- Blockchain in Gaming
- Benefits of using Blockchain in Gaming
- Industry Overview
- Future of Blockchain Gaming
The gaming industry saw its inception in the 1970s and early 1980s. Arcade games like pong, quickly grab the attention of the people. Soon after we saw the advent of video game consoles. The first home console, Magnavox Odyssey, saw good demand. But as the time went by the personal computers became more and more capable of hosting a few games that were earlier limited only to the consoles. Windows XP hosted many famous nerve racking games.The home gaming consoles were also in demand mostly due to better user experience and the ability to run them on our own personal computers. This growing industry has come a long way and as we look forward, blockchain technology can be a catalyst in the near future growth.
Considering the growth in the gaming industry we stand close to a point of inflection were casual gamers and play-to-earn business model will fuel the growth of the gaming industry and will attract more players. Blockchain based gaming activities saw a growth of 2000% in 2022 compared to 2021. But there is a catch. The people who are familiar with the technology have embraced the blockchain gaming revolution, but the larger gaming community is still very resistant. In this newsletter, we will discover how blockchain-based games work and what lies ahead for the gaming industry.
Blockchain in Gaming
In layman terms, the games which are built on top of blockchains can be called blockchain based games. Blockchain gaming reached $3 billion value in 2021, which is surprisingly quick. Blockchains games are a hot topic in the gaming industry because of their ability to monetize the in-game assets in the real world. The in-game assets can be listed as a NFT and can be traded on crypto exchanges for real world currency.
The players will need to have a crypto wallet and the game must be built on a blockchain network. The developer can use an existing cryptocurrency or a completely new cryptocurrency for in-game transactions. This will allow the blockchain based games to provide for full ownership of the assets, so they can now sell the in-game purchases to an external market. This is in stark contrast to the current centralised gaming industry trend, which doesn’t allow the sale of in-game assets in the external market.
No company or organisation can erase what a player has earned. Even if the company decides to shut down, the owner of the in-game asset will be the player. Blockchain are less susceptible to loss of in-game items. This will open a new range of opportunities for casual gamers to enjoy the part of profit in the gaming industry. For a long time, the players earn little to no revenue from the gaming industry, but this is on track to change.
Benefits of using Blockchain in Gaming
To quote Linkin Park co-founder Mike Shinoda. “Imagine taking your favourite skin from Valorant and using it in Fortnite. And not paying extra, because you own it. Then using it in CoD, Minecraft,even twitter, IG.” This is possible by using NFTs, although the transfer of the same skin would be a task for the developers, but transferring the in-game items designed on the same blockchain network can be implemented by reading the NFT content of a player’s wallet. Players will be able to use the same asset by paying only once and enjoying a better user experience. Interoperability between the games is a viable option for the industry in the near future.
The players are the real owner of the assets. This means that they will own the in-game assets even outside of the game. So, if a game decides to shut down, the assets that were purchased by the player will still be with the player and can be used in other games. This is different from the current industry standard, where the players lose the assets when the game is shut down. The asset can be anything, like a car, character, furniture, gun skin, etc. They can be stored on the blockchains as NFTs. This kind of ownership will give the player more control over the asset and they can even trade these assets for real money on crypto-exchange.
Player Reward model
Blockchain games typically let the players earn for the amount of time they spend playing the game. Though most of the players won’t get rich but this does open a potential for passive income for the casual gamers. Developers can also earn more by creating scarcity of the in-game asset and they can earn royalty on the secondary sale of the assets too. Players typically earn cryptocurrency as rewards when they complete a certain quest or mission. These cryptocurrency can then be used to purchase assets or any other in-game items from other players or maybe even use it to make purchases in online platforms.
Gaming industry is more often susceptible to facing the heat of online fraud. Hackers end up exploiting the technical loophole and steal data or undo a transaction. Using blockchain, we get a combination of transparency and security. This means that if a developer claims that they have a fixed number of pieces of an asset, then the player can verify it by checking on the blockchain explorer. Sensitive data like game data, player transaction and information can be better protected from being tampered or hacked, since the transactions/data stored on blockchain is immutable. Hackers won’t be able to overpower a blockchain network since there is no single server to beat.
Players enjoy full control over their gaming experience. They can monetize their in-game assets and use the money in the real world. They can also establish the game rules, character upgrade and introduce fresh content to create a more immersive and engaging gaming environment. There is also a potential to establish a centralised community that will enable the players to access various games. Players can have a single profile to use in different games. This will improve the overall user experience and simplify the process of making in-game purchases.
Using a blockchain game will require the player to have a crypto wallet. Most of the players are unfamiliar with setting up crypto wallets and thus do not care to play such games. Some games require the player to buy cryptocurrency or NFT to participate in the game. This may seem complex to an average player. The barrier exists on the developer side as well, since most of the developers in the industry are building web2 games, they have to additionally learn how to use the blockchain network in their game. This will discourage small developers to enter into the market as it requires a lot of time and effort.
There is a misconception in the gaming industry that using blockchain networks in their games might be environmentally harmful. This might be true for ethereum before the merge, but after that transaction on ethereum produces less carbon emission than a VISA or a mastercard transaction. Other blockchains using proof of stake mechanisms also emit less carbon emission. Another misconception is that the games are gimmicky and they are not fun. This might have been true in the early stages of 2021, but in 2023, we have seen the launch of some AAA blockchain games with amazing graphics and better user experience. They can easily compete with the AAA web2 games.
The regulatory rule revolving around cryptocurrency depends on region to region. There is a lot of speculation and uncertainty in the industry. Regulatory bodies are still trying to understand how certain cryptocurrencies are working and whether they should be allowed to be used. The lack of clarity may introduce legal and compliance challenges for the developers. Players and developers both want to avoid falling into the legal pit. The Security exchange Commission is closely examining the cryptocurrency and the NFT projects in recent years, asserting that some of the games might be offering unregistered securities.
The Blockchain Gaming industry is still in its nascent stages and comprises a niche market. Let us consider a broader view of the gaming industry. The number of casual gamers in the industry has been growing in the past few years, thanks to massive upgrades in mobile chipsets. According to Mordor intelligence’s report the game market will be up to USD 345.88 billion by 2028.
While we see close to stagnant growth in the gaming market globally at a CAGR of 0.09%. The number of mobile gamers are going to see a massive increase by 2028 growing at a CAGR of 16.22%. People are moving away from console and PC games. While certain professional gamers do prefer the console and personal computer for gaming, the mobile phones are becoming more and more capable of handling AAA titles. The mobile gaming market alone is expected to reach USD 300.47 billion in the next five years.
The smartphones have better 5G internet connectivity with latency as low as 5ms. We are also experiencing an increase in high quality AAA mobile games. More and more people globally will have access to smartphones and internet connectivity. Better cloud services and unlimited 5G data packs has allowed an increase of casual gamers in good numbers. According to Ericsson, 5G mobile subscriptions in the Asia Pacific region will reach around 1545 million by 2025. Right now the number of 5G subscribers in North America is experiencing tremendous growth.
This is going to provide an entry point for blockchain game developers to enter the market and exploit the conditions. Creating a crypto wallet that can be easily created in game while being connected to the blockchain and providing play-to-earn games with better user experience might just help the players to migrate to blockchain games. The mobile gaming market right now is highly fragmented. This creates a low barrier for entry into the mobile gaming industry. Strategically adopting partnerships and acquisition might just help the companies to gain sustainable competitive advantage.
According to the BGA x Dapp Radar report, the primary factors expected to drive the blockchain gaming industry are the involvement of traditional gaming studios and existing gaming franchises venturing into web3. These entities already have an impact in the market and will attract more players from web2 games. Epic Games has begun hosting web3 games like Blankos and My pet Hooligan in the Epic Games store.
While the web3 gaming industry is still in its early stages, the growing interest from traditional gaming studios in blockchain technology is encouraging. As blockchain technology becomes more refined, scalable, easy to implement and sustainable, the adoption of blockchain by traditional gaming companies is expected to play a pivotal role in creating web3 games with better user experience that will ultimately gain widespread acceptance among mainstream players.
Future of blockchain Gaming
The Play-to-earn model of blockchain gaming drew eyes towards the games but it was not at all sustainable. Now the blockchain gaming industry needs to find a way to retain those players by creating easy to use web3 games with good UI/UX. The future of blockchain in the gaming industry is promising, with an increasing number of businesses exploring the integration of blockchain technology. This exploration is likely to result in more games and platforms incorporating blockchain in the coming years. Web3 games represent the future of the industry, reshaping the gaming ecosystem by granting players ownership of in-game assets and decision making authority, which moves away from the traditional single authority.
During the period of crypto winter in 2022, the funding into the web3 gaming industry was hampered as investors were more careful with their money. Even then blockchain gaming and metaverse projects managed to raise a substantial $7.6 billion in 2022, marking a 90% increase compared to 2021. In addition to private sector investments, government funding and support for this space are on the rise in certain regions. The South Korean, Japan and Dubai governments have signaled their intentions to back the integration of metaverse initiatives in their region. The substantial investments flowing into the blockchain gaming sector have the potential to drive significant advancements in the coming decade. However, despite the accomplishments of blockchain games within the cryptocurrency space, it may still take some time before we witness widespread adoption.
A transformative future for gaming in the Web3 era awaits. Integration of blockchain technology in gaming won’t necessarily impact the game quality; instead it will introduce new possibilities for incorporating financial systems into the gaming experience. This is set to elevate the gaming ecosystem to new heights. Brands now need to focus on innovative gaming scenarios for various platform types and providing players with NFTs that are distinguishable and capable of fostering interoperability. By introducing cryptocurrency based games with robust gaming wallets, they can empower gamers and grant them more control over their digital identities.
While the broader crypto landscape has faced its share of controversies and market fluctuations, the blockchain gaming ecosystem has largely remained focused on development. Web3 games still have the potential to attract millions of users to novel experiences that offer genuine digital ownership. Despite the challenges, there has been no decline in the number of players engaging with existing games.
It is the dedicated builders and developers in this space who will unlock the full potential of blockchain gaming in the years ahead. The crypto winter has had the most significant negative impact on blockchain gaming. However, the fundamental benefits of blockchain to the industry have remained consistent, with asset ownership for players, new player rewards, and innovative revenue models continuing to be the top priorities. This indicates a commitment to prioritizing players and revolutionizing the gaming industry through the application of blockchain and NFTs.