How the gaming industry is accepting crypto

A few years ago , blockchain games were a niche market for a few users. Now gamers around the world, especially after the recent boom of non-fungible tokens (NFTs), are increasingly interested in such games.

As a result, NFT gaming development the number of players in blockchain games is growing faster than ever. The most popular platform has up to a million active users.

In this article, we will look at the basics of blockchain games, as well as how the gaming industry as a whole is embracing the new concept.

Problems in the video game industry

Most players dislike and feel unethical about microtransactions. They provide an unfair advantage to those who spend money on in-game items. Although such players make up only 1.3% of the total, the pay-to-win model has become a widely popular practice among video game publishers.

According to Statista, 22% of global game developers have used paid in-game currency to monetize their games. At the same time, in 2020, free-to-play games with microtransactions exceeded ($22.7 billion) revenue from premium consoles ($17.8 billion).

In the beginning, only free-to-play games featured non-cosmetic loot boxes, sets, and other in-game items designed to provide an advantage to players who own them. Over the past few years, many full AAA games have also integrated microtransactions and the PTW model to provide an additional source of income.

For this reason, it has become more difficult for the average player to enjoy a fair gaming experience without microtransactions. Even after paying full price for the base game and downloadable content (DLC).

Even worse, microtransactions take place in publishers’ centrally controlled marketplaces. In most cases, studios take 100% of that revenue. And gamers have no real ownership of the in-game items and currencies they buy or collect. Their accounts may be suspended, frozen or restricted for any reason at any time.

For the same reason, once they’ve bought an item, they can’t trade with it — at least not officially. Although publishers prohibit such activities, there has been a recent boom in gray market sales in the video game industry. There, users can purchase in-game currencies and other assets for a fraction of the original cost.

Moreover, even if the publisher has a huge game ecosystem, users cannot transfer or reuse their game elements in another game. As a result, when developers give up IP, players lose all of their collected or purchased assets.

From Pay-To-Win to Play-To-Earn

Both players and developers have to deal with the many limitations of modern video games. These are unethical methods of monetization, centrally controlled marketplaces, lack of real ownership of in-game assets and gray market sales.

Fortunately, blockchain and cryptocurrency technologies provide an efficient and sustainable solution to the above problems.

Simply put, blockchain games include DLT networks and non-fungible tokens.

They are ready to offer players and developers a completely different experience than traditional games. Game assets are tokenized in the form of NFTs : land, armor, weapons, vehicles, potions, crafting elements, and even the game itself.

Because NFTs are unique, irreplaceable, and limited digital assets found on the blockchain, they provide real ownership of in-game items. Most importantly, they can be easily authenticated and tracked in a distributed ledger.

Once collected, earned, or purchased, players can move NFT assets from one game to another compatible solution, store them in wallets, or transact with other players on the publisher’s marketplace or secondary markets.

As a result, blockchain games have developed a new, more consumer-friendly business model called Play to Earn (PTE). In terms of game monetization, it has replaced the controversial pay-to-win principle.

PTE consists of players earning in-game NFT assets or rewards in the developer’s own (fungible) cryptocurrency. To do this, they just need to play, completing quests or tests. This is an attractive model for users who prefer to expand their game collections without fear of losing them due to publisher policies or actions.

At the same time, PTE offers gamers a way to convert their gaming assets into real money. This has helped poor citizens in developing countries and those who have lost their jobs to earn a living. For example, in the Philippines, members of a rural community played the popular blockchain game Axie Infinity. They received an income several times higher than the minimum wage in the country.

However, the proliferation of in-game NFTs and cryptocurrency rewards for gamers does not mean that developers are making less revenue. In fact, we can observe the opposite scenario taking place in the blockchain gaming industry.

According to Token Terminal, Axie Infinity has become a blockchain solution (both among decentralized applications (dApps) and DLT networks) that generates the second largest fee income after the Ethereum network.

With two native tokens, Axie takes part in all transactions (for example, breeding Pokémon-like creatures called Axies, selling these creatures or land). Thus Axie currently receives 330 million dollars. This is about half of what the entire Ethereum ecosystem receives from fees ($650 million).

Traditional video game stores such as the Microsoft Store, Playstation Store, and Steam receive a whopping 30% commission on game sales. Developers can create their own marketplaces for their games on the blockchain. This will partially or completely avoid such high commissions.

At the same time, they can expand their user base using the “play to earn” model. For example, new players will be offered rewards in the form of NFTs and in-game currency. The same practice for existing players is a good incentive to stay in the game.

In addition, the freedom to use game assets in any way makes it easier for developers to raise funds for their games. For example, The Sandbox metaverse with voxel graphics raised $4.51 million by March 2021 through pre-sales of virtual land plots in the game.

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The Rise of Blockchain Games

Now the question arises: what progress has been made in the distribution of cryptocurrency games?

So far, we have explored how blockchain games offer real ownership of in-game assets. This allows both developers and players to earn additional income — along with many other benefits.

When a new technology or concept appears on the market that is radically different from existing solutions, it takes time for consumers to adopt it en masse. In 2009, only a few people used Bitcoin after it was created.

Although cryptocurrencies have not yet reached the majority of the population, millions of users are already using digital assets. They pay day-to-day payments, earn funds, earn passive income, and achieve financial independence.

Blockchain games are in the same position

Although DLT-based games have been around for several years, most of the first solutions failed to attract many players. The exception is Ethereum-based CryptoKitties — in fact, the first blockchain game with a tangible number of players. In 2017, the high popularity of the game among users led to an overload of the Ethereum network.

After the NFT boom at the beginning of this year, blockchain games have started to gain momentum again. They raised $476 million. For the first half of 2021, this represented 9% of all investment in video games.

According to DappRadar, the number of active wallets interacting with cryptocurrency games increased by almost 600% from the first quarter of 2021 to the second quarter of 2021.

From June to July, the audience of the blockchain gaming industry increased to more than 800,000 active users. The growth of the audience for the month was 121%.

While this is indicative of growing adoption, we should note that DappRadar reports only counted active wallets that interacted with the smart contracts of certain games on the blockchain. Therefore, the total audience of the DLT gaming industry will be significantly higher than measured by the company.

The rise of the blockchain gaming industry is not only driven by the aftermath of the NFT gaming development company boom. Another factor has been the development and growing popularity of scalable and high-performance blockchains. Blockchain game publishers need to attract new users and retain existing ones. For this, it is vital to use the DLT network, which provides fast transactions and minimal gas fees. If they fail to achieve this, they risk losing players. Most of them will refuse to pay $50 (or even $10) to buy a $10 in-game item.

The report confirms this phenomenon. Daily activity among the top five Ethereum-based games fell by 83% between January and February 2020. The main reason for the increase in gas fees in the smart contract blockchain.

Ethereum competitors such as Binance Smart Chain (BSC) and Solana have been gaining momentum lately. They have made significant progress in developing layer 2 scalability solutions. Therefore, many blockchain publishers have moved their games to these platforms to offer transactions with minimal or no gas.

Axie Infinity uses the Ronin sidechain to perform gasless transactions. And a virtual three-dimensional world based on DLT Decentraland, in order to increase speed and reduce gas costs for transactions, entered into a partnership with the Polygon sidechain.

Blockchain game and ecosystem provider NFT Enjin launched the first version of its JumpNet Ethereum scalability solution in June. The second version will be launched soon. Instant, secure and free exchange on the blockchain and Enjin Coin (ENJ) transactions become available to users.

Blockchain games are not going anywhere, there are more and more of them

There is currently a viable infrastructure built around blockchain games. It is easier than before for developers to launch games with cryptocurrency, as well as with more features and a much improved user interface.

For this reason, we expect a significant increase in activity in the DLT gaming industry in the near future.

Leading video game publishers are in no hurry to launch their AAA games on the blockchain. After all, they already have full-fledged ecosystems with their own centrally controlled markets and decent income streams.

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