The Tricky Nature of Engagement

Sanctor Capital
6 min readJan 9, 2024

The authors or their affiliates have ownership or other economic interests or intend to have interests in BTC, ETH, SOL, Axie Infinity NFTs, and may have ownership or other economic interests or intend to have interests in other organizations and/or crypto assets discussed as well as other crypto assets not referenced.

Happy New Year Everyone! Despite Matrixport doing its best Grinch imitation and predicting the rejection of Bitcoin ETF proposals, the industry entered 2024 in high spirits. The gaming sector in particular has been trying to leverage the sentiment to gear up for a big Q1-Q2 push.

However, while crypto twitter has been buzzing, and coin prices have rebounded to an extent, some of the underlying fundamentals have remained stagnant. This raises the question of how far this newfound enthusiasm will carry the gaming sector in web3.

Who is Playing?

If you look at DappRadar’s Games Dashboard you’ll see that gamer activity has been very muted, despite the recent price moves and releases from big names like BigTime, Shrapnel and Illuvium.


Volume numbers in Q4 barely matched the activity seen in Q1 of last year. The number of unique active wallets did show a spike, but the statistic has largely retraced back its gains. The numbers suggest, users came in for the mints, but did not stick around to play.

A few things to note. UAW does not equate to unique active users. Let’s assume a user has 3–5 wallets, not taking bots into account, we are looking at 500K-900K active users during last year’s peak.

Another thing of note, is that we are hardly seeing a changing of the guard when it comes to onchain activity. Despite all the negative remarks thrown their way over the years, BNB and Ronin remain top chains in terms of gaming volume.


The flip side of this, is that because many of the 2.5 games have limited web3 implementation, the vast majority of their users may not be interacting with a blockchain and so not showing up in UAW data, despite being active users.

Who is Curious?

Given how early stage a lot of web3 games are, a lot of the market activity can be sentiment driven. That can come from new user interest, or the anticipation of great things to come from existing users.

Google trends are a good indicator of new user interest, as it shows inbound curiosity. However, the key search terms such as web3games, play to earn and blockchain games have not shown much of a spike the past few months.


Moreover, even the broader, better known term NFT has shown a steady decline over the past few months. This is happening in spite of the headway brands like Pudgy Penguins have had penetrating the general consumer market.


The mainstream media is no help. Outside of GamesBeat, few if any have been willing to cover gaming topics involving web3, and when they do, it’s not positive. Look at the difference in NFT Now, GamesBeat and PC Gamer coverage of the Ready Player One metaverse.


The activity around web3 native launchers also appears rather muted. Looking at the traffic for the top launcher websites, HyperPlay, Elixir, KAP Games, and Fractal, we see that none of them hit 100K on traffic. This does not track launcher use, but is an indicator of new interest.


It appears that no one is really looking for web3 games. This is mirrored by the lack of activity for games that have launched on major platforms such as Steam and the Epic Games Store. If gamers are not looking for these games, it’s easy for them to get lost in the crowd.

Chasing Metrics

Still, when you scroll through crypto twitter feeds, you feel like there is a lot of excitement and a substantial increase in engagement and overall activity. This feels a bit artificial if not an outright orchestrated picture.

The gaming content creators resurfaced. The influencers started pushing content all of a sudden, as if someone flipped a switch. As bitcoin momentum started to pick up, gaming teams opened up their marketing budgets in anticipation of an upcoming window for token launches.

This was particularly apparent after an impressive token launch by BigTime. Gaming teams have had a tough time raising, and so some could be looking at spending their last money on marketing in the hopes of refilling their coffers through token sales.


Moreover, throughout 2023, questing platforms have been growing and refining their approaches. Suites offered by DeQuest and others, offer studios the ability to incentivize engagement, and a lot of that is focused on social media activity.

While play to earn as a term appears to have faded, users in web3 appear to still be acting in anticipation of a reward, especially with airdrop season kicking in. This is particularly dangerous when it spills over into testing, as retention metrics come in severely overinflated.

Reason For Optimism

Lackluster engagement coupled with twitter hype may paint a gloomy picture, but there are lots of reasons for optimism. First of all, the games are getting better. Yes, the builds are still rough, but we are seeing more polish, more content, and scalable approaches.

Mobile and browser games are finding a path. With Google and Apple opening up pathways, browser games making a comeback, and progressive web apps making waves, there are visible distribution paths for games appearing on the horizon.

Mobile and browser games are cheaper and faster to build, and have a lower ceiling in terms of top tier quality. Given the same budget it is easier to build a competitive product on mobile, even if the space can appear more saturated.

The infrastructure stack is improving. Fully onchain games are no longer a dream. This is the segment that can offer gamers endemic game mechanics and feature sets that will make web3 an indispensable part of the gaming stack.

AI is promising to reduce production costs and ease the pressure for studios to chase content demand. With lower production costs and widespread UGC tooling smaller studios will not be so overmatched by bigger production and can compete on concept and design more than budgets.

However, we need to exercise patience. The DeFi sector has spoiled us with 3–6 months iteration cycles. Gaming products require more time. Web3 has a place in the future of the gaming world, but we must take the time to allow the technology to fit into the right slot.

This wraps it up for this entry. As always, if you are working on something exciting in the web3 gaming space, or are a traditional gaming team looking to explore the possibilities, don’t hesitate to reach out to any of us at Sanctor Capital. Have a great rest of your week!

Ilya Abugov (@AbugovIlya)

Disclaimer: This commentary is not investment advice. It does not purport to include any recommendation as to any particular investment, transaction or investment strategy, or any recommendation to buy or sell any investment. It does not reflect any attempt to effect any transactions or render any investment advice.

This post is solely for informational and entertainment purposes. It is inherently limited and does not purport to be a complete discussion of the issues presented or the risks involved. Readers should seek their own independent legal, tax, accounting, and investment advice from professional advisors. The views reflected in this commentary are subject to change at any time without notice.



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