Are Gamers Poised to Shape the Blockchain Tech World?

How the Gaming Industry Could Drive the Token Economy

This week, over 25,000 members of the game developer community descended on San Francisco for their largest annual event, GDC, and CryptoKitties, an Ethereum-based collectible game by design team Axiom Zen, just spun off into its own entity, raising $12 million. This makes it a timely moment to examine this growing industry’s relationship with blockchain-based technologies.

There has been much discussion about how blockchains will change the gaming industry. But, how could the gaming industry continue to shape blockchain technology as it progresses forward?

Gaming industry developers and executives gather in San Francisco. Source: GDC

The gaming industry has long pioneered technology that seeks to push the boundaries of both the human experience, and imagination. And these innovations jump frequently into other parts of our lives once they’ve made their mark. Augmented reality (AR) and virtual reality (VR) technologies were essentially incubated by the gaming industry. They’re now being used by sports leagues and broadcasters to create new fan experiences, and by surgeons to perform “telesurgery” operations on patients thousands of miles away.

I believe the advent of new, token-centric business models and applications will usher in another opportunity for the gaming industry to broadly influence our world once again. There are two fronts in which I anticipate strong gaming industry influence:

First, gamers are in a strong position to be one of the early audiences to fully adopt decentralized applications and services.

Crypto’s most recent surge of retail investors and speculators has led to much debate about who will lead the next phase of adoption. Of course, much of this will be driven by when — and where — we see the launch of truly consumer-friendly applications. But, I believe gamers are poised to be a catalyzing force along the way. Not only are there over two billion gamers globally, but:

  1. Games have been using virtual currencies for over 20 years: The gaming industry has long been a pioneer in virtual currency — and users are accustomed to purchasing, earning and spending in this way. From Playstation Store credits, to digital Xbox Live memberships, digital-assets and goods are not foreign to modern gamers.
  2. Gamers trend technically sophisticated: A recent Magid Media Futures study ¹ found that gamers are far more tech savvy than the average online user. This could indicate that, if properly motivated, they would be willing to jump in even before user experience (UX) has reached the point of being truly consumer-ready. Consider the early craze behind the hit zombie-survival game, Day-Z. It still hasn’t released in beta, almost 4 years later, but the fans still love it.
  3. A high number of blockchain-based companies will be directing marketing dollars at gamers: In the last few years, there have been 50 ICOs for gaming-focused projects — from over 20 nations. The top ten fundraisers brought in $323 million² alone. The success of those projects will depend not just on getting gamers on board, but their ability to build a rich ecosystem of partners (no small feat). However, all these teams will be directing marketing dollars to educating the gaming community about the new types of value that come from utilizing blockchains. These marketing dollars will drive awareness and interest among gamers, regardless of how many companies gain actual traction.
There have been 50 gaming-focused ICOs, with the top 10 raising $323 million. Source: Smith + Crown
Second, the gaming industry’s expertise in virtual currency will power token-fueled applications — across industries and types of businesses.

Using gaming fundamentals (gamification) to drive engagement outside of actual games is nothing new. It’s a well-worn strategy in a broad range of industries. MySugr uses it to help manage diabetes, Duolingo uses it to teach language, and even Facebook deploys gamified campaigns to help brands engage consumers. Each of these examples all give us that familiar, lovely zing of dopamine (a hormone that makes us feel good) by rewarding us for specific actions. And, they trigger serotonin (which can boost mood) when we think about past successes, such as looking at badges we’ve earned.

But game designers have an additional (and extremely effective) tool in their arsenal. It’s a mechanism that hasn’t been broadly accessible to industries like healthcare, education, and social media: virtual currency. Game designers have spent years working to shape consumer behavior with a rich range of in-game transactions — all fueled by virtual currency. They have learned how to drive engagement and revenue, no matter how good a player is or where they are in the game. They have even learned how to use virtual currency to help build communities. In short, game designers know a lot about what works and what doesn’t when it comes to creating new economies that motivate and reward user’s behaviors.

Token-centric businesses from many fields could learn much about how to drive a healthy economy from the very game designers that have invested years in perfecting this art. The applications and platforms that dominate the decentralized era may well be rooted in engagement models built atop legacy gaming and virtual currencies’ best practices.

As token economies become mainstream, they will drive even more powerful incentive models.

However, tokens are much more than in-game virtual currencies that have suddenly become a tool available to non-gaming businesses.

The combination of tokens + gaming fundamentals gives a range of businesses the potential to tug more deeply at our psychology than ever before.

Simulated, non-digital “token economies” have been used by therapists as an effective mechanism for shaping behaviors since the 1960s. Loyalty point systems have significantly influenced consumer behavior for nearly 40 years. But this era of cryptocurrency-driven economies — when integrated with game design acumen — holds the potential for much deeper influence on our behavior. This powerful combination could be used to craft near-perfect alignment between sustained action and reward, and it could extend to many areas of our lives. Three attributes work in concert to deliver this power:

  1. Higher reward relevance. Businesses have been historically limited in the kind of rewards they could offer consumers, with many resorting to loyalty point or service credits. As the cryptocurrency space evolves, consumers will have the flexibility to use tokens they have earned to buy an increasingly broad range of goods and services. They could potentially be portable between applications and even platforms. They could even convert them to cash they can hold in their hands (if available through exchanges). This means they can tailor their reward to be more meaningful to them.
  2. More precise targeting. Tokens are not only highly divisible, but can be easily targeted to micro-behaviors, rewarding very small actions that can over time shape broad behaviors. For example, Beta.Cent.co uses ETH-based incentives to drive users to answer questions and complete tasks for their engagement.
  3. Immediate gratification. A fundamental aspect of great game design is immediate reinforcement of actions with rewards. This instant feedback loop could be made easier with tokens (versus waiting for a transaction to clear or a monthly statement, as in the case of miles or points).

How could gamers and the gaming industry influence the evolution of token economies?

eSports fans at an event in St. Petersburg, Russia
  1. We may well see adoption spread outward from gamers’ spheres of influence. Many in the crypto space today were first introduced by a friend or family member who is deep in the crypto community. If gamers are strong adopters of these applications, they could influence the way knowledge and trust of cryptocurrency are spread as a whole. Once they are comfortable interacting with a token economy, gamers may then help to make their friends and families comfortable as well (assuming we have reached the point at which products are consumer-ready). Given the number of gamers, their increasing gender diversity (45% of smartphone gamers and 44% of PC gamers are female³), and how globally dispersed they are, this could be a significant force in the future.
  2. We will see more game designers move into the crypto/blockchain space. Well-funded teams will be able to pay a premium to entice game designers away from the gaming industry. We’ll see them apply their skill to develop rich, value-added ways for consumers to earn and spend tokens— across industries. And this leads to richly gamified applications and platforms that could drive further drive a token’s velocity.

As the space evolves, we must be mindful of the flip side of token-fueled, gamified applications.

One day, we may all be interacting with multiple token economies on a daily basis. If and when this happens, we will need to be more mindful about how we humans stay in control. More effective token-driven gamification means that these applications and platforms will be plugged more directly into our chemical circuitry. They will constantly reward us for participating, becoming almost addictive in nature. And we will need to work harder to make sure the technology is serving us — versus us serving it.

We can use gamified applications to help us exercise more effectively, eat more healthfully, and connect more deeply to our communities — or we could let them alter our belief of what’s important. We’ve seen how hard it is to strike this balance with web 2.0 (think of the teen who starts to tie his sense of worth to the number of Instagram followers he/she has).

This time around, it will be even harder to ignore the allure of gamified feedback loops; especially those combined with financial rewards. How do we make sure we stay in control of how we play the game, instead of ending up the ones being played?

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Edited by: Steven McKie

Footnotes

¹ 2017 Magid Media Futures Study, which showed smartphone, PC, and console gamers far outpaced other online users in both tech activities performed and devices owned.

² Smith + Crown data

³ 2017 Magid Media Futures study

About me

Follow me on Twitter @unblockedfuture or learn more on LinkedIn. A social scientist by training, I’ve devoted my career to driving behavior change in new technology markets. I believe that blockchains and a decentralized future represent an opportunity to remake foundational systems — and with that opportunity comes great responsibility. I write to encourage thoughtful strategy and conscientious execution in these critical early days of crypto technology.

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