There is no doubt the gaming industry will continue to scale and grow. With a whopping 2.3 billion gamers worldwide, it is by far the largest entertainment industry.
Blockchain gaming and crypto assets have been emerging and slowly creeping into the gaming industry. Game developers are looking to blockchain as a solution and enhancement for current games. Companies are aiming to partner and invest in blockchain games. At the same time, gamers are becoming increasingly interested in digital assets.
The recent investment by Naspers and new venture by Animoca Brands shows clearly what top companies think of this growing industry. While the current state of blockchain gaming is somewhat insignificant, this statement won’t stand for long.
The gaming industry has consistently garnered a lot of attention and luxury brands are now venturing into this industry as well. Louis Vuitton is the latest to hop on board and they are making virtual items for one of the most popular games in eSports, League of Legends. This partnership will last until the 2020 finals in China and Louis Vuitton will seek to continually expand their audience in the digital realm.
In April, Moschino partnered with one of Electronic’s Art top life simulator game, Sims 4. Pieces from this Italian luxury brand can reach up to $1200 making it hard for an average person to obtain. By having a digitalized form, it provides a more affordable alternative for people to show their support for the brand. Clothes and accessories that resemble the real Moschino items cost around $10 a set in-game.
Quidd, a digital collectible marketplace, raised $13m 2 years ago with the help of VC firm Sequoia Capital. They have over 6.8 million users and has issued over 2.1 billion individually serialized digital collectibles. With over 300 top brands and over 200 thousand monthly active users, there is still a huge demand for digital assets.
The problem with current virtual items
There has always been a demand for game items and people are willing to spend truckloads of money on them. A virtual nightclub in Entropia was purchased for $100,000 and the original buyer managed to resell it for over $600,000. You can see that there is a lucrative market for virtual items but there are many problems as well.
Security and trust issues
For huge purchases mentioned above, the risk of a scam will indeed be higher. Moreover, transferring huge amounts of money might be a problem due to bank regulations and will take time to process.
In January 2019, over 80 million users on Fortnite were at risk of getting hacked. If this was exploited, the payment card details on the accounts could be used to purchase in-game currency.
Most games offer skins and cosmetics in-game. However, besides your character looking cooler than others, the skin doesn’t normally serve any additional purpose.
Most virtual assets don’t have any value after you purchase them. Be it a skin, a character or upgrades, there isn’t a way for players to sell them or trade the item with other players.
The items you buy in-game are rarely convertible back into cash. Although there are open marketplaces that allows trading of items, it is still not easy to liquidate your game items. Popular gaming platforms such as Steam have their own marketplace but don’t allow withdrawal of money earned by selling items.
Players owning an item in-game don’t really have ownership of the item. If a game actually shuts down the next day, all the progress and items of the player will be lost.
How will blockchain help?
This is where the beauty of blockchain comes in. By converting in-game items into digital assets on the blockchain, magic happens.
In August, Animoca Brands has agreed to acquire Quidd for $8m to bring blockchain into the collectible platform. By tokenizing virtual items, the owner actually has full control over the item.
Enjin, the leading project in blockchain gaming, has created its own token standard (Erc-1155) for game assets. It also created the world’s most secure cryptocurrency wallet in which you can view your digital assets. In order to use an item in-game, you will just need to link your wallet to the game. Your items do not need to be transferred in-game and you will maintain ownership at all times.
Even if the game gets deleted or shuts down, your digital assets will still be alive.
Due to game items being on the blockchain, there can be numerous use cases for them. Enjin, Cocos-BCX, MCH+ all adopt the idea of multiverse items. It works the following way: one item (a sword, for instance) from a game can be used in another one as well (as a shield, for example). That’s how amazing blockchain can be.
Another cool use case that originated from Forest Knight, a game on Enjin, is founder tokens. The original idea was to have games airdrop digital assets to people who hold their founder tokens. Many games have adopted this concept and even added more benefits for their founder token holders. Some games provide early access while some give founder tokens a special ability in-game. It’s like generating interest but in the form of digital assets.
As blockchain assets are created, they will have a limited supply. We look into the example of Enjin items in which the supply is stated when they are minted.
When a game attracts new players, an item with a lower supply gradually increases in value. Imagine 10 thousand of players fighting over an item of 100 supply. Things will be intense.
Enjin assets are also backed by a certain value of Enjin coin when it is minted. This by itself provides the item with a real-world value instantly.
Since an item can also be used in multiple games, this further enhances the value of the asset.
Most blockchain games run their own marketplace for their players to trade-in. Players can easily sell their in-game assets for crypto in which they can cash out.
Open markets such as Opensea support game items from numerous games all across the Ethereum network. This provides users with access to a larger and alternative marketplace in which they can trade their items on.
Transactions containing huge amounts of money can be easily carried out due to the nature of blockchain. Both parties can be sure to receive their agreed terms as no one will be able to disrupt the smart contracts that carry the trade out.
Furthermore, blockchain gaming accounts are way harder to hack. Most game accounts will be linked to your crypto wallets directly in which you have full control of.
With so much added value and utility blockchain assets can bring, it is no wonder big names are jumping in on this. The usefulness of blockchain doesn’t stop here.
In gaming besides user growth, another important aspect is user retention. By using blockchain, there are many ways to incentivize players in order to keep them playing.
- Having blockchain loots that players can withdraw and sell right away
- Having a leaderboard that pays out tokens/blockchain assets
- Limited time events that give limited edition blockchain items
- Special crypto rewards for reaching a certain level/completing a certain task
The crowd will start streaming in when people realize they can get rewarded for spending time on a game. Put 2 similar games side by side: one without blockchain and one with blockchain. It makes perfect sense to commit your time to the blockchain game if you had to pick.
Games in the future will not only be considered as entertainment but also a source of reward. Most people play (for a couple of minutes or maybe hours) and getting incentives is amazing. We also know for sure that many people have the spending power for game assets. It might be still early but everything is shaping up. It’s a matter of time before blockchain gaming explodes.
Great post Ezekiel. Enjin just released their new marketplace which should make the trading of ERC-1155 assets much easier int he future, especially since it can be done from their mobile wallet.