Abstract: In the first half of 2024, the cryptocurrency market showed a diversified development trend, among which Gamefi, Bitcoin Layer 2 network (Layer 2) and decentralized physical infrastructure (DePIN) performed particularly well. As the most mature sector, Gamefi is vulnerable to market fluctuations, but the continued prosperity of its ecosystem provides strong support for the application and implementation of cryptocurrency in daily life. Although Bitcoin Layer 2 is a latecomer, it has a rapid development momentum. Layer 2 solutions represented by the Lightning Network have been continuously deepened and improved, significantly improving transaction efficiency and network throughput, and effectively solving the expansion problem of the Bitcoin mainnet. The DePIN sector shows a high degree of integration with the real world. By introducing the concept of decentralization into traditional physical infrastructure, DePIN is expected to promote the digital transformation of traditional industries and open up new directions for the future development of decentralized technologies.
1. Gamefi Section
1) GameFi Market Overview
Over the past five years, GameFi has been considered the best area to connect Web2 users with Web3. During this time, GameFi has seen many phenomenal products, such as Axie Infinity, and 3A masterpieces created by Web3 launched by some major companies, such as ILV. These projects have received huge financing. However, the reality is that in the past five years, a total of 2,817 Web3 games have emerged, and the lowest failure rate among them has reached 45.9% (according to network data). It can be said that at the end of the bull market, most of the games have stopped operating or lost their activity. This shows that success in the GameFi field is not easy and many challenges need to be overcome.
Network Statistics
As of the first half of 2024, the GameFi sector has reached a peak in terms of the number of games alone, with a total of more than 3,285 games. In fact, the number of online games in the first half of 2024 even exceeds the total number of games in the past five years. Therefore, overall, the GameFi sector is in a booming stage in the first half of 2024. The peak market value reached US$41.25 billion on March 12, 2024. However, due to the impact of the overall market conditions, the market value has continued to decline and is currently US$18.69 billion (as of June 30, 2024).
Emerging trends and innovative projects in the Gamefi market
In this round of bull market, all aspects have experienced major innovations. The original X-to-Earn economic model has fallen into a spiral vicious circle, and the ratio of gold farming and krypton gold cannot be balanced. The roles involved in GameFi include players, teams, and project parties. If only individuals or teams are engaged in gold farming without krypton gold players participating, this is likely to cause huge selling pressure in the later stage of the project, making it difficult for the project to continue, or even in a soft Rug state.
Starting from 2024, with the rise of projects such as PEPE, it can be seen that people in the circle prefer projects with community consensus and no longer believe in the myth of venture capital. More traffic tends to be directed to some fully circulated projects, which are more conducive to retail investors' participation. GameFi was also inspired and began to adopt the free-to-play-to-earn model. Everyone can participate for free, without additional costs or high starting equipment costs. All they need is a mobile phone to participate in the game and gain use value by playing the game, and have the opportunity to make money. This model is more in line with the interests of most people. For example, Not in the Ton ecosystem is a popular product that adopts this model.
NOT game page
Key factors to attract users
There are two key factors that make GameFi attract a large number of users: playability and wealth effect. First, the playability of the game is an important factor in attracting users. Only interesting, challenging and easy-to-play games can retain players. Secondly, the wealth effect is the core charm of GameFi. Players can get real economic returns by participating in games and investing. This wealth appreciation mechanism attracts more people to participate. The new TG track games do meet the above two important conditions and become a new trend in the development of GameFi.
2) Brief analysis of Gamefi data in the first half of the year
Number of agreements and growth rate
In the first half of 2024, the number of protocols in GameFi also increased slightly, from about 2,800 to about 3,200. As for the growth rate of Dao, it is related to specific events and extreme market conditions, and in most cases it is at a mid-to-lower level, about 0.1% to 0.3%. This shows that overall, based on the solid foundation in 2023, the number of protocols in the GameFi field and the growth rate of Dao are relatively stable, without significant explosive growth.
Market value and active users
According to Footprint data analysis, in the first half of 2024, GameFi's market value remained consistent with Bitcoin's market value and rose steadily. However, starting in April, the market value began to decline, and the decline was much greater than that of Bitcoin. This shows that there is a certain correlation between GameFi's market value trend and Bitcoin's market value, but GameFi's performance was weaker during the decline.
As for active users, the active user data of the gaming sector maintained a relatively healthy growth trend. In the first half of the year, it maintained a relatively fast growth rate overall. However, affected by market fluctuations, the active user data basically remained at that level after the peak in early April, without much growth, and even fell at one point.
Transaction volume and transfer amount
As for Txns (transaction volume), it is one of the important indicators of on-chain activity. Compared with the continuously increasing number of active users, the number of transfers saw a small peak between February and March, and then continued to decline.
This change in the number of transfers may reflect the behavioral patterns of users participating in GameFi and the influence of market trends. The small peak in February and March may be due to certain specific activities, the launch of new projects, or the influence of market hotspots, which led to an increase in transfer activities between users. However, the subsequent decline may be due to changes in market sentiment, weakness in specific projects, or adjustments in investors' risk appetite in the GameFi field.
Let's take a look at the latest daily data. There are about 2.64 million daily active users, the latest daily transfer number is about 12.96 million, and the daily transaction volume is about 9.44 million. This shows that despite the market downturn, the Gamefi market can still maintain a certain number of online users.
Finally, let's take a look at the distribution of the game sector on various chains. Since 2021, the top three chains are still Ethereum, BNB, and Polychain. However, starting in 2024, game projects began to gradually get involved in more different chains, resulting in a continuous increase in the number of games on these different chains.
This trend of multi-chain distribution may be due to the continuous development and innovation of blockchain technology and the support for blockchain games, which has enabled more chains to have the ability to support game development and operation. Different chains have different communities and ecosystems. Among them, the more popular public chains in 2024 may be more inclined to IMX and RONIN.
2. BTC Layer2
1) Overview of Bitcoin’s Second Layer Market
After Ordi, the inscription track, made a major breakthrough last year, the Bitcoin ecosystem began to become one of the hottest fields in 2024. Following inscriptions, runes also appeared one after another, and each sub-field was highly sought after. Compared with the rising MEME trend, the second-layer solution of Bitcoin (BTC L2) focuses more on solving problems in the construction of Bitcoin ecological infrastructure.
Although Inscription has been developed for a year, network congestion has seriously hindered the further development of the Bitcoin ecosystem. At this critical period, whether it is Ethereum's second-layer solution or Bitcoin's own second-layer solution, the goal is to take their respective ecosystems to a higher level and achieve wider application and adoption.
New advances in solutions and technological developments
The second-layer solutions of Bitcoin mainly include the following:
l Centralized Layer 2 Solutions: This type of solution builds a centralized exchange or payment network on top of the Bitcoin mainnet, transferring some transactions from the Bitcoin mainnet to this layer for processing, thereby reducing the burden on the mainnet. These transactions are completed within the Layer 2 network, and the final results are submitted to the Bitcoin mainnet only when necessary. Typical representatives include Lightning & RGB, which utilizes a bidirectional payment channel and a multi-hop payment mechanism based on a hash time lock contract (HTLC), taking into account scalability and privacy to a certain extent.
l Decentralized sidechains: These solutions are independent blockchains built on top of the Bitcoin mainnet, introducing new tokens and consensus mechanisms. These sidechains usually have their own node network and consensus algorithm, while interacting with the Bitcoin mainnet. For example, Stacks (formerly Blockstack) uses the Staked BTC (STX) token and the Proof of Transfer (PoX) consensus mechanism. Babylon and Interlay are other decentralized sidechain projects. The advantages of this type of solution are relatively high decentralization and security, while providing more functionality and scalability.
l Joint sidechain: This type of solution is based on cooperation and expands the functionality of Bitcoin by simplifying operations and improving efficiency. These sidechains are usually managed by a trusted consortium or institution and have a certain trust relationship with the Bitcoin mainnet. Representative projects include Liquid (launched by Blockstream), which provides Bitcoin with faster transaction confirmation and higher transaction capacity while increasing privacy. Rootstock and Botanix are also examples of such joint sidechain projects. However, this solution may sacrifice the decentralization of Bitcoin's foundation because it relies on large users and raises some centralization risks.
future development
Due to the high price and scarcity of Bitcoin itself, it is not easy for the general public to participate. Existing Bitcoin investment is mainly concentrated in some countries, institutions or wealthy groups. If more people are to truly participate in the Bitcoin ecosystem, Bitcoin's second-layer solution may be more attractive. However, the existing second-layer solution still has some problems, such as high transaction fees (gas fees) and network congestion, which to some extent restricts the development of the second-layer ecosystem.
If these problems can be effectively solved, Bitcoin's second-layer solution should have a broader development prospect in the future. For example, through further optimization and innovation, transaction fees can be reduced, network congestion can be alleviated, and ordinary people can also easily participate in it. In this way, the accessibility and attractiveness of the second-layer network will be greatly improved, laying the foundation for the further expansion and development of the Bitcoin ecosystem.
data analysis
Defillama Bitcoin Layer 2 TVL data
In contrast, there are relatively few data analyses and reports on Bitcoin’s second-layer network. According to Deflama data, the current total locked value (TVL) of Bitcoin’s second-layer network (Layer2) is approximately $1,063.04 million. Among them, the largest share is held by Arbitrum, Bitlayer, and Rootstock, accounting for 28.28%, 25.68%, and 14.52%, respectively.
It is worth noting that since April, the market share of traditional large-scale staking projects Rootstock and Merlin has dropped significantly. In contrast, emerging projects Bitlayer and BounceBit have gained more market share and successfully eroded the market share of some existing projects.
3. Depin Section
Depin Circuit Overview
Depin (full name Decentralized Physical Infrastructure Networks) is an emerging infrastructure construction and management model. It refers to building and maintaining infrastructure in a decentralized way in the physical world. This "infrastructure" can be a WiFi hotspot in a wireless network or a home solar cell in an energy network. This innovative approach is completely changing the way traditional centralized infrastructure and hardware networks are created and managed.
According to Messari's forecast, the DePIN industry is expected to reach a scale of 35 trillion US dollars by 2028. This decentralized infrastructure construction model has the potential to add 10 trillion US dollars to global GDP in the next decade and is expected to reach a scale of 100 trillion US dollars in ten years.
At present, the main sub-segments of the DePIN industry include cloud storage, computing power, and wireless sensor networks. These fields are based on decentralized underlying architectures and use distributed hardware resources to provide more flexible, scalable, and efficient infrastructure services.
In addition to GameFi and RWA (real world assets), DePIN can be regarded as the third track closest to Web2 users. This field is expected to develop the economic cycle model to the extreme.
This is because the DePIN field can directly compare and analyze actual data and traditional industries to find greater advantages. For example, DePIN's decentralized storage solution is about 70%-80% cheaper than traditional cloud storage.
These obvious advantages make DePIN an important connection point between Web2 and Web3. No other field can better utilize distributed hardware network resources like DePIN and expand them to compete with technology giants. The investment of investment institutions in the DePIN field is gradually realizing the connection between the cryptocurrency world and traditional industries. This track is expected to play an important role in the future and promote the transformation of traditional industries to decentralization.
Overview of Depin's ecosystem
Data analysis
According to CoinGecko statistics, the decentralized physical infrastructure network (DePIN) sector currently ranks 29th, with a total market value of around US$20.14 billion. Overall, the market value of the DePIN sector has shown a steady upward trend.
In terms of the number of DePIN users, it is positively correlated with the total number of devices. According to the latest data, the total number of DePIN devices increased by 1.7 million in the past 7 days, mainly from key application projects such as WIFI Map.
From the perspective of geographical distribution, DePIN devices are mostly concentrated in Europe, North America, Southeast Asia, etc. This reflects that these economically developed and technologically mature regions are widely adopting DePIN solutions.
It is worth noting that in the domestic market, due to the influence of policy supervision and other factors, the deployment and application growth of distributed resource equipment has slowed down significantly. This shows that differences in geopolitical and regulatory environments are becoming one of the important factors restricting the development of DePIN in certain regions.
Despite this, DePIN still shows a good growth trend.
Depin protocol head income situation
According to industry data provided by Artemis, the top three DePIN protocols (Helium, Geodnet and Akash Network) generated a total of $3.5 million in fee income in the past year. This highlights the strong position and good business model of the leading projects in the DePIN field.
It is worth noting that the profitability of the DePIN protocol also shows a certain volatility. Data shows that the profit level in the first quarter of 2024 is about 30% higher than that in the second quarter. This change may be related to the impact of the volatility of the cryptocurrency market, but overall, it shows that the market has widely recognized DePIN technology and application scenarios.
