Web3 Games 2024 Annual Report: Absentee in the bull market?

In 2024, the Web3 gaming industry presented a complex landscape, making significant progress while also facing numerous challenges. Although the number of daily active users surged by over 300%, traditional game companies have also started to make concrete deployments in this field. However, from a market performance perspective, the market capitalization of this sector only grew by 60.5%, significantly lagging behind the Meme coin and AI sectors. As Bitcoin reached a new all-time high and various crypto sectors thrived, a critical question emerged: "Did Web3 games miss the best window of opportunity during this bull market?"

However, behind these surface-level data, 2024 marked an important transformative period for the industry. The industry has transitioned from a purely speculative phase to a more mature stage. This report will analyze how Web3 games have evolved in the 2024 market cycle, exploring the key indicators, technological advancements, and strategic shifts within the sector. From infrastructure development to user engagement models, we will explore how the industry is building sustainable growth while addressing the challenges of mainstream adoption.

Note: Unless otherwise stated, all data in this report is as of December 15, 2024. The data sources are Footprint Analytics and CoinMarketCap.

Overview of Key Annual Indicators

• Market capitalization: Reached $31.8 billion, an increase of 60.5%;
• Trading volume: $5.2 billion, an increase of 18.5%
• Number of transactions: 5.3 billion, a decrease of 30.3%
• Daily active users: Reached 6.6 million at the end of the year, an increase of 308.6% compared to the beginning of the year;
• Active games: 1,361 out of 3,602 games remained active (37.8%);
• Annual financing: 220 financing events, totaling $910 million;
• Leading public chains:
• Trading volume share: BNB Chain (23.1%), Ethereum (17.6%), Blast (9.2%);
• Transaction count share: WAX (33.6%), Aptos (11.6%), Ronin (6.1%);
• Daily active users: opBNB (2.2 million), Ronin (1.1 million), Nebula (458,000) (December daily average).

Market Performance Analysis

Market Capitalization Performance

The Web3 gaming sector experienced strong growth in 2024, but its performance lagged behind other crypto sectors. According to Footprint Analytics data, the gaming token market capitalization reached $31.8 billion at the end of the year, an increase of 60.5% year-over-year. Although the sector reached a high of $47.4 billion in March, it was still significantly lower than the historical high of $114.1 billion set in November 2021.

Although the overall crypto market performed strongly in the second half of 2024, particularly driven by Bitcoin's performance in the last two months, gaming tokens lagged behind other sectors. CoinMarketCap data shows that Web3 gaming ranked 8th in market capitalization growth, significantly behind the leading sectors: Meme Coins (421.1%), AI & Big Data (168.0%), and the Solana ecosystem (124.1%).

This poor performance also extended to community engagement. Among the most-watched sectors on CoinMarketCap, Web3 gaming only accounted for 6.7% of the total views, ranking 9th, as the focus of attention throughout the year was mainly on Meme Coin-related projects.

Trading Volume Analysis

The performance of key indicators in the Web3 gaming sector was mixed in 2024, with trading volume increasing but the number of transactions continuing to decline.

Trading Volume Trend

In 2024, the total trading volume of Web3 games reached $5.2 billion, an increase of 18.5% compared to 2023. Although this reversed the downward trend since 2021, the trading volume was still significantly lower than the previous cycle's peak. The 2024 data was only 6.2% of the 2021 peak ($84.1 billion) and 15.1% of the 2022 trading volume ($34.5 billion).

Transaction Count Trend

In 2024, the total number of transactions reached 530 million, a decrease of 30.3% year-over-year. Although this level was comparable to the 510 million transactions in 2021, it was unable to reverse the downward trend that began in 2022.

User Engagement

Daily active users (DAU) experienced significant growth throughout 2024, increasing from a daily average of 1.6 million in January to 6.6 million in December, a 308.6% increase within the year. This growth surpassed the previous cycle's peak of 1.8 million DAU set in November 2021. Although these data may include some bot activity, this growth still demonstrates significant user engagement in the industry.

Ecosystem Development

Public Chain Competition and Evolution

Analysis of the Leading Public Chains

In 2024, the dominant positions of different public chains in the Web3 gaming sector underwent significant changes, with each chain exhibiting different advantages in terms of trading volume, transaction count, and user engagement.

Trading Volume Distribution Across Chains

BNB Chain maintained a leading position in trading volume, with $1.2 billion in trading volume (23.1% market share), followed by Ethereum with $920 million (17.6%). Blast and Ronin accounted for 9.2% and 9.0% of the market share, respectively.

Transaction Count Across Chains

Despite an overall 30.3% decline in industry transaction count, some public chains exhibited strong performance. WAX led with 1.8 billion transactions (33.6% of the total). Aptos, with its "tap-to-earn" Telegram game Tapos, emerged as a strong contender, reaching 620 million transactions (11.6%), of which 540 million were in August alone. Ronin and opBNB maintained 321 million and 318 million transactions, respectively.

User Engagement Across Chains

User engagement across chains showed significant growth, particularly in the second half of 2024. opBNB emerged as a standout in user engagement, with an average of 2.2 million daily active users in December, surpassing the long-time leader Ronin (1.1 million). Nebula, a SKALE Layer 2 project, ranked third with an average of 458,000 DAU. Public chains like NEAR, Sui, and Sei also entered the top 10 DAU, demonstrating an expanding competitive landscape and users' willingness to try new platforms.

The diversified trend in the use of different blockchains indicates that the ecosystem is becoming more mature, and different public blockchains are finding their own positioning for various game experiences and user preferences. The main networks are no longer just providing basic blockchain infrastructure, but are developing into comprehensive platforms for game developers. The $200 million ARB Game Catalyst Program by the Arbitrum Foundation, the 5 million STRK token distribution program by the Starknet Foundation, and the significant grant programs from Sui and Xai all demonstrate how different chains are attracting and retaining quality game projects through strategic incentives.

Improvements in Technical Infrastructure

Capacity Increase

The blockchain processing capacity has increased significantly, with the current network's transactions per second being over 50 times higher than four years ago. This growth is driven by the rise of Ethereum Layer 2 and Layer 3 networks, including Immutable zkEVM, game-specific chains based on Avalanche L1, Oasys, SKALE, Arbitrum Orbit, as well as other high-throughput blockchains like Solana, Sui, and Aptos.

Game-specific chains have also made significant progress. Ronin announced its Layer 2 plan, Ronin zkEVM, in June 2024, enabling Ronin developers to build their own zkEVM Layer 2. Immutable zkEVM took a strategic step towards greater accessibility by removing the deployment whitelist and enabling permissionless deployment. Additionally, Avalanche completed its most significant upgrade since the mainnet launch in 2020, the "Avalanche9000" upgrade, which addressed the challenges of customized L1 building and improved interoperability.

Reduced Gas Fees

The Ethereum "Cancun" upgrade (also known as "Proto-Danksharding" or "EIP-4844") in March 2024 was a crucial milestone, significantly reducing the fees for L2 networks. The impact was substantial, with gas fees dropping from a few dollars to a few cents or even lower, eliminating one of the major friction points faced by blockchain game developers and players.

Improved Cross-Chain Interoperability

Chainlink's Cross-Chain Interoperability Protocol (CCIP) saw significant development in 2024, enabling developers to build games that can interact with assets across multiple chains. This improvement significantly enhanced the interoperability of in-game items.

The adoption of standardized digital asset formats, particularly ERC-721 and ERC-1155, has become more widespread. These standards ensure that in-game NFTs can be recognized and used across various games and platforms, simplifying asset transfers and interactions.

2024 also witnessed the significant rise of decentralized platforms supporting cross-chain games. Platforms like Portal, Fractal ID, and Web3Games provided the necessary infrastructure for seamless asset transfers and interactions between different blockchain ecosystems.

Project Developments

2024 was a pivotal year for the development of Web3 games. In addition to traditional game companies entering the space, the ecosystem also witnessed the release of several notable games. Highly anticipated titles like Off The Grid and MapleStory Universe entered early access, while Illuvium finally launched. Pirate Nation successfully completed its Token Generation Event (TGE) and launched a successful "play-to-airdrop" initiative.

Analysis of Active Games

As of November 30, 2024, the total number of blockchain games reached 3,602, up from 2,997 in January. However, the active game metrics show some challenging trends. Of the total games, only 1,361 (37.8%) remained actively on-chain, with 2,241 (62.2%) being inactive. Additionally, despite the overall growth in the number of games, the number of active games actually decreased compared to 1,387 in January.

A deeper analysis of user engagement metrics indicates further market concentration. The number of games with over 100,000 Monthly Active Users (MAU) decreased from 586 in June 2022 to 522 by the end of 2024. In November 2024, 161 games (4.5% of the total) achieved over 10,000 MAU, with 96 games (2.7% of the total) surpassing 100,000 MAU.

This user concentration trend indicates a maturing market, with successful games attracting larger audiences. This phenomenon is influenced by factors such as intense competition, rapid iteration strategies, and the "top-tier effect" of leading games within the ecosystem.

Innovative Landscape

Cross-Platform Gaming Trends

Mobile gaming, emphasizing accessibility and seamless user experiences, established itself as the primary platform for Web3 games in 2024. The mobile-first approach has influenced how developers design blockchain games, focusing on intuitive interfaces and simplified onboarding processes. In 2024, mobile games accounted for 29.4% of newly released Web3 games.

Social platforms, particularly Telegram, have become a powerful catalyst for Web3 game adoption, accounting for 20.9% of new Web3 game releases. Telegram's success stems from its massive user base, simplified in-app experiences, and the ability to bypass traditional app store limitations. The platform's influence peaked in the third quarter of 2024, with 11 games surpassing 10 million MAU. Notably, TON successfully converted this large user base into on-chain participants, generating spillover effects in Web3 games, meme coins, and DeFi. This success has prompted multiple blockchain networks, such as Aptos, Sui, and Core, to compete for Telegram's traffic by launching or supporting Telegram-based games.

Similarly, Line announced a plan to launch 20 mini dApps in December 2024, indicating the growing interest of mainstream messaging platforms in blockchain game integration.

The console gaming domain remains relatively underdeveloped in the Web3 game space, with major manufacturers like Microsoft and Sony maintaining a cautious stance. However, new approaches are emerging to bridge this gap. Some developers, such as Gunzilla Games with Off The Grid, have chosen to separate the core game mechanics from blockchain functionality to align with traditional console game expectations. At the same time, blockchain platforms are developing their own Web3 gaming handhelds, such as Sui's SuiPlay0X1 and Solana's Play Solana Gen1 (PSG1), potentially creating a new product category for dedicated Web3 gaming devices.

Entry of Traditional Game Companies

The year 2024 marked a significant shift in the attitude of traditional game companies towards blockchain games, with major game studios transitioning from experimental actions to strategic development.

In October, Ubisoft released Champions Tactics: Grimoria Chronicles on the Oasys Layer 2 HOME Verse. This tactical RPG game maintained traditional game elements while implementing a series of NFT-based features.

Square Enix strengthened its blockchain division through strategic investments and collaborations. In addition to investing in game platforms Elixir Games and HyperPlay, the company announced that its Symbiogenesis game would be brought to HyperPlay.

The participation of the Sony Group signifies a major push towards blockchain games, both through investments and infrastructure development. While supporting double jump.tokyo Inc.'s $10 million Series D funding, Sony also announced the launch of Soneium, a Layer 2 network aimed at connecting Web3 innovations with consumer applications in the gaming and entertainment sectors.

AI Integration into Game Development

As artificial intelligence revolutionized various industries in 2024, the Web3 gaming sector became a significant beneficiary of AI innovations, opening up new opportunities for game development and player experiences.

AI has transformed in-game interactions and content generation. Game studios are leveraging AI to create more sophisticated non-player characters (NPCs) that can adapt to player behavior and generate personalized quests based on individual gaming histories and preferences. This personalization enhances player engagement by making the gaming experience more relevant and tailored.

In the development aspect, AI has significantly simplified the creative process. Developers are using AI tools to automatically generate game environments and assets, drastically reducing production time and costs. This enables smaller teams to create high-quality games that can compete with large-scale studios.

AI also enhances the operations of Web3 games. The technology is being used to automate game testing processes and monitor on-chain transactions to prevent potential fraud or cheating, which is particularly important in games with complex economic systems. Additionally, AI algorithms are helping to optimize game economies and token models, addressing one of the key challenges in Web3 game design.

Investment Landscape

Annual Funding Overview

Web3 games raised $910 million through 220 funding events in 2024. While the funding amount decreased by 7.3% compared to 2023, and was significantly lower than the boom periods of 2021-2022 ($3.2 billion and $2.7 billion, respectively), the number of funding events increased by 48.7% year-over-year, indicating sustained investor interest despite smaller individual deal sizes.

This year showed a clear tilt towards early-stage investments, with 76 early-stage deals (34.6% of total events) compared to only 20 Series A or later-stage funding (9.1%). This trend suggests that while new projects continue to attract initial capital, many projects from the 2021-2022 boom period are facing challenges in securing subsequent funding.

Among investors, Animoca Brands maintained a leading position, completing 38 investments, a 192.3% increase from 2023, and participating in 17.3% of all funding events in 2024. Spartan Group and Big Brain Holdings followed closely with 22 and 15 investments, respectively, and the top 10 investors collectively completed 152 investments.

Major Funding Events

In 2024, seven projects raised over $20 million in single funding events. Azra Games led the pack with a $42.7 million Series A round, focusing on bringing console-quality gaming experiences to mobile platforms.

In terms of cumulative funding, Monkey Tilt raised $51 million through two rounds, operating a platform with a "game-entertainment-gambling" hybrid model. Gunzilla Games secured four rounds of funding from renowned investors, including VanEck, Coinbase Ventures, Delphi Ventures, and Avalanche's Blizzard Fund, demonstrating strong investor confidence.

Strategic Investment Trends

As the industry transitions from the 2021-2022 hype cycle to a more mature phase, the focus has shifted towards fewer but higher-quality projects, with investors becoming more selective in their approach.

Funding is increasingly directed towards game infrastructure and development tools, rather than just the games themselves. Noteworthy examples include NPC Labs' $18 million seed round to build Web3 games on Base, and Alliance Games' $5 million Series A to develop AI-driven decentralized infrastructure. This trend reflects investors' growing interest in technologies that can support multiple games and platforms.

Platform and multi-chain development have attracted significant attention, particularly projects building cross-chain gaming ecosystems. Seeds Labs raised $12 million for its flagship product, Bladerite, on Solana, while B3 launched the Open Gaming Layer, showcasing investor interest in expanding the ability to build cross-chain games.

Additionally, new game genres have gained notable investor attention in 2024, particularly Telegram-based games and gambling game projects, although they face regulatory challenges.

Industry Evolution and Future Outlook

The Web3 gaming industry experienced a significant evolution in game models during 2024. The previously dominant "play-to-earn" model gave way to more sustainable approaches. Telegram-based "tap-to-earn" games have demonstrated unprecedented user acquisition capabilities, while strategies like "play-to-airdrop" from Pirate Nation and Pixels have introduced new user acquisition methods. Meanwhile, mature projects have shifted towards a "play-and-earn" model, placing gameplay at the forefront of financial incentives.

However, the sector continues to face persistent challenges. Technological barriers remain significant, particularly in achieving seamless blockchain integration without compromising the gaming experience. Regulatory uncertainty, especially around gambling features and token classifications, continues to impact development decisions.

The key is to maintain on-chain participation, which has become a fundamental issue. This is particularly evident in the performance of Telegram games: the monthly active users of Hamster Kombat dropped from over 100 million in September to 22.9 million in mid-December, with only 0.0004% of users participating in on-chain gaming activities. While other Telegram games show higher conversion rates, most are still below 1%. It is worth noting that these metrics specifically reflect on-chain gaming activity, as the core gameplay of most Telegram games remains off-chain, and users may be more active in other segments such as Meme coins or DeFi. This highlights the ongoing challenge of converting platform users into active blockchain game players.

Outlook for 2025: Reshaping Relevance

As Web3 games seek to reestablish their position in the crypto landscape, several key trends emerge as potential transformation catalysts:

Social platform integration stands as the most promising path to mainstream relevance. The remarkable success of Telegram games demonstrates the power of meeting users where they are, with platforms like Line and TikTok poised to follow suit. This approach may ultimately solve the user acquisition challenges in the field by leveraging existing social networks rather than building communities from scratch.

AI integration will evolve from a marketing feature to a fundamental driver of innovation. Beyond enhancing game development and NPC interactions, AI may solve core challenges in the field around economic design and user retention - areas where Web3 games have traditionally struggled to compete with traditional gaming experiences.

Achieving sustainable growth through integration may ultimately determine the relevance of the field. Success may not come from competing with traditional games or other crypto verticals, but from seamlessly integrating with them. This means focusing on how blockchain can enhance, rather than define, the gaming experience, developing more sophisticated token economics, and placing user experience above crypto-native features.

In summary, the role of Web3 games in the crypto ecosystem may not be about dominance, but about integration. By cleverly connecting traditional games, social platforms, and blockchain technology, Web3 games have the potential to create genuine innovative value. This evolution not only will help the industry break free from the current "yet another crypto vertical" limitations, but may also become a key force in reshaping the future of the gaming industry.

This report is a joint annual report by Footprint Analytics and CoinMarketCap Research.

The content of this article is for industry research and exchange only and does not constitute any investment advice. There are risks in the market, and investments should be made with caution.