The gaming industry is seeing a surge in the number of blockchain-based games. This technology has opened new opportunities for businesses that want to create decentralized gaming apps.
The global gaming market is projected to grow by $125.65 billion from 2020 to 2025, increasing at a CAGR of 12.40%. The integration of Blockchain technology in gaming apps is the significant factor driving the market growth.
Itemizing some of the most prominent benefits, blockchains help gaming economies in the following ways: -Blockchains foster the organic formation of neoclassical gaming economies. -The games provide utility and adoption for the blockchain. -The chain provides security and real asset value to games in return. -For example, Axie Infinity has provided many pandemic-stricken families with a way to earn income. -Many new gamers and nongamers alike have learned about Ethereum, DeFi, proof-of-stake, impermanent loss, and broader blockchain technology through playing the game.
In this paper, we argue that the current landscape of blockchain gaming is more hype than substance, and present a word of caution to GameFi enthusiasts while highlighting three specific problems that need to be addressed: the “crypto first, game second model,” the facade of decentralization, and the appearance of user control and governance. We first provide a brief history of the space and then present our thoughts and provide potential solutions.
What is Blockchain and how is it used in gaming?
Blockchain technology enables secure transactions and maintains records by creating a distributed digital ledger. This has created a new gaming experience for businesses and players who use NFTs and cryptocurrencies to purchase in-game assets. For example, the game Axie Infinity has millions of players globally that use Ethereum-based cryptocurrencies.
Role of cryptocurrency in gaming
Cryptocurrency has become popular in the gaming industry due to its ability to secure, verify and facilitate transactions without the need for traditional payment systems such as banks and credit card companies. This allows users to make payments online without going through the hassle of dealing with these organizations.
Cryptocurrency, such as Bitcoin and Ethereum can be used to purchase avatars, power-ups, themes, unique artifacts, etc. Players can also earn rewards or Crypto tokens while playing games.
With a significant boom in the gaming industry, you can’t deny the changing cryptocurrency trends that took away the entire gaming market. Moreover, with the rise in crypto games/blockchain games, there are various ways in which blockchain technology is being used in the gaming industry that include:
NFT’s
NFTs are digital tokens that can’t be replaced with another item, and can be used to purchase characters, memes, videos, and other digital assets within blockchain games. NFTs give gamers true ownership of their digital possessions. This gives players more control over what happens to these items and makes them easier to trade and sell, without needing another player to act as an intermediary.
Play & earn
When you play a crypto game, you’re actually interacting with a blockchain. A blockchain is a digital ledger of all cryptocurrency transactions. By playing the game, you’re verifying and validating cryptocurrency transactions, which earns you a small amount of digital currency. Crypto-Games is a sub-genre of games that has arisen from Blockchain technology. These games are unique in that they offer players the opportunity to earn cryptocurrency by playing the game. This currency can then be converted into real-world money, or used to purchase new items within the game. So how does this work? Essentially, when you play one of these games, you are interacting with a blockchain. A blockchain is a digital ledger that records all cryptocurrency transactions. By playing the game, you are verifying and validating these transactions, which in turn earns you a small amount of digital currency.
Crypto games give players rewards in cryptocurrency that they can use to buy real-world goods and services. The idea is to encourage gamers to keep playing by giving them an incentive in cryptocurrency.
Virtual events and tournaments
Virtual events and tournaments play an important role in the gaming industry as a whole. They have been held all over the world for many years and need a lot of resources to manage teams, prize pools, and event venues. However, there have been lots of challenges with this system, such as high registration cost, ticket prices, bandwidth, cybersecurity, and more. Additionally, it can be difficult to verify the rewards participants earn.
With blockchain technology, it becomes very easy to keep track of wins and rewards for playing in virtual events and tournaments. Blockchain is decentralized, so it is secure for users to transact with each other. Additionally, blockchain technology can be implemented on any network, making it easy for gamers to join in and participate.
The Newzoo report states that in-game transactions will cause 9.6% revenue growth on mobile platforms by 2023.
GameFi: Where We Are Today
People today rarely doubt the positive interaction between blockchains and video games. The concept is straightforward: before blockchains, components in video games were centrally managed by the gaming studio. They were changeable, replaceable, and not in the user’s control, since they only existed on the servers of the production company. Games hardly ever let players trade assets between each other, especially on third-party sites, and the ones that did had severe restrictions, only allowing for the licensing of their in-game items. Even in games where you could trade, you didn’t legally own the assets, since studios had no reason to give up their profits.
NFTs are a way to mint unique digital assets that can then be stored, transferred, or traded on a blockchain. The use of blockchain technology has allowed for the development of a decentralized ledger that publicly records all assets. This has made it possible for assets to be easily transferred between parties. Furthermore, the tokenization of gaming assets has resulted in the development of a market economy for these assets, which has strengthened the value of items both inside and outside of specific gaming ecosystems. A new way to earn money has emerged for players in addition to just spending: the play-to-earn (P2E) model, where a player can earn money by utilizing the NFTs they acquire in-game through various means (selling or by staking to produce yield, for example). Vice versa, NFTs, or non-fungible tokens, gain value from gaming integration. NFTs are a way to mint unique digital assets that can then be stored, transferred, or traded on a blockchain.
NFTs can be powerful tools for the gaming industry because they can be used across various games and different blockchains. Individual wallets also replace specific accounts for each individual company, allowing for further interoperability. Though NFTs have not been on the scene for long, we can separate them into four different levels.
Level 0: Collectibles
Examples: CryptoPunks, Bored Ape Yacht Club, Cool Cats, Doodles
Punks are one type of Level 0 avatar NFT. We believe that Punks represent the early stages of the metaverse. Owning a Punk also makes you a member of an exclusive club of collectors with a lot of influence. Having a Punk as your profile picture gives you access to networks that other people don’t have access to. Bored Ape Yacht Club has more partnerships than anyone can keep track of.
Level 1: Basic Interactions
Examples: CryptoKitties, Crypto Crabs, Ether Bots
Punks are not worth very much and have no extra utility beyond speculation and being trendy. CryptoKitties, however, can be bred and provide a game-like experience. There were also games like Crypto Crabs or Ether Bots that allowed players to make moves on the blockchain, but they are no longer popular because Ethereum gas fees are so high.
Level 2: Exploration
Examples: Decentraland, Sandbox
The following text discusses the development of Level 2 games. Level 2 games are virtual platforms that allow users to create, experience, and monetize content and applications. In Level 2 games, land is permanently owned by players. Land has a fixed supply and was bought by users from blockchain-based ledgers of parcels. Landowners control what content is published to their portion of land, which is identified by a set of Cartesian coordinates. Contents can range from static 3D scenes to interactive systems such as games. Land is a non-fungible, transferrable, scarce digital asset stored in an Ethereum smart contract. In Decentraland’s case, it can be acquired by spending an ERC-20 token called $MANA. $MANA can also be used to make in-world purchases of digital goods and services.Mainstream adoption of Decentraland has not yet happened because the game itself is not engaging, with the exception of the casino. The NFTs within Level 2 games cannot yet be used to generate income, unlike Level 3 NFTs.
Level 3: Complex Gameplay (GameFi)
Examples: Axie Infinity, Gods Unchained
Passing from Level 2 to Level 3, the games that experienced explosive growth at the beginning of 2021 now have a product that is available to users. instead of playing a breeding game that occurs on a blockchain browser interface, users can open a client and be rewarded with engaging graphics, mechanics, and the opportunity to be paid for playing. Axie Infinity is once again leading the way in this department. In order to play, Axie users invest in acquiring the Axie NFTs and the $AXS native token. From there, they can earn $SLP by playing the game, and the tokens earned can be exchanged for other crypto assets or fiat currency. Many users in the Philippines are earning more than their usual monthly salary simply by playing Axie Infinity, all during the economic hardship brought on by COVID-19.
The issue with Level 3 games, such as Axie Infinity, is that they require continuous injections of money from new players in order to maintain a balanced economy. If the growth rate of new players decreases, or old players stop reinvesting, the economy will collapse due to inflation of Axies and SLP. In other words, the success of these games is contingent upon people investing their money, and they only make a profit when others do the same. There is no social surplus. That being said, many businesses have survived with similar, unsustainable models that eventually became successful due to economies of scale and increased returns. Fortunately, Axie has plenty of cash, as they have received investment from many institutions, including a16z and Mark Cuban.
The price increase of the currency incentivizes users to hold leaving less available to buy, while the lack of available ETH to buy in results in a decrease in price, decreasing the incentive to hold. This can have significant implications on a game economy. As ETH prices continue to increase, players will be increasingly reluctant to spend in-game. The problem that underlies all Level 3 games is that if the game is no longer profitable, people will not continue to play it. We believe that this is the case because current GameFi projects lack the complexity and mechanics to make the experience truly enjoyable. Most players only play for profit, as the game is not designed well enough to be played without making a profit. As the price of Axie Infinity continues to increase, the growth of the game will undoubtedly slow down. Players currently have to spend a minimum of $100 USD to play a game of Axie Infinity, and gas fees can add several hundred dollars to that total. For a team of three simple beast, aquatic, and bird Axies, one can spend upwards of $4400 USD. Furthermore, there is a deflationary cycle in which the price increase of the currency incentivizes users to hold onto it rather than spend it, whichIf the market value of a game decreases, people are more likely to stop playing it, which will only lower the value of game items even further. Just like momentum works in both directions, games can crash just as fast as they become popular.
Level 4: Pipeline Games
We have decided to classify Level 4 games as a basket of exciting projects that plan to improve upon Axie Infinity and Gods Unchained games in some significant way. Currently, we are looking at Gala Games’ Mirandus, Star Atlas, Phantom Galaxies, Aurory, Untamed Isles, Shrapnel, and others. These games lie in different categories and are headed in different directions. Some have adopted Unreal Engine 5 while others have opted for a much more blocky, cartoonish art style. Some are first-person shooters while others remain TCGs at heart. Some are planning partnerships with DeFi projects to build synergistic dApps, while others are working on cross-chain interoperability.
There are three main problems with current video games that the authors want to discuss because they think these issues will be very important for the future of video games.
How is the gaming industry transforming using Blockchain technology?
The benefits of Blockchain technology have been evident for a while, but it has recently received more attention for its potential to transform various industries. In recent years, due to its benefits in different sectors, it has seen as the first choice for the gaming industry.
Some of the benefits of Blockchain that are helping transform the gaming industry and build blockchain games include:
Secure and transparent transactions
The blockchain is a secure, transparent, and immutable technology that ensures that no double-spends or fraud occur in transaction records. This makes it ideal for games where users share sensitive data or virtual assets, such as in the case of NFTs.
Enhanced security
Data that is stored on a blockchain is less likely to be tampered with or hacked because of the encryption that is used.
Improved user experience
Blockchain technology can improve the user experience by making digital transactions more efficient, secure, and transparent.
However, this technology is still in its early developmental stages, so it will be interesting to see how it shapes up in the future. Blockchain gaming gives players more control over their gaming experience. This includes things like being able to create their characters, storylines, and even playing. They can also download various video games in different versions from any location without risking their gaming experience. However, this technology is still in its early developmental stages, so it will be interesting to see how it shapes up in the future.
Verifications
The Blockchain gaming platform ensures that all transactions between different parties are verified and legitimate, preventing fraud. Businesses can use Blockchain to guarantee that no individual or party has been paid twice for the same service or goods rendered.
Trading resources
Since Blockchain creates a record of each item and its ownership, players can trade with complete confidence, knowing that their items will not be stolen or duplicated. Blockchain also allows players to sell or buy in-game assets from other players.
Earning rewards
Players can earn rewards in the form of cryptocurrencies, which can be used as real money, by completing quests and missions in blockchain-based games. In traditional games, players are only rewarded with points that can only be used within the game.
Creating integrated gaming profiles
Blockchain games are becoming increasingly popular, and it is possible to create a centralized community that allows users to access different games from one profile. This enhances the user experience by making it easier to access different games and purchase items.
Blockchain games have many benefits over traditional gaming, including increased security and transparency. However, blockchain games also have some limitations, such as slower transaction times.
Limitations of Blockchain technology in gaming
Nevertheless, the use of blockchain technology has provided new opportunities for various businesses but also created new challenges like:
Complexity
Crypto games can be tough to play because of the way they work, not because of their storylines. To start playing, you need to set up a user account. Depending on the type of game, you might also need to set up a crypto wallet and buy some crypto.
Regulatory hustles
The use of cryptocurrencies in blockchain gaming poses a challenge as regulatory bodies are still trying to understand how they function and whether or not they should be used.
Competition
The gaming industry is constantly releasing new games and platforms, which can make it difficult for blockchain-based games to compete against traditional games.
There are numerous Blockchain-based games in the industry. Some benefits of Blockchain technology for games are that it can provide a decentralized virtual world, secure in-game assets, and immutable game data. Some limitations of Blockchain technology for games are that it can have high transaction costs and slow transaction speeds. Let’s provide real-world examples of top Blockchain games.
Real-world examples of Blockchain games
With about hundreds of blockchain games in the market, a few popular ones include:
CryptoKitties
The game, which launched in November 2017, is one of the earliest examples of a blockchain-based game. It has become popular among players of Ethereum-based games. The objective of the game is to create and sell new generations of kittens with unique traits.
Players can either trade their kitties through an open marketplace or store them to wait until they become more valuable. Each kitty’s personality is based on genes representing various traits, like fur pattern, eye shape, mouth shape, base color, and accessory color.
Decentraland
Decentraland is a virtual reality platform that allows users to create, experience, and monetize content and applications using blockchain technology. This creates a decentralized virtual world where users can buy and sell land, create content, and more.
In Decentraland’s virtual space, users are able to explore, buy properties from other users, and pay to play games. They can also join space adventures, enter clubs, and try out different experiences that builders worldwide have dreamt of.
Gods Unchained
Gods Unchained is a collectible card game that uses Ethereum blockchain technology to track ownership of its cards. Gods Unchained cards are digital assets that cannot be copied or modified without the owner’s permission, making them unique and valuable.
Cards in Gods Unchained can be traded directly between players without going through the game’s marketplace, and the Ethereum blockchain secures them so they’re safe from hackers.
The Last Will
The Last Will is a blockchain game that allows users to inherit digital assets from other players. The game is based on the Ethereum blockchain and enables users to make wills, set up trusts, and assign executors.
FIFAcoins4sale
FIFAcoins4sale is a website where you can buy and sell in-game items for FIFA. The website uses a decentralized marketplace which means you can buy FIFA coins without having to worry about scams or fraud.
Leave a Reply