The factors attributed to the significant rise of nearly $1 billion in investments in blockchain gaming.

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version of Investment Surge
has caused renewed confidence among investors in the world of cryptocurrency.

The investment surge in the first quarter of 2024 has led to a positive sentiment among investors in the crypto market. Following the resolution of a significant legal case against the SEC, US investors now have access to Bitcoin ETFs. This has opened opportunities for large institutional investors to enter the world of Web3. As a result, there has been a rise in cash inflows to US-based ETFs, surpassing initial projections and triggering a bullish rally to the all-time high price of Bitcoin.

Although the overall market outlook is optimistic, investments in Web3 gaming have been cautious with only $288 million invested in the first quarter. However, in April, the industry experienced a significant boost with a record-breaking $988 million invested, the highest monthly investment since January 2021.

The reasons for this surge in investments in 2024 resemble those of early 2021. Three years ago, the GameFi industry was anticipating significant growth, thanks to new technologies like NFTs. From 2020 to 2021, the market capitalization of NFTs increased by 29 times, while the value locked in DeFi protocols reached an all-time high.

Similarly, the sharp rise in investments in April 2024 can be attributed to Ethereum’s implementation of the new technology of Account Abstraction and the growing popularity of Layer 3 blockchain solutions. The corporate activity in this space is also notable, with major players like a16z raising a $600 million gaming fund, Bitcraft Ventures investing $275 million in their third GameFi fund, and even gaming giant Ubisoft showing an interest in blockchain collaboration and joint ventures. All signs point to a strong headstart for Web3 gaming.

The industry’s strong fundamental user engagement metrics further support this trend. Daily unique active wallets for gaming decentralized applications (dApps) reached a record high of almost 3 million users in April. According to data by DappRadar, one in every three people using dApps in April did so primarily for gaming purposes, indicating a growing interest in fair gaming, play-to-earn, and play-to-airdrop business models. Furthermore, the number of active blockchain gamers grew by 83% in 2024, reaching 90.3 million users.

The growth drivers behind this trend are Account Abstraction and Layer-3 solutions. Investors and venture capitalists see these technologies as having a similar impact to NFTs and DeFi in revolutionizing the gaming industry. In 2021, blockchain gaming was searching for a unique value proposition to differentiate itself from traditional Web2 gaming. This led to the emergence of NFTs, offering users data sovereignty and ownership rights over digital assets, and DeFi, which allowed gamers to monetize native GameFi tokens.

However, in 2024, the issue is not a lack of novel technology or sustainable monetary rewards hindering the development of Web3 gaming. Users have already become accustomed to the play-to-earn model and the world of Web3. Ironically, the demand for new technology has now turned into frustration with its complexity. Investors are not betting on the technology or in-app economy layer, but rather see Account Abstraction and Layer-3 solutions as catalysts for superior user experience in GameFi.

On paper, Account Abstraction replaces non-custodial wallets with programmable smart contracts, allowing for greater flexibility for dApp developers. This also eliminates the need for seed phrases and introduces familiar options like email or Google accounts for creating decentralized accounts. It also enables in-game purchases without compromising security and introduces sponsored transactions to tackle the issue of high gas fees, a significant obstacle in dApps’ user experience.

Similarly, Layer-3 solutions for vertical scaling on Ethereum (also known as application-specific blockchains) can significantly reduce transaction execution time and gas fees, making it possible to achieve zero-gas functionality. Combined with Account Abstraction, Layer-3 solutions pave the way for a novel gaming experience in GameFi, one that is truly free-to-play, seamless, and indistinguishable from traditional Web2 gaming processes.

With these new technologies and substantial financial backing driving growth, it is only a matter of time before they become the next major wave of GameFi products. Blockchain gaming is poised to become the leader in user experience, thanks to these developments, and this surge in investments has renewed confidence among investors in the world of cryptocurrency.