Blockchain reinvents the “Virtual Asset”
In the fall of 2017, developers at Axiom Zen released CryptoKitties, a game that allows players to breed and trade virtual cats. Within a month, the in-game economy saw more than $1.3 million in sales with the rarest kitties commanding price tags as high as $114,000.
The web is filled with eyebrow-raising examples of gamers willing to spend staggering real-world cash on completely virtual assets: $4,500 for a blue party-hat in Runescape, $61,000 for a rifle-skin bearing the signature of champion Counter-Strike player Skadoodle, $635,000 — the most spent on a single virtual item ever — for a nightclub in the MMO Entropia Universe.
But, while CryptoKitties mania would seem to fit a familiar pattern of big spending by gamers, the dollar value is not what makes it a special case. Instead, it is the fact that users who purchased these one-of-a-kind kitties were participating in one of the earliest and most successful attempts to guarantee a virtual asset transaction by linking it to a blockchain.
Increasingly, developers look to blockchain, the underlying technology behind Bitcoin and other cryptocurrencies, as the driving force behind the next era of gaming innovation. A blockchain is a database for transactions which is constantly verified by its users and not by a centralized authority. Due to this decentralization, a good blockchain is considered un-hackable, and a marketplace built on a blockchain is therefore called “trustless” (i.e. no-trust-required). The promise of a massive, decentralized, secure ledger for virtual items represents a holy grail for the most avid gamers: a mithril-clad guarantee that they truly own their virtual loot.
Today, most virtual ownership is based on a very different model.
Traditional games are highly centralized, and gamers have few rights to items they win or buy in the game. The copyright for these items belongs to the game-maker who may alter, revoke, or delete them at will. For instance, a player can buy the privilege of using a premium skin in Fortnite, but Epic Games can prevent that player from accessing it on certain consoles or lock players out of their accounts if they run afoul of the terms of service. These conditions appear in most user-agreements and a player cannot opt out. Additionally, if a game ever shuts down its servers, gamers lose their investment since the power-ups and items they paid for no longer have a world in which to exist.
Other barriers to trade include strict bans on real-world sales between players for in-game items. World of Warcraft is a notable game that prohibits cash-for-content transfers, and the ensuing black market for gold and other items is a case-study for the risk and inefficiency that characterizes current virtual asset markets. These unsupported exchanges are risky because they lack trustworthy information and secure trading mechanisms. Fraud is common and players could have their accounts banned if caught by the company. Only a small subset of players is willing to enter into a black market, so millions of potential trades never take place.
Blockchain could disrupt the status quo by utilizing “tokenization.”
The most famous application of blockchain is for digital currency (i.e. Bitcoin, “Litecoin, Ethereum). But almost anything can be “tokenized,” — translated into data that the blockchain ledger can keep track of. This means that game developers could “mint” unique virtual items such as weapons, skins, or kittens. Fraud would no longer be a risk, since the ledger ensures everyone actually has the goods they wish to transfer. Furthermore, because each token has a unique address, blockchain guarantees the scarcity of digital assets and eliminates the possibility of counterfeit items: it would ensure that a one-of-a-kind legendary battle-ax is truly one-of-a-kind.
Additionally, if in-game items are tokenized, blockchain could allow gamers to retain some of their investment if their favorite game shuts down. For instance, a legendary battle-ax may no longer have a gameplay use, but it could be traded as rare collectible or “melted” — destroyed and converted back into the currency used to purchase it.
The blockchain would also allow gamers to safely barter items across games. Hypothetically, a mount in World of Warcraft could be traded for a Counter Strike skin at an exchange rate agreed upon by the players or determined by the open market. The benefits of this technology, however, extend beyond individual transfers. Because blockchain is decentralized, everyone can see the source code, leading to a more democratic relationship between developers and players.
Serious efforts to implement a blockchain based marketplace are already underway. Ethereum (the second largest cryptocurrency after Bitcoin) has laid important infrastructure by allowing users to tokenize on top of its existing ledger. This means even small games can instantly have access to a massive and safe network instead of starting from scratch with their own blockchain. In order to make it easy for developers to bring content to this budding marketplace, companies like Loom Network offer simple software development kits that function with common game engines such as Unity or Unreal. Other Companies such as Enjin, DMarket, and Bitguild hope to make participating in the market attractive and intuitive for consumers by combining cryptocurrency wallet services with platforms where virtual items can be searched for and traded.
If these innovations weren’t enough, there are some who imagine even wider applications for blockchain technology. On such believer is John Jacobs, better known by his screen name, NEVERDIE. Jacobs was the man behind the record setting $625,000 sale of the virtual nightclub and once campaigned to become “president of Virtual Reality.”
While Jacobs’ title is mostly for show, his projects are garnering very tangible support. Jacobs has raised millions in funding for his project, NEVERDIE which, like other platforms, combines a crypto wallet service with a virtual item marketplace. Unlike others, however, NEVERDIE allows players to tokenize their virtual identities in addition to their loot.
Jacobs sees blockchain as a way to revitalize the flagging MMO (Massive-Multiplayer-Online game) genre. The problem: players invest so much time and money into one game that they are reluctant to start from scratch in a new game. This means, budding MMO’s struggle to find a player base. Jacobs’ solution would be to allow players to use their avatars across multiple games. He likens the idea to visiting a new country in real life: the rules and customs may be new, but you still carry your experiences and your money with you. Implementation would be far from simple: how could a medieval fantasy character translate to a military style shooter, for instance? Jacobs, however, is confident that the challenges can be overcome. For example, games could disallow certain items that break their rules- no guns in a medieval fantasy- or set up systems to prevent experienced players from immediately overpowering new ones.
NEVERDIE is building a suite of VR games to act as a proof of concept that blockchain enabled characters can successfully crossover into different games. This functionality is only the tip of an iceberg in Jacob’s head where he imagines players have jobs, incomes, and livelihoods wholly in virtual spaces, empowered by the security of blockchain technology.
Whether video games stand on the cusp of a Ready Player One style multiverse or are merely adding layers to speculative crypto gambling, there will certainly be serious attempts to introduce blockchain technology into a wide range of games. The true test of the idea will come when a blockchain linked game comes out that is as fun to play as it is to think about. Until that day comes, however, virtual cat breeding will have to be diversion enough.
