Driving game value with blockchain
While working on CryptoRome with the GigLabs team, the concept of value when it comes to blockchain game assets has become an obsession of mine. Here are my thoughts on blockchain games and value creation — both what I’ve seen firsthand with our game and what I’ve observed from others. As blockchain games and technology continue to expand and develop, so will my thoughts on this topic (presumably!). I welcome further thoughts and comments on this topic from other game developers, gamers and non-gamers alike!
You’ve probably heard a stat like this before: when you purchase a new car, it can lose up to 10% of its value as soon as you drive it off the lot. It can drop up to 20% in the first year! This same concept of a purchase losing value over time can be applied to most industries, especially the game industry. The traditional model of gaming — purchasing the game, playing it for a while and then putting it aside only to play occasionally for nostalgic reasons — mirrors the same rapid depreciation curve of a newly purchased car. This loss in value is true for both the player and for the game developers. As player interest quickly fades, game developers are left scrambling to get the next game in market to take its place. The biggest challenger to come and disrupt this pattern in gaming is the blockchain, where the value of the game asset can not only be sustained but can even grow in value over time.
Where and how do blockchain games truly differentiate themselves? Non-fungible tokens or more simply NFTs — the unique digital assets that enable you to play the game. Whereas in the past you might have purchased a cartridge, with blockchain games you purchase NFTs to play the game. In CryptoKitties, these are digital cats. In MLB CryptoBaseball, they are digital bobbleheads. In CryptoRome, the game our company developed, players purchase unique villages that produce resources. The main selling point of blockchain games to this point has been that once you buy that asset, you own it. It’s yours, it’s unique and the underlying blockchain enables that proof of ownership.
While innovative in its own right, demonstrating ownership of tokens is just table stakes in blockchain gaming and, unfortunately, that idea around asset ownership is not that important or (more likely) is misunderstood by most mainstream gamers. In order for blockchain games to truly stand out from mainstream games, it must prove out value creation of those digital tokens. This is the clear, singular advantage that blockchain games have in the gaming industry.
Still in the early days of blockchain gaming, all blockchain game developers are discovering new ways to create value for players. Why? Creating value for players means creating value for the game developers. Mainstream games are built primarily for entertainment, social connection, personal satisfaction and recognition. But as we’ve seen, this quickly wears off. Blockchain games can deliver on these essential game elements and build intrinsic value that is sustained and can even grow over time.
Creating Value in Blockchain Game Assets
There are two fundamental elements that contribute to the value of blockchain game assets. The first is that assets can be transferred, bought and sold between individuals. With ownership comes the ability to hold or transfer the asset. This is a foundational component of asset value and a key differentiator for blockchain games. With “traditional” games, assets are kept by the game and value is reduced to zero when you stop playing the game.
The other way to create value is through scarcity. Basic supply and demand economics explains that scarcity is an underlying requirement when it comes to value. Scarcity is a powerful driver of value in blockchain gaming.
With the ability to transfer and scarcity as a foundation, there are three main levers game developers can look to when creating value in blockchain game assets.
- Hype the future potential of the game…then deliver.
- Enable asset level ups and improvements through game play
- Increase the utility of tokens: in-game and cross-game
Let’s dig in…
1. Hype it up then deliver
The most important way to drive value to blockchain assets in a game is to integrate them with a killer game design. Build a game that people love. That’s pretty straightforward. However, there is opportunity to drive up value even before a game is released.
Although gaming companies shy away from this description, pre-sales of game assets have become the new ICO-like model for blockchain games. In this article about Gods Unchained, it’s even described that “they raised $1.3M in 15 days.” This is a common descriptor for these pre-sales. White papers are being replaced by a sick storyline, amazing graphics and a hyped up game trailer. As a game developer, you’re selling a vision. You want people to believe in the future potential of the game and purchase your game assets. The majority of blockchain gamers today fall into this category of investor-player who buy up gaming assets even before the official game is released. Even though we had some basic gameplay from the beginning, there is no denying these are some of the early players we’ve seen in CryptoRome.
Building excitement around a game and growing an equally excited audience is a great way to create initial value of game assets. Of course, excitement alone is not sustainable and will wane over time if the game doesn’t deliver. In many ways, creating that initial buzz is significantly easier than actually delivering on the promise. Yet, a strong belief in the game potential (and by association blockchain gaming in general) has been the main driver for the sometimes jaw-dropping value attributed to blockchain game assets. Gods Unchained is a great example of a project that might warrant the hype. Fuel Games already proved they can successfully launch a game with Etherbots and had financial backing from some big players in the blockchain space including Coinbase. Unfortunately, similar to the ICO failures that became prominent news in 2017, not all games have delivered on their promises which brings some deserved skepticism to any pre-sale hype.
[As a brief aside, pre-sales are an important resource for game developers beyond asset value creation and revenue. These pre-sales also help validate your game concept with in-market testing. With these initial investor-players, game developers have a new community that is bought into the future success of the game. This community becomes an extension of the game developer’s team. They provide feedback (solicited and unsolicited) and motivate developers to deliver on the expectations that have been set. In this regard, Discord is an amazing resource for game developers, especially in the early stages of development. These players also make sure that you stay focused on creating and maintaining the value of their game assets.]
It should go without saying then that delivering on the hype by building a highly addictive, fun game brings with it huge increases in value. Here is where scarcity plays a huge complementary driver in the value of those assets. If a game attracts more players than the scarcity mechanism allows, the value of those assets will skyrocket! As a game developer, this is an opportunity — once there is sufficient demand for an item, new items can be introduced to drive even more value to the game.
2. Enable asset level ups and improvements through game play
When I was in my 20s, I played Tiger Woods PGA Tour on my Xbox…a lot. My golfer — Jon Bonus — was a force. I played that game so much, leveling up my character, maxing out my attributes. I even set an absurd goal for myself. I believed that if I made the settings easy on the easiest course, I could shoot a 40. Did I do that? Did I take a picture of my television when I did?
Blockchain, let alone blockchain in gaming, wasn’t around when I achieved this very impressive accomplishment. But let’s imagine for a minute that Jon Bonus was a non-fungible token that I owned. I would have the ability to promote in a marketplace that Jon Bonus shot a 40 and “Wouldn’t you like to play as Jon Bonus?” Someone could buy my golfer, presumably at a higher price than what I had originally purchased him for. I now not only get to experience the fun, entertainment and satisfaction of dominating the game, but I benefit in the added value that I built in my golfer when someone purchases him from me.
The ability to add value to your asset through gameplay is an essential element in blockchain gaming. It’s one of the key drivers for price setting an in-game asset. As a player, you should be able to think — “I can purchase this item for X, play the game, level it up and sell it later potentially for Y.” This concept only exists in blockchain games. This benefits game developers as well. If I were to sell Jon Bonus, what would I most likely have done? I would have bought another golfer, played the game again and again and tried to sell my new golfer. Through this, blockchain creates ways to build a stickier and a mutually beneficial economic relationship with the player.
Etheremon, consistently near the top of dappradar’s most popular blockchain games, gives players the opportunity to train their Mons (fierce little monsters that you can take into battles). Many play the game with the intention to level up their Mons and sell them to another player at a profit. By playing the game, players create value in their assets.
We saw a pretty remarkable event happen in the early days of CryptoRome related to this idea. Player 1 developed his profile, spent a good amount of money and countless hours in building his assets while improving his status in CryptoRome. He built quite the portfolio and recognition among the community. Along comes Player 2 who started playing the game and wanted what Player 1 had (and possibly more). Instead of taking the same path as Player 1, he simply purchased all of Player 1’s assets. This is the win-win scenario, as far as value is concerned, that is promised by blockchain games. The time and resources spent in the game by Player 1 is rewarded at a profit (the total exchange was worth 25 ETH / ~$6k at the time). Player 2 meanwhile, with one transaction gained significant assets and resources into his account and moved his way into a strong position of power in the game. Both players walked away happy with this fair exchange of value. We, the game developers, were even more excited to see Player 1 jump back into the game and start building up a new inventory of assets.
3. Increase the utility of tokens: in-game and cross-game
The final lever in building game asset value is introducing new ways to utilize an asset both within the game and with other games.
When someone purchases an asset in a game, they purchase it with the understanding of what the asset allows them to do. That is a convoluted way of saying they know what they get when they buy it. It allows them to play the game: to grow resources, to dress up their digital cat or field a team. Whatever the use, they have a clear reason for purchasing it. In addition, going back to the idea of hyping a game, players may also want to purchase an item based on the promise or expectation of what that item will deliver in the future.
As the game develops, there are opportunities for game developers to create new ways to use these assets. This delivers increased value to the assets while extending the life and value of the game. Both players and game developers gain value when an asset can be used in new ways.
What’s even more interesting with blockchain gaming is developing ways to use assets across games. When an item purchased in one game can be used in another game, it brings increased utility of the item thereby increasing its value. This is all made possible as a result of the transparency and decentralized nature of blockchain gaming. From a game developer perspective, it opens up your game to a new audience while making your in-game assets more valuable. These cross-game digital assets now warrant a higher price point if you can use it across different games. From a player perspective, that purchased asset instantly becomes more valuable because you now can play two (or more!) games with the same item.
In CryptoRome, we partnered with CryptoHorse, another blockchain game where you can buy, sell, collect, breed & race horses. Together, we developed 50 unique General-class horses in CryptoHorse. When brought into CryptoRome, these horses become Roman War Horses. We didn’t stop there. All of the regular CryptoHorses can be used in CryptoRome as Light Cavalry. It’s the same token used in multiple games. This puts the power and opportunity of public smart contracts on display. Traditional, centralized gaming companies cannot create a similar experience nor create value in the same way.
Blockchain gaming has a long way to go before it can rival mainstream games. For blockchain games to make the leap forward, it must play to its strengths. Focus on value creation with the assets that exist in the game. It is the most clear competitive advantage and will be the reason more and more games will be built on blockchain technology.
What am I missing? Let me know here in the comments or find me on Twitter (@jon_parise) or over on Discord (@jonbonus).
Special thanks to Doug Dimola and Brian Burns, my partners at GigLabs who have been my personal blockchain discovery sherpas.