NFT Gaming Continues to Thrive: An Analysis of the Ecosystem and Business Behind Blockchain Games

AXS+4. 00%

Axie Infinity ignited the first wave of the NFT and GameFi frenzy this summer, and the blockchain gaming market has entered a phase of frenzied growth over the past few months. Although the overall GameFi market has cooled somewhat recently, Axie Infinity and other NFT games have still achieved remarkable results, and the NFT market remains red-hot.

Following Axie's lead, no second NFT game has yet emerged with comparable popularity in the current market. However, challengers are already gearing up and entering the fray — including Illuvium, Guild of Guardians, and Big Time, slated for release next year, as well as Star Atlas and Aurory, which are gaining attention.

Amid the NFT wave, with continuous support from capital and players, can blockchain gaming sustain its momentum? What exactly makes blockchain games like Axie so enduringly popular? This article will explore these questions one by one.

Blockchain Games Dominate the DeFi Market

August 2021 was a record-breaking month for NFTs and gaming. NFT games remain one of the primary drivers of blockchain market activity. According to the latest Blockchain User Behavior Report from DappRadar, DeFi dApps now account for approximately 18% of traffic, while gaming accounts for 45%, and NFTs account for nearly 41%. Compared to May, when NFTs and gaming averaged around 45% combined, this represents a significant shift.

This shows that as DeFi's dominance declines, blockchain gaming continues the warming trend that began in July. Due to sustained growing interest in blockchain games and NFTs, NFT-driven traffic has also been increasing regularly since July.

Among NFT gaming projects, Axie Infinity remains the largest source of traffic. According to DappRadar data, Axie Infinity's total trading volume exceeded $2 billion this past week. As of September 26th, it ranks first among all NFTs in both trading volume and number of traders. Since the GameFi summer craze took off in July, Axie Infinity has become the undisputed "King of Blockchain Gaming." Initially, Axie gained popularity primarily in the Philippines, but it has now gone global, with Thailand, the United States, China, Brazil, and other countries among the highest Click rates for the Axie Infinity application.

Axie's native governance token, AXS, has also surged in price this year, with a market cap exceeding $3.8 billion, trading at $65.5 at the time of writing.

If we are to explain why Axie Infinity has sustained its popularity, the key lies in its innovative "play-to-earn" model and a relatively complete economic system that can be continuously adjusted — maintaining playability while also ensuring players enjoy substantial in-game returns. In a recent update, Sky Mavis significantly reduced SLP token output in PVE gameplay. Players who want to earn tokens must collect more powerful Axies for battle, requiring more tokens and items, which helps absorb excess currency from the market.

Whether player numbers increase or decrease in the future, the Axie Infinity team can use this approach to adjust, maintaining a more balanced state of currency supply and demand, so players don't have to worry about token value declining continuously.

Additionally, Axie Infinity will be upgrading its battle system sometime later this year or early 2022, and will launch a land system — developments that many players are eagerly anticipating.

Although Axie Infinity is already the most closely watched and most successful blockchain game on the market, challengers have been joining one after another, such as Aurory, Star Atlas, Guild of Guardians, and Big Time.

The rise of the blockchain gaming ecosystem, beyond the innovations of individual projects, has been driven by capital support,背后的商业及社区运作, and the development of public chains. Next, we will analyze the key "driving forces" behind blockchain gaming.

Animoca Brands — Capital Empowerment

First and foremost, the boom in blockchain gaming is inseparable from capital's推波助澜. From a timing perspective, Axie Infinity's rapid growth this summer began right after it announced its Series A funding. Capital support has attracted more players to rush in, with increasing amounts of funds flowing into the GameFi赛道, forming a positive feedback loop that sustains the heat in blockchain gaming. According to blockchaingamer.biz, as of July 30th, investment in the blockchain gaming sector this year has reached $1 billion, far exceeding the $72 million for the entire year of 2020.

In the blockchain gaming market, one company is everywhere: Animoca Brands, which can be described as the biggest capital enabler in the blockchain gaming ecosystem.

Animoca Brands is a cross-platform application publisher and a leader in digital entertainment, blockchain, gamification, and artificial intelligence. Starting in 2018, Animoca Brands has been actively involved in blockchain and blockchain gaming projects. According to incomplete statistics, it has made over 70 investments over the past three years. These include the current "top流量" Axie Infinity, the well-known blockchain game The Sandbox (a subsidiary brand), the leading NFT trading platform OpenSea, gaming guild YGG, racing game F1 Delta Time, and more. Its partners include Axie Infinity's development team Sky Mavis and Crypto Kitties, as well as Dapper Labs, the team behind NBA Top Shot. This demonstrates the extent of its reach across the blockchain gaming ecosystem.

As for why Animoca Brands is so bullish on the blockchain gaming market, the company's founder and chairman Yat Siu believes that the reason they are optimistic about this赛道 is that blockchain gaming can truly achieve decentralization, and he believes that when blockchain technology becomes a foundational infrastructure in the future, the popularity of blockchain gaming will continue to exceed public expectations.

With capital backing from Animoca Brands and similar companies, blockchain gaming has also attracted more attention and optimism from industry insiders, such as billionaire investor Mark Cuban and Reddit co-founder Alexis Ohanian. Their affirmation of blockchain gaming and the P2E model has further fueled the market's fervor.

YGG — Gaming Guild Operations

With capital support, players quickly entered and formed communities. Axie Infinity's rapid expansion is inseparable from the "operations" of the YGG gaming guild behind the scenes. Without gaming guilds like YGG, there might not be the Axie Infinity we know today. Those familiar with Axie know that while it enables "Play to Earn," its biggest barrier for ordinary players is the high entry cost — three Axies are required to play, meaning players need to spend anywhere from dozens to hundreds of dollars just to get started. This has locked many players out, especially in countries like the Philippines and Vietnam, where average monthly incomes simply do not allow people to become gold-farming players.

Yield Guild Games (YGG) is a Filipino blockchain gaming gold-farming guild, operating in a DAO structure, earning returns by investing in "play-to-earn" games. The guild is comprised of tens of thousands of gamers and investors. YGG invests in NFT assets from different games, such as Axie Infinity and Zed Run NFTs, and lends these assets to gamers within the community, enabling them to earn income through playing games.

YGG has deeply participated in and invested in Axie Infinity, The Sandbox, F1 Delta Time, Zed Run, Star Atlas, Guild of Guardians, Illuvium, and League of Kingdoms, among other popular games.

To accelerate the development of the "play-to-earn" model, YGG has launched a "Scholarship" program specifically for Axie Infinity (Axie Scholarship). For Scholar players who apply, managers lend them a team of three Axies, allowing them to start earning SLP tokens at virtually zero cost. Once a certain amount of tokens has accumulated, the manager initiates a smart contract, with returns distributed at a ratio of 70% to the player, 20% to the manager, and 10% to YGG.

Currently, YGG has formed an all-in-one model of recruitment, training, and gaming asset lending operating in global player communities, attracting numerous sponsors to join and creating an NFT gaming "gold-farming" industry chain. YGG's guild membership has grown from under 500 to over 30,000 in just six months.

In the future, should blockchain gaming continue to grow, YGG is expected to guide its existing and even more community players into new games in the metaverse. Which will be the next breakout game? It is worth looking forward to.

High-Performance Public Chains and Layer2 Development

Beyond the two major factors mentioned above, the maturation and development of public chains and sidechains have also provided fertile ground for blockchain gaming and GameFi projects. High-performance public chains and Layer2 solutions such as WAX, FLOW, OKTC, Solana, Polygon, and Immutable X are the preferred choices for many gaming and NFT projects.

For example, games built on Immutable X include Illuvium and Gods Unchained; Zed Run and Aavegotchi are on Polygon; Star Atlas and Aurory are on Solana; and Crypto Gladiator, The Land of Strife, Farm Hero, and Celestial are on OKTC.

This year, OKTC has leveraged its infrastructure and ecosystem fund to form an ecosystem led by DeFi, NFT, gaming, and infrastructure — with low on-chain trading costs and high trading efficiency — attracting numerous breakout games and NFT projects and providing players with play-to-earn gaming experiences and substantial returns.

Axie Infinity, on the other hand, has developed its own dedicated Ethereum sidechain, Ronin, which not only reduces trading fees but also avoids Ethereum network congestion and lowers players' barriers to entry. Since the launch of Ronin, Axie Infinity's community has grown rapidly, with significant increases in Axie's treasury revenue, DAU, Axie holders, monthly marketplace trading volume, and Discord members.

Axie Infinity's Community Growth Source: Sky Mavis

Sky Mavis co-founder and growth lead Jeff Zirlin described Ronin as the spark that ignited Axie Infinity. "Ethereum will become the universal settlement layer, but it is not a place where high-performance applications can run." Axie Infinity is a successful example of how a powerful community product can completely migrate to a sidechain or Layer 2 scaling solution.

With the accelerated rollout of Layer2 projects recently, such as Arbitrum and Optimism, these solutions will serve as infrastructure for carrying more NFT, GameFi, and metaverse projects in the future, empowering the development of gaming and DeFi ecosystems.

Disclaimer

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