The web3 gaming market experienced a bit of a slowdown in February, yet still managed to coast off the momentum of the new year. The number of unique active wallets (UAWs) for blockchain games remained stable for active releases, but the January release of Oath of Peak helped boost the number, proving that new higher-quality games do indeed make an impact. Hopefully, mobile releases slated for later this year will expand the addressable player base and drive UAW growth once more.
While the transaction volumes in the secondary market reset for some blockchains, others proved that the bear market may not be as severe as initially thought. Additionally, some revised figures indicate that transaction volumes in January were even higher than previously thought, and February's numbers were able to eek about that just slightly. Assuming crypto can keep pace without major headwinds, we could see the beginning of a market resurgence. However, it is likely still too early, especially since some game release dates are further away than desired.
Although there was a slight decrease in fundraising, there was still a significant level of interest in games. It's possible that if a highly successful web3 game is released soon, it could produce an investment halo effect for games sharing similar attributes. Despite lack of utility and even macroeconomic pressure, non-gaming NFTs still continue to move and there seems to be enough speculative energy that it may only take one big project to act as kindling set the market ablaze again.
Overall, February was a month for building and testing in which industry players focused mostly on releasing alpha and beta products to gear up for proper launches later this year. Unfortunately, that meant there was a severe dearth of new releases, making February an iterative month at best. March looks to be off to a better start already, and hopefully web3 game developers’ more savvy strategy around releases, community management, and game direction will pay off in the second half of 2023.
Unique Active Wallets
Data source: DappRadar
Per DappRadar, blockchain gaming daily UAWs experienced a precipitous drop of 20.9% in February. Most of the top games didn’t see a big loss, but the delisting of WAM for unknown reasons is likely responsible for a sizable portion of the loss as it had been up over 100% in January compared to the month prior. It’s probable that if WAM’s previous UAW data was accurate, then there was only a small UAW drop at best.
Most of the top games saw a less than 12% change up or down. However, there was a new game on the list, Oath of Peak, released on mobile. Oath of Peak is an anime-style MMORPG in the vein of Genshin Impact and developed by Chinese developer Yeeha Games. This is a genre in which we’ve come to expect a fair number of copycats, but more often without the web3 elements. Of course, it’s worth noting that mobile games like Oath of Peak might have chunks of its player non engaged with any of its web3 elements. But if Yeeha is able to convert some of those players into wallet holders, it can expand the overall UAWs of the market. This will be more important as more mobile games with optional web3 elements hit app stores later this year.
Alien Worlds and Splinterlands, as first-generation web3 games, have likely stagnated in terms of user growth. That means we’ll know we’re seeing newer games gain traction and overall market growth once these titles are knocked down the leaderboard. That said, it may be some time until more mainstream games releases can challenge these incumbents, although there are quite a few candidates in development.
As a reminder, UAWs are not a perfect indicator of total users. For instance, a user can have more than one wallet, which can lead to an overestimation of activity. Conversely, a user can play a game, but not transact with the blockchain that game is built upon, leading to an underestimation of activity. Bots are also common across many web3 games due play-to-earn mechanics, skewing UAW numbers even further.
Top Games by Unique Active Wallets
Data source: DappRadar
Alien 7Worlds managed to recover from its small 5% dip last month, while Splinterlands suffered a dip of its own this month.
It’s worth noting that there is likely some overlap in players and bots between these two, and both games are contending with declining profits from the P2E player base as a result of declining token values.
There is a component of investment that likely keeps players with more desirable assets to stick around due to a combination of higher value extraction and sunk cost as the investment value reduces.
Bots of course are more likely to stick around as long as they can maintain profitability, which is simply a factor of cost versus earnings. Splinterlands did manage to shed a fair amount of the bots when it changed its rewards structure, forcing adaptation from bot makers. But it could be possible to eliminate more inauthentic behavior by following a similar path of forcing costly adaptations for a token of diminishing value.
Still, Splinterlands for example has been vocally bot-friendly, so long as the bots participate fairly in the economy.
Planet IX’s UAW gains slowed this month, going from 45% in January to just 10% in February.
Game activity still consists primarily of staking, and we may see UAWs stabilize depending on any significant game changes or profit-related rumors. Of course, we could also see the opposite occur if a portion of the player base decides to liquidate their assets.
The game’s roadmap doesn’t have actual gameplay arriving until Q2 or Q3 this year, so it may be some time before we see if the game is an improvement over something like Alien Worlds.
Benji Bananas lost serious steam this month with a 62% drop in UAWs. It wasn’t just the overall UAW loss for the month, but also the daily UAWs showed a general lack of activity for those who did participate.
That’s not surprising since the casual gameplay is neither groundbreaking nor does it lend itself to high retention rates. A lot of the gains were based on the game’s core P2E promise combined with simple gameplay, but many players are likely burning out on the poor earning potential, leading to serious churn.
Earnings require a membership pass NFT and involve maneuvering a KYC process to claim, meaning there is also a pretty strong cap on participation. There are only 5,000 NFT passes total, although a number of them are likely sitting idle.
Prices of the pass on OpenSea have been dropping over time, with the floor currently down to just over $50. Exiting players are expected to try and sell their passes to recoup investment cost, but without any significant new drivers of demand, the floor price will keep dropping and apply further selloff pressure.
Oath of Peak, as mentioned above, was the hot new game to join the top 10 this month. Like most MMOs and ARPGs, it leans heavily on a mix between narrative and grinding.
Like many Asian mobile MMOs, it does have autopilot , which given the popularity of the feature and the Idle genre in general should translate to higher player retention.
While the game has been localized in English, it’s difficult to say if the genre can gain a strong foothold outside of Asian markets (though of course Genshin Impact has shown cross-regional appeal). Oath of Peak had some decent activity in January, but was much more consistent in February as user growth picked up.
The game garnered a flood of negative reviews in January, mostly stemming from technical issues. Developer Yeeha Games has already made moves to address these issues, and that helped boost player count in February. According to Google Play, the game has over 100,000 downloads on Android, a vast majority of which appear to have occurred in February with 93,000 UAW for the month.
If the game can continue fixing its technical issues, then Oath of Peak should enjoy continued growth. Its main competitor at the moment is Genshin Impact, which is of course a mobile F2P leader devoid of any web3 elements. So Oath of Peak will be a good test for whether combining traditionally popular game design with blockchain tech is a solid strategy for attracting mainstream players to web3.
We expect players invested in Oath of Peak’s web3 side will help keep the game relevant, with a dependency on live ops to keep the rest of the player base engaged.
Trickshot Blitz managed to grow again after dropping out of the top 10 in January. It had a strong start and end in February, although a bit of a weak middle that may be attributed to a focus on a Solitaire Blitz tournament after the first week of the month.
A lot of attention from the developer of late has focused on Tennis Champs, which may be cannibalizing some of the UA spend like Trickshot Blitz did to Solitaire Blitz.
As with much of the casual P2E space, it will be worth watching how well these games can actually retain players given the unsustainable nature of the base.
We’re looking forward to seeing how well Carrom Blitz performs overall after its decent run this month, despite not making it into the top charts. Hopefully, the Blitz series sees a wider release to test the growth and staying power of the model.
Transaction Volume
Data Source: Cryptoslam
Total transaction volume on secondary markets only experienced a small 2.45% bump, but it’s worth noting that we observed a retroactive increase in January’s numbers across most of the blockchains. That is a revision of the previous drop of 7.9% to an increase of 47.7%.
It’s difficult to determine exactly where the revised increase came from, but it’s likely that Cryptoslam added significant new collections, or marketplaces — like OpenSea rival Blur, for example — may have had an outsized impact on the numbers.
Of course, it also follows that February includes these revisions, too, so it’s a promising sign that growth, albeit just a small bump, remained steady after such a large jump in January. (It’s also worth keeping in mind February’s shorter calendar length, with three less days of transaction volume.)
Ethereum continues to be dominant, and its $859 million in secondary market volume in February is the highest we’ve seen since the big crash in May 2022 that sunk volume from $2.7 billion down to $739 million the following month.
Much of last month’s volume came during the second half and flattened in the last few days of February, so it’s difficult to say if March will be as strong.
Ultimately, it comes down to both interest in particular collections as well as recent marketplace incentives, including the trend toward reduced fees.
Overall, Ethereum still captures the vast majority of NFT secondary sales versus other chains, with Ethereum’s share growing to its highest since June 2022 with 84% compared to just 78% in January.
There is also a growing threat to Ethereum’s NFT dominance in the form of Bitcoin-based NFTs.
While the NFTs being pumped on Bitcoin so far are primarily from the creators of existing popular non-game NFT collections like Yuga Labs, there is still potential for this to impact games in the near future if the trend continues.
Bitcoin lacks the robust Smart Contract functionality that Ethereum sports, so it won’t have on-chain games.
But there’s nothing stopping games being developed that utilize NFTs held on Bitcoin’s network instead of Ethereum related networks. This is an area we will be keeping an eye on for future development.
Polygon had its biggest month since August 2022 with $30 million in secondary market volume, a fair amount of which was actually game-related.
Coinllectibles, Trump trading cards, and Collab.Land membership NFTs were some of the bigger non-gaming NFT collections, but Land for The Sandbox and Zed Run legacy horses still made a significant impact with nearly $3 million combined.
There are still a number of solid looking games set to deploy on Polygon, so we do expect volume here to show growth in the future.
Immutable had its best month since October 2022, coming in at $23 million compared to a decline of $14 million in both December and January.
While Gods Unchained is still the pillar of volume on the network, there was still strong activity from upcoming games like Blocklords, Cross the Ages, and Illuvium.
With several games in development on the network, it’s likely we’ll see bigger numbers down the line. Releases are expected to be more spread out going forward and some developers are shying away from pre-sales.
Outside of Gods Unchained, activity on Immutable might still be rather sporadic and inconsistent on a month-to-month basis for now.
Solana, which enjoyed a very strong January with $158 million in secondary market volume, delivered just $76 million in February.
Unfortunately for game projects on Solana, the majority of NFT secondary market volume is not game-related, which does raise the question of whether there ever will be a significant gaming audience for Solana to tap into.
It wouldn’t be surprising if massive games building for the network, like Star Atlas, haven’t at least considered moving to competing networks like Immutable or Polygon.
Thanks to new data availability, we were able to revamp the “Other” category on the chart, which is currently composed of BNB, Ronin, WAX, Arbitrum, Panini, Avalanche, Tezos, and Algorand. While these are currently the better performing blockchains that have too small of volume to focus on individually, we will continue to evaluate the categories as necessary to keep the data relevant to the current market environment.
As a reminder, Cryptoslam only accounts for NFT volumes in the secondary market. It also includes data on the following blockchains: Ethereum, Solana, Avalanche, Ronin, Flow, WAX, Polygon, Panini, Tezos, Palm, Cronos, Fantom, Waves, BNB, Theta, Cardano, Arbitrum and Immutable.
Top Games by NFT Transaction Volume
Data Source: Cryptoslam
While the top five games remained relatively the same as January, Otherdeed did switch places with Sewer Pass as the Dookey Dash competition concluded. The market performance in January helped with momentum, but many games still lost steam with some notable exceptions.
Even though the sales volume of Sewer Pass dipped as expected, there were still some big transactions, with the most notable being the $1 million in ETH spent on the one-of-a-kind “Golden Key” NFT awarded Fortnite pro Kyle “Mongraal” Jackson, who won the competition last month.
Now that the contest is over, sales volume for Sewer Passes will naturally be tied more closely to Power Source NFTs. Sewer Pass owners can convert their existing tokens into Power Source ones, with a tier rating determined by the owner’s Dookie Dash high score if it passed a certain threshold and placed on the leaderboard. This tier rating determines what attributes the new NFT type has.
There is also the Dookey Dash: Toad Mode competition, first introduced at the end of February, for players that didn’t make the leaderboard. That could potentially move some Sewer Passes, too, although the volume won’t be anywhere near what it was during the main competition.
Gods Unchained continues to grow thanks to expanded awareness. The hype generated around its mobile alpha has also likely helped boost secondary transaction volume indirectly.
It’s also worth remembering that as a trading card game, there’s an inherent emphasis on the secondary market for more desirable cards.
Cards earned by playing are of limited value, and the only way to get the other cards is either through purchasing blind packs or buying one off the secondary market. Once the packs are no longer for sale, all transactions are funneled through the secondary markets.
DigiDaigaku benefitted in terms of volume from the much hyped Super Bowl commercial. The big unknown is whether it was a benefit to developer Limit Break, given the company only sees 10% of that volume in royalties and spent nearly $7 million on the ad.
As part of the ad, Limit Break gave away 4,000 NFTs and, once those were claimed, directed curious users to co-founder Gabe Leydon’s Twitter account.
The event created 5,000 new Dragon Egg NFTs to be traded, with 5,000 more still to come from an upcoming whitelist giveaway.
The ad also increases interest in DigiDaigaku’s existing NFTs, driving additional transaction volume with the expectation of future airdrops and utility. Given Limit Break’s ambition and skill at maintaining an air of mystery and excitement around the project, we expect DigiDaigaku to remain in the top 10 for some time.
Blocklords Banner NFT sales saw a huge 432% boost, thanks to the project’s Royal Feast promotion in the second half of February.
The promotion event required burning banners for raffle tickets, which naturally diminished the supply of banners available for purchase and helped drive up the price.
Much like DigiDaigaku, the team behind Blocklords have yet to release an actual game and is instead relying on interest in the NFTs to keep the project going. It remains to be seen if it can keep up the momentum.
The Sandbox experienced a decent bump thanks to its Voxel Madness land sale in late February. Excitement over virtual land isn’t what it used to be, but The Sandbox has managed to maintain a sense of relevance alongside Decentraland for the moment.
Createra Genesis Land is also benefiting from continued interest, but the 65% decrease there shows that much of the initial purchasing was more speculative than practical.
Wolf Game, and its newer Land NFTs, are also suffering from some waning excitement around the project, but perhaps it might be able to add new elements to help boost sales down the road.
With Parallel now starting to run more alphas, we do expect to see its reappearance on the charts in the future, provided the game is halfway decent. Cross the Ages is also attempting to reclaim a position now that it’s been migrated over to Immutable and selling on the IMX marketplace.
Fundraising Events
Despite a slightly higher quantity of raises, February trailed January in terms of dollar amount with a 35% drop to $179 million. There were, however, many small raises for games in various stages of development. There were also some interesting trends around guilds such as YGG and IndiGG, plus a number of raises around social-centric tech.
One of the most notable raises came from Kratos Studios, which raised $20 million from VCs to buy and expand IndiGG as a much bigger India-centric DAO.
India has continued to grow in interesting ways in gaming and this investment is hoping to capture some of that socially-driven web3 wave that hit other countries like the Philippines.
It’s probable the investment is part of an attempt to develop a regional player base that Kratos can leverage for future game partnerships and community-oriented programs.
Avalon managed to raise $13 million from BITKRAFT, Hashed, Delphi Digital, and Mechanism to build a UGC and MMO-oriented platform for cross-game interoperability.
Rather than claiming to build a metaverse, the team is trying to build tech infrastructure for other game-driven metaverses as a platform provider.
There are a number of former game developers from big-name projects, so at the very least the team does have more formal gaming, and not just tech, experience.
Considering the difficulty interoperability poses across domains like tech, politics, and law, Avalon will certainly need the money to push through these early phases.
With the team having a strong background, it’s likely Avalon will have to build a game or perhaps even multiple products using its own tools to help convince other companies to do the same.
YGG also had a very impressive $14 million private token sale to DWF Labs and a16z. Impressive given that it’s difficult to see exactly how the guild’s token has a strong enough future to justify this big of an investment this late in the stage post-P2E.
With the original concept of guilds growing stale and existing gaming guilds needing a pivot, YGG has taken steps to cultivate new player bases.
The big project that has firms like a16z excited is so-called soul-bound tokens, a system designed to link profiles and identities to crypto wallets and leverage player development programs. The hope is that game-agnostic player profiles will be an important tool for web3 games and UA in the future.
Mino Games raised $15 million to create web3 games around Dimensionals collectible characters.
The company has experience in this area, and with the NFT angle of collectability it’s hoping to capitalize on a Pokemon-style approach.
Getting players to obsess over virtual characters is never easy, and we imagine some of that $15 million will go towards marketing to try and build that audience while getting over web3 speed bumps.
Azra Games raised an additional $10 million from a16z for its Legions and Legends web3 RPG.
The senior team from Azra Games have been able to help fundraise by leveraging their experience building a previous social game company, Klicknation, which was acquired by EA. Members of the team later worked at EA Capital Games on successful mobile projects like Star Wars: Galaxy of Heroes.
The question now is less on Azra’s ability to build a game studio from the ground up and more on its chances of developing a sustainable web3 game at scale, which we have yet to see.
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.
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