Blockchain in the Video Game Industry (Part 1)
By the standards of world history, the video game market appeared only recently in the second half of the XX century, only about 30–40 years ago. In such a short time, games have conquered the world and become one of the most popular types of entertainment. Every third inhabitant of the planet spends time in the gaming world. Video games were one of the reasons that computers became cheaper and acquired the mass application. Games have contributed to the progress of the mobile phone market and other mobile gadgets. Almost all world trends find their reflections in video games, and, naturally, the blockchain phenomenon simply could not just pass the industry by.
To date, there are four effective options for interaction between blockchain and the gaming industry, and they are of the following types:
· Direct games based on the blockchain
· Tokenization of in-game items
· Monetization of proprietary author content
· Gambling/betting.
In this article, we will discuss in detail the first two categories.
Games based on blockchain appeared quite recently and have acquired world fame in late 2017 when the project CryptoKittes almost managed to halt the operation of the Ethereum network by overloading its bandwidth. How did it happen? Let me tell you.
CryptoKitties are pretty cute, digital kittens, each of which is a unique non-fungible token. To make it clearer, almost any cryptocurrency, among them both Bitcoin and Ether, are replaceable, that is equivalent to tokens. The irreplaceability of crypto-kittens is the feature that makes kittens collectible (digital collectibles), and this is the essence of CryptoKitties. In addition, the kittens can breed, but this process costs a certain amount of Ether. On December 4, 2017, the number of breeding kittens became so large that the Ethereum blockchain supporting the breeding process could no longer withstand the load. Transaction times reached critical terms, confirmations could take up to several hours (in comparison with the usual time of minutes). According to the developers of the crypto-kittens, the goal of the project was to popularize blockchain throughout the world. Well, having gotten into all the news headlines of the planet, they definitely achieved their goal.
Blockchain provides full transparency of transactions, as that is its essence. Everyone knows who owns this or that kitten and can monitor its movements between the owners/wallets. This fact is the basis for another category of games in the form of add-ons over existing blockchain games, but with fundamentally different mechanics. For example, owning a crypto-kitten allows one to participate in the battles of these kittens, where different external features give them different parameters, much like a video game combat unit. Unfortunately (or fortunately), such projects do not last long, but they are replaced by new ones on almost any subject, including dating, racing, stickers, fighting and so on and so forth.
The second type of games based on blockchain is city-building simulators like Fair City. The essence of such games is the construction of a city, where each new plot of land will have to be paid for in ETH. The larger the city, the more expensive are the plots bought by the forerunners and first players of the game, and since the whole history is kept in the blockchain, these plots become tradable assets. The projects themselves resemble classic financial pyramids, and given the almost total lack of gameplay, plot and even some remarkable graphics, at first glance, they seem useless. But it is not that simple. Their value resides in the fact that they revealed one of the most serious shortcomings of the blockchain system, and that is the network’s pathetic speed and the high cost of transactions, and they have given a serious impetus to the development of next-generation blockchains.
The second major line of integration of video games and blockchain is tokenization and trade/exchange of in-game items. You probably know that according to the rules of any game, it is forbidden to sell a rare and valuable item, except through official sources. For example, a sword (rare and unique) received in a raid on a boss can either be sacrificed for the benefit of the player’s guild or sold to a trader in some castle after receiving a comparatively small amount of in-game currency. And that is why there is a black market of in-game items in the form of third-party platforms, where they can be sold for real fiat money. But this market has little in terms of pleasantries, as it is rife with deception and nobody can guarantee the honesty of any deal. In addition, when trading on the black market, users directly violate the terms of the game and risk losing the character, or even their account in the event of the discovery of such an illegal trade transaction.
Recently, projects have appeared that encourage game developers to tokenize, that is assigned a digital signature to in-game items, which will be stored in the blockchain. This will make the exchange and trade market transparent and the honesty of deals will be guaranteed by smart contracts, and game loot can be earned in earnest. It would seem that this should not be very beneficial to the developers, because then the players will stop buying lockboxes and it will be easier to buy the goods they need on the exchange. But there is a problem only at first glance. First, nothing prevents the developers from imposing a tax on such sales, and secondly, the value of the items themselves will grow, because by having a digital signature they become very close by their characteristics to items endowed with real value. And thirdly, given the recent changes in European legislation, which almost equated lockboxes to lotteries and gambling, their days are almost numbered.
The tokenization of loot will allow for the advent of new types of in-game financial interactions, for example, the rental of items. And the trophies would become real, as they would have a history that increases their value. Just imagine, you can buy the dagger that the winner of the world championship in Counter-Strike in 2016 used to epically slaughter a sniper 3 seconds before the end of the round. Remember that fight? Six hours on one map, a two million dollar prize fund, and the losing team throwing keyboards and monitors at the audience…
In the next material, we will tell you about the other types of game tokenization options, but until that material is released, think about this: powerful video cards and the value of something that does not exist in the real world have always been the prerogative of the gaming industry. And these factors are the drivers of the cryptocurrency market. Without graphics cards and mining, there would be no Bitcoin and Ether, and without the understanding that the result of mining could be evaluated and sold for real (fiat) money, it would have all passed unnoticed.
