ABSTRACT

This report explores the emerging intersection of blockchain gaming and blockchain-based artificial intelligence (AI), examining how these technologies are reshaping the crypto ecosystem. Blockchain gaming, along with its heavy use of non-fungible tokens (NFTs), offers players true ownership of in-game assets, secure transactions, and novel play-to-earn models. Simultaneously, blockchain AI enhances gaming experiences by decentralizing decision-making and automating smart contract interactions, introducing innovative gameplay that features AI vs AI mechanics. The convergence of both AI and gaming on blockchain has the potential to transform not only gameplay experiences but also the underlying infrastructure of virtual economies. This report analyzes existing protocols in these sectors, technological trends, and the potential for future developments, highlighting the opportunities and challenges at the intersection between the two rapidly growing domains. It offers insights into how blockchain gaming and AI can bring a new paradigm for decentralized gaming experiences while pushing the boundaries of AI capabilities.

1. INTRODUCTION

The adoption of blockchain technology in games and AI networks demonstrates its practical applications beyond cryptocurrencies. The game Axie Infinity and the decentralized machine learning network Bittensor demonstrate blockchain technology's practical applications beyond cryptocurrencies. Game developers incorporate blockchain elements primarily for asset tokenization and incentive mechanisms. By converting in-game assets into non-fungible tokens (NFTs), games create verifiable digital ownership. Additionally, blockchain enables the implementation of financial incentives for specific player behaviors. Axie Infinity exemplified this approach during the "play-to-earn" (P2E) period in 2021, when games distributed tokens to players as rewards, establishing a model where gameplay could yield financial benefits.

Developers of AI networks leverage blockchain technology to decentralize model training and create markets for computational resources. Traditionally, developers train AI models using local devices and datasets, requiring significant computing power. Blockchain enables the distribution of this computational load across a decentralized network, where users rent processing power on-demand. This approach allows researchers to experiment in democratizing AI development, testing whether the process of building optimal models can be effectively decentralized and monetized while potentially improving outcomes through broader participation.

The increase in their respective market capitalization typically indicates growing interest in these technologies. As of November 2024, the blockchain gaming market has reached approximately $14.9 billion and the blockchain AI market has grown to $26.6 billion, highlighting the significant economic potential of these sectors. This is a year-on-year increase of 91.5% and 236% respectively, demonstrating the optimistic sentiment the market has towards these sectors.

As these two sectors continue to develop, we see a growing overlap between them, namely AI agents capable of acting autonomously in games. This overlap provides the opportunity for developers to enhance user experiences in games with onchain AI in games and vice versa. Although this intersection is still relatively small, it has considerable potential for a future where AI augments most gaming experiences and enables the evolution of new game-based economies.

This convergence of blockchain gaming and AI, along with their individual growth trajectories, creates a complex landscape that merits careful analysis. Our research into these evolving markets and their technological developments reveals several key insights:

Full onchain computation is not yet feasible, and technical architectures in blockchain gaming and AI protocols reflect different requirements around trust and verification. Gaming solutions primarily focus on asset ownership, making centralized off-chain game engines with onchain assets sufficient. AI protocols, where manipulation risks can be more serious, require stronger guarantees, leading to various approaches from verification proofs to distributed compute networks with onchain coordination.
Economic incentive mechanisms drive adoption across both sectors through tokenized ownership. Developers are creating both blockchain games and AI protocols with novel monetization mechanisms, where tokenized ownership provides financial incentives for developers and users.
Testing and development synergies emerge from the convergence of both technologies. Blockchain games provide a controlled environment for testing AI development with real user interactions, while simultaneously offering lower risk compared to critical applications. This creates a symbiotic relationship where gaming platforms serve as practical validation grounds for blockchain AI capabilities.

During the final phases of this report, AI chatbots and “agents” emerged as a strong narrative in crypto markets. While the report predates this emerging meta, we’ve added a brief discussion of the topic in Section 3.4.

In Section 2 of this report, we will examine projects working on i) blockchain gaming, ii) blockchain AI, and the iii) projects operating at their intersection. Within each sub-section, we will examine top protocols and key use cases. In Section 3, we will analyze emerging trends across these sectors. Finally, in Section 4, we will conclude.

2. THE COALESCENCE OF BLOCKCHAIN, GAMING AND AI

In this section, we examine key players within the ecosystem to identify and analyze predominant use cases across three primary verticals: AI on blockchain, gaming on blockchain, and the intersection of AI and blockchain gaming. Through this analysis, we aim to understand how different protocols approach the integration of these technologies and their relative success in market adoption and user engagement.

The protocol selection focuses on market capitalization rankings from CoinGecko, specifically examining the top ten projects in the space. However, we exclude certain high-capitalization protocols that demonstrate insufficient integration across their verticals. A For example, while Arkham uses AI as an extension of the product, it primarily functions as a blockchain analysis platform. Additionally, we incorporate several pre-token generation event (TGE) protocols that do not yet have market capitalization rankings but demonstrate innovative approaches or unique use cases that merit analysis. The Appendix contains a breakdown of our inclusion and exclusion criteria.

We found it challenging to evaluate user engagement, particularly when trying to obtain comparable data across protocols. While Daily Active Users (DAU) represent the ideal metric for assessing actual protocol usage and retail adoption, many protocols do not publicly disclose these figures. We expect this in an emerging sector. In the absence of DAU data, analyses therefore rely on various proxy metrics, including daily active addresses and unique wallet holders of protocol tokens or NFTs. Our measurements have limitations:

Active addresses may overcount users (if one user controls multiple addresses) or undercount them (if multiple users operate through a single address, such as via centralized exchanges or interactions that occur off-chain, such as in many games.)

Token/NFT holder counts represent potential users rather than active ones.

Developers of different protocols may apply different methodologies to calculate metrics, making it challenging to compare them directly.

Despite these limitations, we believe that these metrics, where available, allow us to shed some light on user adoption developments across this nascent ecosystem.

2.1 Gaming on Blockchain

Blockchain gaming represents an emerging sector within the digital entertainment industry, characterized by the integration of distributed ledger technology into traditional gaming frameworks. Blockchain technology transforms conventional gaming models by introducing verifiable digital asset ownership, player-driven economies, and decentralized governance mechanisms. Current implementations range from simple play-to-earn mechanisms to complex virtual worlds, with platforms experimenting with various approaches to balancing new use cases and engaging gameplay with blockchain functionality.

2.1.1 Key Ecosystem Players

Several projects and platforms lead the blockchain gaming sector, demonstrating distinct approaches to integrating blockchain technologies into gaming. Table 2.1 provides a comparative overview of these key players, focusing on their inception, core functionalities, use cases, and market capitalization. This table serves as the foundation for a deeper exploration of the prominent protocols shaping the ecosystem below.

Immutable X

Immutable X, established in 2018, operates as a Layer-2 scaling solution for NFTs on the Ethereum blockchain, with a specific focus on gaming applications. The protocol employs StarkWare's Zero-Knowledge Rollup technology to process transactions, enabling a theoretical throughput of up to 9,000 transactions per second while eliminating gas fees for NFT minting and trading operations. These technical specifications address two primary barriers in blockchain gaming: transaction costs and processing speed.

Based on Figure 2.1.0, Immutable X has maintained a relatively consistent active account base throughout most of 2024 with an average of 240,000 active accounts between May and October. During this period, Immutable launched a gaming rewards program that incentivized users to complete quests and interact with different games. The platform's core infrastructure includes developer tools such as APIs and SDKs, which simplify blockchain integration for game developers.

The protocol's security model relies on Ethereum's underlying blockchain, utilizing zero-knowledge proofs to verify transaction validity. This architecture allows Immutable X to maintain security while scaling transaction capacity beyond Ethereum's base layer capabilities. The platform's focus remains on enabling player-owned economies and digital asset ownership within gaming environments, providing infrastructure for developers to implement these features without managing direct blockchain interactions.

Floki

Floki originated in 2021 as a meme-inspired cryptocurrency project that has since expanded into blockchain gaming and metaverse development. The project operates Valhalla, a play-to-earn NFT gaming metaverse that utilizes the FLOKI token as its primary in-game currency. Floki currently maintains a market capitalization of $1,447,158,996, operating across multiple blockchain networks, including Ethereum and BNB Chain.

We did not find user activity metrics for Floki; however, a proxy of token holder data shows approximately 81,000 unique holders on Ethereum and 334,000 on BNB Chain. It is important to note that these figures represent total holders rather than active daily users, making actual engagement metrics difficult to verify. The project's gaming ecosystem focuses on reward mechanisms through in-game activities and NFT trading.

The project's development strategy has centered on expanding beyond its meme coin origins to establish utility through gaming applications. This transition represents an attempt to create sustainable use cases for the token beyond speculative trading. The Valhalla platform serves as the primary vehicle for this utility-focused approach, though its actual user engagement metrics remain unclear due to limited public data.

Gala Games

Founded in 2019, Gala Games operates as a blockchain gaming platform built on Ethereum and its proprietary Gala Network. The platform's infrastructure utilizes a node-operator model where users maintain network operations, supporting in-game economies and asset verification. The system enables player ownership of in-game assets through non-fungible tokens and incorporates a native GALA token for ecosystem transactions and governance mechanisms. The platform built its ecosystem on Ethereum but is now taking a step forward by developing GalaChain, its own Layer 1 blockchain. This shift will address Ethereum’s scalability and gas fee issues, allowing Gala to provide faster and more cost-effective transactions while maintaining its focus on user ownership and decentralization.

Platform user metrics show significant variance between reported figures and onchain data. While Gala Games reports over 3 million users within their Telegram ecosystem, onchain analysis through Dune Analytics indicates approximately 430,000 users. Off-chain activity may explain discrepancy not captured in blockchain data, though this cannot be independently verified. At the time of writing, Gala Games maintains a market capitalization of $916,240,603.

The platform's business model centers on play-to-earn mechanics and digital asset ownership, with a focus on developing games across various genres. Since its inception, Gala Games has also expanded its scope beyond gaming. The company has ventured into adjacent digital asset markets, launching Gala Music and Gala Film to offer NFT-based experiences in the music and film industries.

NotCoin

NotCoin, launched in 2023 on The Open Network (TON) blockchain, represents a minimalist approach to blockchain gaming through its idle game mechanics. The project's core functionality centers on a simple clicking mechanism where users tap a virtual coin to earn NotCoin tokens, supplemented by features such as auto-clickers and multipliers.

The project has established a significant presence on the Telegram messaging platform, leveraging the application's existing infrastructure for user acquisition. While the game does not actively report DAU, blockchain data from the TON explorer indicates approximately 2,800,000 token holders, though this figure differs substantially from other reported user metrics. As of the latest available data, NotCoin maintains a market capitalization of $908,525,172.

NotCoin's implementation focuses on reducing barriers to entry in blockchain gaming through simplified gameplay mechanics. The project utilizes basic token economic principles and social features to demonstrate fundamental blockchain concepts, positioning itself as an entry point for users new to blockchain technology and digital asset ownership.

Beam

Beam leverages a privacy-focused cryptocurrency project built on the Mimblewimble protocol, with an expanding presence in the blockchain gaming sector. First established in 2018, the protocol's fundamental architecture enables confidential and scalable transactions, which form the basis for its gaming-focused applications. At time of writing, Beam maintains a market capitalization of $851,500,000, while serving a concentrated user base of 300-400 daily active addresses throughout the majority of October 2024. User activity on Beam was highly concentrated between Oct 2023 to April 2024 during which saw spikes of user activity as high as 95,000 as seen in Figure 2.1.1.

The project's gaming ecosystem comprises multiple components, including the Sphere NFT marketplace, Beam Companion App, Beam Hub, Beam OS, and Beam SDK. These features provide infrastructure for both game developers and players, with a distinct focus on privacy preservation in gaming transactions and asset ownership. A notable aspect of Beam's approach is the optional nature of asset ownership, allowing players to opt out of item ownership entirely.

Beam's implementation in gaming represents an intersection between privacy technology and blockchain gaming infrastructure. The protocol leverages its core privacy features from the Mimblewimble foundation to facilitate confidential transactions within gaming environments while maintaining the scalability required for gaming applications. This architecture positions Beam as a specialized solution in the blockchain gaming sector, focusing on users who prioritize transaction privacy.

Axie Infinity

Axie Infinity pioneered the play-to-earn model in blockchain gaming in 2018 through its creature-collection gameplay centered around NFT-based characters called Axies. The platform operates through a dual-token economy: AXS serves governance functions, and SLP functions as an in-game reward currency.

The protocol currently averages approximately 10,000 daily active users, a dramatic decline from its peak of over 2,700,000 daily active users in late 2021. At the time of writing, Axie Infinity maintains a market capitalization of $737,901,349, down from a high of $9,700,000,000. The game's core mechanics revolve around breeding, collecting, and battling Axies, where all in-game assets exist as NFTs on the blockchain. This structure implements digital ownership principles within a gaming context and initially demonstrated significant traction, particularly in developing economies where it provided alternative income sources.

Despite its groundbreaking success, the project has faced significant challenges in maintaining a sustainable economy and adapting to market fluctuations. These challenges highlight the complex nature of balancing gameplay, economic incentives, and long-term sustainability in blockchain-based gaming ecosystems. The platform's trajectory from peak popularity to current usage levels provides important insights into the challenges of sustaining play-to-earn economies at scale, particularly regarding token value stability and user retention.

Sandbox

The Sandbox operates as a decentralized virtual world on the Ethereum blockchain, launching in 2019. The platform enables users to purchase virtual LAND parcels as NFTs, create gaming assets, and participate in user-generated gaming experiences. The Sandbox currently maintains a market capitalization of $649,268,115, with its native SAND token serving both transaction and governance functions.

Platform metrics indicate a growing average of 2,600 unique users in October 2024, up from a low of 80 in September 2024 described in Figure 2.1.2. The figure also shows new all-time highs for this metric, demonstrating a resurgence in activity, suggesting increased onchain wallet interactions. The platform generates revenue through virtual land sales, marketplace transactions, and partnership integrations.

The Sandbox's business model centers on three primary components: virtual real estate ownership, digital asset creation and trading, and interactive gaming experiences. The platform has established commercial partnerships with various brands and entertainment entities, including Time, Atari, Adidas, and MakerDAO, enhancing its visibility and appeal in the broader metaverse landscape.

SuperVerse

SuperVerse, an ecosystem focused on Web3 innovations, combines NFT marketplace technology and blockchain gaming to cater to both crypto enthusiasts and traditional users. Initially developed as SuperFarm in 2021, the platform evolved into SuperVerse, emphasizing broader applications for NFTs and immersive social gaming.

The SUPER token powers the ecosystem as the primary utility and governance asset within its decentralized framework. The token sits at a $647,200,000 market cap and there has been an average of 366 wallets transacting the token in October, down from highs of over 10,000 during the first months of launch seen in Figure 2.1.3. Hype drove the initial traction, and the Superverse’s activity has fallen off since.

SuperVerse includes key components such as GigaMart, an NFT marketplace designed with advanced analytics and social features, and Impostors, a blockchain-based social gaming metaverse. These products aim to attract Web2 gamers while enriching the NFT ecosystem with unique trading and interaction tools.The SuperVerse DAO empowers token holders to influence platform governance, including decisions about transaction fees, development priorities, and community rules.

Ronin

Founded in 2021 by Sky Mavis, Ronin functions as a purpose-built gaming blockchain designed as an Ethereum sidechain. The network employed a Proof-of-Authority consensus mechanism to process transactions, primarily serving as the underlying infrastructure for Axie Infinity and other blockchain games. This architectural choice enabled faster transaction processing and reduced fees compared to Ethereum's mainnet, addressing specific requirements of gaming applications. While Ronin initially used a PoA consensus, following the infamous $600 million hack in March 2022, Ronin transitioned to a Delegated Proof of Stake (DPoS) model in 2023. This shift allowed for greater decentralization, as token holders could now stake their RON tokens to elect validators.

The network maintains significant user engagement metrics, reporting approximately 970,000 daily active addresses in October 2024 seen in Figure 2.1.4. The project saw highs of 2,200,000 daily active addresses set in August of 2024, shadowing the 2021 peak associated with Axie Infinity's initial success. While Axie Infinity comprised a large proportion of Ronin‘s usage, the protocol has since expanded to service other use cases. The platform's token serves dual purposes as a gas fee mechanism and governance instrument and currently sits at $575,571,719 market cap.

Ronin's technical infrastructure includes EVM compatibility, enabling straightforward migration of Ethereum-based applications and smart contracts. This feature, combined with its specialized gaming focus, positions the network as a dedicated gaming ecosystem rather than a general-purpose blockchain. The platform's core value proposition centers on reducing friction in blockchain gaming operations through optimized transaction processing and cost structures.

Decentraland

Decentraland, initially developed in 2017 and launched publicly in 2020, operates as a virtual world platform built on the Ethereum blockchain. The platform implements a dual-token economic structure: MANA for in-world transactions and LAND tokens representing discrete parcels of virtual real estate. At time of writing, MANA maintains a market capitalization of $572,447,071, with 6,044 unique NFT holders in its ecosystem.

User engagement metrics indicate an average of 299 daily active users in October 2024. Activity spiked in January of 2022 and has since stabilized to less than one thousand daily active users seen in Figure 2.1.5. The platform's virtual environment enables users to purchase, develop, and monetize virtual land parcels, which exist as non-fungible tokens on the Ethereum blockchain. These parcels serve as the foundation for user-created experiences, including virtual events, art exhibitions, and social spaces.

The platform operates under a Decentralized Autonomous Organization (DAO) structure, enabling token holders to participate in governance decisions. This framework allows users to propose and vote on changes to the platform's policies, features, and technical parameters. Decentraland's infrastructure supports content creation and application development within its virtual space, though current usage metrics suggest adoption remains in the early stages relative to traditional virtual worlds.

Prime

Echelon Prime, launched in 2022, is a blockchain-based gaming ecosystem centers on PRIME, an ERC-20 token. Distinct from traditional gaming platforms, Echelon Prime operates as a non-profit foundation dedicated to creating a decentralized, community-led environment for game development and play-to-earn (P2E) mechanics. The platform provides developers with web3 tools and infrastructure to create games within the Echelon ecosystem, emphasizing community governance and progressive decentralization. At the time of writing, PRIME maintains a market capitalization of $406,085,409.

The first game to integrate the PRIME token is Parallel TCG, a sci-fi trading card game, marking a significant step in the project's ambition to create player-owned economies. Players also stake PRIME, participate in token sinks (mechanisms to reduce supply), and earn rewards through in-game activities. The Echelon Prime Foundation's governance structure aims to progressively decentralize decision-making as the ecosystem grows, with the community playing a critical role.

The platform employs a hybrid operational model, where core gameplay mechanics function off-chain while asset ownership and the blockchain records financial transactions. Figure 2.1.6 represents onchain activity metrics which indicate approximately 200 daily active addresses performing transactions throughout October 2024, though this figure explicitly represents onchain interactions and excludes off-chain gameplay activity. The average user count has been trending up since 2022 with an all-time high count of 1,021 addresses in June 2024.

StepN

Founded in 2021, STEPN operates as a move-to-earn application combining elements of fitness tracking with blockchain-based gaming mechanics. The platform requires users to purchase NFT sneakers to participate, after which they can earn cryptocurrency rewards (GMT and GST tokens) through outdoor physical activities such as walking, jogging, or running. At time of writing, STEPN’s MGT token maintains a market capitalization of $390,057,202.

The platform employs a proprietary anti-cheating system called SMAC-7, which analyzes GPS data, motion sensors, and health data to validate user activity. This system assigns users a Turing Score that determines their ability to withdraw earnings and interact with the marketplace. The implementation of this verification mechanism reflects the platform's attempts to maintain system integrity while operating in a mobile-first environment.

STEPN's economic model has faced significant structural challenges since launch. User growth drove supply above demand, substantially devaluing the platform's utility token, GST. This economic pressure manifested in declining token prices from peaks above $2, affecting both user rewards and platform sustainability. The platform struggles to balance the cost structure for NFT sneaker minting and maintenance against user acquisition and retention metrics. While there were no official stats on DAU, a Dune dashboard reported approximately 2 daily active users.

Illuvium

Illuvium, established in 2020, is an open-world RPG adventure game that operates on the Ethereum blockchain through Immutable X's scaling solution. The game distinguishes itself through its high-quality 3D graphics and a unique blend of conventional gaming elements with decentralized finance and NFTs. Illuvium's core gameplay revolves around players exploring alien worlds, capturing creatures called Illuvials as NFTs, and engaging in auto-battler-style combat.

The project currently maintains a market capitalization of $262,635,146 at the time of writing, with observable onchain daily active addresses averaging 361 daily active addresses depicted in Figure 2.1.7. Activity peaked in September 2021 when approximately 3,500 users transacted Illuvium that day. While core gameplay occurs off-chain, limiting comprehensive user metrics, the onchain components primarily facilitate asset ownership and trading functions. The platform utilizes ILV as its governance token, enabling holder participation in protocol decisions.

Illuvium's technical infrastructure leverages Immutable X for NFT minting and trading, inheriting the layer-2 solution's zero-gas-fee capabilities and transaction processing advantages. This architecture allows the project to maintain traditional gaming performance standards while incorporating blockchain elements for digital asset ownership. The game's development focuses on delivering high-fidelity 3D graphics and complex gameplay mechanics, positioning itself at the intersection of traditional gaming and blockchain technology.

Gods Unchained

Gods Unchained, launched in 2018, is a competitive trading card game (TCG) built on the Ethereum blockchain. The game combines traditional TCG mechanics with blockchain technology, enabling players to have true ownership of their digital cards as non-fungible tokens. This approach allows players to collect, trade, and sell their cards on various marketplaces, creating a player-owned economy within the game ecosystem.

As seen in Figure 2.1.8, the platform currently maintains approximately 4,000 daily active users, with a notable downward trend in both the number of unique players and number of matches played since it peaked in February of this year. Market capitalization for its native $GODS token currently sits at $61,286,318. The game's economic model incorporates both traditional gameplay elements and blockchain-enabled features, including card trading and tournament participation mechanisms.

The platform's core technical infrastructure leverages Ethereum's blockchain for asset ownership verification while maintaining conventional gaming elements such as deck building and strategic gameplay. Players acquire assets through both traditional gameplay progression and market transactions allowing players to trade their cards across supported NFT marketplaces. The game demonstrates a practical implementation of blockchain technology within an established gaming genre, focusing on digital asset ownership and player-controlled economies.

Star Atlas

Star Atlas, founded in 2021, is an ambitious blockchain-based space exploration game built on the Solana blockchain. The project combines elements of grand strategy, space exploration, and massively multiplayer online (MMO) gameplay within a vast virtual universe. The game's economic structure operates through a dual-token system: ATLAS for in-game transactions and POLIS for governance mechanisms.

At time of writing, Star Atlas maintains a market capitalization of approximately $80,000,000 across both tokens with the ATLAS token held by around 140,000 wallet addresses. The project's scope encompasses space exploration, resource management, and territorial control systems, with all in-game assets existing as NFTs on the Solana blockchain.

While the project has published extensive documentation and development roadmaps, the core gaming experience remains under development. Active user engagement metrics lack public verification, making it difficult to assess pre-alpha player participation levels. The project represents one of the more technically ambitious attempts to merge traditional MMO gaming mechanics with blockchain technology.

In conclusion, the blockchain gaming ecosystem has evolved into a diverse landscape, with protocols addressing various gaming aspects. Player ownership emerges as the fundamental thread connecting these platforms, with tokens and NFTs representing in-game assets and governance tokens enabling platform decision-making. Despite considerable investment and development efforts, the sector has yet to produce a sustainable flagship application. Based on the insights about key players gained, we next discuss the main identified use cases for blockchain gaming.

2.1.2 Use Cases for Blockchain Gaming

The main use cases for blockchain games are i) digital ownership and player identity management, and ii) incentive mechanisms. To understand both is important to distinguish between on and offchain elements of blockchain games. Games operate both on and offchain, resulting in different technical challenges, cost considerations, and trade-offs. For example, while storing in-game assets onchain enables true digital ownership and interoperability, it also introduces transaction costs and potential scalability constraints. Similarly, onchain player profiles can enable persistent cross-game identities but must balance data privacy with transparency.

Use case 1: Digital Asset Ownership and Player Profiles

Many key players in the blockchain gaming space implement hybrid models, where blockchain is exclusively used for asset and player identity management. Developers host core game operations offchain to address throughput limitations. For example, Axie Infinity and Gods Unchained rely on centrally hosted game servers for performance but use blockchain to manage digital ownership and player profiles. This approach combines the benefits of blockchain, such as secure digital ownership and decentralized identity verification, with the performance of traditional server hosting.

Digital asset ownership is a primary application of blockchain in gaming, encompassing both fungible and non-fungible tokens. In traditional gaming, centralized systems constrain asset monetization through controlled trading and exchange mechanisms. For instance, in Magic: The Gathering: Arena, players cannot resell or trade purchased cards. Web2 games like Counter-Strike 2 have made strides with pseudo-market systems, such as the Steam Community Market, where players trade items in a closed ecosystem. While there are third party marketplaces that allow users to trade in an open economy, these systems remain under centralized control, allowing developers like Valve to unilaterally freeze accounts and assets—a risk evidenced by cases of Steam inventory bans involving accounts worth millions.

Web3 games mitigate this risk by enabling true digital ownership. Players control their assets on the blockchain, granting them the freedom to trade or monetize without centralized interference. This ownership model promotes vibrant peer-to-peer economies and allows players to financialize their gaming experiences.

Player profiles, while typically non-monetary, hold value for both players and third parties. These profiles include measurable elements, such as owned NFTs and tokens, as well as intangible metrics like reputation and skill levels. For example, a Fortnite player's high ranking and achievements currently cannot be transferred outside the game.

Interoperable profiles can significantly improve user experience by carrying data like preferred control settings or audio preferences across games within an ecosystem. In Web3 games, developers could represent profiles as soul-bound tokens, offering functions such as tracking player activity or serving as marketing tools for game advertisers. This innovation may enhance player engagement while reducing friction in trying new titles.

Use case 2: Improved Incentive Structure

Several blockchain gaming platforms discussed above enable refined incentive structures through transparent, programmable fee mechanisms. When players own digital assets, this typically leads to increased peer-to-peer trading, which developers can monetize through transaction fees. This creates a direct financial incentive for developers to build features that encourage onchain transactions.

This approach builds upon successful monetization strategies from traditional gaming, where games like Valorant and Call of Duty: Warzone use battle passes and seasonal content to drive long-term engagement. However, centralized platforms like the App Store constrain traditional Web2 gaming which usually take non-negotiable percentages from in-app purchases, impacting developer earnings.

Web3 platforms offer an alternative through smart contracts. For example, Parallel cards on the Ethereum blockchain exist as NFTs, where card owners can choose what royalties they pay to game developers. This shifts fee determination from platforms to users, fundamentally changing platform-developer dynamics.

While this variable royalty system could create a more meritocratic ecosystem where the best games thrive based on player support, it also presents challenges. Unpredictable user-determined royalties make revenue planning difficult, and there's a risk of a "race to the bottom" if games compete by offering increasingly lower royalties to attract players. The challenge of "race to the bottom" in user-determined royalties presents a significant threat to sustainable game development. Potential mitigations include:

Governance Standards: Establishing community-driven minimum royalty rates through decentralized governance frameworks can ensure fair compensation for developers while maintaining player freedom.

Dynamic Incentive Models: Developers could tie royalty rates to benefits, such as exclusive in-game content or enhanced functionality, to encourage voluntary compliance without mandates.

Transparent Benchmarking: Platforms could publish data on successful games with varying royalty rates, demonstrating how fair royalties correlate with robust economies and long-term engagement.

These strategies offer a path to balance developer incentives with the decentralized ethos of Web3, fostering a more equitable and sustainable ecosystem.

While blockchain technology's integration into gaming presents both opportunities and challenges, the two primary use cases discussed above – digital asset ownership and improved incentive structures – demonstrate the potential for product market fit of blockchain technology in the gaming industry. The ability to truly own and freely trade digital assets, combined with interoperable player profiles, offers gamers more control and value retention compared to traditional gaming platforms. Meanwhile, the flexible fee structures enabled by smart contracts could reshape the developer-platform-player relationship, though this comes with its own set of challenges in terms of revenue predictability. As the technology matures, these use cases may serve as foundational elements for a more player-centric gaming ecosystem, even if the core gaming operations currently remain centralized due to technical limitations.

2.2 AI on Blockchain

Artificial intelligence's integration with blockchain technology represents a major technological convergence, introducing new advancements in decentralized computation and automated decision-making. This vertical encompasses various applications and use cases, from AI-powered agents to decentralized machine learning networks, each attempting to leverage blockchain's transparency and immutability alongside AI's computational capabilities. While centralized entities with proprietary datasets dominate AI development, blockchain-based AI initiatives aim to democratize access to both AI tools and the data that powers them.

2.2.1 Key Ecosystem Players

Table 2.2 presents an overview of the leading decentralized AI protocols and infrastructure providers, ranked by market capitalization as of October 15th, 2024. The ecosystem shows a clear focus on distributed compute and AI infrastructure, with the highest valuations concentrated in foundational computing layers and AI ecosystems. Notable is the emergence of several protocols in 2023-2024, indicating a nascent but rapidly evolving sector. Many projects focus on distributed compute infrastructure, with specialized use cases emerging in AI training, GPU rendering, and data privacy. Below, we provide short portraits of each key player, examining their technical architectures, computational frameworks, market positioning, and current development status.

TAO

Tao, established in 2019, operates as a decentralized network designed to facilitate the development and deployment of artificial intelligence models. The network implements a tokenized incentive structure where contributors receive TAO tokens for providing and maintaining AI models and the blockchain manages transactions and model quality verification. At the time of writing, the network maintains a market capitalization of $4,555,715,463, with approximately 114,000 registered accounts.

The network's core architecture delegates AI model operation to specialized nodes, enabling developers to access AI capabilities without direct model deployment. This system aims to address technical barriers in blockchain AI integration through a distributed approach, where computational resources are shared across the network rather than centralized with traditional cloud providers.

The platform utilizes a consensus mechanism for evaluating AI model performance and distributing rewards. While this approach potentially enables more democratic access to AI development resources, the network's effectiveness in achieving consistent model quality and sustainable resource distribution requires demonstration through longer-term operational data. The current infrastructure primarily serves developers and node operators, with specific application cases still emerging.

Internet Computer

The Internet Computer (ICP), launched by the Dfinity Foundation in 2021, operates as a blockchain-based distributed computing platform. The network's primary function is to enable the deployment of software and smart contracts directly on a decentralized infrastructure, utilizing specialized containers called "canisters" for application execution. Currently, the protocol boasts a market capitalization of $3,928,399,940, with approximately 26,000 active stakers participating in network operations.

The platform's technical infrastructure differs from traditional blockchain networks through its focus on general-purpose computation rather than solely transaction processing. ICP implements a network of decentralized data centers that host and execute applications, aiming to provide alternatives to centralized cloud computing services. The system processes transactions and executes smart contracts through its proprietary consensus mechanism, which maintains web-speed performance.

While the platform promotes capabilities for hosting web services and decentralized applications, actual adoption metrics and performance data in production environments remain limited. The network governance operates through the ICP token, which facilitates both computational resource allocation and participation in protocol decisions.

ASI

The Artificial Superintelligence Alliance (ASI) crypto merger, initiated in 2024, represents a technical integration between three established blockchain platforms: SingularityNET, Fetch.ai, and Ocean Protocol. The merger combines SingularityNET's AI marketplace infrastructure, Fetch.ai's autonomous agent framework, and Ocean Protocol's data-sharing protocols into a unified ecosystem under the unified ASI token. The combined market capitalization presently stands at $3,932,840,938, with daily active addresses distributed across the platforms in October: approximately 1,000 on Fetch.ai, 160 on SingularityNET (AGIX), and 115 on Ocean Protocol, as shown in Figure 2.2.0. All 3 projects saw increased activity through 2024 with concentrated spikes when the migration of tokens was announced. FET currently serves as the ticker for ASI while other tokens complete their migration.

The technical architecture integrates three distinct blockchain infrastructures: a marketplace for AI services, an autonomous agent network, and a decentralized data exchange protocol. This integration aims to enable cross-platform functionality where AI models can access distributed data sets while being executed by autonomous agents. However, the complexity of maintaining interoperability between three separate blockchain protocols may present ongoing technical challenges.

The platform's current operational metrics indicate modest user adoption across its component networks, with a combined daily active user base of approximately 14,000 across all three protocols. While the merger aims to create synergies between AI services, autonomous agents, and data sharing, practical implementation of cross-platform functionalities and widespread adoption of these integrated services remains in development.

Render

Render Network, launched in 2017, operates as a decentralized GPU computing platform that facilitates both AI processing and digital content rendering. The network enables access to distributed GPU resources through a blockchain-based marketplace and facilitates tasks ranging from 3D animation rendering to AI model training. At the time of writing, the Render platform maintains a market capitalization of $2,230,318,745. It reports daily active usage of approximately 415 daily active addresses transacting the token in October, down from an average of 1,400 between January and September, as seen in Figure 2.2.1.

The platform's infrastructure connects GPU providers with end users through a tokenized system using RNDR as the medium of exchange. This model allows content creators and AI developers to access computational resources without investing in expensive hardware setups, while GPU owners can monetize unused processing capacity. The network particularly targets use cases in gaming, visual effects, and AI computation, where traditional centralized solutions present cost or scaling challenges.

The network leverages smart contracts to manage resource allocation and compensation, establishing a foundation for decentralized computing services. As the platform continues to develop, its blockchain-based architecture provides potential advantages in terms of resource accessibility and cost efficiency compared to traditional computing solutions, particularly for specialized GPU-intensive applications in both content creation and AI development.

Akash

Akash, established in 2018, operates as a decentralized cloud computing marketplace that enables the trading of computational resources between providers and users. The platform facilitates deployment of cloud applications through a blockchain-based infrastructure, positioning itself as an alternative to centralized cloud providers. Akash Network currently commands a $630,760,415 market capitalization, with daily lease activity ranges below 500 for most of the project's lifespan. However, activity has been trending up and broke 600 daily new leases in October as described in Figure 2.2.2.

The network's architecture implements a provider-tenant model where data centers and computing resource owners can offer unused capacity to the marketplace. Users conduct transactions using the native AKT token, which serves multiple functions, including payment settlement, network governance, and staking operations. The platform utilizes blockchain technology to manage resource allocation and payment verification.

The platform's model aims to optimize cloud computing costs through market-driven pricing mechanisms. With 65 active providers, the network demonstrates early-stage market development in the decentralized cloud computing sector. The platform's growth potential depends on expanding market participation and provider network development.

AIOZ Network

AIOZ Network operates as a decentralized content delivery network (CDN) utilizing blockchain technology for media content distribution. The layer one founded in 2018, utilizes a node-based infrastructure where participants contribute bandwidth and computing resources in exchange for AIOZ tokens, creating a distributed alternative to traditional centralized CDN services. At the time of writing, AIOZ achieved a market capitalization of $580,831,249, with Figure 2.2.3 depicting 200 daily active addresses in October, down from initial spikes in activity as high as 4,800.

The platform's architecture implements a token-based incentive model where node operators receive AIOZ tokens for contributing computing resources. This system aims to create a more cost-efficient alternative to traditional CDN services by distributing content delivery tasks across the network. The decentralized structure potentially offers advantages in reducing server load and improving streaming performance, particularly in regions with limited infrastructure.

AIOZ Network's technology supports various media applications, including streaming services and video-on-demand platforms. While the network demonstrates potential in reducing intermediary costs and enabling direct creator-viewer relationships, adoption metrics suggest the platform remains in the early stages of market penetration.

Golem

Golem, launched in 2016, operates as a decentralized computing network that enables peer-to-peer sharing of computational resources. The platform allows users to rent out unused computing power for tasks including rendering, machine learning, and scientific calculations. Currently, the network holds a market capitalization of $336,635,579 and recorded approximately 436 daily active service providers.

The network's architecture facilitates direct transactions between resource providers and requesters through its native GLM token, bypassing traditional cloud service intermediaries. Resource providers earn GLM tokens by making their hardware available, while users purchase computational power using the same token system. This creates a marketplace where computing resources trade directly between participants.

While Golem's infrastructure establishes a marketplace for peer-to-peer computational resources, its current network metrics indicate potential for added participation. The platform continues to develop its position alongside established providers, working to enhance service accessibility and consistent resource availability. The network maintains 436 daily active service providers, demonstrating ongoing operational capacity while highlighting opportunities for expanded market presence.

Nosana

Nosana, founded in 2021, is a platform that repurposes blockchain technology for continuous integration and delivery (CI/CD) operations. Current metrics indicate moderate operational activity, with an average of 1,680 daily inferences recorded in October, referenced in Figure 2.2.4. Activity peaked in June with 130,000 jobs processed and has returned below 100,000 since. The platform's market capitalization stands at $148,760,795 at the time of writing.

Nosana's infrastructure leverages a tokenized economy through its NOS cryptocurrency to create a marketplace for computing resources. The system enables developers to execute testing and deployment pipelines through a distributed network of nodes, providing an alternative to traditional centralized CI/CD services. Resource providers earn NOS tokens for contributing computational power, while developers can access these resources to run their automation workflows.

The platform automates software testing and deployment processes using blockchain-based coordination, with smart contracts managing resource allocation and compensation. This architecture supports parallel processing capabilities across multiple nodes, allowing developers to scale their CI/CD operations based on demand. The system integrates with existing development tools while maintaining the core benefits of decentralization: reduced single points of failure and market-driven resource pricing.

Grass Protocol

Launched in 2023, Grass Protocol represents an early-stage blockchain initiative targeting the data marketplace sector. The protocol, which has not launched its token at time of writing, positions itself as an intermediary layer between data providers and consumers, with a particular focus on privacy-preserving computation and controlled data access.

Initial development focuses on creating infrastructure for consensual data sharing and verification. The protocol claims approximately 2 million total users, according to self-reported figures, though independent verification could not be completed. This early-stage user base reportedly consists of individuals who have registered to share or monetize their personal data through the platform's permission-based system.

The technical architecture implements novel blockchain-based access controls and verification mechanisms aimed at enabling privacy-compliant data transactions. At the time of writing, Grass is a pre-launch project, the protocol's ability to deliver on its proposed features and maintain sustainable operations in a competitive data marketplace environment has yet to be demonstrated through real-world implementation.

0G.AI

0G.AI Protocol is a decentralized infrastructure platform that aims to democratize access to artificial intelligence by providing a transparent, open-source environment for AI model development and deployment. The layer one allows users and developers to contribute computational resources and AI models, which are verified and rewarded through a tokenized ecosystem. The 0G.AI protocol is currently in the pre-launch phase, with its token generation event pending. The project's testnet, "Newton," deployed in April 2024, represents its first public technical implementation. Early testing indicates data throughput capabilities of 50 GB per second, though these metrics await independent verification in production environments.

The protocol's technical framework comprises four core components: 0G Storage, 0G Data Availability (DA), 0G Serving, and 0G Chain. This architecture implements novel consensus mechanisms, including Proof of Random Access (PoRA) and Verifiable Random Functions (VRF), specifically designed for AI workload optimization. While these mechanisms show theoretical promise for addressing scalability challenges, their effectiveness in real-world scenarios remains to be demonstrated.

As an early-stage project initiated in 2024, 0G.AI positions itself within the increasingly crowded blockchain AI infrastructure sector. The protocol's mainnet launch was scheduled for Q3 2024, but has since been delayed. Current development focuses on establishing fundamental infrastructure for decentralized AI computation, though measurable adoption metrics are not yet available due to the project's pre-launch status.

Sentient AI

Sentient AI is developing a decentralized artificial intelligence platform focused on collective machine learning, creating AI models that can learn and improve continuously without relying on centralized infrastructure. Sentient AI is a pre-launch initiative in the blockchain AI space. Founded in 2024, the project has not yet conducted its token generation event, placing it in early development phases alongside numerous competing protocols.

The protocol proposes a distributed machine learning framework designed to facilitate collaborative AI model training and deployment. The network compensates contributors with native tokens to provide computational resources or data to fuel AI training processes, incentivizing high-quality input and broad participation. This approach seeks to democratize AI, giving individuals and organizations access to sophisticated machine-learning tools without the need for significant upfront investment.

Sentient AI is developing core infrastructure components for decentralized machine learning computation. The protocol's development roadmap focuses on implementing its proprietary fingerprinting technology for machine learning provenance and establishing the fundamental architecture for distributed AI training. Given the project's pre-launch status, adoption metrics, and operational data are not yet available.

Gensyn AI

Gensyn AI, founded in 2020, has developed a protocol that aims to decentralize machine learning computation through a marketplace model. The platform's primary innovation lies in its verification mechanism, which enables blockchain-based validation of off-chain AI computations - a technical approach intended to ensure computation integrity without centralized oversight. The project remains in pre token generation event phase, with no public market valuation established.

The system's architecture facilitates connections between compute providers and AI developers, employing a token-based incentive model to compensate participants who contribute computational resources. This distributed approach represents an attempt to challenge the current state where major cloud service providers predominantly control machine learning infrastructure.

Unlike traditional cloud services that operate on fixed pricing models, Gensyn's marketplace design aims to allow dynamic pricing models that fluctuate with computational resource supply and demand. However, as a pre-TGE project, the platform has yet to demonstrate sustained network effects or significant market adoption. The absence of public usage metrics and the early stage of development make it premature to assess the system's effectiveness in democratizing AI computation access.

The diverse set of protocols outlined in Section 2.2.1 illustrates the innovative approaches taken by blockchain AI projects address challenges in computation, data management, and decentralization. These key players form the foundation for real-world applications that push the boundaries of both AI and blockchain technology. In the following section, we analyze the primary use cases enabled by these protocols, showcasing how distributed computation, open-source AI deployment, and data provenance solutions are transforming traditional paradigms. By linking technical infrastructure with practical outcomes, we highlight how these platforms unlock new opportunities across industries while navigating inherent limitations.

2.2.2 Use Cases for Blockchain AI

Based on the insights from portraying the key players above, we identify three main use cases for onchain AI deployment: i) deploying open-source AI agents onchain, ii) distributing computational resources for data processing, and iii) strengthening data provenance.

Use Case 1: Deploying Open-Sourced Onchain AI Agents

Organizations typically maintain traditional centralized AI models as closed-source assets for monetization. In contrast, open-source models, while enhancing innovation and transparency, face challenges in revenue generation for developers. Blockchain-based infrastructure provides a pathway for open-source AI models to be monetized while remaining accessible.

For example, Sentient’s Open, Monetizable, and Loyal (OML) framework is one such approach that will serve to describe the use case’s potential in more detail. OML enables contributors to maintain ownership over their models and participate in revenue generation. The protocol uses a technique called model fingerprinting to verify usage and ownership, crucial for effective monetization.

Model fingerprinting embeds unique identifying markers, or "fingerprints," within machine learning models through distinct output patterns and parameter settings. These markers allow verification of model origin even in cases of forks or modifications, preserving the model’s core functionality while serving as ownership identifiers.

To ensure fair use, OML employs a decentralized network of watcher nodes that monitor model deployment and usage. These nodes perform periodic checks on models that developers deploy on Sentient, confirming if queries are registered with the Sentient Protocol. When nodes detect unregistered queries, they trigger fraud procedures, which may lead to the platform removing the offending models.

Although Sentient hosts AI models centrally, this architecture uses a decentralized network to deter malicious actors from forking and redeploying models illegitimately. This hybrid framework enables monetization for open-source AI models while maintaining control over deployment.

Use case 2: Distributing Computational Resources for Data Processing

This use case centers on distributing computational resources to support data processing and AI model training. Traditionally, only entities with significant infrastructure and vast datasets could conduct AI training. Decentralized protocols, however, such as Render and Nosana, as portrayed above, address these limitations by leveraging distributed computation networks.

Centralized infrastructure faces unique scaling constraints. As Gensyn AI’s co-founder Ben Fielding noted in a Delphi Digital interview, a key limitation is not funding but rather geographical availability for data centers. He highlights that limited physical locations for data centers restrict scaling potential, suggesting that only a distributed, cross-company network could achieve optimal scale.

Distributed computation networks offer distinct advantages over centralized setups. Decentralized systems not only repurpose idle computing power but also address scalability issues that centralized providers struggle with, as highlighted by Ben Fielding. By allowing anyone to contribute to or use AI services in a competitive, permissionless marketplace, blockchain-based AI improves the overall efficiency of data processing.

Grass Protocol exemplifies this model by using a token-based compensation system for computing contributions centralizing processed data for use by organizations. This approach enables new companies to quickly scale computing power, offering services that could rival large centralized organizations by using a blockchain-powered, distributed AI infrastructure.

Use case 3: Strengthening Data Provenance with Tamper-Resistant Record

Traditional AI models typically lack transparent documentation of training data sources, creating potential issues with data verification and bias. For instance, ChatGPT users have no direct visibility into the nature or sources of data used in the model's training process, potentially leading to biased or unreliable outputs in specific domains.

Blockchain technology addresses this challenge by enabling onchain recording of training datasets. This approach creates an immutable record that enables third-party verification and attestation of data sources. Through this mechanism, AI service providers can prove the provenance of their training data to independent verifiers, who then attest to the authenticity of the model's responses. This creates a chain of trust from the data source to the end user.

Verifiable data provenance may become particularly important in preventing the spread of deepfakes. With the rising concern over AI-generated fake content, blockchain-based records allow third-party attesters to verify whether AI models utilize unauthorized images or videos in their training data. This capability helps identify potential misuse of personal content and creates accountability in AI development. Through this mechanism, blockchain technology not only enhances the trustworthiness of AI systems but also helps protect users from fraudulent AI-generated content.

The integration of blockchain technology with artificial intelligence represents a new approach to developing, deploying, and verifying AI systems. While traditional AI development has largely followed a centralized model favoring established players with significant resources, blockchain infrastructure introduces mechanisms for democratizing various aspects of the AI ecosystem. This architectural change enables new market dynamics surrounding resource contribution, model development, and distributed data verification. However, the successful implementation of these systems faces significant technical and coordination challenges. Balancing decentralization with performance, managing complex tokenomics, and establishing effective verification mechanisms remain crucial issues that need to be addressed.

2.3 AI x Gaming on Blockchain

The convergence of artificial intelligence, blockchain technology, and gaming represents one of the more complex technological intersections in the digital economy. This tripartite combination seeks to enhance gaming experiences through AI-driven interactions while leveraging blockchain for asset ownership and economic models. The sector encompasses various approaches, from AI-enhanced NPCs with blockchain-verified behaviors to machine learning systems that adapt game economies based on decentralized data. However, the practical implementation of these three technologies faces significant challenges, including computational overhead, economic sustainability, and user experience complexity. The successful integration of these elements requires careful consideration of technical limitations, economic design, and player engagement mechanics.

2.3.1 Key Ecosystem Players

Table 2.3 presents an overview of projects at the intersection of AI and blockchain gaming as of October 15th, 2024.1 This nascent sector shows considerably lower market capitalizations compared to standalone gaming or AI protocols, with most projects emerging between 2021-2023. The ecosystem is primarily segmented into three categories: decentralized computing infrastructure, AI agent development, and AI-powered game development tools. Below, we provide short portraits of each key player, noting that due to the emerging nature of this sector, many projects are still in development phases with limited operational metrics available.

Parallel

As we covered in the gaming section, Parallel is a blockchain-based ecosystem that combines immersive gaming experiences with AI-enhanced gameplay and decentralized finance elements. Parallel embeds AI components into various aspects of gameplay, primarily supporting interactive and adaptive game dynamics that provide players with a more responsive and personalized experience. This foundation has expanded through the development of Wayfinder, an omni-chain tool that enables autonomous AI agents to navigate and execute transactions across multiple blockchain networks.

The ecosystem's development of Wayfinder represents a strategic expansion from gaming-specific applications toward broader blockchain infrastructure, with the protocol enabling AI agents to execute complex operations across different blockchain environments. This architecture demonstrates practical applications in gaming contexts, particularly for resource management and asset trading, while maintaining the potential for broader crypto-economic use cases.

GamerHash

GamerHash operates as a distributed computing network, launched in 2017, that monetizes idle gaming hardware through cryptocurrency mining. The platform's core function converts unused GPU and CPU capacity into mining output, delivering compensation through their native GHX token. Current network metrics indicate approximately 800 daily active devices, with a market capitalization of $50,720,000.

The system's technical architecture differs from traditional distributed computing networks by specifically targeting consumer gaming hardware rather than dedicated mining equipment. This design choice reflects a strategic focus on accessibility, though it potentially results in lower hash rates compared to specialized mining operations. The platform includes a marketplace for digital goods and gaming items, attempting to create a native economy for earned tokens.

The platform demonstrates an established operational history, maintaining consistent service since 2017 with a clear focus on gaming hardware utilization. Network participation is recorded at 3,688 total connected devices. This specialized approach to distributed computing continues to provide an alternative revenue stream for gaming hardware owners. The platform's marketplace integration offers practical utility for earned tokens, distinguishing it from traditional mining pools.

GameSwift

GameSwift emerged in 2022 as a specialized blockchain gaming infrastructure provider, evolving from its origins within the Polygon ecosystem to establish an independent layer-2 solution. The platform reports a user base of approximately 101,000 active users, though onchain data from Dune Analytics indicates a more conservative figure of 23,000 token holders. At present, the platform maintains a market capitalization of $20,952,520.

The technical framework centers on developer-focused infrastructure, providing standardized tools for Web3 game integration. Core components include proprietary identity management systems (GameSwift ID) and specialized digital asset handling through GameSwift Wallet. This infrastructure layer aims to abstract blockchain complexity from both development and user interaction workflows, facilitating easier onboarding for traditional game developers.

The platform leverages the $GSWIFT token as its primary utility mechanism and incorporates it into governance, staking, and transaction systems. By positioning itself as a middleware solution between traditional game development and blockchain infrastructure, GameSwift exemplifies the ongoing evolution of Web3 gaming platforms toward more developer-centric service models. The disparity between reported users and onchain holders suggests varying levels of platform engagement across different user segments.

Gaimin

Gaimin, established in 2017, represents another entrant in the gaming-focused distributed computing sector. The platform aggregates idle GPU resources from gaming computers to service computational demands across AI, rendering, and blockchain applications. With a market capitalization of $8,000,000 at the time of writing, the network reports approximately 13,234 daily active addresses over the past three months with Figure 2.3.0 showing an upward trend.

Gaimin employs a token-based reward system (GMRX) to compensate users for their computational contributions. However, Gaimin differentiates its service offering by targeting a broader range of computational tasks beyond cryptocurrency mining, including machine learning and video rendering workloads. The platform integrates with existing gaming setups, prioritizing gaming performance while harvesting excess computational capacity.

The platform has established a multi-purpose marketplace ecosystem where earned tokens are exchanged for gaming assets and NFTs. Gaimin demonstrates the ongoing evolution of distributed computing platforms that leverage gaming hardware. Their focus on diverse computational workloads suggests an attempt to reduce dependency on cryptocurrency mining revenue alone.

AI Arena

AI Arena, established in 2021, represents an emerging category in the blockchain gaming sector that combines competitive gameplay with machine learning mechanisms. The platform's core innovation lies in implementing reinforcement learning for character development, where gameplay interactions evolve AI-powered avatars. With a current market capitalization of $6,179,774, the platform operates at the intersection of gaming, artificial intelligence, and digital asset ownership.

The system architecture employs a dual-token model: non-fungible tokens (NFTs) represent unique AI avatars and their accumulated training data, while a native token facilitates in-platform transactions and rewards. This structure creates a marketplace where performance metrics and battle history directly determine asset values, differentiating it from traditional gaming NFTs that typically rely on cosmetic attributes or rarity alone.

Rather than requiring direct machine learning expertise, users interact with AI systems through gameplay mechanics and training interfaces. This abstraction layer potentially enables broader participation in AI development, though the long-term implications for AI advancement through this gamified approach remain to be demonstrated. The platform continues to operate in a relatively nascent market segment where competitive dynamics and user engagement patterns are still emerging.

GameGPT

GameGPT represents an experimental convergence of AI and blockchain technology in game development, initiated in 2021. The platform proposes an AI-assisted game creation system utilizing the $DUEL token, with a current market capitalization of $6,050,000. While GameGPT scheduled its mainnet launch for January 2025, the current deployment status is unclear at the time of writing.

The technical architecture aims to integrate large language models with blockchain infrastructure to enable programmatic generation of game content and dynamic NPC behaviors. This approach represents a departure from traditional game development pipelines, proposing to shift certain creative and development processes to AI systems while maintaining community governance through token mechanisms.

The platform's development framework includes provisions for asset interoperability and onchain verification of game elements. While still in the early deployment phase, GameGPT's technical documentation outlines a governance model where token holders can influence development priorities and content parameters.

Asto

Asto, launched in 2021, is developing a decentralized protocol for AI agent creation and deployment. The system aims to establish a framework for autonomous AI agents that can operate across various digital environments, with blockchain technology managing ownership and transactions. Currently, the platform reports a market capitalization of $5,960,000.

The protocol's architecture centers on "Asto Agents" - programmable AI entities designed to serve functions ranging from automated trading to virtual assistance. These agents utilize a token-based economic model intended to align developer incentives with agent performance and utility. The platform's technical approach emphasizes user ownership of AI agents, enabling creators to have direct monetization and customization rights.

The platform implements a framework for agent interoperability, enabling AI entities to operate across different digital environments including trading, gaming, and virtual assistance applications. Key technical components include agent creation tools, distributed training protocols, and marketplace infrastructure for agent exchange.

Leela Vs. The World

Leela vs. The World represents a specialized implementation of neural network-based chess deployed on the Ethereum blockchain by Modulus Labs in 2023. The system integrates the LCZero chess engine with smart contract infrastructure, enabling direct player-AI interactions through onchain transactions. This architecture marks a technical departure from traditional chess platforms by using the blockchain to store game states, moves, and outcomes directly.

The platform's distinguishing feature is its integration of the Leela Chess Zero (LCZero) neural network, an open-source chess engine, with Ethereum's smart contract functionality. This combination creates a verifiable game environment where all interactions between human players and the AI system are recorded onchain. While innovative, this approach necessitates players to incur transaction costs for each move, introducing economic considerations to the gaming experience.

From a technical perspective, Leela vs. The World serves as a proof of concept for blockchain-based AI gaming systems. The platform demonstrates the feasibility of operating complex neural networks through smart contract interfaces while maintaining game-state integrity through distributed consensus. This implementation opens potential pathways for third-party developers to build upon the protocol, though adoption metrics are not yet publicly available.

The AI and blockchain gaming landscape has attempted to integrate artificial intelligence, distributed computing, and gaming experiences. Market analysis reveals a nascent sector, with most protocols maintaining modest market capitalizations and limited verifiable user engagement. This pattern suggests an industry still seeking product-market fit and a breakout protocol. Technical implementations across the sector demonstrate an emphasis on AI integration, whether through distributed computing infrastructure, agent-based systems, or direct gameplay mechanics. While innovative, these approaches highlight the ongoing challenge of balancing technological advancement with user accessibility.

2.3.2 Use Cases for Onchain AI X Gaming

Based on our preceding analyses, we see three main use cases for integrating AI and games onchain, which are i) AI-enabled agents, ii) incentivizing player behavior, and iii) providing a sandbox for AI development and testing.

Use case 1: Augmenting Gaming Experience with Player-Like AI Agents

To enhance player engagement, AI agents can play a pivotal role in simulating a player-like experience within game environments. These agents can act on behalf of players, interact dynamically within the game, and serve as teammates or opponents. This effect is particularly valuable in massively multiplayer online (MMO) games, where high player interaction is essential to creating an engaging and immersive experience.

In early stages, AI agents help bootstrap player counts, simulating activity in the game world that attracts and retains human players. By consistently populating the game environment, they create the appearance of a bustling community, an effect that can increase engagement and drive revenue. However, AI agents can also lead to player dissatisfaction if not transparently integrated. The "bot lobby" issue seen in traditional gaming is a common challenge: players often feel deceived when they discover they have been interacting mainly with AI rather than real users. To avoid this, developers need to balance AI presence with clear communication about their role within the game.

Blockchain technology can mitigate some of these trust issues by providing a transparent and immutable record of AI agent interactions, ensuring that developers can verify and analyze agent impact on player engagement. While the full real-time behavior of AI agents may be impractical to record onchain, a hybrid approach enables selective transparency, such as logging key activities or player-agent interactions. This selective onchain record can foster trust as players gain insight into the nature and frequency of AI interactions. Leveraging Layer-2 solutions, such as rollups, can further optimize transaction efficiency by batching multiple events into single onchain transactions. This approach maintains a balance between transparency, scalability, and economic practicality.

Further, the potential for blockchain interoperability could enable AI agents to transition across games or platforms, creating a more immersive experience. Although such cross-game agent interoperability remains speculative and depends on the adoption of shared standards, it represents a promising area for enhancing player engagement and agent versatility across the ecosystem.

Use case 2: Utilizing Transparent AI Behavior to Increase a Player’s Lifetime Value

Onchain AI can serve as a catalyst for enhancing players’ lifetime value (LTV) by maintaining engagement and increasing in-game spending. Lifetime value measures the average revenue generated per player over their lifespan within a game. In most free-to-play MMO games, only a small subset of players contribute financially. However, these revenue-generating players benefit from a vibrant and interactive game environment maintained by the broader player base. AI agents can step in during low-activity periods, simulating player interactions to ensure consistent engagement, especially for high-value players.

Blockchain-based AI agents offer diverse playing styles, skill levels, and behaviors, creating a dynamic and challenging experience that encourages player retention by continually presenting new and unpredictable scenarios. Additionally, AI agents can subtly promote in-game purchases by demonstrating the benefits of premium items or features, nudging players toward spending without aggressive marketing tactics. This approach leverages blockchain transparency, which allows precise tracking of AI interactions and spending influence, offering developers valuable data to optimize monetization strategies.

Blockchain-based AI agents can foster ethical transparency by allowing players to opt-in to specific AI-driven interactions, such as demonstrations of premium items or features. For example, AI agents could utilize premium game elements in a natural, gameplay-integrated manner, enabling players to observe their benefits without aggressive marketing tactics. Blockchain systems provide an additional layer of trust by logging these interactions transparently, allowing players to verify and audit AI behavior. Moreover, developers can adhere to ethical guidelines, such as limiting the frequency of nudges and clearly communicating the AI's role, ensuring that player trust is maintained. These measures balance AI-driven promotion with a commitment to transparency and user autonomy.

Blockchain technology enables unique, verifiable AI agents that can accumulate value and histories over time, potentially becoming tradable assets within the game ecosystem. This adds a new revenue stream for both developers and players, further enhancing the game’s LTV. However, developers must balance AI-driven influence with ethical transparency to ensure trust and avoid potential backlash or regulatory scrutiny.

Use case 3: Providing a Sandbox for the Transparent and Safe Development of AI

Games offer an ideal sandbox environment for blockchain-based AI development, providing structured testing parameters with controlled risk. Gaming environments are a low-stakes testing ground for AI agents, where errors carry less severe consequences compared to real-world applications. For example, an AI agent performing an onchain swap of in-game assets worth hundreds of dollars involves far lower risk than a similar swap of cryptocurrency worth thousands, especially when factors like slippage tolerance are not yet optimized.

The gaming ecosystem’s diverse scenarios expose AI agents to a broad range of interactions and user behaviors, offering a rich testing ground for AI learning and evolution. Developers can observe AI interactions with smart contracts and network conditions in real-time, allowing for continuous refinement within a controlled yet dynamic environment. The iterative nature of game development—with regular updates and versioning—supports rapid prototyping and testing, enabling developers to strengthen AI algorithms based on player feedback and real-time data. Insights gained from these gamified tests can later be adapted to more critical sectors like finance, healthcare, and governance, instilling greater confidence in AI reliability and safety as it matures.

The identified use cases—AI-enabled agents, behavior-driven monetization, and sandbox environments—demonstrate the immediate value of blockchain-based AI in gaming. These applications not only enhance player engagement and create new revenue streams but also establish gaming as a controlled testing environment for innovative AI implementations. By leveraging the structured yet dynamic nature of gaming, developers can refine algorithms and validate systems in low-risk scenarios.

The convergence of blockchain, AI, and gaming creates a unique experimental ground where structured testing can refine and scale complex technological systems with relatively low risk. Learning experiences in areas like real-time AI interactions, decentralized asset management, and transparent behavior tracking have potential relevance for sectors like finance, healthcare, and governance. For instance, the safe development methods honed in gaming could guide the adoption of AI in financial systems or public administration frameworks. Additionally, the transparent nature of blockchain enables unprecedented visibility into AI behavior and impact, offering valuable insights for broader adoption. However, significant challenges remain in balancing technological capabilities with user experience, particularly regarding the disclosure of AI presence and its influence on player behavior.

2.4 Taking Stock: The State of Gaming and AI on Blockchain Rails

The three verticals analyzed in the preceding sub-sections reveal consistent patterns. Each vertical i) gaming and ii) AI on blockchain, as well as iii) their intersection demonstrates a pull between technological sophistication and user accessibility, with platforms attempting to abstract complex underlying mechanisms while maintaining their core use cases.

Technical challenges persist across all three domains. Blockchain gaming platforms are difficult to scale and integrate into traditional gaming infrastructure. Developers struggle to balance decentralization with performance requirements in AI protocols. For AI x gaming implementations, developers face the added challenge of managing both complexities. This technical overhead frequently manifests in poor user experiences, whether through wallet management requirements in blockchain gaming or complex token mechanisms in AI protocols. The multi-disciplinary nature of these projects makes developing frameworks distinctly challenging. Teams must maintain expertise across blockchain architecture, AI model development, and game design principles while balancing innovation with standardization for interoperability. This complexity extends development timelines and increases resource requirements, particularly for projects attempting full decentralization.

Economic sustainability emerges as another common thread. Blockchain gaming's play-to-earn models, AI protocols' computational resource markets, and AI x Gaming's hybrid incentive systems all face similar challenges in maintaining long-term viability without relying on speculative token value. Across these sectors, user adoption patterns often follow similar trajectories: initial enthusiasm, often follows speculative interest or novel mechanics, typically encounters friction when confronting practical implementation challenges. This pattern suggests that sustainable growth in these sectors will likely depend on delivering tangible utility relative to centralized alternatives rather than relying solely on tokenization or decentralization as value propositions.

User experience requirements often conflict with traditional expectations, particularly in gaming, where players consider seamless interactions standard. Projects must abstract multiple layers of technical complexity – from wallet integration and key management to transaction fee structures and AI model interaction latency. This frequently creates hybrid solutions where developers compromise some aspects of decentralization for practical functionality. Current implementations frequently require users to manage cryptocurrency wallets, understand token economics, and navigate complex interfaces that differ significantly from traditional gaming platforms. These friction points present substantial barriers to mainstream adoption, especially for users unfamiliar with blockchain technology. While some projects implement abstraction layers to hide complexity, these solutions often introduce centralization vectors that compromise core blockchain benefits and can alienate people who are interested in blockchain implementation.

Having taken stock of the current state across these intersecting domains, the next section examines potential future trajectories and their implications for the broader digital ecosystem.

3. The Future of Blockchain Gaming and AI

The convergence of blockchain gaming and AI represents a pivotal moment for technological innovation, offering transformative possibilities in both sectors. In the previous section, we examined the current state of these domains, highlighting the challenges of scaling technology, achieving economic sustainability, and balancing user experience with decentralization. Building on these insights, this section explores how these challenges are shaping future trajectories and the opportunities emerging at the intersection of blockchain, gaming, and AI.

As argued, blockchain technology has already redefined gaming by enabling true ownership of digital assets and introducing novel incentive mechanisms. Similarly, blockchain-integrated AI offers potential advancements in performance optimization, monetization, and user safety through verified data provenance. By merging these capabilities, developers can not only revolutionize user experiences in gaming but also leverage games as experimental platforms for advancing AI capabilities.

Several emerging trends highlight how these innovations are evolving and what lies ahead for this rapidly developing ecosystem:

1. Working towards improving public access to AI services

In blockchain AI, many protocols aim to offer cost-effective, permissionless AI services, such as by utilizing idle computational power or generating AI-based outputs. The primary challenge lies in creating a sustainable monetization model. Without it, service providers may struggle to survive, risking a decline in blockchain AI protocols.

By decentralizing the ownership of AI protocols, we can distribute the responsibility of providing services across a diverse set of actors. This fosters a competitive market where the most efficient setups can offer affordable services, benefiting users with greater access to cost-effective AI tools.

2. Utilizing games as a platform for financializing the development of AI

While some protocols focus on making AI a public good, others explore new ways to monetize AI services. Competing with established models like ChatGPT's API services is difficult due to its market dominance and closed-source nature. Finding alternatives to monetize the development of AI may involve finding new use cases. This is where games present an opportunity for AI monetization.

Even in free-to-play games, revenue can be generated through ads or in-game purchases. Integrating AI into such games allows developers to ride on these existing monetization methods without needing new approaches to monetize the AI model as a standalone product. Furthermore, we are witnessing innovation in monetization mechanics for onchain games that integrate AI. One example is Leela vs The World, where the game is capable of both advancing AI developments and generating revenue, indicating the potential of using games to finance AI development.

3. Modularizing the responsibilities of building blockchain AI

The modular approach, which first emerged in blockchain with the separation of consensus and execution layers, is also emerging in blockchain AI. Tasks such as data collection, AI training, and service provision are divided into distinct stages, with specialized protocols handling each component. This modular structure is likely to develop further, as the resources needed to manage the entire AI lifecycle are substantial, even for centralized entities. By focusing on individual stages, blockchain AI protocols can capitalize on the efficiencies of modularization.

4. Growing community

The blockchain AI and gaming ecosystem is finally seeing the growth of a budding community. As new protocols emerge to address different aspects of onchain AI and gaming, this trend will likely continue. One driving factor is the ability to design novel incentive structures independent of traditional Web2 monetization models. As a result, developers, including those from Web2 backgrounds, gravitate toward opportunities for innovation in these ever-evolving domains. This grows the mindshare of the space, potentially propelling these sectors further and strengthening the narrative for the adoption of blockchains in AI and gaming applications.

These emerging trends highlight both the challenges and opportunities in the convergence of blockchain gaming and AI. While each trend points to significant potential, the practical implementation and integration of these technologies remains a critical challenge. To better understand how these trends may manifest in practice, in the following section we shed light into four specific areas that hinge on how these trends play out: i) the Blockchain Gaming X AI’s ‘killer application’, ii) developmental frameworks, iii) user experience, and iv) AI agents.

3.1 Blockchain Gaming X AI’s Diamond In The Rough

The intersection of blockchain gaming and artificial intelligence represents a potentially transformative combination in the gaming industry. While both sectors have developed independently, their convergence offers unique capabilities that traditional Web2 gaming platforms cannot easily replicate: blockchain's transparent ownership and economic mechanisms paired with AI's capacity for dynamic content generation and gameplay enhancement.

The blockchain gaming sector approaches a critical juncture with the impending launch of next-generation titles that have undergone development since 2021. As Sandeep Nailwal from Polygon observes:

“We are now starting to see the growth in crypto gaming from the protocols that have raised funds back in 2021. These games take time to build, and I would say this is one of the factors that is important for the success of games. The games must be fun to play, and not just to launch a token.”

This new wave of games, including projects like Illuvium and Star Atlas, aims to deliver more sophisticated gaming experiences while maintaining blockchain's core value propositions of asset ownership and economic participation. Their success or failure will likely influence the sector's trajectory significantly.

Concurrent with these developments, the blockchain AI landscape evolves through increasing modularization. This presents both opportunities and challenges for gaming applications. As Jesse Eisses from Nosana explains:

“There are many parts to deploying AI. First off, there are the compute resources required (what Nosana is solving), then there is the training data required, discoverability, and interoperability. All of these can be developed independently by different solutions, a big challenge will be to bring them together to a unified way for decentralized AI.”

The combination of blockchain and AI technologies could address persistent challenges in blockchain gaming. While previous blockchain games struggled with maintaining engaging gameplay and sustainable economies, AI integration could enhance game mechanics while blockchain infrastructure ensures player ownership and economic participation.

Significant technical and design challenges persist. The successful integration of these technologies requires solving both the scalability issues inherent to blockchain gaming and the complexity of implementing AI systems in a decentralized environment. The sector's ability to overcome these challenges while delivering compelling gaming experiences will determine whether this convergence can produce the long-anticipated killer application in blockchain gaming.

3.2 Developmental Frameworks

Understanding the developmental frameworks underpinning blockchain games and AI applications is crucial for assessing the sector's growth potential and identifying barriers to mainstream adoption. These frameworks not only determine the technical capabilities of current applications but also shape the possibilities for future innovation and integration. As we'll see, the stark differences between gaming and AI frameworks present both challenges and opportunities for developers working at this intersection.

The developmental frameworks for blockchain games and blockchain AI are vastly different. While the framework for the former has largely established itself, the latter is still seeing relatively novel frameworks surfacing across the landscape.

Blockchain games typically adopt the use of NFTs to represent in-game assets, leveraging the typical ERC-721 and ERC-1155 token standards. The former is used for digital collectibles whilst the latter is used for representing fractional ownership of a digital asset. In recent times, ERC-404 tokens have gained traction. These are an experimental hybrid of both the fungible ERC-20 token standard and the non-fungible ERC-721 token standard. These token standards will continue to be cornerstone of representing onchain in-game digital assets, though we could well see new innovative token standards in the future. For example, ERC-404 tokens allow for fractional ownership of a unique entity, such as a limited-edition in-game item. This can enable novel gameplay mechanics where players simultaneously collaborate and compete in an event where they work towards a common goal but receive a greater share of ownership of the limited-edition loot at the end based on their contributions.

Aside from token standards, blockchain games also leverage popular game engines, such as Unreal Engine by The Sandbox, and Unity by Decentraland and Axie Infinity. We cannot extrapolate the success of games based on the game engines developers use to build them. However, blockchain games are only beginning to experiment with different game engines. This should serve as a reminder that blockchain games are much younger than the broader gaming landscape.

For blockchain AI applications, we observe a far more divergent set of developmental frameworks. This divergence stems from various processes involved in building blockchain AI applications, ranging from data preparation to AI inference. This is also a good point to highlight the difference between blockchain AI and crypto AI. Sandeep Nailwal from Polygon shares his thoughts:

“Onchain AI and crypto AI are not the same. Onchain AI means putting an AI model onchain. Crypto AI means having off-chain AI interact with some onchain crypto protocol. I think AI-assisted crypto applications have a lot of potential, but onchain AI will have very niche use cases.”

This is why we see efforts in building blockchain AI infrastructure and AI-augmented blockchain applications, instead of solely putting AI models onchain.

3.3 User Experience

The developmental frameworks discussed above directly impact how users interact with blockchain games and AI applications. While these frameworks enable powerful technical capabilities, they also introduce complexity that can significantly affect user experience. This relationship between technical infrastructure and user interaction represents one of the most critical challenges facing the sector's growth.

Most blockchain games and AI protocols have not prioritized user experience, since the developmental efforts have focused on the logic implementation rather than creating a seamless experience for users.

Most agree that the user experience of blockchain games caters mainly to the crypto-native audience. For most blockchain games, onboarding funds to purchase digital assets remains a hassle and the custody of digital assets is not a concept that traditional gamers are familiar with. Developers should aim to create a seamless experience for gamers, by minimizing the need for onchain interactions. As the co-founder of The Sandbox, Sebastien Borget puts it:

“...people can enter a world they can play for hours, and they don't need to interact on the blockchain all time. So even though we (The Sandbox) have close to six million users now with a wallet, there are very few blockchain interactions.”

Thus, developers need to optimize the typical user experience for blockchain games. We may potentially see

Kristin Majcher

Brazil’s Federal Police seizes nearly $28 million in crypto