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How Blockchain Revolutionizes the Gaming Industry?
By Manoj Dharra & Laxmikant Khanvilkar
Gaming Industry Transcends from Arcades to Consoles, Online, and Beyond
Ah, the captivating realm of the gaming industry, a journey that has taken us from the enchanting arcades to the comfort of our living rooms with consoles, and now even further into the vast expanse of the online world and beyond.
Throughout its history, the gaming industry has been characterized by perpetual innovation and evolution—starting in arcades and shifting to in-home consoles, followed by moving online to join players across the globe, and now onto the blockchain.
According to Deloitte estimates, the gaming industry market size will reach $435 billion by 2028, corresponding to a record compounded annual growth rate (CAGR) of almost 12.1 percent from 2022 to 2028.
“We found Gen Z and Millennial gamers surveyed play an average of 11 hours a week, turning to gaming over traditional forms of entertainment,” Deloitee said in a note.
Various reports suggest investment in blockchain gaming is growing rapidly and that the sector will attract investments in the range of $2.3-2.6 billion in 2023.
The DappRadar August 2023 report shows an average of 758,330 daily unique active wallets (UAW), representing a 6.4% increase from July and a commanding 37% of all blockchain activity in August.
Customers might have more than one wallet, therefore it’s not always the case that there are unique active wallets. Be that as it may, it is a robust indicator of player engagement in games.
Developers of more conventional video games are looking at Web3 integration as blockchain technology develops. Games markets like the Epic Games Store are gradually considering hosting Web3 games. These steps in bridging Web3 and traditional gaming bring a much wider potential audience.
Blockchain gaming’s distinctive features derive from the blockchain-enabled functionality of their in-game assets and the use of cryptocurrencies to pay and get paid.
Players can buy and sell associated NFTs for in-game assets, like characters and items, quasi-independently from their parent games, connecting these assets to the wider NFT marketplace.
Digital assets stored on the blockchain become the unique personal property of the gamer, unlocking entirely new gameplay and market possibilities—a step that changes the business model for developers and the value proposition for players.
Furthermore, storing these digital assets in a wallet outside of the game creates security and value, allowing gamers to transact as they wish.
Game developers could theoretically introduce buying and selling functionality without blockchain technology, but they wouldn’t be able to take advantage of the existing technical and economic infrastructure of NFT marketplaces, which has no real non-blockchain analogue. The London Stock Exchange will not help you sell your Pokémon yet.
Therefore, in short, the main purpose of blockchain gaming is
- Blockchain technologies can be used for native purposes to record the transactions of in-game items or currencies.
- Blockchain uses smart contracts, which effectively allow the players to monetize their in-game assets and rewards earned while playing the game and transact with or sell them to other gamers.
- The gaming industry bears the brunt of fraudulent activities, and the vulnerability is on the rise. With the help of blockchain technology, these vulnerabilities are completely taken care of and can help eradicate the possibility of hacking.
- With the help of blockchain technology, players can store their in-game assets and collectibles safely in their digital wallets.
- Blockchain technologies enable seamless cross-border transactions of cryptocurrencies and assets.
After going through the above salient features, you might question why anyone would want to buy someone else’s video game character. Perhaps, for games that are sufficiently popular—or likely to become very popular—a much bigger marketplace than just players might be interested in having a stake.
Web3 game characters have desirable characteristics that improve player performance, which might be valuable to a lot of people, making them an asset worth owning.
Are games popular enough—and are assets useful enough in gameplay—to warrant a separate trading market? The most popular blockchain games only have a few hundred thousand daily unique active wallets.
Many blockchain games require users to have ‘wallets’ to play and track user identity, transactions, and activities. A hundred thousand players are nothing to sniff at, but compared to blockchain games, traditional games draw tens of millions each day.
Blockchain is constrained by reach, so perhaps its long-term success depends on its unique asset trading features and the ability of publishers to onboard tens of millions of players and raise its reachability.
Traditional gaming giants like Ubisoft, the publisher of the successful franchise ‘Assassin’s Creed’, forayed into the Web3 gaming space.
Square Enix, creators of the 180 million-copy-selling Final Fantasy video game series, launched the website for their Web3 game ‘Symbiogenesis’. The company is running competitions for prospective players to create, and potentially win, playable characters in November, with the release of the game itself to follow. There are numerous examples, such as those above, to portray how traditional gaming giants are foraying into the Web3 gaming space.
In our Brand Watch, we have already covered Nike’s partnership with EA Sports, publisher of FIFA, the world’s best-selling sports video game. Fashion brands have been partnering with video game publishers for decades as more people spend more and more time playing. The idea that players will enjoy greater status because their character is nicely kitted out isn’t that much of a conceptual leap. Just as it’s not that hard to believe that a guarantee that apparel is unique not just within one game but every video game in existence is something people would pay for.
Blockchain technology provides the infrastructure for a broader conception of ownership. Players can monetize the time they’ve invested in levelling up their characters. In a few games, players can loan out their characters to those who don’t have the time to train or can’t afford to buy higher-level ones. Because who doesn’t want to spend a magical day as a level 1000 wizard with Tiffany earrings and a Gucci cloak?
Things that blockchain technology can fix:
For players, perhaps the most valuable use cases that blockchain and digital assets could address are the true ownership of avatars, assets, items, or currencies and their safety, security, transparency, removal of restrictions, and seamless cross-border transactions.
Going forward, as for the digital assets in games, they will likely continue to evolve and permutate based on emerging trends, consumer behaviors, and technologies that drive new gameplay experiences. As widespread adoption occurs, so too can innovation in how developers choose to leverage digital assets.
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