Author : Mark
Date : Jan 02,2023
A fortress built on a fragile foundation of sand can be quickly washed away when the tide comes in and goes out again
Instead of creating enjoyable games, developers have been concentrating more on tokens. GameFi has been dying as a result.
The amount of play-to-earn games made possible by blockchain technology has increased dramatically in recent years.
The chance to accumulate cryptocurrencies or nonfungible tokens (NFTs) created in blockchain-based games has been embraced by gamers.
Players can now make money thanks to the introduction of this new technology by selling in-game NFTs or receiving cryptocurrency rewards, both of which can be converted into real money.
The expected market size of the GameFi sector is predicted to increase as a result, according to statistics from Absolute Reports, to $2.8 billion by 2028, with a compound annual growth rate of 20.4% over that time. However, these assertions can turn out to be false.
One could assume that there was absolutely no reason to doubt the pattern will continue well into 2023 and beyond given the exponential growth rate shown in previous years. Right? Wrong.
A fortress built on a fragile foundation of sand can be quickly washed away when the tide comes in and goes out again, as we have seen with the disgraceful case of erstwhile crypto king Sam Bankman-Fried and the implosion of FTX.
Or, to paraphrase the late, great investor Warren Buffett, "Only when the tide goes out do you find who's been swimming naked."
We might soon find out who these folks are. In actuality, the play-to-earn gaming sector lacks solid pillars on which to stand. The foundations are weak and frail, which may cause problems in 2023. The entire structure appears to be about to collapse.
The token-centric nature of the existing GameFi market can lead to a variety of problems. Before announcing that they will create games, project owners first issue their tokens and list them on exchanges. Games are useful because they give out tokens. Tokens therefore come first, followed by contents. The quality and design of games in the blockchain industry are undervalued because of this.
It has been established that players are not very interested in the games themselves, which is an odd situation for the gaming industry to be in. In reality, an increasing number of the participants are investors seeking returns on their investments.
One of the reasons the system is not functioning as it should be is because the current structure generates the wrong kind of incentives. I would contend that DeFi Kingdoms, one of the more well-known play-to-earn blockchain games available, has been systematically tampering with its tokenomics by generating irrational incentives.
Currently, the speculative trading market is dead, and the token market is generally on a downward trend. A certain length of time can be spent in an industry surviving on hype, expectation, and unfounded promises. But it is limited in how long it can continue. People eventually become aware that they haven't received what was promised. It gets harder to be patient. They become irate, upset, and start to distance themselves. The smartest players start out in a trickle, but that can quickly turn into a flood.
Those who had intended to raise money by listing their tokens will need to reconsider their strategy. Many will be compelled to abandon their projects because of a lack of funding. Even historically positive cryptocurrency venture capitalists (VCs) are now delaying fresh investments due to the urgency of the issue.
Who will therefore survive this lack of investment? GameFi appears unlikely to do so. Other blockchain games, though, might follow suit.
One illustration is Sorare, a Web3 unicorn that runs a fantasy football league that is powered by Ethereum and NFT. While many of its rivals are having trouble, Sorare continues to grow its user base and income even during the worst times. Their daily auction volume, which ranges between 300 and 400 Ether, is outstanding.
Despite having a blockchain-based back end, people do not think of it as a GameFi initiative. They do not offer native tokens, but they do offer their content on Ethereum first, which appears to be the direction the industry is heading in general.
Therefore, even though GameFi may shut down in 2023, not all is lost. Death is an essential component of evolution. It might already be starting to produce new life.