Gaming industry has seen incredible advancements with the implementation of VR, AR and AI, but blockchain promises to bring even more value.
Blockchain is transforming the financial industry right before our eyes, with many market onlookers anticipating a complete replacement of existing payment, trading and banking infrastructures. Blockchain and finance seem like the perfect match, but there are other sectors, for which the technology may play a game-changing role. For one particular industry, the latter adjective isn’t figurative at all, because blockchain can do just that – change the gaming market. This is a unique chance for investors, and it seems like they don’t want to miss it.
During the last few years, the gaming industry has been pampered with several innovations at once – virtual reality (VR), augmented reality and artificial intelligence. But it is blockchain that can have the greatest contribution, bringing more transparency and trust to the gaming space.
Investors don’t want to be simple observers and are jumping on the blockchain gaming bandwagon. For them, the technology has a disruptive potential that can be converted into profitable deals. Thus, they consider this emerging technology to be a breakthrough in the gaming industry.
Transforming gaming at all levels
But how can distributed ledger technology (DLT) help both developers and gamers? Blockchain’s capabilities are limitless in terms of use cases, so there are many ways it can transform the gaming industry:
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Blockchain can help developers remove grey market trading of in-game assets — game developers have designed their games to be closed ecosystems, which ensures that any value inputted into the game cannot be extracted. For instance, players were not able to sell their assets for money, use them in other games or trade them for another game’s assets. This led to the creation of grey markets where players could come together to facilitate these types of activities. Blockchain technology enables publishers to embed rules into their tokenized assets that enforce a transaction fee upon each transfer of the asset, regardless of where that asset is being sold. As a result, users are free to trade their assets as they see fit, and publishers can continue to generate revenue beyond the primary market.
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Blockchain enables projection of value to intangible assets — everyone realized the close interaction between DLT and gaming when CryptoKitties came out on Ethereum. The game allows players to purchase, breed and trade unique virtual kittens with cryptocurrencies. This collectible game uses so-called non-fungible tokens (NFT) since each digital kitty is unique. So far, players have spent millions of United States dollars for the kitties, with the most expensive one being sold for 600 Ether (ETH) — over $173,000 at the time. Games like CryptoKitties demonstrate the power of DLT through the tokenization of assets. This ensures that each asset can be proved to be unique or rare; it ensures that users have ownership over their digital assets; and it allows these assets to interoperate with other applications outside of their original ecosystem. These features all contribute to a greater perceived value by the user, which increases the propensity to spend real dollars within the app. While CryptoKitties showcased the attributes that DLT could bring to gaming, it failed to create an engaging experience that would entice a wider audience. Next generation blockchain-enabled games, like Epics Digital Collectibles, seamlessly integrate DLT with a consumer-centric, captivating and gamified experience.
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Blockchain can help with buying, selling and storing in-gaming assets — with DLT, the issuing and trading of in-game assets reach the next level.
Developers can create games that allow players to buy in-game assets with cryptocurrencies, which makes the process easier, more rapid and secure. Also, cryptocurrencies can address the challenge of microtransactions. However, publishers understand that the average consumer is not ready to make a transaction in cryptocurrencies, and thus, they obfuscate these crypto mechanics behind a familiar fiat payment gateway.
Moreover, developers can create specialized frameworks for digital assets used in games. As mentioned, CryptoKitties was built on Ethereum, but there are already blockchain-based standards focused exclusively on gaming. One such example is dGoods, which is a token framework developed initially for the EOSIO protocol.
Mythical Games is one of the creators and developers that has used dGoods for its in-game assets. The company is set to launch its first game, called Blankos, in 2020. Blankos is projected to be the biggest launch of a blockchain-enabled game to date, accessing the wider gaming communities on PC, console and mobile.
Soon, more developers will begin leveraging digital asset frameworks and will collectively improve the operation of in-game assets. -
Blockchain can help developers reach higher engagement rates and improve the Average Revenue Per Paying User (ARPPU) — NFT’s can be used to increase player engagement and improve the ARPPU. Game publishers have been noticing that blockchain-enabled games produce much higher ARPPU metrics due to the greater perceived value by the user. NFT’s are changing the way brands interact with their consumers. This new form of marketing is non-intrusive and offers the end consumer value, which ultimately drives up engagement rates. For instance, Azarus runs a challenge network on the Twitch streaming platform that rewards players for watching their favorite esports streams with AZA tokens that can be redeemed for in-game goods and items. Rewarding users with in-game items related to the game they are watching incentivizes them to continue viewing, which increases the likelihood of them spending more time playing the game. Given the engagement results that these new forms of marketing are producing, it is no surprise that game publishers are starting to invest marketing dollars in this industry.
Contributing to market growth
The gaming market is huge, and blockchain has attracted many investors who are now driving the industry’s expansion to new levels.
Today, there are over 2 billion gamers who either play on computer devices or smartphones. Games and esports analytics firm Newzoo estimates that the total number of gamers is 2.5 billion, suggesting that 1 in 3 people play video games. By the end of this year, they will have spent a combined $152.1 billion on games, which is a 9.6% increase compared to 2018.
Gaming is one of the fastest-growing industries in the world right now, and blockchain plays an essential role in polishing its image by bringing a new set of possibilities through a more open and trusting environment. This, in turn, attracts investors, many of whom are looking specifically for gaming firms that adopt DLT.
Some prominent blockchain-oriented investors have been including gaming firms in their portfolios. For instance, venture capital firm SVK Crypto has invested in Mythical Games, Azarus and High Fidelity. The latter is a VR platform co-founded by Philip Rosedale, the founder of the popular game Second Life, that uses blockchain technology to manage the ownership of in-game assets and currency.
SVK Crypto is part of Block.one’s EOS VC syndicate alongside Galaxy Digital and FinLab AG. Interestingly, FinLab AG has also shown interest in gaming firms, as it invested in Upland. Elsewhere, Galaxy Digital recently took part in a funding round held by Immutable, a Sydney-based blockchain gaming startup.
All in all, blockchain-oriented institutional investors don’t want to stay aloof from the rapid growth of the gaming space. Therefore, they might play an essential role in driving the industry’s expansion.
