Venture capitalists are betting billions of dollars on the nascent blockchain gaming industry, even as the broader crypto and gaming markets continue to grapple with several challenges. A report by crypto data company DappRadar has revealed that blockchain games have received approximately $2.3 billion in funding so far this year.
Venture investors optimistic about blockchain gaming, despite bearish sentiment
In Q3 2023, the blockchain gaming industry attracted funds worth nearly $600 million. While that is a 38% dip from the $973 million crypto gaming funding in Q2 2023, the figures indicate that venture investors still see significant potential in blockchain-based games.
Game studios — both in and outside of crypto — are having a difficult year. More than 6,100 employees have already been laid off across the entire gaming industry in 2023 so far, according to GamesIndustry.biz. The long list of companies that have laid off employees this year includes Epic Games, Team 17, Telltale Games, Star Atlas studio ATMTA, and Yuga Labs.
As per DappRadar’s report, the lion’s share of the crypto gaming funding in Q3 was injected into gaming-centric investment firms. This suggests that venture capitalists, alongside their accelerators and funds, will continue to be a key source of startup capital for budding blockchain game studios.
Investment firms in the blockchain gaming pace received $262 million in funding during the July-September quarter. Meanwhile, about $213 million was channeled directly toward game and metaverse projects. An additional $125 million was pushed towards blockchain gaming infrastructure, according to the report.
Top Web3 games in terms of transaction volume
Axie Infinity emerged as the top Web3 game in Q3, clocking a total NFT transaction volume of $90 million over the three-month period. It was followed by the NFT trading card game Gods Unchained, which logged $55 million in transaction volume during the same period.
The ongoing dominance of Axie Infinity in the blockchain gaming industry has partly been attributed to the delayed release of NFT games like Parallel, Shrapnel, Deaddrop, and MapleStory Universe. The Sky Mavis team behind Axie has also played its part by maintaining player engagement.
In a recent interview, Jeffrey Zirlin, co-founder of Sky Mavis, described Axie’s esports scene as “very much vibrant.” He claims his company distributes 112,000 AXS tokens (approximately $472,000) to players every season, each lasting about six weeks. Additionally, the game hosts weekly tournaments, keeping the community engaged.
According to Zirlin, the Web3 guild space — crypto gaming’s version of esports team organizations — is going through a “consolidation”, but the bear market is a necessary phase for evolution.
“Bear market hard times—that’s needed for evolution. You cannot evolve, actually, when you’re going through a really great boom. You will change in other ways, but in terms of figuring out the next thing—that’s what these times are for.”
Sky Mavis cofounder Jeffrey Zirlin
Crypto funding takes a hit as VCs bet on AI
The DappRadar’s report comes at a time when venture capital investment in the crypto industry has been plummeting at an alarming rate, sparking concerns about potential business closures. In the third quarter of 2023, VCs only funneled $1.9 billion into the crypto market. This marks a 63% decline from the same period last year. This dip in funding has resulted from the growing interest in artificial intelligence.
