It is no secret that 2022 has been a difficult year for the crypto industry. The crypto market suffered huge losses because of events like the Terra stablecoin collapse or the FTX bankruptcy which led to subsequent negative ripple effects in the Cryptoverse. The past year also saw many big brands like Nike, Starbucks and Tag Heuer (read more on Top Brands in Web3) dive into Web3. Ethereum successfully completed its long-awaited merge. It was a rollercoaster ride, to say the least.
Many GameFi projects obtained crazy valuations as the sector continued to attract investors but soon suffered from poor user retention and token price crashes. Such projects used video games as a marketing ploy to sell tokens/NFTs to a crowd full of “play to earn” hopefuls participating in projects that promised a lot but delivered games that resembled the Sega Genesis days with added token grinding. These tokens may be tradable on Uniswap but have essentially become worthless. GameFi as of today is not built on strong foundations and a major overhaul is required if the players in the industry wish not only to survive but thrive.
So, what can we expect from the GameFi sector in 2023? More of the same overly shilled garbage, or will genuine builders and project owners bring out their innovation and creativity to revive this market? In this article, Super Ultra shares our outlook on GameFi for the year 2023.
A major dip in the value of investments, mergers, and acquisitions (M&A) related to games
The past two years have been record years in terms of investment deals taking into consideration the biggest gaming deal of Microsoft acquiring Activision Blizzard. This year, speculators must keep their expectations low. The situation started worsening in the second half of 2022 itself, when many industry giants, VCs, and investors put a hold on new investments considering the volatility of the market. The trend is expected to continue in 2023 as investors will continue to remain wary of investing in GameFi, particularly in the first half of the year.
Having said that, while the value or worth of overall investment activity may go down, there is a chance that M&A activity will increase as many companies with grim financials may need to be rescued through acquisitions by bigger players. It will be a cut-throat year for project owners, so fund management should remain a priority, but the projects that do succeed will have a huge impact in transforming GameFi through innovation.
2. New opportunities for innovators with engaging business models and value propositions
The current approach to GameFi projects is highly token-centric and lacks a sustainable growth strategy for long-term stability. The industry can only survive for a certain amount of time on promise, expectation, and unjustified hype. Blockchain games suffer from the Web3 gaming trilemma where one factor is paid more attention than the other two. Game developers will have to change their approach and put efforts into creating a gaming ecosystem that caters to all three elements; Challenge, Engagement, and Gratification.
We believe this year will be a year of opportunity. As rough as it may get, quality projects who cautiously work through building the right infrastructure, providing a genuine utility and focusing on steady growth will continue to attract interest from both retail and institutional investors. To build utility, GameFi’s focus needs to shift towards improving the rewards and retention of Web3 games to be able to grow sustainably. Games need to be put first, and blockchain needs to come second. Playing games has always been about the experience, the momentary escape from reality, and the joy of progressing.
3. Esports x GameFi - The future of gaming
The Esports industry has been growing rapidly, with revenues exceeding $1 billion over the past few years. The intersection of GameFi and Esports is inevitable, and the good thing is the combination of both can deliver more competitiveness and fun to gaming while also benefiting from the security and fairness aspects of blockchain.
The integration of these two sectors is likely to happen in a more impactful way this year bringing opportunities like diversified revenue streams, increased engagement, transparency and fairness, and crowdfunding which will collectively build a high-growth model for the gaming industry.
Conclusion
We have set our expectations for GameFi this year cautiously based on the previous year being so rough, however, 2023 could also be a breakout year for games with blockchain. Projects that build during the storm are the ones that will shine, having discovered a way to build games that have substance.
We need to revisit our fundamentals and ask ourselves two important questions:
What makes a good video game?
Does it need blockchain?
A good game may be well-crafted, visually appealing and immersive. While larger games should have an engaging story. The controls should be intuitive, and the gameplay responsive. It should certainly be fun to play and account for the interest of the people playing. And the outstanding ones are replayable, whether hypercasual games or involved stories, with multiple possible endings, difficulties or paths to follow.
Do you need anything to do with blockchain to make that happen?
No, you don’t.
But can you add a whole new layer of immersion through this technology?
Yes, you can.
The diagram above lists the pros and cons of blockchain technology for games in a simple and articulate way. At Super Ultra, we are particularly excited by how we can use blockchain technology and Web3 concepts to reinvent how we reward players and reinvigorate retention, the number one challenge for all game developers. We have been building during the storm…and though we are keeping our heads down in these tough conditions, we cannot wait to unveil the games and projects we have been working on very soon.