The Core Issue of Crypto Games: Game or Token?

Author: Ryan S. Gladwin

Compiled by: Deep Tide TechFlow

According to CoinGecko, after Immutable (IMX) fell out of the rankings on Monday, there are currently no game tokens among the top 100 cryptocurrencies by market capitalization. While CoinMarketCap still has a few game tokens lingering at the bottom of its rankings, the conclusion is nearly unanimous: the performance of top game tokens continues to be sluggish.

Although crypto games reached a peak in mainstream markets and player communities over the past year, the associated tokens have quickly receded, and newly issued tokens struggle to gain attention.

Data from the Wayback Machine shows that just a year ago, there were still six game tokens among the top 100 cryptocurrencies by market capitalization. At that time, the total market capitalization of CoinGecko's game token category was $29.3 billion. However, despite more tokens being launched during this period, that figure has plummeted by 68%, leaving only $9.24 billion.

The Ethereum gaming platform Immutable was once the last bastion, but its token IMX has significantly declined over the past year.

According to CoinGecko, in December 2023, IMX was the 31st largest cryptocurrency by market capitalization globally. At that time, investment firm VanEck expressed strong confidence in Immutable, predicting that IMX would break into the top 25 by 2024. Even a year ago today, IMX was still ranked 34th.

However, since then, IMX has plummeted by 87% over the past year, due to factors including the overall cooling of the crypto gaming market and an investigation by the U.S. Securities and Exchange Commission (SEC), which Immutable recently stated has concluded.

In just the past week, IMX dropped by 29%, while Bitcoin's decline was only about 10%. IMX became the token with the largest drop in the CoinGecko top 100 list that week, until it slipped out of the rankings, currently sitting at 103rd place.

Other major game tokens that once made it into the top 100 have also faced severe setbacks over the past year. For example, Gala Games (GALA) has fallen by 80% (with a 19% drop this week), while The Sandbox (SAND) has dropped by 64% during the same period (with a 16% drop in the past 7 days).

Those once-glorious legacy game tokens have significantly declined since their peak in 2021. Even recently launched major game tokens have not escaped the predicament. The Pixels (PIXEL) token launched last year has plummeted by 98% from its peak, Notcoin (NOT) has dropped by 94%, and Hamster Kombat (HMSTR) has also slid by 68%.

Last week, Gunzilla Games' popular game "Off the Grid" and its GUN network based on Avalanche L1 launched the GUN token, which is the largest game token issuance in months. However, even though "Off the Grid" has not yet integrated GUN into the game, the token has already dropped 62% from its peak.

Higher Quality Games Are Rising

"Off the Grid" has been rated by Decrypt as the Best Blockchain Game of 2024, and the game shone brightly last fall, boosting the market's positive perception of the current quality of crypto games.

This stands in stark contrast to the "Play-to-Earn" craze of 2021, represented by the simple monster battle game "Axie Infinity".

"The crypto gaming market in 2021 was completely narrative-driven, with almost no real products, except for a few exceptions like 'Axie'," said the founder of Treeverse, who goes by the pseudonym Loopify, in an interview with Decrypt. "Now, a few years later, there are indeed more products, but they still need time and have not really entered the mainstream market."

At that time, "Axie Infinity" was far ahead, but its in-game economic system, token value, and player base suffered a severe blow in early 2022. Now, a new wave of higher-quality games has emerged in the market, some of which have attracted millions of players—though popularity and reputation do not always align.

For example, "Hamster Kombat" attracted 300 million players last summer through its "Tap-to-Earn" Telegram game, despite the gameplay being simple and repetitive. However, since the token launch in September, players have left due to price issues, and the development team has been slow to release subsequent seasons.

"Off the Grid" became one of the few success stories last October, with its public release becoming one of the most successful in the blockchain gaming sector, and it once topped the Epic Games Store free games chart, even surpassing Fortnite. Additionally, the farming simulation game "Pixels" and the card battle game "Parallel" have also received positive feedback from players and attracted a growing audience, while the survival game "Crypto: The Game" has become a niche hit through viral marketing.

"I actually think the current state of crypto games is quite solid," said Jaxie, the community manager of the crypto gaming team GIA, in an interview with Decrypt. "We now have some excellent games starting to launch, which may bring millions of players into the crypto ecosystem."

But there are also missteps

Creating a great game takes time—just look at Rockstar Games, which has spent seven years developing "Grand Theft Auto 6," backed by a large team and substantial funding. This also explains why, despite the crypto gaming craze emerging years ago, we are only now starting to see some results.

However, hasty crypto games often end in failure. The Illuvium series is a typical example. According to CoinGecko, Illuvium's token (ILV) was launched in 2021 and quickly soared to a peak of $1,749, generating huge expectations in the market for the project. However, when the team launched three interconnected games in July 2024, the results did not meet expectations.

Illuvium's actual performance was disappointing, and its co-founder Kieran Warwick admitted in February that criticisms regarding gameplay were "valid" and planned a comprehensive overhaul of the game. Now, the price of the ILV token has plummeted by 99.4% from its historical peak, currently sitting at just $10.60.

The Core Issue of Crypto Games: Game or Token?

"99% of crypto games are not fun," said a member of the meme coin MLG team, who goes by the pseudonym Munnopoly, in an interview with Decrypt. "They seem more like tokens first, then games. I think they have been struggling to bridge the gap with Web2 players."

The various failures in the crypto gaming industry indicate that developing quality games requires time and patience, while projects that rush to launch and lack depth will only disappoint players, leading to a sharp decline in token value.

The once-promising "Deadrop" seemed poised to bridge the gap between traditional gamers and Web3. Developed by former developers of "Call of Duty" and "Halo", along with the well-known streamer Dr. Disrespect, the game attracted mainstream players' attention. However, after a fallout between the development team and Dr. Disrespect over allegations of inappropriate conversations with minors, the studio announced its closure after running out of funds in January this year.

"I think the cancellation of Deadrop is a significant setback for the field," said content creator MayorReynolds. "This game was one of the few with the potential to stand on its own based solely on gameplay while integrating Web3 features in a way that players could understand."

However, the cessation of game projects due to depleted funds is not an isolated incident. Recently, the blockchain gaming ecosystem Treasure announced a large-scale restructuring and layoffs due to financial issues. According to a report from Blockworks last week, the developer of "Shrapnel," Neon Machine, is also facing a funding crisis.

The development team of the Ethereum game "The Mystery Society" paused the development of this social deduction game in February this year, with co-founder Chris Heatherly stating that the blockchain gaming industry is filled with destructive behavior.

"Greed and stupidity are killing almost all participants before they can prove themselves in this field," Heatherly said in an interview with Decrypt. "We need to focus on building healthy on-chain business models rather than continuing this fallacy of 'token issuance equals a Ponzi scheme.' Every Web3 game founder I know is feeling frustrated and exhausted; everything they are doing now is just to survive, but the true belief is fading."

Reshaping the Narrative: Shifting Investor Attention

According to Loopify, the recent issues with game tokens partly stem from investors shifting their focus to crypto assets that are more likely to yield quick profits. He pointed out that since the last gaming token bull market, investor interest has gone through meme coins, SocialFi, and recently shifted to the AI sector.

As each wave of investment trends moves toward new asset classes, the attention on game tokens has gradually declined. These tokens still exhibit high volatility in the market, but the recent declines have been even more severe.

"The narrative of crypto games has long disappeared, and the number of investors willing to pay has decreased as the crypto industry essentially follows trends," Loopify said in an interview with Decrypt. "Even if these games are of higher quality and offer low-cost investment opportunities through NFTs, tokens, or equity, the market cannot immediately price them effectively. It takes time to reflect."

Jaxie raised a more fundamental question: do crypto games really need their own tokens? He believes that what players truly care about is owning their skins through blockchain, rather than a game-specific token. While these tokens can create speculative hype for projects, once the token crashes, the negative impact can shake the community and create unrealistic expectations.

"Most games shouldn't even use their own tokens," he stated. "Launching a token feels more like a marketing tool or a way to appease existing users—don't get me wrong, I also take advantage of airdrops—but it's not a genuinely useful game utility token."

Recently, "tap-to-earn" (tap-to-earn games have sparked a wave of token issuance, with each game requiring tokens to incentivize players to keep tapping. However, these tokens often lack real utility after issuance, leading to a rapid decline in value. Similar stories have played out repeatedly from "Hamster Kombat" to "Catizen" and "Zoo."

Additionally, the "play-to-airdrop trend" (play-to-airdrop trend) that was popular last year has once again distributed tokens to players, but players have little incentive to hold these tokens long-term. Like the earlier "play-to-earn" craze, this model initially attracted a lot of attention and enthusiasm, but the eventual crash was equally painful for both projects and players.

"Most Web3 players are actually speculators in the crypto space, and their goal is to make money," Jaxie bluntly stated. "The lifespan of most crypto games is only 90 days, after which the number of players significantly declines—so why contribute to an economy that you know will shrink dramatically in three months?"

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