Game development is a high-risk, high-reward business that requires substantial investments in programming, math, and sound and graphic design. So developers are understandably wary of committing to, and spending money on, an additional technology such as the blockchain. The good news is that there are some awesome projects underway aiming to make it easy and seamless to integrate the blockchain into your games.
In-game items and payments are being decentralized. With the right tools, you won’t just get access to helpful new technology. You’ll be opening up your games to a truly global gaming community. However, to do it right, you’re going to have to be part of a massive industry rework.
Making money from games
The Internet has completely changed the economics of the video game industry. It used to be simple; build a game then sell it to players for a fixed price. The development of online gaming has made things more complicated. Players now want to play alongside other players from around the world in games like World of Warcraft, earn in-game currencies and items, trade with each other, and experience constantly evolving virtual worlds. These days, games need investments and development long after release.
Combine this with the fact that development costs are spiraling out of control and that the retail prices for many types of games are actually going down, and you can see why the industry is in need of new ideas. The old economic model doesn’t work in this new environment. Developers are now trying out different ways to make money on their skills and creativity.
Advertising and extra downloadable content are good streams of continuous revenue for some, but many players are frustrated with where this model is heading. We’ll be looking at what might be the most exciting and controversial method being developed in the gaming industry: In-game purchases.
In-game transactions
We’ve all encountered in-game transactions before, especially in mobile game. Many mobile games are free to download and use, but certain features will be locked until you pay. These games are called free-to-play.
Since the 2000s, small in-game “microtransactions” of $1–5 have also started to find their way into console games too. One of the first examples of this business model was the controversial horse armor pack: A $2.50 add-on for The Elder Scrolls IV: Oblivion. The gaming community had mixed reactions to this development. Understandably, some hate the idea of having to pay even more after paying full price for a game. But others love the idea, and they are more than happy to pay for in-game extras. Sometimes they pay hundreds or even thousands of dollars on a regular basis to access these items.
In-game purchases and microtransactions let players spend as much as they want. Many gamers get to play epic games for free or at a heavily discounted price, while the big spenders can splash out new characters and items, paying for the bulk of the game’s development costs in the process. We’ve seen this happen in the mobile market where at one point 50% of mobile game revenue came from just 0.15% of players.
This new model requires a different way of thinking. Xbox Live’s general manager Cam Ferroni said, “You have to stop looking at video games as a toy and start looking at them as an entertainment service.”
So as a developer, what tools are there to help you deliver this entertainment service without significant time or financial investments?
Current platforms
Platforms like Steam and Roblox are currently the best outlets for game developers to create and market in-game items to players. Steam allows developers to use their marketplace and in-game payment pathways to sell in-game items and generate revenue from games continuously. Roblox is a game development platform that lets you build games and items to sell to other players. While these platforms have paid out millions to developers, they aren’t perfect.
Payments are slow, and transactions on credit cards and PayPal massively cut into the profits for small transactions. Valve’s cut of transactions on Steam isn’t published, but apparently it lies around the 30% mark. The Roblox marketplace fee is around the same. The marketplaces are also tightly controlled and closed off from each other and other game marketplaces. A new business model is desperately needed.
Blockchain solutions for in-game monetization
The blockchain is the ideal solution for many of these problems. It isn’t just going to make things easier, it’s going to change how we think about games.
This isn’t just a guess either. The first blockchain games are out, and people are going crazy about them. It all started with Crypto Kitties, a blockchain-based game that allows you to own and breed new cartoon cats. Each crypto kitty is “one-of-a-kind and 100% owned by you; it cannot be replicated, taken away, or destroyed.” They are cryptocollectibles. The game is so popular that, at times, it has taken up to 30% of the transactions on the Ethereum network, and certain kitties are selling for tens of thousands of dollars. Total Kitty sales are over $22 million in just the first few months, and the developers behind Crypto Kitties take 3.75% of every transaction. Crypto-asset trading can be very lucrative for developers.
Crypto Kitties is just the beginning. Streamlined transactions, true ownership of digital assets, and seamless integration with eSports betting are some of the immediate benefits of blockchain technology for both developers and players. And there are some killer projects to help developers make it happen.
1. Cryptocurrency: In-Game Currency 2.0
Streamlined transactions are the most immediate benefit after implementing blockchain technology. Cryptocurrency transactions happen on a blockchain, and when implemented well they are fast, safe, and cheap.
With cryptocurrency, in-game transactions can cost mere pennies and happen in seconds. This makes true microtransactions a much better prospect, especially for developers. Even the cheapest game items can have big profit margins, and the money will be in your account almost instantly.
Digital coins and currencies in games are nothing new, the difference with cryptocurrencies is that they are decentralized. That means transactions don’t need to go through a central server. Think about how Bitcoin removes the need for banks in transactions. This means that players take responsibility for their own tokens, and store them in their own wallets. As a developer, you won’t need to worry about security, fraud, refunds, and many other headaches and legal issues that come with the responsibility of running a centralized virtual currency.
Another great thing is you don’t even have to implement all this yourself. BitGuild is a project that’s making cryptocurrencies easily accessible to developers. At the core of that platform will be a gaming-specific cryptocurrency called PLAT token. Gamers will be able to use PLAT tokens to buy and trade games, in-game items, and currencies.
The idea is to make the blockchain plug-and-play. When the platform is complete, you will be able to easily integrate PLAT payments directly into your games. In-game payments and microtransactions will be available without having to setup up all the different payment channels. Players can buy or earn PLAT tokens and use them on any of the games using the BitGuild platform, or they can sell their tokens to cash out.
In-game economies are a big deal. They had already grown to a $15 billion dollar industry in 2012, with $2 billion in World of Warcraft alone. Crypto tokens could make these economies an order of magnitude larger yet again.
Cryptocurrencies do come with new bottlenecks, however. Blockchain transactions can’t be refunded, and players will be responsible for their own currency. This means if players and developers aren’t careful, there is the potential for hacks that can’t be reversed like the ones we’ve seen with Bitcoin. Also, the Ethereum and Bitcoin blockchains are currently having problems with congestion. There are some promising solutions being looked at, but this could be a problem if it gets worse.
2. Real Ownership of In-Game Assets
Have you ever thought that that new Counter Strike skin you landed was cool? Imagine the same item, but living permanently on the blockchain, provably unique and stored in your own wallet. Now that’s boss!
Digital tokens can represent more than just currency. Game assets like items and skins can be coded into crypto tokens along with their unique appearance, characteristics, and histories. Bitcoin works as a currency because Bitcoins can’t be copied or replicated. The same can happen for in-game assets. These characteristics mean that players will be able to truly own their digital assets. Items are all completely unique, just like items in the real world.
Crypto Kitties proved that people love true ownership of digital items, and it’s easy to see how this idea can translate into the video game world. If people are going crazy for unique cats, imagine what will happen when unique characters and items with their own histories and characteristics are available for use within popular games.
Enjin Coin provides a platform to do this. You can use Enjin Coin to “mint unique in-game items, currencies, and virtual tokens using Enjin Coins as the parent currency. These assets can be converted back into ENJ anytime.”
Based on Ethereum, it’s a collection of open source smart contracts and software development kits that you can use to easily integrate the blockchain into your games. Your players can even trade assets across other games that use Enjin Coin too. Enjin is already a powerful social gaming platform, and having a common decentralized currency marketplace can unite these communities even more.
Counter Strike: Global Offensive was widely regarded as a flop when it first came out. That was, until they released The Arms Deal Update, allowing players to trade weapons skins with each other and “experience all the illicit thrills of black market weapons trafficking.” After that update, the number of monthly players skyrocketed, growing 26 fold in the next three years. That’s a ridiculously high jump, and the same could happen for the whole gaming industry.
Players are begging to trade useful and unique items with each other. Blockchain platforms like Enjin Coin could help you integrate these features into your games and open up new revenue channels in the process.
As for cryptocurrency, a potential problem with tokenized items is that players have to take responsibility for them. Developers will need to find ways to help all players do this effectively. Also, items will only be transferable between games that use the same blockchain. Choosing the right one will be important.
3. Direct Betting in Competitions
Streaming platforms like Twitch have brought eSports to the big leagues. The industry is projected to have over a half a billion viewers by 2020. But there’s still one key ingredient missing. Betting. In regular sports, revenue from betting on a game far outweighs the revenue from everything else. So far, the eSports betting markets betting hasn’t enjoyed the same success.
ESports betting is already measured in the billions of dollars but the industry is heavily restricted by prohibitive laws in countries like the US. The potential is there, but most of this betting is concentrated in only a few games. The main game is League of Legends which has a 38% market share and more viewers than the NBA finals. All this has been done in just a few years.
But a large problem is prohibitive regulations. In fact, eSports betting is banned in the US. Unikrn is an established eSports betting platform, and UnikoinGold is their blockchain solution to these problems. They intend to use the power of cryptocurrency to open up eSports betting across the world. Users will be able to bet on professional eSports matches, play for UnikoinGold in competitive video game matches, and host tournaments. No bank account is required.
Developers should be excited about this. UnikoinGold will be an extension to platforms like Twitch that could allow players to bet on the games they are streaming from within their game launcher. Just plug it in and offer a completely frictionless streaming/betting experience to the players.
Conclusion
The video game industry is bigger and more connected than ever before, and blockchain technology is showing how it can open up whole new ways to monetize games. There are some great new projects making it easier for developers to integrate these features into their games. The blockchain can’t help design the characters or create epic battles, but it can take care of in-game monetization. Savvy developers are experimenting with the blockchain, and many are making money from it already. Those who don’t are at risk of getting left behind.
About the author:
Kirill Shilov — Founder of Geekforge.io and Howtotoken.com. Interviewing the top 10,000 worldwide experts who reveal the biggest issues on the way to technological singularity. Join my #10kqachallenge: GeekForge Formula.