When CryptoKitties slowed the Ethereum network to a crawl in 2017, it showed the limitations of games built entirely on the blockchain. But this doesn’t mean blockchain-based systems can’t be integrated profitably into more traditional games.
In the short term, there are two main opportunities for the video game industry to take advantage of blockchain technology: secure in-game transactions and digital collectibles.
In-game transactions
In-game transactions are an essential feature of games where money is at stake, like poker and gambling apps, or any kind of party game where players make wagers. Unlike simple one-off purchases, which can be accomplished securely by credit card, such games require players to make a pool of funds available for the duration of a game.
Traditionally, players make an account with a custodian who holds the funds that are used during the game. They never have possession of the digital tokens they play with and have to trust the game developer and their partners to be transparent and look after their assets. Blockchain represents an obvious solution to these trust and custody issues.
The online gambling market is growing rapidly, and is estimated to be worth $94 billion by 2024. Boasting of enhanced funds security thanks to blockchain is one way players might be able to get ahead of the pack.
This incentive is especially appealing for smaller, independent games publishers. Gambling games don’t require advanced graphics or complex physics engines. They essentially imitate tabletop games and are hence ideal for small teams to develop. The upside of making a successful gambling game can be immense, generating a steady stream of revenue. Fast development times with potentially high rewards will continue to drive activity in this sector.
Demand for such games is also likely to receive a boost from the ongoing coronavirus crisis. With people staying home like never before, more online gaming will certainly happen globally at scale. Social distancing will lead to an increase in casual gamers playing simple games on their smartphones or tablets. Party games for people in quarantine who want to have fun with friends but can’t spend time together will prove especially popular. Games like this can incorporate wagers and bets – and we’ll only see more of such games choosing to use blockchain as infrastructure for their transactions.
Digital collectibles
Blockchain can also be of use to the video game industry by providing digital collectibles in the form of non-fungible tokens.
The collectibles market represents a huge opportunity. While the explosion of CryptoKitties was largely down to novelty, there are already popular digital collectibles within the gaming industry that could benefit greatly from the security of blockchain.
Digital collectible card games have generated revenue over $1 billion every year since 2015 and that market keeps on growing. Consider also the profitability of online games like Overwatch or Fortnite. This is down to microtransactions – people buying items in the game, such as new costumes for their characters.
Gaming makes clear why digital collectibles are popular. These items let you do new things in the game. They let you customize your virtual world.
Non-fungible physical assets will eventually be tokenized on the blockchain to take advantage of market liquidity. However, the growth of security tokens like this requires significant legal infrastructure to bridge the gap between physical and virtual.
In the meantime, blockchain appears to be the natural solution for digital collectibles. We’re sure to see more online games taking advantage of it in the near future.
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