“That’s Our Two Satoshis” - Web3 Gaming is Actually Happening

Jeff Dorman, CFA
Dec 4, 2023

Thats Our 2 Satoshis Logo

Screenshot 2023-12-04 at 11.06.30 AM

Source: TradingView, CNBC, Bloomberg, Messari
Strong-to-Quite Strong
November was the best month for the Bloomberg U.S. Bond Aggregate Index (+4.53%) since May 1985. The S&P 500 also rallied +9.1%, its best month since July 2022, and reversed three months of losses.  As a result, November was the best month for a global 60/40 portfolio since November 2020.  Naturally, December started similarly, as bonds and stocks rallied together again on the first trading day of December as traders piled into “rate cut bets”.  Over five rate cuts are now priced into next year.
As always, the tug-o-war between hype and substance looms large over digital assets investors.  Bitcoin’s strength YTD, especially last week, falls in the “substance” camp, given the multiple catalysts this year from the regional banking crisis to Ordinals, to the inevitable ETF.  But some hype is also present, as seen by the CME futures basis reaching 25% annualized, as TradFi investors who don’t have access to native crypto exchanges are happily paying a premium to access Bitcoin ahead of the ETF approvals. But away from Bitcoin, the substance is more sporadic.  Crypto projects tied to artificial intelligence (AI) continue to rally, and some projects are starting to see real traction (like Bittensor), but most projects continue to be more hype than substance. The Solana ecosystem continues to reach new highs in TVL and volume, but it’s still hard to identify a distinct sector or popular application driving this renewed interest.  Gaming has been the “hype” sector for the past three years, and recent strength in the tokens of gaming apps and blockchains still feels a little more hype than substance, but that may change in real-time as many games are coming to market.
The Rebirth of Blockchain Gaming
Written by Sasha Fleyshman, Portfolio Manager and Christopher MacPherson, Analyst 
Since the rise of Axie Infinity, gaming integrated with web3 has been significantly debated. Throughout 2022, we saw many projects release reskinned versions of Axie Infinity with minor tweaks to Axie’s ‘play to earn’ (P2E) model come and go. Since then, we have seen a major renaissance when developers from the largest traditional gaming studios entered the space, raised money and released tokens for new game studios that we believe will pave the way for a new era of web3 gaming. Arca has reviewed over 100 web3  gaming pitch decks this year alone. Because game development cycles typically take 2-4 years, we expect a flurry of web3-enabled games to come to market in the coming years. We also witnessed large web2 corporations publicly enter the mix in 2023 in varying capacities, including Google, Apple, Amazon, Epic Games, and Zynga.  
These new games will likely differ in quality, approach to web3 integration of tokens/NFTs, and genre- and the blockchains that these games will leverage will also differ in infrastructure tech, target market, and business development. However, it is clear that the hype for web3 gaming is growing, and the market is taking note. Since the market turnaround in mid-September, most gaming tokens have outperformed BTC and ETH, as seen in the comparison chart below.
Source: Trading View
Currently, there are three major blockchains that are primarily focused on Web3 gaming that exemplify the growth: Ronin (RON), ImmutableX (IMX), and Avalanche (AVAX).
Current Statistics
Market Cap
Fully Diluted Value
Total Value Locked
Unique Wallets 
Source: DappRadar, Coingecko, Defillama 
Ronin (RON): Ronin arguably has the most momentum of the three chains. After the decline of interest in Axie in 2022 and the Ronin bridge hack in April 2022, interest around Ronin was at peak lows. However, with the November 2023  public release of Pixels, Ronin’s first 3rd party game release, interest and users on Ronin boomed. Pixels, alone,  accounted for 300K unique active wallets in the past 30 days. 
  • Tech: Ronin is an Ethereum side-chain EVM (Ethereum Virtual Machine). Ronin optimizes for near-instant transactions and low fees enabling millions of in-game transactions to occur seamlessly.
  • Target Market: Ronin is the only chain of the three specifically targeting gamers in Asia where fast-casual, mobile-enabled games are popular.
  • User Acquisition: User acquisition continues to be the most important puzzle to solve for gaming studios. Ronin stands out because it has a distinct initial advantage in user acquisition due to its affiliation with the Axie Infinity community. Despite the token price of Axie being well below all-time highs in 2021, the Axie community has remained strong. The massive early success of Pixels shows that the community is excited to get their hands on new releases. Ronin currently has 463K unique active wallets registered over the past thirty days (+337.03%).
  • Marquee Games: Axie Infinity, Pixels, The Machines Arena, Wild Forest
  • Relative Valuation: Ronin (RON) is currently the lowest-valued gaming chain of the three on a relative valuation basis ($310M market cap). However, if Ronin continues to announce new games that are successfully adopted, it is plausible that the valuation gap between Ronin and other gaming chains will start to close quickly.
Immutable (IMX): Immutable has recently seen momentum from its partnership with Ubisoft and the first public release of one of its marquee games, Illuvium (ILV). Immutable boasts the largest catalog of partnered games of all the gaming chains, and an upcoming technology upgrade to its infrastructure gives Immutable fans a lot to look forward to.
  • Tech: Immutable is a layer-2 scaling solution specifically built for gaming. A recent partnership with Polygon allows games being built on the Immutable ecosystem to have the option to host their own zkEVM, which provides benefits such as token gas payments, staking, and upgraded security (app chains?). The new chain, Immutable zkEVM, is coming online soon and the tokenomics will likely see an upgrade as well.
  • Target Market: Compared to the other chains, Immutable targets the broadest range of gamers. Various games are built on the chain, including games focused on shooters,RPGs,  fast-casual, horror, and more. Additionally, Immutable’s Passport product will simplify onboarding by allowing users to easily onboard to Web3 with just an email address.
  • User Acquisition: Immutable’s path to winning at user acquisition will require partnering with the best games, building the best tech, and giving gamers the best user experience.
  • Marquee Games: Illuvium, Embersword, The Bornless, Avalon, Guild of Guardians, Gods Unchained, Shardbound, and MetalCore
  • Relative Valuation: The IMX token is currently valued at a $1.8 billion market cap. Most of Immutable’s marquee games are still in development/private betas, and the zkEVM partnership is still in its early stages, so it is reasonable to expect that momentum will pick up again as more products come to the market.
Avalanche (AVAX): Although Avalanche is more than just gaming, gaming has been a top priority for their team since the release of Avalanche subnets. Avalanche’s current momentum comes from the subnet releases of Merit Circle’s Beam and Shrapnel. Avalanche has also benefited from recent JP Morgan and Citi partnership announcements. 
  • Tech: Avalanche’s tech advantage comes from their use of subnets. Elastic Subnets allow permissionless staking/delegating, allowing anyone to stake or run a validator on the network using the network’s platform token. This is a change from before, when validators for the network had to be whitelisted by the genesis validator set. 
  • Target Market: Thus far, two of Avalanche’s most anticipated games, Shrapnel and Gunzilla, are attracting AAA-level quality shooter fans. That said, Avalanche is not just focused on one specific genre or geographic market. Avalanche’s subnets also allows this ecosystem to be well set up for games that are considered fully on-chain. 
  • User Acquisition: Avalanche first saw gamers onboard from the rise of DeFi Kingdoms, a cross-chain fantasy game, in Q1 2022. Since Avalanche is more than a gaming chain, it provides natural cross-pollination opportunities for users using it for use cases outside of gaming. Popularity around Beam and the upcoming Blitz.gg integration may also serve as major catalysts for acquiring users. Shrapnel’s token SHRAP is up 233.61% since its launch in early November. 
  • Marquee Games: Shrapnel, Gunzilla, Fableborne, Domi Online, Trial Extreme, Rumble Arcade, Raini the Lords of Light
  • Relative Valuation: AVAX’s valuation is the largest by a large gap of the three chains valued at a $8.03 billion market cap. This is mainly due to the chain having multiple use cases beyond gaming. If ambitious titles like Shrapnel hit mass appeal akin to Call Of Duty or Escape From Tarkov, Avalanche will see significant increases in on-chain metrics such as Unique Active Wallets and TVL. 
Where There’s Smoke, There’s Fire
There’s a reason that web3 gaming has received significant interest from allocators, speculators, and developers alike - gaming is a growing market, estimated to pull in $249 billion in revenue worldwide (11.8% YoY growth). That growth happened during an unstable year for businesses overall due to consumer spending continuing to decline:

Source: Citi Research, 2023

Gaming continues to reinforce the recession-proof motif that consumer spending shrugs off the market trends in times of tightening - per Statista, worldwide gaming revenue has an expected 9.32% CAGR between 2023 and 2028.

A stark example of gaming’s resilience in any market condition is exhibited by Roblox and the culmination of user-generated content (UGC), concurrent online gameplay, and shareable content (social). This “triple threat” of product offerings has set the project apart from the pack and provides a representation of what a successful web3 game can achieve (it’s worth noting that Roblox CEO David Baszucki ‘dreams’ of adding NFT functionality to Roblox one day). As of Q3 2023, Roblox has 70 million daily active users….DAILY. That would equate to roughly 20% of the United States population interacting with the in-game economy daily.

Source: Roblox

Currently, there is significant pushback from the traditional gaming community on the advancement and implementation of web3 gaming. Concerns about pay-to-win (P2W) game loops, the financialization of gaming, and the overall poor product releases up until now have left a bad taste in the mouths of many. Additionally, coupled with the eccentric personalities that the champions of our space employ, this hesitancy is easily justified.

However, web3 gaming firmly takes the successes of Roblox and Fortnite to the extreme - putting power and assets into the hands of the users while simultaneously allowing for said users to create monetizable content. This is the central ethos web. When users can monetize their time  (sweat equity) and creations (equity), it can unlock whole new class of power users. In this regard, digital assets offer a means to an end - web3 gaming creates a better transference layer for what is already happening to the gaming sector. This, in time, will be seen in a positive light.

This message is beginning to permeate the minds of venture allocators. In a challenging environment, web3 gaming investments remained stable, with ~$2.3 billion allocated thus far in 2023. As of Q3:

Source: DappRadar

These games (and the surrounding infrastructure) have been incubated over the past 12-24 months, and are starting to roll out in waves to select groups via alpha and beta testing. While the ramp-up of user-facing game builds has increased across all platforms (web-based, Steam, internal applications, etc), none  has been more visible and interesting than Epic Games Store (which just changed their self-publishing policy):

Source: Game7 Research 
As we move forward into 2024, expect a continuation of this gaming narrative. With the steady state of venture funding, the progression of development and go-to-market strategies, and the launches of products next year, it is likely that a sector leader will emerge that both reprices and adjusts the market mindset. When this time comes, keeping up with the flow pace will be challenging - crypto is known to iterate with blazing speed. If done correctly, this sector can usher in an entirely new class of participants, which we welcome with open arms.


And That’s Our Two Satoshis!
Thanks for reading everyone! Questions or comments, just let us know.

The Arca Portfolio Management Team
Jeff Dorman, CFA - Chief Investment Officer
Katie Talati - Director of Research
Sasha Fleyshman - Portfolio Manager
David Nage - Portfolio Manager
Wes Hansen - Director of Trading and Operations
Michal Benedykcinski - Senior Vice President, Research
Nick Hotz, CFA - Vice President, Research
Kyle Doane - Vice President, Trading
Alex Woodard - Associate, Research
Christopher Macpherson - Research Analyst
Andrew Masotti - Associate, Trading and Operations
To learn more or talk to us about investing in digital assets and cryptocurrency
call us now at (424) 289-8068.

Subscribe For the Latest Blockchain News & Analysis



Disclaimer: This commentary is provided as general information only and is in no way intended as investment advice, investment research, legal advice, tax advice, a research report, or a recommendation. Any decision to invest or take any other action with respect to any investments discussed in this commentary may involve risks not discussed, and therefore, such decisions should not be based solely on the information contained in this document. Please consult your own financial/legal/tax professional.

Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed are those of the author, and are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. Arca disclaims any obligation to update or revise any statements or views expressed herein. Past performance is not a guarantee of future results and there can be no assurance that any future results will be realized. Some or all of the information provided herein may be or be based on statements of opinion. In addition, certain information provided herein may be based on third-party sources, which is believed to be accurate, but has not been independently verified. Arca and/or certain of its affiliates and/or clients may now, or in the future, hold a financial interest in investments that are the same as or substantially similar to the investments discussed in this commentary. No claims are made as to the profitability of such financial interests, now, in the past or in the future and Arca and/or its clients may sell such financial interests at any time. The information provided herein is not intended to be, nor should it be construed as an offer to sell or a solicitation of any offer to buy any securities, or a solicitation to provide investment advisory services.