Polygon has continuously made news for its mainstream partnerships, $450 million venture round, and $1 billion investment in scaling solutions. But what about Polygon's gaming ecosystem?

For crypto games, 2022 has been a year of sorrow and despair. Almost a year into the crypto winter, highly anticipated games have been postponed or abandoned. The current first-generation of play-to-earn games suffer from declining incentives, which harms their player bases. However, not all hope is gone, as certain successful games inside the ecosystem continue to attract devoted fans.

This article will explore the Polygon gaming ecosystem through the 2022 bear market, including an examination of major projects, evaluations, and a positive outlook for 2023.

Polygon Network vs. Polygon DeFi vs. Polygon Gaming

The last six months have been a disaster in the cryptocurrency sector. Metrics have plunged across the board, from digital asset prices to protocol treasuries. Despite the volatile market circumstances, transactions inside the Polygon network have remained rather constant. The same may be said of DeFi, but not about Polygon's gaming environment.

Source: Dune Analytics

Since late May, gaming transactions on the Polygon network have decreased by 40%, from 429k to 255k. Gaming transactions have lost 5% of their market share in comparison to the whole Polygon network, decreasing from 15% to 10%. The fundamental premise based on diminishing transactions shows that blockchain gaming is dying. Factors such as diminishing player numbers, unprofitable P2E incentives, and gaming dApps losing treasury runway are also factors. This is obviously not unique to Polygon.

Comparison of Unique Users

Source: Dune Analytics

A comparison of unique users depicts a contrasting story. DeFi users have decreased by 18% since May, as falling token values have led to dwindling yield farming chances and decreased trading-related activity. Surprisingly, the number of unique users in the gaming industry has stayed consistent. Gaming users have risen by 1.4%, indicating strong user retention. Polygon user growth is closely correlated with successful retention. The number of unique users on the Polygon network has increased by 72%, reaching 5.9 million in October. In November, the proportion of Polygon network users who were gamers fell by 16% to 23%. We'll now look at some of Polygon's best games and see how they've performed.

Crypto Unicorns

Crypto Unicorns is a blockchain-based game created by Laguna Games that revolves around unique Unicorn NFTs. The game revolves around a farming simulator in which Unicorns cultivate berries, gather resources, and breed. Other gameplay loops on the roadmap include Unicorns competing in jousting, racing, and team RPG fights. External teams are also working on external games based on the Crypto Unicorns IP. The Crypto Unicorns universe continues with Shadowcorns, Unicorns' nemeses. Unicorns and Shadowcorns vie for important resources in the Dark Forest.

Transactions vs. Daily Active Users

Weekly users and transactions have varied dramatically over the last three months. In September, the weekly low was 1,900 players transacting 30k times. Changes in the meta and seasonal events, on the other hand, have accelerated Crypto Unicorn activity since October. Weekly highs were set in October, with 4,800 participants executing 55k transactions. Users climbed by 150%, and transactions increased by 83% respectively. The maximum energy limit for Unicorns was increased as part of the meta changes. Unicorns may now grow more berries, collect resources, breed, and make products on a more consistent basis. In addition, new craftable food products have been added to the seasonal autumn event. To remain competitive, players must buy berries from the in-game shop (Rainbow Marketplace), raising the transaction total. Top food crafters will be rewarded with loot boxes containing prizes and the in-game token RBW.

Unicorn Evolution and Reproduction

Energy is essential to every Unicorn's activities in the game. Players may now breed their Unicorns to enhance their maximum energy limit fivefold thanks to the latest meta update. Prior to the upgrade, players bred 269 new Unicorns every day on average. The proportion has risen by 12% since the last update. Although the breeding rate is minor, many gamers may believe that increasing energy constraints is needless. Many time-consuming tasks, such as harvesting, crafting, and breeding, might take anywhere between 2 and 24 hours.

In mid-October, Laguna Games published the much-awaited jousting trailer. Leaderboards and bounty payouts are designed to encourage greater breeding and development. Players who successfully grow a Unicorn's numbers over a certain threshold or who possess numerous rare traits will be rewarded. However, evolution has accelerated by 15% since the announcement. Due to repeated delays in the jousting gameplay cycle, a small adjustment was foreseen. Many months ago, players most likely bred and developed Unicorns with great scores. Jousting was originally scheduled to be released in the second quarter of 2022.

GameBank RBW

The Rainbow Marketplace had strong RBW inflows prior to October 23rd. Inflows outnumbered outflows by 11%. RBW stash peaked at 1.79M in the last three months. As resources are matched with RBW on a bonding curve, the availability of RBW liquidity is critical inside the Rainbow Marketplace. On October 23rd, market exploits occurred, and approximately 35M RBW and 1.6M UNIM were drained and sold on the open market. At the time of the breach, the assets liquidated totaled $200,000. To mitigate the market's unfavorable price effect, the Laguna Games team purchased all 35 million RBW tokens and partly purchased UNIM.

Source: Dune Analytics

The Rainbow Marketplace needs assistance in re-creating the RBW liquidity witnessed before the hack. RBW outflows from the market currently outnumber inflows by 1%. The aforementioned meta adjustments, as well as the autumn season event, have temporarily increased RBW demand. However, it was insufficient, as the Laguna Games team was forced to inject a huge quantity of RBW in order to preserve liquidity. The jousting game loop must be launched as soon as possible since it will be a significant RBW drain. Unicorns demand an admission fee in RBW and spend a lot of energy. Berries may refill the energy and can be purchased in the marketplace for RBW.

Jousting

The much-anticipated jousting gameplay is about to be released. A new breeding and development event has begun, and players will be rewarded for producing the highest-valued Unicorns. High Unicorn stats and legendary body parts are valuable. Power, speed, endurance, and intellect are the top four attributes produced by a mixture of multiple metrics. 32 Unicorns will battle in knockout rounds until a champion is determined. Unicorns will compete in three jousting battles to choose a champion. A miss, glance, stagger, or knockout are all possible results after each match. A jousting summary is provided below:

Benji Bananas

Benji Bananas is a mobile adventure game centered on Benji, a monkey that hangs on vines while collecting objects to gain upgrades. Benji Bananas has added a "swing and earn" P2E function. Membership NFT holders may engage in reward programs to acquire PRIMATE, the native token. The major goal of PRIMATE is to expose mobile players to crypto gaming. To prevent bots from farming prizes, players must submit KYC credentials using Google Play or Apple ID.

Unique active wallets and transactions

Benji Bananas is a fun, simple F2P game that has over 50 million downloads on Android and iOS. During the last three months, Benji Bananas claimed to have had an average of 33k unique active wallets. However, an examination of their membership pass NFTs suggests that this is improbable (at least prior to Nov. 24th). The increase in players on November 24th was due to a tournament feature that allowed non-members to compete in tournaments. 5,000 membership NFTs have been sold so far to gamers who want to "swing and earn." Players use a "claim" smart contract feature to get PRIMATE incentives for participating in seasonal reward programs. To earn incentives, gamers must have an NFT membership pass, which is limited to 5,000. The 5,000 NFTs are owned by 2,852 different people. Thus, 2,852 is the theoretical maximum number of distinct active wallets, which is 91% fewer than the reported number. It should be noted that existing NFT holders are eligible for any future reward schemes.

Source: Delphi digital

NFT Floor Price vs. PRIMATE Token Price Over Time

To provide a return on investment, PRIMATE awards must surpass the amount spent in obtaining the membership NFT. If the price of PRIMATE falls, as it did from mid-September to late October, the membership NFT will fall soon after. The codependence of both assets is presently causing negative price reflexivity during the bad market. Prices have varied considerably in the last three months, with swings of 50-54%.

The liquidity of the PRIMATE cryptocurrency is thinly dispersed among numerous decentralized pools. The majority of pools are made up of token pairings from various gaming ecosystem tokens in the Animoca Brands ecosystem. The introduction of different tokens is an effort to introduce Benji Bananas players to such games. The concentrated volume and limited liquidity depth, on the other hand, show that Benji players are uninterested in further exploration. USDT pairings account for up to 97% of all volume transactions on centralized exchanges.

Holders Over Time

The increase of unique membership NFT holders over the last three months demonstrates that the community is firmly committed. The number of unique NFT holders has only risen by 93 wallets since the beginning of September. P2E profits are adequate during reward campaign events, according to diamond hands. During the inaugural season event, qualifying wallets might win a prize pool of 18M PRIMATE tokens. On March 17th, membership NFTs were minted and sold for 25 APE, or $212. During the first campaign event, payouts were roughly $160 per play, which meant that participants might recuperate up to 75% of their original deposits. With many season reward campaigns so far, it is reasonable to believe that NFT minters are successful and have little motive to sell, as proven by just nine NFTs selling on the collection's greatest volatility day. Current NFT holders have an additional incentive to acquire and stack up to five membership passes since possessing multiple passes adds a reward multiplier.

Non-NFT Holders Can Enter Open Tournaments

As on November 24th, any Benji Bananas player may take part in a unique week-long event. Although information on PRIMATE incentives is being kept under wraps, allowing non-NFT-gated gaming is positive for bringing new crypto players into the ecosystem. Check out their most recent AMA to learn about community queries, their roadmap, and more.

Sunflower Country

Sunflower Land is a free and open-source farming simulator. Sunflower Land, which is available on PC, is a play-and-own game in which all assets are identified on the Polygon blockchain. Players take on the role of farmers, engaging in tasks ranging from agricultural cultivation to crafts. Farmers may either consume or exchange things on secondary marketplaces. With 150k players, Sunflower Land is now in beta. To be included in the December cohort, you must first register.

Sunflower Land's game design aims to increase crypto literacy by exposing key DeFi principles to onboard players in a welcoming way through core game loops. Quests throughout the game will mimic crypto-native operations such as minting land using MetaMask, producing magical LP tokens, and leading players to trade on secondary markets.

Transactions and Unique Active Wallets

A wide look at analytics shows a declining trend in transactions and active users from the September highs. Transactions peaked at 21k on September 11th, then fell 78% to 4,600. Active users fell similarly, with the September high of 8,300 gamers plummeting by 65%. These indicators, however, have been predominantly influenced by events inside Sunflower Land rather than the macroenvironment. Sunflower Lands began their long-awaited move to Sunflower Isles in early November. Game testing preparations started to transition from beta to public game. Exclusive members such as the core staff, moderators, and high-ranking community members having access to beta testing may explain the handful of hundred active users. Sunflower Isle became public on December 15th, which should result in an increase in active users and transactions.

Total Minted Lands vs. Daily Syncs (Revenue Sources)

Source: Dune Analytics

Having enough runway for teams during a crypto bear market is critical. Unfortunately, all money for the Sunflower Land squad is produced in-game (Thought Farm Ltd.). There was no private or pre-sale financing raised. Thought Farm has no money to fall back on without players. Thought Farm is funded through sync fees, land mints, NFT royalties, and the SFL transfer tax. SFL is the in-game token necessary for farmland and crafts. The graph above compares sync costs to land mints.

The entire number of participants is represented by almost 152k lands. Minting an account costs $5 in MATIC, with 10% of the price going to a charity of the player's preference. As a result of people joining the game, $675k has been produced. Players synchronizing their game data with the Polygon blockchain provide the majority of in-game money. During the two months of open beta, the number of daily syncs peaked at 148k. Daily syncs have dropped by 96% since then. Sunflower Land's principal income source is syncing, therefore development and recruiting runway is likely to stall unless a strong trigger for daily syncing occurs soon. Syncing happens every one or two days and costs around ten cents in MATIC. Sync prices vary according on the price of MATIC; when the price of MATIC is high, sync fees fall, and vice versa.

Monthly Revenue vs. Monthly Expenses

Sunflower Land was in closed beta prior to April, with around 1,700 testers. Sunflower Land entered public beta in early April, reserving 100,000 NFT acres for the general public. Revenue topped $300,000 when waitlisted players started minting and playing the game. It is worth noting that income was not disclosed in May, October, or November. Revenue fell 74% in June owing to a limited supply of land NFTs and a large decline in the previously indicated daily syncs. Revenue is declining, which is a major source of concern. During the months of August and September, there were net revenue losses. In official documents, the crew indicates six months of runway remaining.

Engineer wages account for the majority of costs, as predicted, according to monthly public disclosures. Recurring expenditures include infrastructure, service, legal, and contractor fees. Thought Farm has taken a cautious approach to the treasury. MATIC fees are changed to stablecoins or cash on a weekly basis to resist turbulent market circumstances. If the Sunflower Isles launch fails to attract new users and activities, Sunflower Land's future looks gloomy.

Sunflower Isles Will Be Available Soon

Sunflower Isles is the updated version of Sunflower Land. The new gameplay mechanisms in Sunflower Isles include skill trees and an in-game economy. Sunflower team and high-ranking players are presently undergoing testing. Tokens, in-game goods, and NFTs will all be relocated to Sunflower Isles. Sunflower Isles also marks the public debut of Bumpkins (dynamic NFTs). Players may customize their NFTs by collecting, equipping, and upgrading them.

Ember Sword is a massively multiplayer online role-playing game (MMORPG) that was developed by Bright Star Studios. Players will enter a social sandbox to choose countries and engage in PvP and PvE adventures. Players will really own the digital assets they gather in the game.

Ember Sword left for Immutable X

Ember Sword's departure from Polygon for ImmutableX was unavoidable. After selling 12k land plots to 1,800 landowners, Ember Sword generated $1.5M in its maiden land sale. Because the sale was in great demand, raising funds was fast and successful. The Polygon network grew overcrowded, and the sale repeatedly collapsed, lasting seven hours. Ember Sword hopes to attract millions of MMORPG gamers, and Polygon's first test run flopped.

Polygon failed to satisfy Ember Sword's NFT scaling requirements two more times. Candidates for the second land sale were chosen via an open application process. Over 35k participants pledged to buy 6,000 land plots for $203 million. According to Bright Star Studios, 70-80% of the applicants are individuals or organizations. The third sale began on October 15th, when registered members could purchase community badges. Community badge holders were granted an EMBER allotment and access to alpha testing. Unfortunately, the Polygon network once again failed to fulfill the huge demand of the community. Ember Sword needed a scalable solution since further land sales were anticipated. Ember Sword announced its move to ImmutableX shortly after, on November 5th.

Ember Sword departed Polygon for a variety of reasons. ImmutableX is an Ethereum zk-proof L2 scaling solution designed specifically for NFTs. The blockchain has quick trade confirmations, 9k transactions per second, 0 gas fees, and the security of Ethereum. Ember Sword is now in alpha testing, thus the beta launch seems to be near. To make the blockchain more accessible to participants, it must also ensure smooth custodial wallet solutions for non-crypto-native users. Reddit is one example of widespread success, having introduced over 3 million people to NFTs through Reddit Vault wallets.

Polygon's $1 billion ZK Tech and $450 million Studio Investment

Seeing the weakness in its scalability in the example above, Polygon is on its way to finding a solution.

Polygon launched the "Polygon Thesis: Strategic Focus on ZK Technology" in mid-2021. The thesis was to research, collaborate with, and acquire ZK projects and teams. Polygon is one of several teams who feel ZK cryptography is the best way to enroll billions of users. A year later, Polygon revealed a zero-knowledge scaling solution that is completely compatible with Ethereum (zkEVM). Polygon claims that the zkEVM outperforms alternative scaling solutions, including full EVM compatibility where no code modification or re-implementation is necessary. Simply speaking, Polygon Hermez provides the most seamless conversion for EVM-compatible dApps.

By hiring YouTube's former Head of Gaming, Ryan Wyatt, Polygon made news in the gaming industry. Wyatt is in charge of Polygon's gaming environment, which is one of the $450 million investment's top priorities. zkEVM has made it simpler to attract talent. When developing on Polygon's zkEVM, Ethereum developers may continue to utilize the same programming language, smart contracts, and tools. Furthermore, when compared to Ethereum, zkEVM is expected to lower costs by 90%. As seen by the NFT minting debacles over the last two years, minimizing energy production is critical for onboarding players. Ember Sword also indicated that ImmutableX's 100% carbon-neutral trade was a factor in their migration decision. zkEVM is now in test mode, with a mainnet launch scheduled for early 2023. Polygon's zkEVM, like ImmutableX's siphoning of popular games like Illuvium and Ember Sword, is expected to have the same impact when they roll out a more robust technological stack.

Conclusion

In the present bear market, no crypto game has escaped untouched. During the last twelve months, flaws have been revealed from which game makers may learn. Teams who rely only on NFT trading volume and in-game fees for profit will most likely suffer in the future. Furthermore, player bases in P2E games have prioritized money above enjoyment. Despite the criticism, Polygon's gaming environment looks to have a bright future. Past investments may help Polygon's appeal to a wide range of game companies, developers, and players. Polygon is poised to be a key participant in blockchain gaming for the foreseeable future, with a solid BD team and Ryan Wyatt at the lead.

Disclaimer:
This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.

Polygon (MATIC): Don't sleep on the gaming sector