Blockchain and Gaming — What’s in Store for the Future?

Introduction

Figure 1–2019 Global Games Market (Source: Newzoo)

Video games face several issues

  • Account takeover (ATO): in this situation a fraudster hacks the online account of their target and uses the account to send spammy messages to other gamers, for example sending a malicious link to what is a fake promise to receive free game add-ons to then steal username and passwords of their victims once they input the data via the malicious link. In addition, their victim’s account can be hacked too, and these accounts can be sold for big money especially if the player was performing at a high-level or had rare add-ons. Being hacked can of course cause frustration and bring players to leave a game.
  • Hacks on items for sale in the secondary market: there are many legal and illegal marketplaces in which people exchange game items for real money (including game money for real money). The main issue of these marketplaces is that the majority are not certified by the videogame publishing companies and, as such, don’t offer a secure environment to trade. Scammers get payments with real money and don’t deliver the promised item to their victims, or they can deliver a fake in-game item (using a hacked code) that doesn’t work once the victims start using it. In addition, some websites offer the possibility to buy hacked skills and characters.

Blockchain in Gaming

  • Real ownership: all in-game items can be placed on a blockchain, for example using Ethereum’s ERC-721 standard that allows each in-game asset to be represented by a unique, non-fungible token (NFT), meaning that each item is virtually unique and, as a result, not interchangeable. This means that players can be sure that the items are linked to their game wallet and will be theirs forever, with developers being unable to take these items back (those in charge and running the servers are currently “omnipotent and indisputable”, as they have the complete power to edit rules and items).
  • New revenue streams for developers: Blockchain technology enables game publishing companies to also embed rules into their smart contracts codes that enforce a transaction fee upon each transfer of the asset (i.e. the in-game NFT). As a result, users are free to trade their assets as they see fit, and publishers can generate revenue beyond the primary market.
  • Decentralised marketplaces: putting in-game assets on a blockchain potentially allows the creation of decentralised marketplaces, whereby gamers can freely exchange items in a trust-less way. Smart contracts in fact allow users to be confident that they are receiving authentic items since they are tethered to the blockchain.
  • Reward programs and play-to-earn gaming: every game or every game publishing company can have their own token that can reward people when playing if they achieve certain milestones, rewarding them either with tokens tradable for game add-ons or real money. This will result in higher engagement rates among players due to the greater value perceived by the users, and could bring much more people to gaming as they can see this as an additional source of income by leveraging a play-to-earn mode.
  • Inter game transfers: once game add-ons are put on the blockchain, these can easily be moved across different games, with people avoiding the need to start from scratch to gain certain items, improving the user experience by allowing the user to have a unique identity with items used across multiple games.
  • Fair Gameplay: the implementation of blockchain prevents hackers and cheaters from disrupting the game, making the playground safer and transparent. In addition, players can be sure that game publishing companies put transparent rules to manage in-game items (i.e. having a specific probability to find a certain rare item can be verified on the blockchain).
  • Better payment experience and opening to new markets: blockchain is known to bring significant benefits for payments [14]. Adding several digital currencies as a way to buy items can also enhance the experience and respond to the requests of younger generations [7]. Accepting global payments isn’t easy — developers’ ability to accommodate gamers in Brazil, China or India requires them to run a provider that accepts both the card and the currency, and this doesn’t even account for people who are unbanked. By leveraging blockchain, gaming could see a large inflow of new capital.

Current status of blockchain in gaming

Figure 2 — CryptoKitties — Genesis
Figure 3 — Decentraland
Figure 4 — Ubisoft

What are the main challenges encountered by blockchain applied to gaming?

  • Scalability: because blockchains tend to be much slower than centralised networks, this may limit adoption of blockchain based games on a global scale (just think about the CryptoKitties example). New scalable platforms such as Algorand, Tezos, Dfinity etc. could serve as a catalyst to solve the limits imposed by scalability.
  • Centralisation: Not all blockchain-based games are fully decentralised. The majority are actually running on centralised servers, bringing the limitations of centralised architectures with them.
  • User Experience: blockchain infrastructure is currently congested with elements that are too difficult or that take too much time to be tackled by the users, including creating accounts, installing wallets, managing private keys, etc.

Conclusion

Bibliography

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Eterna Capital

Eterna Capital

Investment company focused exclusively on blockchain technology. www.eternacapital.com