When will blockchain gaming be worth investing in?

This is a guest column from early stage games investor LVP.

It is currently invested in companies such as Unity, Coda Games, Double Loop Games, and Bossa Studios, and recently closed a $80 million fund for new investments. 

It has also invested and exited from companies such as Supercell, NaturalMotion and Playfish. 


From 1962’s Spacewar! onwards, any advance in the IT industry has been co-opted by programmers – willingly or otherwise – in the cause of making better interactive entertainment. 

So it’s no surprise something as arcane as the creation of a new form of decentralized digital currency has been heralded as the coming revolution that will take the value of $150 billion annual global computer games industry into the trillions. 

But for all the clamour around blockchain games, which grew following the launch of flexible smart contract networks such as Ethereum in 2015 and EOS in 2018, little of substance has resulted. 

The importance of scale

This isn’t to say nothing of value has been accomplished. Nevertheless, given the estimated $500 million in direct funding to blockchain game projects to-date and the tens of thousands of man-months invested by developers, it is remarkable no blockchain game has managed to sustain over 10,000 daily active users. 

In contrast, there are many mobile games – from Candy Crush Saga to Clash of Clans and Free Fire – boasting a daily audience in the tens of millions. In this regard, blockchain gaming doesn’t yet rank as a rounding error in the big spreadsheet of computer game significance. 

It is remarkable no blockchain game has managed to sustain over 10,000 daily active users

This is one of the reasons LVP hasn’t been active in the sector. 

That stated, it’s not just blockchain games which have failed in this regard. No blockchain app (also known as a dapp or ‘decentralized app’) has hit this target either; something which is now the subject of a $500,000 bet ending May 2023 between two of crypto’s best-known protagonists. 

As for the reason for this state of affairs, an obvious case in point is the tension between the sort of UX flexibility billions of web and mobile app users have grown to expect as standard over the past decade, and the requirement to secure identity and value in a brave new world that lacked the simplest recourse to log-in failure or password recovery. 

After all, that’s the point of decentralization. 

Still, in the context of being asked to write down on a sheet of paper and keep securely in perpetuity twelve words – the standard Ethereum wallet onboarding process – or risk losing everything, maybe it’s a miracle anyone has ever transferred real-world value onto a blockchain. 

Users first

And it’s been the collision of such hard technicalities against soft vital issues such as accessibility and fun that have most limited the emergence of blockchain gaming, despite the early interest of mass market brands such as MLB, the NBA, F1, FC Barcelona, and Star Trek, which are dipping their toes in the water. 

Nevertheless, things are changing fast, very fast. The building blocks of an ecosystem that can handle hundreds of thousands of user accounts in a familiar manner, as well as enabling in-game economies worth hundreds of millions of dollars, are being put into place. 

Blockchain gaming doesn’t yet rank as a rounding error in the big spreadsheet of computer game significance.

In particular, there are now multiple service providers offering simple account creation flows and the sort of social recovery methods already used in platforms such as WeChat. 

But, crucially, we’ve not seen any projects which demonstrate the ability to attract and grow their audiences outside of the existing blockchain-savvy hardcore.

As early-stage investors, the ability to scale in this manner is a vital component of our thinking. 

Instead, current blockchain games seem to be best viewed as economic simulators that attract some of the same users happy to spend tens of thousand of dollars playing free-to-play mobile games. 

Dominated by crypto whales, but without the bulk of non-paying players which enable these heavy-spenders to stand out from the crowd, the sector has proved to be something of an inverted pyramid; one based around financial value rather than fun. 

A modest proposal

A strange state of affairs then because, at heart, the elevator pitch for any blockchain game is very simple and doesn’t need to impact gameplay at all. 

Players invest a lot of time and money into their games, amassing characters, items and resources in the process, so what would happen if they could give away, sell or trade those in-game assets with other gamers?

Put another way, would gamers spend more or less if they could recycle their Fortnite accounts?

Of course, this sort of thing already occurs haphazardly through black markets as the occasional news flurry about players illegally selling on their accounts, but not receiving their expected due, reveals. 

Would gamers spend more or less if they could recycle their Fortnite accounts?

Similarly, a surprising number of blockchain game pioneers have a somewhat chequered history trading in-game items and gold ranging back all the way to the inglorious days of EverQuest and World of Warcraft mining.

What’s next?

Looking to the future, though, it’s clear that it’s the innovation provided by such player-led economies and fundamentally open development frameworks rather than cryptocurrency price speculation that drives the vision of the new generation of companies working on blockchain games. 

As an aside, it’s significant to note few of the current blockchain game developers have demonstrated any substantial history of success in the traditional game sector, and fewer have managed to raise beyond a seed round. 

We remain on the lookout for real breakthroughs in game design or interactivity that benefit fundamentally from blockchain technology. 

Clearly these enthusiastic, inexperienced companies have failed to overcome the tricky obstacles set before them. 

Not every game is fun, and – as we’ve seen in the slow progress of new innovation ranging from cross-platform play to location-based activity – the higher the technical barriers, the harder it is to unlock the magic. Not every game is a Fortnite or a Pokemon Go

However, there are now serious outfits running blockchain game projects, whose budgets are measured across multiple years and in millions of dollars. Proper games in fact. 

What these companies grasp is that while technology is always important, creating an exciting and fun experience is what really matters for gamers and eventually drives sector growth.

So, the opportunities – and conversely, the challenges – for using blockchains in gaming are complex and still nuanced. We remain on the lookout for real breakthroughs in game design or interactivity that benefit fundamentally from blockchain technology. 

Discovering how to utilise blockchains for new and unique ways to play and pay remains an as-yet unfulfilled goal. But it’s getting closer.

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