing Bitcoin under 'Other,' which significantly skews this month's proportions. However, we may reassess these categorizations in the future. 
• Regrettably, Ethereum continues its slow decline, albeit with less severe monthly reductions. The surge in Bitcoin ordinal usage likely affected Ethereum's activity, as both have overlapping participants. Game-related NFTs have yet to dominate Ethereum’s market volume, barring content from Yuga Labs and Sorare, as other networks (including layer 2s on Ethereum) provide greater development incentives.
• Conversely, Immutable was one of the non-Bitcoin blockchains, along with WAX, to witness an increase in secondary market volume in May. This rise from $24.6 million to $26.6 million is largely attributable to Gods Unchained, the trading card-centric design of which is likely to enhance secondary market volume given its popularity among collectors and players. Cross the Ages, also a trading card game, increased by 32.9%. We also foresee a boost in NFT trading volume on Immutable X as more games launch on the chain. In terms of overall market share, the chain has been gaining some ground thanks to increasing the number of games and other projects trading on its IMX marketplace. While the GameStop marketplace helped drive attention to the blockchain, it doesn’t seem to have made significant direct increases to volume. Games like Blocklords and Illuvium trading NFTs prior to full launch have also helped prevent IMX from being stuck waiting for game launches to increase market share.
• Solana suffered the steepest decline, plummeting from $85 million in April to $45 million in May. The network has yet to host any games that are generating substantial trading volume. Unlike blockchains such as Immutable, Polygon, and Sui, Solana hasn't invested heavily to persuade games to adopt its network. This is another network that likely suffered from some cannibalism due to the Bitcoin NFT hype. Also, despite its intrigue, the Saga phone project is unlikely to significantly influence Solana's adoption and transaction volume.
• As a reminder, Cryptoslam only accounts for NFT volumes in the secondary market. It also only includes data on the following blockchains: Ethereum, Solana, Avalanche, Ronin, Flow, WAX, Polygon, Panini, Tezos, Palm, Cronos, Fantom, Waves, BNB, Theta, Cardano, Arbitrum Mythos, Bitcoin, and Immutable.

Top Games by NFT Transaction Volume

• Gods Unchained experienced a strong month, making a comeback from a 9% decline in April to a striking 58% gain in May — all without releasing any new cards. The event leading to this heightened trading activity was a balance patch, which appeared to take into account feedback from a recent community poll. Players' response to the balance patch was mixed but undoubtedly instigated a rush of reactionary trading. As a result, the game's volume immediately spiked from $100-300,000 a day on average to $500-850,000 for the rest of the month.
• Sorare saw a 15% drop compared to April. However, this fall was minor in absolute dollars, standing at just $2 million compared to the $5 million drop from March to April. As a continually updating sports game now featuring three sports, Sorare remains relevant for fantasy sports fans, and it should likely sustain momentum for quite some time given there is no major competition on the horizon.
• Blocklords saw the excitement from the release of its public community beta subside, possibly because the game's initial farming gameplay may be too monotonous for players who aren't heavily into that style of play. The beta isn't the game's final release, so interest is likely to rise and fall in waves. Incorporating community feedback into future iterations could lead to renewed waves of interest down the line. Of course, a lack of secondary market trading volume doesn't necessarily equate to a lack of players, but it does indicate that the enthusiasm to dive in for new players may stagnate for now.
• The initial excitement around Otherside-related NFTs (Otherdeed, Otherdeed Expanded, HV-MTL, and Koda) appeared to cool off rather swiftly after the first week of May. Yuga Labs’ HV-MTL NFT reveal in mid-May did provide a small bump in interest, but disappointment quickly followed, and the end result was no significant uplift for the ecosystem. Interest in the project tends to ebb and flow, which could easily signal a resurgence in the next month or thereafter. However, the project's hype-driven nature might also lead to some degree of burnout, which Yuga Labs will need to counteract.
• Undead Blocks managed an incredible increase in trading volume, from $212,000 in April to $2.5 million in the latter half of May. The only noteworthy announcement around the time of the volume spike was a partnership with Nexus Gaming for some exposure, which could have potentially spurred interest. The collection had managed to pull in nearly $4 million in secondary market volume back in December 2022, but since then, it had consistently remained under the $1 million mark. Based on the initial volume for June, Undead Blocks is unlikely to maintain the boost it experienced in May.
• Overall, we expect to see the majority of these 10 projects persist for the near future, with some variance in the Yuga Labs projects as those have been doing things like forking (in the case of Otherdeed’s becoming Expanded or Kodas) or transforming (in the case of Sewer Passes eventually becoming HV-MTL NFTs and perhaps something else after). Axie Infinity has been dwindling pretty consistently and without a renewal in player interest, it risks dropping off completely. Gods Unchained and Sorare, on the other hand, are older but have consistently stayed relevant even though Gods Unchained wasn’t tracked here last year. Blocklords sticking around is uncertain as the game is possibly a way away from launching. As usual, we expect to see at least one new and probably temporary entrant next month.

Fundraising Events 

• May marked a significant downturn in fundraising for web3 gaming companies, with a 22% overall drop. Illuvium is the only game even included on the list, having secured approximately $10M essentially as a runway extension from Framework Ventures. While the game has made progress over time, it's likely been consuming cash faster than anticipated, despite its successful land sales. The fact that these land sales were primarily conducted in Illuvium's own token also means it is unlikely the developers could get a significant runway increase from the sale without dumping the token back on the market. Framework Ventures, having led the game’s initial $5M seed round, appears to be more than doubling down on the project with this latest funding round.
• This month's notable big-ticket funding round is a Series C for Worldcoin, which raised a substantial $115 million. The project is spearheaded by Sam Altman, known for his involvement with OpenAI. Worldcoin is deploying advanced technology, including iris scanning, in an attempt to resolve proof of humanity problems. Web3 gaming already grapples with bot-related issues, multiple wallets per player, and KYC/AML restrictions due to the intrinsically pseudonymous nature of the blockchain. Although the primary use case of Worldcoin isn’t specifically gaming, the potential for using models to uniquely identify real human players is certainly evident, particularly as AI’s gaming proficiency develops to the point where even P2E esports models could be challenged.
• Magic's $52 million funding round is the other significant raise this month. Magic is part of an expanding cohort of wallet-as-a-service (WaaS) providers. As web3 games strive to overcome wallet-related hurdles, particularly on mobile, these services will be crucial in facilitating a smoother transition from web2 to web3 for players. Interestingly, Magic's funding round was led by PayPal Ventures, which likely boosted interest for other investors to help with the overall size of the round. Like Sequence from Horizon, the Magic service creates non-custodial wallets compatible with email and social logins. This approach is likely to become one of the most prevalent strategies to alleviate the complexities of private key management. 

A big thanks to Devin Becker for writing this essay! If Naavik can be of help as you build or fund games, please reach out.