The research arm of the Huobi cryptocurrency exchange, Huobi Research, identified a growing interest in blockchain games as a direct impact of the GameFi initiatives. GameFi involves the use of decentralized finance (DeFi) and blockchain games that incentivize users based on a play-to-earn (lit, play to win) model.
According to Huobi Research, on-chain data suggests that GameFi initiatives have seen a sharp increase since June 2021, due to a significant reduction in transaction costs and improved user experience.
Research shows that popular blockchain games like CryptoKitties recorded a peak of 140,000 daily active users and 180,000 daily transactions back in November 2017, but lost more than 90% of user interaction in just a few months:
“The early blockchain games suffered from flaws such as singular models, simple entertainment, and poor experiences in general.”
However, the blockchain gaming industry was back in action with the integration of non-fungible tokens (NFTs), DeFi, and other play-to-earn items. NFT-based game Axie Infinity made $ 9.72 million in a single day in June, beating Tencent’s record at the time.
“DApp rankings show that five of the top nine apps are from GameFi. As of early December [2021], GameFi’s weekly active users have reached 9.21 million, a record. “
Based on the above results, Huobi Research concluded that transaction costs are essential in the new institutional economics. Although the blockchain gaming industry had already implemented play-to-earn features, “society tends to choose the system with the lowest transaction costs to operate.”
The research also highlights three fundamental aspects in which GameFi differs from other existing gaming models: free trade in game materials, free trade and pricing of gaming currencies, and protection of property rights. In addition, GameFi developers have the advantage of deploying private property rights through NFTs at a lower cost:
“This is not only a comparative advantage that traditional video game developers never had, but it also reflects the intrinsic value of Blockchain technology in the video game industry.”