After Nfts, Play-to-Earn could be the next bubble to burst

After NFTs, play-to-earn could be the next bubble to pop

While the numbers indicate that the NFT bubble may have already burst, another closely related segment appears poised to fall, i.e. the play-to-earn industry, or P2E as it is more commonly known.

The once-growing NFT market has fallen victim to a harsh crypto winter, especially in recent months. In October alone, NFT sales and trading volume fell by 25% and 30%, respectively, according to DappRadar. Moreover, NFT sales failed to pass the $500 million mark for the first time in 15 months.

While the numbers indicate that the NFT bubble may have already burst, another closely related segment appears poised to fall, i.e. the play-to-earn industry, or P2E as it is more commonly known.

According to CoinMarketCap and Naavik’s 2022 Blockchain Games Report, P2E games have been brought to their knees, with well-known games such as Axie Infinity, Crabada, STEPN, and Thetan Arena losing over 90 percent of their market capitalization in 2022 alone.

According to DappRadar, the number of unique active wallets on blockchain gaming platforms has hovered below 1 million for five months. Even the dominance of games in the blockchain industry has dropped from 48 percent to 45 percent. The number of blockchain games on offer is another indicator that the segment is losing popularity – it has been stuck at the 2,000 game level for some time now. The lack of new releases in the blockchain gaming space has exacerbated the problems of an already stagnating market.

Even funding in the blockchain gaming space looks very lackluster and has dropped significantly on a quarterly basis (QoQ). For example, in the third quarter of 2021, the blockchain gaming industry received over $1 billion in funding. The same figure fell by almost 20 percent over the same period this year to $875 million. This hints that investors are being cautious in this space.

According to blockchain solutions provider Chain, the main reason for the drop in P2E is the tokenomics of it all. As players are encouraged to play games by offering tokens as rewards, the tokens themselves become inflationary assets. This means that as the game becomes more popular, more and more players join the platform, resulting in an increase in the distribution of tokens. As the supply of tokens in the market increases, the demand for them falls, and, accordingly, they lose their value.

Chain also stated that while such games do appeal to players, the focus is on earning rather than the gameplay itself. This puts off experienced gamers who are looking for quality content.

A similar observation is contained in the CoinMarketCap report. It states that the concept of ownership was reinvented with the advent of NFTs on the Ethereum network and merged even more with gaming in 2017 when CryptoKitties entered the scene. However, at the time, the Ethereum network did not have scalability, so playability became a concern.

Players like Axie Infinity have gone one step further and added scalability to make it more playable. But in the process, these second generation games failed to keep their users interested and the glamor of these blockchain games eventually faded. An example of this trend is the sharp drop in the prices of gaming-related NFTs across the board.

Blockchain games have yet to see full-fledged mainstream adoption and are still in their infancy. As we grow, it seems that solving one problem leads to another. We are now moving into a Play-to-Own (P2O) era that focuses on gaming experience and user retention. Naavik lists three unique projects designed to destroy space: Splinterlands, Sorare and Dark Forest.

“The next era of crypto gaming will, to (over)simplify, build on the previous two eras—using different scalability solutions and bypassing the most significant economic shortcomings in favor of entertainment,” CoinMarketCap said in a report.

Written by khirou

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