2022 was a rollercoaster ride for the GameFi market. All in all, it was mirroring the turbulence started within the crypto spaces. Major firms like FTX and Luna collapsed, and this impacted the broader crypto space including the GameFi sector along with it. The market cap plummeted by more than 80%, falling from $23.2 billion to a mere $4.3 billion at the end of 2022. And it wasn’t just a dip; the token prices of major GameFi titles collapsed as well. It was a catastrophe.

Then there came the user retention, the trust has been damaged. People losing their trust was followed by, of course, more crashes in the market.

New narratives were created, new narratives that were considered promising— from Metaverse to Move-to-Earn, X-to-Earn, and AAA Games. However, these trends dyed out almost as quickly as they appeared, at least that’s what we’ve thought.

The top 10 GameFi tokens in market cap witnessed sharp declines then. AXS by 92.9%, SAND by 92.5%, MANA by 90.3%, and GMT by 93.9%, they all plummeted. It was clear that the once-thriving GameFi space was in trouble.

The Metaverse also faced its share of the challenges, as you might guess. I has reached its peak in the first two months of the year. The average monthly trading volume was $48.75 million and land prices were around $15,000. But, by November, the trading volume plummeted by 96% to $2 million, and the average sale price dropped to below $2,000, down almost 90%. I am actually getting depressed by mentioning these numbers.

Attempting to address these challenges, GameFi projects took on rebranding efforts, shifting from play-to-earn to play-and-earn, play-to-own, and free-to-own models. They also explored new ways to survive. Some survived, some didn’t, unfortunately.

Yet, uncertainty haunted all of us.

It showed we did need more robust strategies in the face of market volatility.

So, what went wrong? 

Three main aspects stand out:

1. long-term vision was not long-term enough
2. game costs and expectations were not aligned
3. There was lack of enhanced user engagement tools within the metaverse

Many of the Metaverse and GameFi projects were built on hype. There was no solid long-term vision. Limitations in tools on top of that, user activity within the metaverse was restricted. It meant nothing to them. So no one was feeling a real connection with the space. It all seemed like make believe.

On top of that, the cost of entry came into play. Many didn’t see the logic in investing that much for a volatile space. The same worries occurred in crypto space were present. GameFi have had challenges on attracting the real gamers into the space. The traditional gamers were not interested. The audience was a whole new audience, not connected with the community of gamers we were used to.

Some may argue that assets like Lands in Decentraland holded value, there were still much to answer about the long-term benefits and revenue distribution. Still, there was a doubt on trust.

The fall of 2022 was a wake-up call for the GameFi and Metaverse sectors. It highlighted the basic needs for the space. 

Sustainable tokenomics, robust strategies, and a user-centric approach to design. Creators really needed to understand the gamers more and more.

Instead they should’ve done more observation on how gamers get attracted and actually put in their time and effort to learn the game.

Making people play your game, is hard work. Sometimes it’s much harder than any other product. You have to provide them something vague, but something they would enjoy. Sometimes it’s the cozy feeling, and sometimes it’s the powerful edge.

And some games are complex, you just need to learn the details to survive. When you think about it, It’s almost like having someone learn Illustrator, per say, and use it for fun. They will not get anything out of it, for sure. They will not get any profit, or outcome. So you just have to find a way to achieve this impossible quest. They will have to want to play in their free time, that’s the aim. But how? How’s that possible?

Of course, there is a profit in GameFi but let’s remember that you cannot guarantee that 100%. And in a business model when the user is only there if the market is booming, that’s not a trustable user-base.

And then, in 2023, it was more about regulatory heat. 

Lack of Sustainability 

Simplicity and engagement are key factors in blockchain gaming, but sustainability is also important. This can be done through narratives like Move to earn and Learn to earn, apart from the usual games like Illuvium, FPS games. 

By capitalizing on daily activities like walking or exercising, these games offer users the opportunity to earn rewards while staying active. 

However, the popular move to earn games was not sustainable. That’s why, they fell flat. 

Take the StepN game, for instance, which incentivizes users to achieve fitness milestones. these games promise to revolutionize the fitness and gaming industries.

But it was not sustainable in the end.

For a sustainable economy, new money has to come from outside, contributors has to create real value through their work and contributors participate meaningfully in the monetization.

Furthermore, STEPN has failed to build a sustainable economy. It has the fatal flaw of being completely dependent on new money coming in from the outside – the Ponzi scheme, which stopped after the crash.

But its growth only depended on bringing in new players and not much on the existing ones.

You have to think about both ways, if you cannot make your existing player happy, that’s not gonna work. Do you agree? Or better yet, if you have a different opinion, please share. We’ll mention in in the next episode, while staying true to our colors.