Statement: The data in this article is derived from the annual reports of various platforms and other research reports, and the reference standards may vary.

DeFi and NFT Cultivate the Development Soil of GameFi

DeFi and NFT Lay the Foundation for GameFi

Since the launch of the Ethereum mainnet on July 30, 2015, it officially heralded the arrival of the Web3 era. The smart contract deployment function of the Ethereum mainnet supports the design and operation of DAPPs (decentralized applications). Based on this, a large number of popular DeFi (decentralized finance) projects have emerged, such as Uniswap, which implements DEX (decentralized exchange) through automated market makers, and MakerDAO, which implements contract lending. These DeFi projects, with characteristics such as high investment returns, public transparency, strong privacy, and complete openness, have attracted a large amount of hot money. The total market value of the DeFi track has also grown from $50 million in 2015 to $100 billion in 2023.

Figure 1: Growth of DeFi Market Value

While DeFi was booming, capital began to continuously explore the combinability of decentralized finance with other areas. During this period, the NFT market experienced a major outbreak. In 2017, CryptoKitties, an NFT project based on Ethereum, allowed players to buy, breed, and trade digital cats, attracting widespread attention and often being seen as the starting point of the NFT explosion. The total market value of the NFT market has risen from several million dollars in 2018 to $8 billion in 2023.

Figure 2: Growth of NFT Market Value

If DeFi brought a continuous stream of funds to the cryptocurrency market, then NFTs redirected the blockchain's focus to entertainment and gaming. Under the combined influence of the two, GameFi, which combines the concepts of DeFi and blockchain games, began to emerge, providing a fertile ground for the development of blockchain games.

The Beginning of the Dream of GameFi

In the second half of 2019, Mary Ma, Chief Strategy Officer of MixMarvel, first proposed the concept of GameFi - "gamified finance" and "a completely new gamified business." This concept combines elements of gaming and finance, aiming to introduce new business models and economic systems to the gaming industry through blockchain technology. In Mary Ma's view, games of the future will not only be entertainment tools but can also become financial tools. Through blockchain technology, virtual items in games can become valuable digital assets, and players can acquire, trade, and appreciate these assets through gaming. In this model, game companies and players can participate in economic activities in a decentralized environment, achieving mutual benefit.

However, due to the immaturity of blockchain technology and its application paradigm at the time, the concept of GameFi did not immediately attract widespread attention and application.

The Start of the GameFi Explosion

In September 2020, Andre Cronje, the founder of Yearn.finance, detailed his understanding and outlook on GameFi in a speech and public statement, leveraging his authority in the DeFi industry, the concept of GameFi truly entered the public eye. Many of Andre Cronje's views on GameFi also clarified the future development direction of GameFi.

In Andre Cronje's concept, the DeFi industry is in the "TradeFi" (trade finance) stage, where users' funds are mainly used for trading, staking, and borrowing, failing to reflect the differences between cryptocurrencies and traditional finance. GameFi, on the other hand, will serve as the future development direction of DeFi, where user funds can not only be used for financial transactions but will also have practical application value in the virtual gaming world, allowing users to earn substantial token rewards through activities in the virtual gaming world, similar to working in real life.

Since then, the GameFi field has begun to experience its first wave of growth!

Figure 3: GameFi Promotional Image

GameFi Reshaping the Gaming Track

GameFi is a blockchain technology that combines DeFi, NFT, and Blockchain Game (chain game), where the assets of the game and some logic are run in smart contracts on the blockchain, and are managed by DAOs (decentralized autonomous organizations) to ensure users' ownership of game assets and governance rights. GameFi focuses on building a complete financial system, supporting activities such as trading in-game native tokens. Users can earn token rewards through gaming and share in the benefits of game development.

Completely Resolving the Ills of Traditional Games

In traditional games, items such as props and skins have a certain value, which has long been a consensus. The average annual sales of items in CSGO from 2018 to 2023 exceeded $420 million and increased year by year; the annual sales of skin items in League of Legends increased from $1.4 billion in 2018 to $2.5 billion in 2023; the annual sales of skin items in Honor of Kings reached an exaggerated $2.74 billion in 2023. Whether domestically or internationally, game items have a broad market space.

Figure 4: CSGO Annual Sales of Items

Figure 5: League of Legends Annual Sales of Items

Figure 6: Honor of Kings Annual Sales of Items

However, due to the fact that item transactions often damage the profits of game publishers and touch upon the financial attributes of certain countries and regions, game companies have always adopted two strategies for item transactions. One is the monopoly of item trading markets, such as CSGO's collaboration with Steam, which charges high transaction fees, and the other is the unlimited supply of items in games like League of Legends and Honor of Kings, with strictly controlled item purchase channels and a strict ban on game account trading.

Due to the prohibition by game publishers and local regulations, the black market sale of game items has become a highly profitable business. Within certain limits, as game publishers and local regulations intensify their crackdown on black market transactions, the supply of black market items shifts left, increasing the profit from sales.

Figure 7: Rough Curve Relationship between Private Trading Profit and Trading Difficulty

GameFi, built on blockchain technology, naturally possesses DeFi attributes and can perfectly resolve the current situation of game publisher monopolies and rampant black markets. GameFi is both a game and a market, where game skins and items exist in the form of NFTs, and all transactions will follow the market's natural laws and strive to remain transparent.

In addition, one major feature of GameFi is the governance of game development through DAO, allowing all players to share governance rights of the game. This measure can shatter the current situation where game publishers have absolute discourse power, and users no longer need to worry about the game developing in a direction unfavorable to them, enjoying the overall economic benefits brought about by game development.

Perfectly Fits the Development History of Games

Looking at the development history of games, it often revolves around the important factors of improvement in computer technology, hardware upgrades, and innovative game concepts.

• Early Computer Game Era (1970s-1980s): The early stage of electronic game development was mainly concentrated in laboratories and university environments. Notable early games include "Spacewar!" and "Pong," with the release of "Pong" marking the beginning of commercial electronic games.

• Home Game Console Era (1980s-1990s): Nintendo released the NES home game console, bringing classic games like "Super Mario Bros."

• 16-bit Game Console Era (1990s): Sony released the PlayStation, ushering in the era of CD games, with the game "Final Fantasy VII" sparking a gaming craze.

• 3D Game Era (Late 1990s-Early 2000s): Valve released "Half-Life," which won widespread acclaim from players for its deep storyline and immersive experience.

• Online Games and MMORPG Era (2000s): Blizzard Entertainment released "World of Warcraft," becoming one of the most successful MMORPGs and driving the development of online multiplayer games.

• Mobile Games and Social Games Era (2010-Present): Supercell released "Clash of Clans," becoming one of the most successful mobile strategy games, and Niantic released "Pokémon GO," combining augmented reality (AR) technology with mobile games, sparking a global craze.

Figure 8: Traditional Game Development Timeline

In the past, the development of games mainly relied on the three major elements of improvement in computer technology, hardware upgrades, and innovative game concepts. Today, GameFi, as a powerful combination of DeFi and NFT, represents one of the most cutting-edge and interesting technologies in the blockchain; it is also a cross-disciplinary fusion of computer science and finance, with the novel "play-to-earn" game concept. It also provides an example for financial market research. It can be said that GameFi perfectly fits two of the three elements in the development history of games, aligning with the historical development of games.

In recent years, GameFi has experienced rapid development, introducing novel concepts and designs, giving birth to many top-tier projects.

• Early Exploration (2018): Decentraland was launched as one of the early GameFi projects, allowing players to buy, develop, and trade virtual land, achieving true ownership using blockchain technology. Gods Unchained introduced a blockchain-based collectible card game, allowing players to buy, sell, and trade cards, demonstrating the potential application of NFTs in games.

• Conceptualization (2019): Mary Ma proposed the concepts of "gamified finance" and "a completely new gamified business," marking the birth of the GameFi concept. In the same year, Axie Infinity, launched by Sky Mavis, began to gain popularity.

• Initial Rise (2020): Andre Cronje, the founder of Yearn.finance, reiterated the concept of GameFi in September 2020, predicting that DeFi would evolve into a gamified finance stage, with user funds being used as equipment in games. At this time, the DeFi and NFT markets also entered a golden period, laying the groundwork for the explosion of GameFi.

• Explosive Growth (2021): Axie Infinity achieved tremendous success, attracting millions of players and reaching a daily trading volume of $1 million in August, allowing players to earn income through the "play-to-earn" model, becoming the main source of income for hundreds of thousands of residents in Southeast Asian countries during the pandemic. The Sandbox also gained popularity, allowing users to create, own, and trade virtual assets and land, attracting significant interest from venture capital firms.

• Sharp Decline in Traffic (2022-Present): Influenced by the overall downturn in the cryptocurrency market, GameFi's popularity has significantly declined. Axie Infinity's daily active users plummeted from 740,000 in August 2021 to 35,000 in August 2022. At the same time, many GameFi projects are facing serious inflation issues, with the token supply of DeFi Kingdoms increasing from 60 million in early 2022 to 100 million in mid-2022.

Figure 9: Game vs GameFi

The explosion of GameFi has also driven the concept of the metaverse. The essence of the metaverse is to build a virtual shared space achieved through AR (augmented reality) and VR (virtual reality), combined with decentralized technologies such as blockchain, covering not only games but all aspects of life. The free ecological development of GameFi has made it a synonym for the metaverse in many scenarios. In the years 2021 to 2022, many traditional tech companies began to get involved in the concepts of GameFi and the metaverse.

• Facebook rebranded as Meta, reflecting its long-term vision for the metaverse.

• Tencent established the new TiMi Studios, focusing on developing metaverse-related games, and invested in The Sandbox and Decentraland.

• Microsoft acquired Blizzard for $68.7 billion, planning to combine traditional popular games with blockchain technology to create a new generation of GameFi.

• Goldman Sachs and SoftBank increased their investments in GameFi, supporting well-known GameFi projects such as Axie Infinity and The Sandbox.

The overall market value of GameFi has increased from $200 million in 2018 to $24.52 billion in 2023, with a growth rate as high as 733.3% from 2020 to 2021.

Figure 10: Growth of GameFi Market Value

Figure 11: Growth Rate of GameFi Market Value

Although GameFi may currently face some challenges, with the strong involvement of traditional tech companies and the gradual maturity of technology, it still has unlimited potential in the future.

A Narrative of Gathering the Best of All

GameFi itself is a combination of DeFi+NFT+Blockchain Game, making DeFi more vivid and giving NFT technology a chance for practical application. The governance model of GameFi also provides an opportunity for the implementation of DAO organizations. Combined with the current hot concepts such as the metaverse, AR, and VR, they are also expected to become part of the grand works of GameFi 3A. Therefore, GameFi is a major application area that deeply applies blockchain technology and aligns with virtual technology.

DeFi+NFT Token Economy, Building an Independent Financial Ecosystem

The financial characteristics are the biggest difference between GameFi and Blockchain Game. Blockchain Game often only focuses on using blockchain technology to enhance game transparency, fairness, and asset ownership, while GameFi focuses on introducing a complete financial system into games, creating a Blockchain Game with financial attributes. So, while Blockchain Game can be a simple blockchain application game, GameFi will inevitably include financial functions and an economic system.

• From a technical perspective: The uniqueness and indivisibility of NFTs give each game item unique value. By limiting the issuance of NFT items, scarcity value can be created for the items.

• From a rights perspective: In GameFi, the project party only appears as game developers, bug fixers, and resolution callers. At the beginning of the game, they sell tokens and NFT items to players, while giving most of the power to ordinary players. The update and development of the game, as well as the distribution of benefits, are decided by a DAO organization composed of players and the project party.

• From a mechanism perspective: The "play-to-earn" model in GameFi allows players to earn NFT items or tokens in the game through time and early financial investment, and exchange them with real-world fiat currency, generating economic benefits.

Introducing a financial system into games is not unique to GameFi. Some traditional games already have complex financial systems, proving that this initiative is feasible. The MMORPG game "EVE Online" is known for its complex financial system, simulating real-world markets within the game, including production, trade, resource management in combat, and more than 40,000 items. Players can mine, manufacture goods, establish companies and alliances, and even engage in market manipulation. The developer of "EVE Online," CCP Games, hired economist Eyjólfur Guðmundsson to study the economic operation mechanism within the game and timely regulate the vast market to prevent market collapse.

Figure 12: Promotional Image of "EVE Online"

Figure 13: Some Game Items in "EVE Online"

Currently, the complexity of the financial system in GameFi is far less than that of older games such as "EVE Online," "World of Warcraft," and "Second Life." However, its decentralized nature ensures that GameFi players have ownership of assets without the risk of trusting game developers.

Cross-Chain Asset Interoperability + Multi-Platform Operation, Creating a Large Financial Circle

A single GameFi may face issues such as low user numbers, low activity, and unstable funds. Cross-chain asset interoperability and multi-platform operation may help address these issues. Each GameFi is an economic entity, and when GameFi is interconnected, it can form a large economic market. This requires the comprehensive application of technologies such as cross-chain compatibility, cross-platform compatibility, data synchronization and consistency, and decentralized account management.

• Cross-chain technology: Allows users to directly trade and communicate between different blockchains through cross-chain bridge technology or interoperability protocols.

• Cross-platform compatibility: At the beginning of GameFi development, it is important to ensure that it can run in different hardware and software environments. The use of highly compatible game engines such as Unity and Unreal Engine and standardized APIs is crucial for achieving cross-platform compatibility.

• Data synchronization and consistency: Through state channels technology, users can complete transactions off-chain and only submit the final state to the blockchain for information synchronization, reducing data transmission pressure.

• Decentralized account management: When supporting cross-chain and multi-platform operations in GameFi, technologies such as DID (decentralized identity), SSO (single sign-on), and distributed account storage become important. Through these technologies, the pressure on users to manage accounts can be reduced, and security can be improved.

A unified and effective financial cycle can not only increase the liquidity of funds within the cycle, but as Andre Cronje hopes, it may also become the direction of future DeFi development. In addition, the financial cycle of GameFi will simulate the financial behaviors between countries and regions in the real world, providing examples for further economic research.

Integration of AR and VR Technologies, "Ready Player One" is No Longer a Fantasy

Benefiting from the explosive growth of GameFi in 2021, the concept of the metaverse briefly dominated the A-share and U.S. stock markets. During this period, there were numerous fraudulent activities under the guise of the metaverse concept. Against this backdrop, GameFi gradually became the hope for embracing the metaverse concept.

At the same time, AR and VR technologies associated with the metaverse began to flourish. By 2023, the global AR and VR market had exceeded $70 billion, and it is expected to surpass $400 billion by 2030.

Figure 14: Estimated Size of the AR and VR Market

Many projects have begun to focus on the underlying implementation of the integration of blockchain with AR and VR technologies, making it possible for GameFi to combine AR and VR technologies and bring "Ready Player One" into reality.

• Render Network: Provides distributed GPU rendering services, supporting high-quality 3D rendering for AR and VR. Many applications, including Apple Vision Pro, already offer this service.

• Ozone: Provides 3D application and cloud computing services that support multi-chain and cross-chain operations.

• IOTX: Provides a secure, privacy-protecting, and scalable blockchain platform for connecting and managing IoT devices.

In the face of such future demand in the virtual market, the integration of AR and VR technologies with GameFi to create a new generation of 3A games has gradually become a consensus.

GameFi 1.0 Era, the Fast-Paced Ponzi Game

CryptoKitties, the Crazy Cats that Started the GameFi 1.0 Era

On November 28, 2017, CryptoKitties was launched on the Ethereum blockchain, becoming the first phenomenon-level DApp. Its appearance proved to users that Ethereum is not just about token issuance, but also about simple and fun NFT games. CryptoKitties offered a series of innovative gameplay features.

• Users could use ETH to purchase their own cat NFT in the CryptoKitties marketplace.

• Each cat had a unique genetic code, and users could search the marketplace for the cat's parents, siblings, and past activities.

Figure 15: Information about CryptoKitties

• Two cats could breed to produce a new generation of kittens. After breeding, the cat would have a cooldown period, which would increase in length with each breeding, and the cooldown time would be inherited by the new generation of kittens.

• Players could lease their cats for breeding with other players' cats, gift their cats to others, or auction them in the marketplace.

The innovative gameplay of CryptoKitties and the high expected returns quickly attracted the attention of speculators. One cat named "Dragon" was sold for 600 ETH (approximately $170,000), setting a historic record. The CryptoKitties project also separated from its original company, Axiom Zen game studio, and received a $12 million investment from top venture capital firms a16z and USV.

As of 2024, the CryptoKitties project has conducted over 700,000 transactions, with a total transaction volume of 67,818 ETH, equivalent to approximately $115 million. However, since mid-2018, the transaction volume of the CryptoKitties project has experienced a sharp decline and has now completely departed from the market spotlight.

Although the original intention of the CryptoKitties project was not to create a Ponzi scheme, but rather to explore more channels for the future development of Ethereum through NFT games, it resulted in a very serious economic bubble.

Fomo3D - Purely a Gambling Game

The popularity of CryptoKitties sparked the early explosion of Blockchain, but most of these Blockchains did not have any innovative features. The most well-known project among them was Fomo3D. Fomo3D is a simple mechanism-based gambling game, mainly consisting of four types of gameplay. The core mechanism is a treasure hunt, and it incorporates a team bonus mechanism, referral reward mechanism, and lucky candy mechanism to increase profitability.

The treasure hunt mechanism targets gamblers. In Fomo3D, each full game includes a 24-hour countdown, and during the countdown, players spend Ethereum to purchase tokens called "Keys" in the game. Each time a player purchases a "Key," the countdown increases by 90 seconds (no longer increasing after 24 hours). Ultimately, the player who becomes the last one to buy at least 1 "Key" when the 24-hour countdown ends can take away 48% of the prize pool. To ensure that a full game can end, Fomo3D continuously adjusts the price of "Keys." After each purchase of a "Key," subsequent players need to spend a higher price to purchase them. As the cost of player participation increases, there is a situation where the countdown speed exceeds the 90-second increase rate, ultimately ending the game.

It is obvious that Fomo3D is a typical Ponzi game, where everyone hopes to be the ultimate winner, but most end up losing everything.

Ponzi scheme Blockchain games like Fomo3D were the norm in the GameFi 1.0 era, almost all of them were Ponzi schemes that robbed new users to reward old users. The fragile balance under high returns is very susceptible to factors such as currency sell-offs, loss of popularity, and a decrease in new users, leading to collapse. Moreover, in terms of entertainment, these Blockchain games cannot compare to traditional games. Therefore, fundamentally speaking, the Blockchain games of this era did not have a complete financial system and cannot be called GameFi.

GameFi 2.0 Era, Inspired by "Play-to-Earn"

The GameFi 2.0 era is a stage of vigorous development of the GameFi concept, expanding the financial system of Blockchain step by step from "play-to-earn" to "x-to-earn," gradually introducing financial elements such as community, trading, combat, and market into GameFi.

Axie Infinity Ignites the "Play-to-Earn" Trend

Unlike all previous Blockchain games, Axie Infinity was the first to combine the "play-to-earn" concept with complex financial mechanisms, creating an attractive NFT creature world where players can collect, breed, battle, and trade creatures called Axies within the game.

• Early Stage (2018): Axie Infinity was released by the Vietnamese startup team Sky Mavis, with the initial inspiration coming from "Pokemon" and CryptoKitties. The team aimed to create a player-autonomous creature world.

• Early Development Stage (2019-2020): Axie Infinity officially launched on the Ethereum blockchain, allowing players to purchase Axies for breeding and sale in the marketplace. Subsequently, Axie Infinity introduced PVP mode and adventure systems, further increasing the game's playability.

• Explosive Period (2021): Due to the "play-to-earn" mode within the game, Axie Infinity attracted a large number of players. An article titled "Playing and Earning - NFT Games in the Philippines" brought more attention to this promising game.

• Expansion Stage (2022-present): Axie Infinity has quietly developed, and currently consists of six sections: Axie Infinity Origins, Axie Infinity: Homeland, Axie Classic, Axie Infinity: Raylights, Defenders of Lunacian, and Project T prototype.

In the Axie Classic version, users need to start battling or breeding by purchasing 3 Axies. Each Axie is unique and fully owned by the player. Axies are born with randomly assigned attribute tendencies, including health, skills, speed, and morale. Axies also have different racial attributes that provide certain restraint relationships during battles. There are many details in the specific game rules, which will not be elaborated on here.

The Axie Infinity token governance model is a dual-token governance, with AXS as the governance token and SLP as the game token.

Role of AXS

• AXS holders have voting rights for the governance of the Axie Infinity ecosystem, including the future development direction and major decisions of the game.
• Players can stake AXS tokens to earn rewards.
• When breeding Axies, a portion of AXS is required as breeding fees.
• AXS also serves as the token for in-game event rewards.

Role of SLP

• SLP is mainly used for breeding Axies, with a certain amount of SLP consumed for each breeding. The more breedings, the more SLP is required.
• Players can earn generous SLP rewards by completing daily tasks, participating in PVE (adventure mode), and PVP (arena mode).

Unique Scholarship Mechanism

Axie Infinity has a unique scholarship mechanism, where Axie holders can lend their Axies to scholars. Scholars use the Axies to battle and earn SLP, and the holders receive a share of the earnings. Under this mechanism, diligent and knowledgeable players can enter the game with zero barriers and continuously earn AXS and SLP to grow their Axie team. During the pandemic, a large number of Filipinos sustained their basic livelihoods through the Axie game, making it a rare case of a blockchain project truly improving people's lives.

The creative achievements of Axie Infinity are also reflected in the project's monthly active users (MAU), transaction volume, and revenue. In August 2021, Axie Infinity's total transaction volume exceeded $2 billion, with a monthly revenue of $364 million, surpassing "Honor of Kings" for the first time. By the end of the same year, the monthly active user count exceeded 2 million.

Although Axie Infinity made groundbreaking breakthroughs in the development of GameFi, it was still affected by economic bubbles and the overall market downturn. Its active user count decreased from a peak of 2.7 million in 2021 to 400,000 in 2023, and currently has only around 100,000 monthly users. Its transaction volume also decreased from $4 billion in 2021 to $200 million in 2023.

Even though Axie Infinity has experienced a massive economic bubble, the game has withstood the turmoil and still maintains its leading position in GameFi. In the past 30 days, the number of Axie transactions reached as high as 387,232, with sales totaling 1083.3 ETH, approximately $4 million, which is very impressive data for a game that has been around for six years.

Axie Infinity was the first to practice the concept and model of GameFi through the "play-to-earn" mode, and successfully attracted people who truly enjoy the game through PEP and PVP modes, making it a successful example in GameFi.

The Sandbox Shaping a Virtual World

If Axie Infinity is a casual game in GameFi, then The Sandbox is definitely a masterpiece. The Sandbox originated from two popular sandbox games, "Sandbox" and "Sandbox Evolution," with a combined total of over 40 million downloads on iOS and Android systems. In 2018, the publisher Pixowl decided to bring this successful user-generated content game IP and a large creator community from mobile devices into the blockchain ecosystem, providing real intellectual property rights to creators through NFTs and rewarding their contributions to the community in the form of tokens. Thus, The Sandbox was born.

From a technical perspective: The Sandbox inherits the UGC (user-generated content) ecosystem of past sandbox games and provides three integrated functions, VoxEdit, MakeTPlace, and Game Maker, to provide users with a comprehensive design experience, while also supporting copyright protection for successful designs through blockchain and smart contracts.

From a token model perspective: The Sandbox provides three tokens to ensure the economic cycle within the game, namely SAND, LAND, and ASSETS (material assets).

• SAND follows the ERC-20 standard and is the token required for players to obtain material assets, purchase land, and publish content in The Sandbox game. SAND also has ecological governance functions and allows for staking to earn SAND rewards.

• LAND follows the ERC-721 standard and represents the in-game land assets. Each piece of LAND is sized at 96x96, and after purchasing LAND, players can add game and material assets within the LAND and establish their own game rules. Multiple pieces of LAND can form larger ESTATES, suitable for creating larger and more content-rich sandbox games.

• ASSETS follow the ERC-1155 standard and are tokens generated by creators to prove ownership, which can be sold on The Sandbox's front-end webpage.

The Sandbox, with its strong IP effect, innovative game concept, and open financial system, has been highly sought after by capital. In 2018, Animoca Brands acquired Pixowl and provided long-term assistance for The Sandbox development. In 2019, The Sandbox received a $2.5 million seed round investment led by Hashed. In 2020, The Sandbox raised $3 million in Series A funding from institutions such as True Global Ventures and Square Enix. In 2021, The Sandbox's powerful ecosystem was discovered by SoftBank, leading to a $93 million investment in its Series B funding.

The Sandbox has not disappointed major investment institutions. Since the sale of LAND began, the average price has continued to rise, and the floor price on the NFT exchange OpenSea remains as high as 0.12 ETH.

In addition, many core location LANDs have been sold for astronomical prices. In November 2021, virtual real estate investment company Republic Realm purchased a virtual land in The Sandbox for $4.3 million, and the adjacent LAND was sold for approximately $450,000 the following month.

The Sandbox's market value has fluctuated significantly since its ICO, reaching a peak of $6.8 billion and currently standing at a high of $700 million, making it difficult to estimate the profits obtained by venture capital firms investing in The Sandbox.

Overall, The Sandbox's emergence provides an example of the combination of traditional IP and blockchain technology, and demonstrates the strong wealth aggregation effect of high-quality GameFi.

GameFi 3.0 Era: Exploring the Future GameFi Market

Mini Games are not GameFi

Recently, Telegram mini-games such as Not and Hamster have become popular, allowing users to earn tokens with just a few taps on the screen. These simple operations have led to viral community growth, with participation reaching tens of millions of users in a short period. Since its launch in January 2024, the Not game has attracted over 30 million participants, with a daily active user count of up to 5 million. Subsequently, Notcoin successfully conducted an ICO on multiple exchanges, including Binance, and saw a 400% increase in value within 7 days.

However, these games are built on Telegram and can only be considered as Mini Games, lacking a complete financial system and being very deficient in terms of IP effect and playability. It can be said that their popularity is almost entirely supported by the concept of "fair launch." Unlike similar mini-games on WeChat, Telegram's Mini Games are not limited by the platform, and the benefits obtained can be seen as an extension of Web2 to Web3 benefits.

Re-evaluating GameFi

Diverse Game Forms but the Market is Still a Blue Ocean

The years 2023 to 2024 have seen rapid development in the forms of GameFi games, currently mainly covering Farming/Mining Games, Card Games, Move-to-earn Games, MMORPGs, Metaverse Games, and Auto Battles.

On DAppradar, the GameFi MMORPG Matr1x, ranked first in terms of UAW (active user count), has seen a high of 1.92 million active users in the past 30 days, yet its market capitalization is only $49 million. Currently, the market focus is mainly on foundational areas such as Layer1 and Layer2 development, while GameFi leans towards comprehensive technological applications. With breakthroughs in foundational areas, there is still an opportunity for a second wave of growth.

Full On-chain Games

Full on-chain games run all game logic, data, and assets on the blockchain. During the GameFi 1.0 to 2.0 era, most games only had assets or partial logic on-chain, while full on-chain games emphasize complete decentralization and transparency, effectively avoiding issues such as cheating. The "Autonomous World" can be seen as a major manifestation of full on-chain games, building a virtual world based on blockchain technology, making the rules and operations of the entire world transparent. The future development goal of GameFi is undoubtedly full on-chain games.

GameFi+?

In the current market, standalone GameFi projects are finding it difficult to gain market favor, and integration with AI, IoT, and other technologies may be the breakthrough. A series of GameFi+AI projects such as colony, Nimnetwork, Futureverse, Palio, and Ultiverse have broken the deadlock. Palio, in particular, secured a $15 million investment from Binance Labs for the development and integration of AI technology, demonstrating the recognition and pursuit of GameFi+AI projects by major VCs. In addition, the combination of GameFi with hot topics such as IoT and cloud computing is also a major development path.

From Technological, IP Effect, and Playability Perspectives

Axie Infinity developed a pet battle game on the blockchain, inspired by the game "Pokémon," while The Sandbox is a blockchain migration of "Sand" and "Sand Evolution," demonstrating the infinite development potential of traditional IP on the blockchain. Although both Axie Infinity and The Sandbox have experienced severe economic bubbles, their current market values are still as high as $800 million and $700 million, proving their ability to attract real users.

Furthermore, many game companies plan to introduce blockchain technology into classic games.

• Atari is collaborating with The Sandbox to bring its classic games such as "Centipede" and "Pong" into the metaverse platform. Players can use SAND tokens to participate in and create experiences based on these classic games within The Sandbox.
• Square Enix announced plans to introduce its renowned game IPs, "Final Fantasy" and "Dragon Quest," to the blockchain platform.
• Capcom announced its exploration of ways to introduce its well-known games such as "Street Fighter" and "Resident Evil" into the blockchain gaming field.

In the traditional gaming industry, the emergence of MOBA games such as League of Legends and Honor of Kings often represents the peak stage of game development. In the GameFi field, the current breakthrough method is to create a highly playable game with a complete financial system. Whoever can first introduce an excellent game IP has the opportunity to gain a first-mover advantage.

Conclusion

• GameFi is essentially a combination of DeFi, NFT, and Blockchain Game, representing the unified application of blockchain technology and a new stage in the development of games.
• GameFi has transitioned from past Ponzi schemes to gradually becoming an attractive game ecosystem for real users during the 1.0 to 2.0 eras.
• Currently, the blockchain industry's focus is on foundational ecosystem development such as Layer1 and Layer2, while GameFi is still gathering momentum.
• "Full on-chain games" and "GameFi+?" are the development trends for GameFi 3.0.
• Investing in GameFi requires attention to its IP, playability, and technological aspects. Only GameFi projects that can truly attract players have the potential for long-term development.

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