Huobi Research, the research arm of the Huobi crypto exchange, has identified an increasing interest in blockchain games as a direct impact of GameFi initiatives. GameFi implies the use of decentralized finance (DeFi) and blockchain games that incentivize users based on a play-to-earn model.
According to Huobi Research, on-chain data suggests that GameFi initiatives have seen a sharp increase since June 2021, driven by a significant reduction in transaction costs and an improved user experience.
Ways GameFi is reducing transaction fees. Source: Huobi Research
the research shows that popular blockchain games like CryptoKitties had a maximum of 140,000 daily active users and 180,000 daily transactions in November 2017, but lost over 90% of user interaction within a few months:
“Early blockchain games suffered from shortcomings such as singular models, simplified entertainment and poor experiences in general.”Changes in daily active users of CryptoKitties and trading volume. Source: DappRadar, Huobi Research
However, the blockchain gaming industry made a comeback with the integration of non-fungible tokens (NFT), DeFi, and other play-to-earn elements. The NFT-based pet 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 nine best apps are GameFi apps. From the beginning of December , GameFi’s weekly active users have reached 9.21 million, a record high. “
Based on the above results, Huobi Research concluded that transaction costs are essential in the new institutional economy. While the games industry had already implemented play-to-earn functions, “society tends to choose the system with the lowest transaction costs to operate”.
The study also highlights three fundamental aspects in which GameFi differs from other existing game models – free trade in game materials, free trade and pricing of game currencies, and protection of property rights. In addition, GameFi developers have the advantage of using private property rights more cheaply via NFTs:
“Not only is this a comparative advantage that traditional game developers never had, but it also reflects the intrinsic value of blockchain technology in the game industry.”