DappRadar x BGA Games Report – Q1 2022

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Blockchain gaming activity has grown 2,000% from the previous year.

Despite a challenging scenario from micro and macroeconomic perspectives, blockchain gaming activity stabilized. Security incidents, including the latest half-billion hack to the Ronin Bridge, remind us that interoperability comes with trade-offs. At the same time, the war in Ukraine and the negative performance of the cryptocurrency market hindered the sustained growth shown by games during last year. Still, in perspective, blockchain gaming activity has grown 2,000% from the previous year.

Source: Google Trends

Game dapps continue their ongoing developments, and the metaverse keeps flashing one of the most exciting opportunities in the blockchain industry. VCs and other investors keep pouring capital into blockchain games and metaverse projects, surpassing $2.5 billion in investments. Meanwhile, financial institutions are estimating the economic potential of the decentralized metaverse to become at least an $8 trillion market

Key Takeaways

  • Investments keep pouring into blockchain games as $2.5 billion were raised in Q1; at this pace, 2022 investments will be 150% higher than last year.
  • Blockchain games attracted 1.22 million UAW in March, accounting for 52% of the industry’s activity; while the short term usage seems steady, the use of blockchain games has increased 2,000% from Q1 2021. 
  • Sky Mavis undergoes a challenging period after suffering one of the most significant attacks in crypto history; still, Axie Infinity attracted 22,000 daily UAW in March, while Binance led a $150 million fund to recover assets from the Ronin bridge hack
  • The metaverse continues to evolve; The Sandbox Alpha season 2, Decentraland’s Fashion Week, and NFT World’s value appraisal showcase the potential of the space. 
  • Splinterlands, Alien Worlds, and Crazy Defense Heroes drive blockchain gaming activity with an average of over 650,000 daily UAW in March.

Table of Contents

52% of blockchain activity comes from game dapps

Amid the challenging scenario, blockchain games maintained a steady usage level. A total of 1.17 million Unique Active Wallets (UAW) connected daily to blockchain games on average during Q1, decreasing 2% from last year’s Q4 daily average. However, the March daily average surpassed 1.22 million daily UAW, showing signs of recovery already.

Matic keeps building momentum as a challenger to the leading gaming ecosystems of Wax, Harmony, and BNB Chain from a blockchain activity perspective. Game dapps on the Ethereum sidechain attracted 114,000 daily UAW on average during Q1 and an impressive 173,000 during March. Play-to-earn games like Crazy Defense Heroes, Pegaxy, Arc8, and Aavegotchi have fueled Polygon’s gaming activity by 219% from the end of December. 

On the other hand, Ronin and BNB Chain’s on-chain activity has decreased since the end of last year. Apart from Mobox and Bomb Crypto, to some extent, the use of most game dapps in the Binance branded network has mainly been volatile. Still, BNB Chain is the third-largest network in blockchain gaming activity, with 165,000 daily UAW in Q1, 33% lower than December.

Meanwhile, Ronin is undergoing its most challenging period since launching almost one year ago.  

Challenging period for Sky Mavis

On March 29, the Sky Mavis team announced that 175,000 ETH and 25.5 million USDC were stolen after the Ronin bridge suffered an exploit almost one week before. The hacker managed to control five out of the eight multisig wallets required to approve deposits and withdrawals from the bridge’s custodian contracts, stealing the second-largest amount of crypto in history. 

While the hack forced Ronin’s native dapps to halt operations, the plunge in Axie’s blockchain activity was not wholly a result of the latest attack; in fact, it was already in decline. The game’s on-chain activity peaked in January when the game registered over 55,000 daily UAW on average and has come down to almost 22,000 daily UAW in March. 

The number of UAW started decreasing in mid-February due to changes implemented by Sky Mavis in the SLP rewards ratio to make Axie’s in-game currency sustainable in the long run. Still, Axie Infinity is among the top 10 most played games based on daily usage, and the game is still attracting over 1.5 million Daily Active Users measuring off-chain data. 

The Ronin bridge exploit represents a tough blow for the Sky Mavis. However, Ronin is a complete ecosystem. Katana proved to be a serviceable DeFi option after hosting its first mining program, and both network and communities are governed by its token RON. In addition, the support from the Axie Infinity user base and from the Web3 community in general has been felt. Binance led a $150 million funding round with Animoca Brands, a16z, to reimburse the user funds affected by the attack. To help cement and strengthen the core of its ecosystem, Sky Mavis launched a $1 million bug bounty program

It is probable that Axie Infinity will remain a leading play-to-earn alternative for months. Amid this challenging period, it is easy to forget that Axie NFTs became the first collection to surpass $4 billion in historical trading volume, excluding artificial trading (LooksRare). Moreover, the launch of Origin’s Beta was successfully deployed in April, attracting over 220,000 testers, according to Sky Mavis. Origin means that Lunacia, Axie’s virtual world, is one step closer

$2.5 billion was raised by games and metaverse projects in Q1

The amount of capital invested in blockchain games in Q1 is overperforming the $4 billion raised in 2021. In the first three months of 2022, VCs and investors have raked at least $2.5 billion into blockchain games and their underlying infrastructure. At this pace, play-to-earn and metaverse-related projects will add $10 billion this year to keep building the future of this industry. 

Animoca Brands raised a $360 million investment at a $5 billion valuation, fostering its presence as one of the leading Web3 brands. Last month, Sequoia Capital led a $450 million investment in Polygon, a network nurturing one of the most enticing blockchain game ecosystems.

In March, over $785 million was invested across different projects. Yuga Labs, the studio behind the renowned NFT collection Bored Ape Yacht Club (BAYC), received a $450 million investment led by Animoca Brands, with The Sandbox, FTX, and Coinbase involved in the deal. The investment further cements the status of Yuga Labs as one of the names to follow in the Web3 narrative. It also boosts the team’s metaverse plans as they prepare for the launch of Otherside. Otherside will become an interoperable metaverse platform involving play-to-earn games, fashion, and media.

It is also worth highlighting the $200 million investment led by Temasek in Immutable-X (IMX). The investment brings the value of the Sidney-based Ethereum scaling solution to a $2.5 billion Series C valuation. IMX hosts two popular blockchain games in Gods Unchained and Guilds of Guardians. These dapps will be joined by Illuvium and Ember Sword in the upcoming months. The capital raised will bring flexibility to keep building and scaling the IMX product further.

The blockchain metaverse brewing around us

Interest in the metaverse has cooled down after the hype cycle driven by Meta’s rebranding announcement in Q4 2021. The trading volume in virtual worlds has decreased 12% from Q4 2021, reaching over $430 million in Q1 2022. The average price of lands in Decentraland and The Sandbox has plummeted 40%, while trading volume on both platforms decreased 20% and 60%, respectively. Still, a general perspective on metaverse platforms signals a bullish scenario for this type of project.

The Sandbox completed its second Alpha season, attracting over 325,000 visitors to the 35 experiences opened for early players. Season 2 distributed around $30 million in SAND tokens. Plus, brands like Warner Bros, Ubisoft, and HSBC have closed partnerships with this play-to-earn virtual world.

At the same time, Decentraland and Boson Protocol hosted the Fashion week in the last week of March. Renowned fashion brands like D&G, Esteé Lauder, and Forever 21, among others, displayed immersive experiences in the platform’s Fashion District, a virtual parcel that was bought for $2.4 million by Metaverse Group.  

It is also worth noting the performance of NFT Worlds, a virtual world consisting of 10,000 lands NFTs that allow their owners to customize their parcels to offer gaming experiences. The project showed its utility factor with its WRLD airdrop and staking pools, causing a spike in demand for the NFTs. NFT Worlds was the second metaverse project in terms of trading volume, generating $95 million in trades, only lagging behind The Sandbox ($113M). 

The potential of a blockchain-based metaverse is imminent. Leading organizations like Microsoft, Google, Disney, Sony, and several others will undoubtedly try to develop their brands within the metaverse. However, it is utterly relevant to understand that the ownership entitled by NFTs and the underlying financial ecosystem enabled by cryptocurrencies and play-to-earn games will shift the paradigm from the traditional metaverse that is limited to virtual, augmented reality.

Review of top games

It feels like the top play-to-earn and GameFi dapps have found a way to engage their respective communities. Splinterlands is established as the number one play-to-earn dapp. In March, Hive’s trading card game attracted over 366,000 daily UAW, a 15% growth from December 2021. Updates to the card deck supply, including the earnings ratio, have set a solid community around the game. The idea about the upcoming Splinterlands virtual world has also helped the cause. 

Polygon games Crazy Defense Heroes (CDH) and Pegaxy have been among the best performing games. The tower defense game CDH has seen a steady rise in its player base, attracting over 134,000 daily UAW in March. That represents an impressive 540% growth from the end of December. Similarly, Pegaxy’s on-chain activity has risen 420% in the same timeframe and attracted over 16,000 UAW in March.

BNB’s Mobox and Harmony’s DeFi Kingdoms (DFK) managed to keep their on-chain metrics positive. The blockchain activity on Mobox increased 10% from the previous quarter thanks to a solid roadmap that moves around the Momoverse. As for DFK, the on-chain activity remains relatively stagnant despite a negative downtrend in the DeFi space and a 12% drop in the price of JEWEL, the game’s native token. Both games showcase the potential of GameFi as the lines between DeFi and games begin to blur. 

On the other hand, Wax’s Alien Worlds and Binance’s Bomb Crypto struggled to keep their blockchain activity on the same levels as last year. Alien Worlds lost some ground after attracting more than 300,000 daily UAW in August last year. The space mining GameFi dapp is still drawing over 188,000 daily UAW, while its TLM token has been among the most popular game-based cryptocurrencies. The case of Bomb Crypto is worth monitoring due to the history of other BNB games, namely CryptoBlades and CryptoBay. 

While the top 10 blockchain games are primarily established, look out for other game dapps like Avalanche’s Crabada or IMX’s Gods Unchained to challenge the incumbent for the game’s blockchain activity lion’s share. 

Road ahead

All in all, blockchain games remain one of the most enticing aspects of the dapp industry. Although the demand for blockchain games appears to have stalled, game dapps are still driving most of the industry’s on-chain activity. Notably, the top games are still attracting their player base during a challenging Q1. 

The support for a decentralized and interoperable metaverse where blockchain games will be foundational is imminent. VCs and investors are throwing capital at Web3 game projects at a record rate. At the same time, top brands like Ubisoft, Warner Bros, and Adidas are starting to make their mark in the space. 

What is more, financial institutions such as Morgan Stanley have estimated the economic potential of the metaverse into at least an $8 trillion industry. The Sandbox’s second Alpha season, Decentraland’s Fashion Week, and NFT Worlds’ high demand point the industry in the right direction.

However, security issues like the Ronin bridge exploit and the challenges to achieving full interoperability remind everyone involved that mainstream adoption is still a few steps away. 

Blockchain games will need to play a vital role in this equation to reach that point. Along with NFTs, game dapps will be the key to achieving the mass adoption point required to take Web3 to the next level. 

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