Decentralized gaming is blooming as a completely new direction in the digital recreation and entertainment industry. As one of the biggest selling points of decentralization – the inherent characteristics of blockchain technologies are playing into the hands of game developers, acting as near-irresistible allure for integrating such unique solutions into their platforms.
But even more attractive than the technological possibilities opened up by decentralization is the financial aspect, which has been beating records on a near-daily basis.
The Flow
The hype around decentralized games started back in 2017 with the launch of CryptoKitties on the Ethereum blockchain, ushering users to hoard digital kittens with unique characteristics.
But that time, the game lost its appeal rather quickly due to the simple fact that it had no continuity and engagement, which limited player interaction with both the in-game content and the possibilities of its resale and monetization on the secondary market.
A new lease on life was handed to the digital gaming sector in late 2020 when the NFT craze kicked off and started attracting artists into the new medium of art and creativity with the possibilities embedded in the underlying Non-Fungible Tokens. It did not take long for the gaming industry to realize the potential of NFTs as both value and content carriers within in-game universes.
And as the decentralized gaming arenas suddenly exploded from their confines into entire metaverses powered by blockchain and NFT monetization opportunities, venture capital, and institutional investors started jumping on board.
The most recent data indicates that a total of 24 blockchain gaming companies raised a total of $475 million in funding, according to a report by Investgame released at the end of the first half of 2021. Such figures are indicative of the existing and potential volume of the decentralized gaming market, considering that the lion’s share of the funding was attracted by only three companies.
The first is Forte with a $185 million round at a $1 billion valuation in May of 2021, the second – Animoca Brands with $88 million per round at a $1 billion valuation in the same month, and Mythical Games in the last place with a $75 million round in June of 2021.
Such impressive investments have a considerable foundation in both the application field and in the potential that blockchain can yield for gaming as a whole in the long run, and considering its already burgeoning community of players.
The New Genres
Blockchain, and the adjacent markets and industries of digital currencies, have allowed games to turn from an isolated instrument of entertainment generation and payment for playing into entire universes that offer players the chance to start earning by engaging in the games with their own contributions.
The cryptocurrency and NFT aspects have added content creation to the mix of monetization opportunities, while the established crypto exchange and marketplace ecosystem has given players ample venues for selling their achievements and in-game items.
But the decentralized finance market has influenced the newest concepts of gaming more than any other. DeFi has launched an entirely innovative approach to revenue generation, one which game developers have incorporated into their products.
The Play-to-Win model is no longer applicable in decentralized gaming, as winning itself has become impossible. The ongoing and perpetual mode of blockchain gaming means that players can keep playing with no logical or story-based ending foreseen for the game’s premise. The goal of blockchain-based games is to keep playing and earning on the content generation and the actions committed within the games.
This transformation has led to the emergence of Play-to-Earn as the driving mechanism of blockchain-based games. Play-to-Earn is based on two core concepts that are seamlessly incorporated into the game’s premise and gameplay.
The first is the scenario under which players create unique in-game items and content, such as weapons, power-ups, characters, and so on, in NFT format and sell and exchange it on marketplaces. The second scenario includes rewarding players with in-game cryptocurrencies for actions, achievements, feats, and other activities that are either preprogrammed in the game or are promotional by nature.
Some games, like Axie Infinite, allow players to create unique creatures, called Axies, in NFT format and sell them on marketplaces. Another game, MOBOX, encourages players to hold the native MBOX digital currency and earn rewards from staking.
Either approach to Play-to-Earn empowers gamers and hands them the reins of game progression and enrichment, leaving developers with the task of managing the game’s architecture and incentivizing communities to keep playing.
The Use Cases
The benefits of introducing blockchain in gaming are many, along with the digital currencies and NFTs that it supports. Among the most widespread applications for blockchain-based assets, in-game are the following.
Ownership of in-game assets is ensured by blockchain technologies, as is the uniqueness of the items players hold or create in NFT format. This allows players to be sure that cheating, duplication, theft, or any other infraction in-game is rendered impossible.
Sales are the biggest allure of blockchain’s application, as the swelling decentralized community is eager to tap into the liquidity on the market. In addition, the gamification mechanisms of earning allow blockchain-based games to yield considerable revenues for players in countries with low GDPs, acting as additional sources of income.
The unlimited and endless nature of blockchain, ensured by its growing scalability, means that such gaming metaverses can literally be endless in terms of space, content, supported players, and monetization opportunities. The task is now up to game developers to tap into both the technical and imaginative possibilities of blockchain-based gaming to allow the potential of the given industry to unfold.
Technologically speaking, blockchain allows the full deployment of such modules as Virtual and Augmented Reality in games thanks to the transition to Web 3.0. Said transition also makes it possible for brands of any kind to seamlessly merge into metaverses and present their products and services in such environments.
The Prospects
It is fair to say that the age of blockchain gaming has only just begun, as witnessed by the influx of investors and players into the space.
“There’s an incredibly broad range of possibilities in terms of what’s happening and what will happen in the universe of crypto games. I think at the core of this movement is really the idea of giving more of the value and ownership in these game assets back to the players.
That’s something that has historically been a problem. You might spend years and years building up your arsenal of skins or in-game assets, and then a game will change the rules, take some of your winnings away from you or do any number of things that can leave players feeling very disappointed and kind of ripped off.
The idea with blockchain-based games is to make them more open and allow players to have actual ownership in the space themselves,”
Arianna Simpson, general partner at Andreessen Horowitz
In general, the evolution of games to the Play-to-Earn model was merely a matter of time, considering the stagnation in the overall gaming industry, which seems to have exhausted itself in terms of imagination and technological advancement. The price-high walls of new gaming consoles and the exuberant technical requirements of modern games that force players to invest immense amounts of funds into high-end gaming PCs are nudging players to seek entertainment elsewhere.
With its convenient, profitable, accessible, mobile-based structure, blockchain gaming may well soon start ousting console games from the top charts.
This article is part of The Gaming Metaverse Writing Contest hosted by HackerNoon in partnership with The Sandbox.
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