GameFi initiatives have seen a steep increase since June 2021, owing to a sizable reduction in transaction costs and improved user experience.
Crypto exchange Huobi’s research arm, Huobi Research, has identified a rising interest in blockchain gaming as a direct impact from GameFi initiatives. GameFi implies the use of decentralized finance (DeFi) and blockchain gaming that incentivizes users based on a play-to-earn model.
According to Huobi Research, on-chain data suggests that GameFi initiatives have seen a steep increase since June 2021, owing to a sizable reduction in transaction costs and improved user experience.Ways that GameFi reduces transaction fees. Source: Huobi Research
The research shows that popular blockchain games such as CryptoKitties recorded a maximum of 140,000 daily active users and 180,000 daily transactions back in November 2017 but lost over 90% user interaction within a few months:
“Early blockchain games suffered from defects such as singular models, simplistic entertainment and poor experiences in general.”Changes in CryptoKitties daily active users and trading volume. Source: DappRadar, Huobi Research
However, the blockchain gaming industry saw a comeback with integrating nonfungible tokens (NFT), DeFi and other play-to-earn elements. NFT-based pet game Axie Infinity made $9.72 million in a single day in June, surpassing Tencent’s record at the time.
“DApp rankings show that five of the top nine apps are GameFi apps. As of early December , GameFi’s weekly active users have reached 9.21 million, a record high.”
Based on the above findings, Huobi Research concluded that transaction costs are essential in new institutional economics. While the gaming industry had already implemented play-to-earn features, “the society tends to choose the system with the lowest transaction costs to operate.”
The research also highlights three fundamental aspects of how GameFi differs from other existing gaming models — free trading of game materials, free trading and pricing of game currencies, and protection of property rights. Moreover, GameFi developers have the advantage to deploy private property rights via NFTs at a lower cost:
“This not only is a comparative advantage that traditional game developers never had, but also reflects the intrinsic value of blockchain technology in the gaming industry.”