Gaming on Chain — What’s going on the Block?
There is a lot of talk about Blockchain disrupting this industry, or that industry. Considering the gaming community has always been at the forefront of new technologies, let us have a quick look into the love affair between blockchain and gaming as well as some companies to keep an eye on.
Gamers and Crypto: Love at first sight
Even before bitcoin, gamers were used to trading virtual assets. In fact, Brock Pierce build a whole global business around acquiring and then dealing in virtual gaming goods.
There are several reasons for that. First of all, the idea that value does not equal money has been at the heart of the gamers’ brain for quite some time already.
Let us have a look at one of the most successful Games of this century: World of Warcraft (WoW). Launched 2004, the online multi-player role-game accounts for up to 10 million online users at peak time. Within the game, it is possible to buy any kind of item using the WoW currency called “Gold”. Using some digital currency for buying things — does that sound familiar?
As soon as there were players who figured out how to farm rare items that helped others level up their game, a marketplace outside of the game was created. On this marketplace, one player could buy rare items from another for fiat money. At this point, they had crossed the line from value digitally represented in a game to “real world” money e.g. fiat. This does easily translate into our current crypto ecosystem where one can exchange from cryptocurrencies represented on the blockchain in and out of fiat using exchanges.
The most important turn here is that, after generations that perceived value as something preserved in money or other real-world assets, this generation accepted the fact that value can be stored digitally as long as both parties involved in the transaction agreed upon it. From there, the step to using cryptocurrencies is just a small one.
Another fact that might have contributed to the early acceptance of crypto in the gaming community was the rather low hash rate for mining. So while one was not gaming, one’s gaming equipment could earn money. And who doesn’t love some free money?
But how about blockchain technology in gaming itself?
Problems of the traditional Gaming industry
To understand the real value that blockchain can provide for the gaming industry, we will have a quick look at some problems the gaming industry is facing.
As long as people strive to win more than to stick to the rules, there will be people trying to cheat their way to victory. Unfortunately, the gaming industry has developed a sub-economy for cheaters that allows anyone to purchase different kind of tools to get around the rules or to effortlessly gain super-powers.
In a study conducted by Irdeto (9436 participants), 37% confessed that they had cheated during a game (13% always, 9% often, 18% sometimes, 12% rarely). One challenge to overcome is the realization of an honest player that he cannot win against the cheater without cheating. Hence, 90% of gamers in the study expressed that they have had negative experiences with cheating. Despite being widely known, it is very difficult to fight this problem from the demand side, since the most obvious effect of someone cheating is his superiority towards other players.
Centralization in Tournaments
Similar to other industries, centralization is creating challenges in the gaming industry. When it comes to tournaments, the gaming companies are setting all the rules, decide who can participate and in the end, the power always remains with them.
As Vitalik Buterin himself painfully experienced once: “I happily played World of Warcraft during 2007–2010, but one day Blizzard removed the damage component from my beloved warlock’s Siphon Life spell. I cried myself to sleep, and on that day I realized what horrors centralized services can bring. I soon decided to quit.”
Nowadays, popular video games still cost around $50. Even though it seems to be a reasonable price, it still invites people to hack software or games to make them available for free. Making software and games available to the masses for free might seem like a noble act, but it is an act of crime unless explicit permission is given in its license.
A study conducted by PC Gamer suggests that 25% of PC gamers have pirated more than 50 games in their lifetime. The younger a gamer, the more likely he is to pirate games. This is not surprising if we take into account their lack of financial resources to actually purchase a game. Despite massive efforts by the gaming industry to fight piracy, it remains an ongoing problem.
Ironically, a study conducted on behalf of the European Commission comes to the conclusion that piracy in the gaming industry might even have a positive effect in the sense that it increases sales of games.
Another problem that mainly originates in centralization. As for now, if an individual develops his own game, he will use centralized platforms to distribute his work. In return for giving him market exposure and making his game visible for all their followers, centralized platforms ask for a considerable amount of the profit. Sometimes this eats up to 30% of the revenue.
Ownership of Assets
In a vast majority of games, we have in-game assets that are tradeable, purchasable and can be sold for fiat. It is not rare that gamers invest more in such in-game assets than in the purchase of the actual game. This market is expected to grow to an amount of $32bn by 2020.
In the end, all these digital assets are nothing but lines of code in a program and therefore can easily be tampered with. It is very frustrating for any developer who created an item to watch how it is being given away without his permission. Needless to say without him receiving any payment.
Blockchain — The cure for all problems?
If you have been following the blockchain industry for a while, you will have noticed that blockchain is praised as a solution for all problems.
Want to get rid of high transaction fees? Blockchain.
Want to save world climate? Blockchain.
Faster Access to Jesus? Blockchain.
Without arguing too much, there are a handful of use-cases where blockchain makes sense and increases efficiency. I just wanted to raise awareness that every implementation should be seen with a critical eye.
For gaming, there are some obvious benefits of integrating blockchain.
Another way blockchain could help the gaming industry as well as improve gamers in-game experience is by making it significantly more difficult to cheat. One way this is achieved is by having a track record for everyone visible of a players game journey, this means someone can just enter a new level, if he clearly has advanced that far. Every intent to cheat would be recorded and noted, therefore cheaters would be denied access to certain levels.
Blockchain being a tamper-resistant distributed ledger, where all made transactions can be traced back, is the ideal database for fighting online piracy. Blockchain can be used to deliver licensed software to the customer without having to worry about inauthentic use or illicit distribution. If the user licensed is stored on-chain, every product ID can be tracked to the corresponding user ID. Thus, a product registered to a customer cannot be used by another individual.
On a side note, Sony has filed a patent for a blockchain based Digital-Rights-Management System. So even big corporations start to consider using blockchain to control their rights.
Since blockchain is known for empowering the people by cutting out the middle-men, implementation of this technology can solve the problem of one entity in control of all the rules of a tournament. Depending on the model adopted, it could be possible for gamers to vote on rules to be implemented as well as setting the entry fee. Price money could be handled by a smart contract that will only release the money if certain conditions are met.
Another way how blockchain facilitates tournaments is by setting up a low-fee, trustless and secure ecosystem, where no single entity can control or enrich itself from people betting on tournaments. Additionally, the use of blockchain increases the barrier for those trying to cheat and change results afterwards.
As previously mentioned gaming platforms charge developers up to 30% of their revenue. Blockchain gives creators the chance to develop a new reality without any intermediaries. In this reality, they will be paid fairly and can easily interact with their users. To name one example: GameCredits allows developers to keep up to 90% of their revenue. In comparison to 70%, this is quite an improvement.
Ownership of Assets
The most beautiful benefit of blockchain for gaming comes in the form of non-fungible-tokens (NFTs). Each NFT is unique and distinguishable from every other NFT. This makes them a perfect match for in-game items. On the one hand, it allows in-game item developers to stay in full control of the items they created and to monetize them. On the other hand, it allows gamers to verify the provenance of an item they are about to purchase. If widely known standards such as the ERC 721 are being used for building the NFT it enables easy trading even outside the boundaries of the game.
All in all, there are several benefits and problems being solved by using blockchain technologies for gaming. However, there are still some technical limitations that come with it.
Some limitations of Blockchain Games
One of the largest problems, when building games on top of current blockchains, is scalability. Assuming there was a massively popular game that required hundreds of thousands or even millions of transactions, most blockchains could not handle that yet. To name an example, during the Cryptokitties craze, game transactions occupied a big part of the Ethereum network and drove gas prices higher and higher. It rendered the Ethereum network basically useless for a while.
However, I am optimistic when it comes to the problem of scalability. There are already several blockchains trying to cater to the needs of games and, more importantly, innovative dapp developers that use sidechains to get the transaction load off the main chain.
Another problem blockchain games together with the whole industry are facing is a lack of talent. There are not yet many professional gamers and development companies focusing on blockchain games. Nonetheless, blockchain and gaming are still in a very early phase and with more and more gaming companies getting into the space, I am sure that this will lead to more variety, improved gaming experience as well as technological progress.
A few players to keep an eye on
Please note, this is not an extensive list, but should merely give an idea of what kind of companies are active in this space. For an extensive overview of dapps dappradar is a good place to start.
Animoca Brands is an innovative mobile game publisher and developer company listed on the ASX. Animoca Brands has put a lot of effort into blockchain and acquired a leading edge against competitors. Their CEO Yat Siu stated: “We believe gamers are the first and easiest frontier for blockchain adoption. Animoca Brands is on a mission to use games to onboard the next billion people on to blockchain. “ Not only are they launching several games on-chain, Animoca is heavily involved in the Sandbox and partnering with well-known blockchain dapps such as decentraland. Only a while ago they partnered with Formula 1 to develop a blockchain racing game. It will be exciting to see if they can fulfil their vision of bringing billions to the blockchain via games.
Kyber network is essentially a liquidity-provider running on the blockchain. You might wonder, why a liquidity provider pops up in a gaming article. Imagine the following scenario: A gamer owns the stablecoin DAI. Now he wants to buy some Land in Decentraland. First, he would have to exchange his DAI for some ERC Token. In a second transaction, he would then exchange ERC for Mana (the Decentraland currency) and finally, he could buy the land in Decentraland. Makes 3 transactions in total and each of them involves paying a transaction fee. Sounds impractical? Indeed.
Kyber network is processing the aforementioned transactions in the backend. So from a user point of view, land can directly be purchased with DAI. This decreases the entry barrier and enables seamless trading between different games and currencies. Therefore, I think it is safe to state that, liquidity-providers will form an essential part of the blockchain gaming landscape.
Probably most people outside of Japan have never heard about this one. It is a Japanese dApp that combines some basic elements of pokemonGo with the possibility to earn Nekopoints (“Cat points”) that can be exchanged for the cryptocurrency Arukoin (“Walk coin”). In Game the player has a cat avatar that is moving together with him. Through exploring new places, new points can be earned. Considering the addiction factor that pokemonGo had, this might have a bright future. It for sure has some hype in Japan and if they manage to onboard partner shops that accept arukoin as payment popularity could easily grow.
These are just 3 companies, that are active in the blockchain gaming space. Apart from dappradar, everyone interested in games can also find a list of blockchain games here.
One thing worth mentioning is that in comparison to other industries blockchain might not “disrupt” the gaming industry, but rather help solve some pressing problems. Looking at the payment sector, blockchain companies are trying to eliminate the banks. When it comes to gaming, with the increasing market for in-game assets, even game companies can profit by blockchain without having to fear to lose all of their market shares. Maybe gaming could turn out to be a trojan horse to mass adaption.
If you found value in this article, please “clap” (up to 50 times).
This article is part of our Tokyo FinTech Publication, please follow us to read more from our writers, like hundreds of readers do every day.
Should you live in Tokyo, or just pass through, please also join our Tokyo FinTech Meetup. In any case, our LinkedIn page, Facebook page and our Instagram account are there for you as well. Recently, we also launched the Tokyo FinTech Podcast.