The current cryptocurrency market conditions appear to have affected funding coming into Web3 and blockchain gaming, with the segment bagging only $600 million in investments in the third quarter of 2023, a recent report shows.

The amount raised by Web3 gaming projects in Q3 represents a 38% decrease from the $937 million in Q2, according to a DappRadar report published on Oct. 12. While the number adds to the $2.3 billion total for the year, it’s also down approximately 50.8% from investments last year during the same quarter.

Blockchain gaming projects have so far raised $2.3 billion this year, according to the report.

Most of the funding during the period went to investment firms, with $262 million, followed by game and metaverse projects (213 million), and infrastructure development ($125 million).

“An intriguing observation from this year’s funding trend is the significant allocation towards investment firms,” DappRadar noted. “This underscores the confidence and commitment VCs hold for the future of this domain, signaling their readiness to back the forthcoming Web3 gaming sensations.”

Despite dips in momentum, the report noted that the blockchain gaming sector retained its “influential position” above the decentralized application (dApp) hierarchy, explaining that the low numbers in comparison to last year’s are not an indication of the segment waning. “Instead, it underscores the evolving landscape as other industry sectors start to gain traction,” it added.

Decent dApp ecosystem activity

Gaming retains its market dominance by user activity across the dApp ecosystem in Q3, with 35%, followed by decentralized finance (DeFi) (24%), and non-fungible tokens (NFT) (12%).

The report highlighted the increasing popularity of decentralized social networks, dApps where user data and content are stored on a blockchain. While Web3 social networks only have a market dominance of 11% in the dApp ecosystem, DappRadar noted it observed a surge in user engagement with social projects since Q3 of last year. 

“As we often highlight, social dapps can be perceived as a kindred spirit to the blockchain gaming world, largely owing to their embedded gamification elements,” the report said.