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We are at an important moment in the development of the Web3 gaming industry, and the next 12 months will be crucial in predicting the development of the next five years. Whether in a bull or bear market, as the market matures, opportunities will belong to those who can fully understand the situation and best position themselves.
📍This article will summarize the development of games in various key areas over the past year in four parts, and highlight how we think the gaming industry will develop in the next year:
1) Web3 game financing
2) Summary of the game ecosystem
3) Web3 Games and AI
4) Interest from retail and institutional investors
1) Web3 game financing situation🔻
By the third quarter of 2024, Web3 game financing had reached US$715 million, with a total of 135 financings, which was the same as in 2021 but lower than the 265 in 2022.
Although 2024 funding amounts to only 43.8% of the $4 billion raised in Q1 2022, the macroeconomic environment is more severe, and capital inflows to the industry remain healthy for now. Following the 2022 boom, the focus has shifted to higher quality and more scarce projects. Only 8 game projects raised more than $20 million in 2024, while 18 game projects reached this amount in 2023, indicating that investors are becoming more selective and concentrated.
From a low of $7.49 billion in October 2023, the market value of Web3 games has jumped more than 360% to $34.8 billion, up 115% from $16.16 billion before the election. However, it is still 10% lower than the peak of $38 billion in March 2024 and 43.5% lower than the peak of $49.96 billion in the previous cycle, highlighting the recovery but still room for growth.
66 gaming tokens were launched in 2024, almost double the 34 tokens in 2023, driven by projects rushing to launch TGEs following the strong market recovery following the October 2023 lows.
The battle for player liquidity and attention will intensify through 2025. If leading games fail to drive broader adoption, there’s a good chance the gaming industry will continue to underperform other industries, such as memes and AI.
Web3 gaming NFTs have shown a slight recovery, with trading volumes rising since November 24: Pirate Nation and Hytopia Worlds have more than doubled their trading volumes month-on-month, while My Pet Hooligan and Infinigods have seen a 50% increase in trading volumes. Contagious NFTs such as The Sandbox and Decentraland still lead the market.
2) Game Ecosystem Summary🔻
New Ecosystems and Blockchains as Issuers: Arbitrum, Xai, and SUI use Grants to ensure exclusivity, disbursing funds based on milestones to incentivize activity and drive ecosystem goals.
The gaming ecosystem, especially Layer2/Layer3, is growing faster than gaming: 104 new networks launched in 2024, compared to 263 for gaming
Web3 games have seen a slight but steady increase in users, with total wallets rising to 6 million. While bot activity may inflate these numbers, this growth trend is driven by the growing influence of Web3 games driven by ecosystems such as TON and Ronin.
The huge success of Off The Grid (OTG), the largest game launch of 2024, has propelled Avalanche to become a strong contender in the gaming space. After a brief peak of 82 million in July 2023, daily transaction volume for Web3 games has stabilized at an average of 10-12 million.
3) Web3 Games and AI🔻
AI will be a dominant topic in 2025, and we believe games will play an increasingly critical role in the future development of the industry. Not only will gamified experiences be the perfect testing ground for AI fundamentals, they will also help increase engagement and bring in some much-needed token pools.
Teams that understand both sides of the AI x Gaming equation will be most likely to be first movers in the space, securing market share by providing highly engaging experiences to their connected communities.
4) Interest from retail and institutional investors🔻
The mismatch between supply and user growth was highlighted by a surge in token listings in early 2024. As token issuance outpaced cryptocurrency adoption, a plethora of investment options overwhelmed a small group of buyers, revealing the challenges of balancing supply and demand.
The battle for player liquidity in Web3 games intensified in 2024, validating our prediction in last year’s YA report. Network oversaturation sparked an incentive competition for Web3 users, which have only grown slightly since the end of 2023.
Coupled with the plight of Web2 UAs, the limited Web3 audience forces games and networks to compete fiercely for user attention and engagement.
🔹Original compilation link: https://twitter.com/Delphi_Digital/status/1865120446926197082?t=-8L95y9OlKWhvdGgFerZmw&s=19