🎮Gaming: The Key to mass crypto adoption
Web3 adoption and gaming come hand-in-hand.
Last updated
Web3 adoption and gaming come hand-in-hand.
Last updated
Blockchain was heralded as a disruptive technology once it became clear that cryptocurrency wasn’t its only use case. Experts say the industry is poised for a sea-change; they say gaming will be the first real use case for blockchain. Blockchain could completely restructure the industry, turn the tables on the monopolistic console market, create a multiverse, and make games more immersive and boundary-blurring than ever. How gaming navigates, the remaining hurdles will become a case study for other industries considering widespread adoption. When we hear about globalization, we think of the public policy, trade agreements, immigration, and big business. However, oftentimes, the world's connectivity isn’t happening in board rooms - but in virtual environments accessed worldwide. Massively Multiplayer Online (MMO) games or any other type of Metaverse have changed how we interact, form friendships, and establish communities, allowing people to connect and socialize without borders in virtual, playful environments.
One of the most interesting aspects of this rapid globalization of communities is the economies that have grown out of them and how players place and create value on digital goods and services. Online games and metaverses have been at the forefront of innovative business strategies enabling participation worldwide. This has ranged from players wishing to sell their digital goods for real-life currency to large companies inventing entirely new business models. When we get together with friends in the analogue world, social connection typically revolves around a shared activity: we grab a coffee, have lunch, and see a movie. We rarely socialize without something to do. But the purpose of these events is rarely to drink coffee or to eat lunch. Those outcomes are a by-product of the real purpose: to connect. Humans are social beings, and we crave intimate connection; these activities are lubricants that allow us to fulfil that need. Gaming serves a similar purpose in the digital world. It’s an excuse to get together with friends and family, to meet strangers. Gaming is social, and social is gaming; the lines are blurring, and people who would never have considered themselves “gamers” are now regular participants in vibrant and immersive virtual worlds. If you’re looking for an on-ramp to new consumer technologies, look to gaming; often, it’s at the cutting edge of technology adoption. This brings us to crypto. Parts of crypto have become mainstream - about 46 million Americans, representing 17% of the country, own Bitcoin. Revolutionary innovations like NFTs and social tokens remain in the “early adopters” phase of the technological life cycle. They have yet to cross the chasm.
With gaming subscription services such as Apple Arcade or Netflix, the in-game items trend will grow rapidly. As the access to titles becomes easier and smoother, gamers will spend more time in the virtual worlds. They are currently dedicating 7.1 hours per week to playing their favourite titles. It may double by 2022 with cloud gaming.
The new industry rules follow a free-to-play model, and the growth of subscription cloud services demands new monetization pathways from game developers. In-game skins are becoming one of the main options for them to keep and entertain communities while monetizing their games simultaneously. Either the game developers build in-game item economies themselves or hire a third party to provide that for them. It seems the market is not very competitive for now, and only a few third parties offer this solution.
Now about blockchain and crypto. In terms of technology, the main use for blockchain within the gaming realm, in a word, is liquidity.
Blockchain’s application in gaming is a no-brainer because gamers are already accustomed to tokenization. Some of the earliest games featured applications of virtual currency. Games evolved and fused with the internet: In-game gold and items can be purchased with real-life (fiat) currency. Transactions often occur outside the game itself and to the chagrin of its creators. Blockchain could establish norms and fairness around in-game currency and asset trading and tie them to the real world in sensible ways. This could be particularly useful for the free-to-play model popularized by Fortnite, wherein most gaming revenue is generated by in-game purchases (e.g., skins) funded by digital currency. The success of Epic Games’ Fortnite could be a premonition of blockchain’s success in gaming. Fortnite earned $2.4 billion in 2018, making it the highest-grossing game in history. Free-to-play games generally made up 80% of all global gaming revenue in 2018; on consoles, free-to-play titles grossed 458% more in 2018 than in 2017.
A second use concerns structure. So far, blockchain games have been simple in scope, falling into one of two main categories: decentralized or hybridized. In the first model, the game is run completely from a blockchain, meaning that the developer cannot alter the game in any way without the say-so of the community. In a hybridized model, the game itself runs from a central server, but its assets are traded via a decentralized marketplace. In either scenario, blockchain takes in-game assets and makes them as ownable as possible, creating legitimacy and permanent value.
As the gaming industry pivots its focus to in-game assets, blockchain could solve several related problems, including - eliminating fraudulent items, creating scarcity, and incentivizing more purchases by making items transferable across games (more on that below). According to a survey by Worldwide Asset eXchange (WAX) - a blockchain platform focused on virtual items, 62% of gamers would be more likely to invest in digital assets if transferable between games; 84% of developers would create in-game items for the same reasons. Epic Games CEO Tim Sweeney hasn’t publicly ruled out blockchain or cryptocurrency - application at the level of Fortnite might be enough to tip gaming toward mass blockchain adoption. So while many investors ask themselves whether blockchain gaming is the ‘next big thing.’ We ask them in return, ‘If you can play for something valuable to you, then why would you choose to play in a game where there is no value?’ We are not saying traditional games will go away. But we believe in this thesis that the player should play in an environment where you have some ownership.
In summary, blockchain offers several solutions to the gaming industry:
Granting immutable ownership of in-game items and solving item theft due to hacking and selling fake in-game assets.
Tying assets to players instead of games protect players' time/money investments, irrespective of developer decisions.
Protecting players from undesirable actions on the part of creators; players can take the wheel, extending game longevity and encouraging user content.
Restoring trust between game developers and distributors by recording sales on a blockchain.
Creating a decentralized distribution network for games.
Creating more realistic economic systems within games.
Shifting the definition of a successful game away from revenue and toward in-game currency value, thereby refocusing game development efforts to benefit players.
Incentivizing players by offering dividends and granting them a vote in development processes.
Fixing the high-cost, low-revenue problems of cloud gaming initiatives by distributing the server over a blockchain network.
Encouraging game development competition outside of the monopolistic console and game-publishing industries.
