The Role of Cryptocurrencies in Online Gaming Industry

Since we’ve first seen Pong in the 1970s, there has been a groundbreaking advancement in the video game industry. With the latest virtual and augmented reality devices, we can basically live within a video game.

This technology allows us to have an immersive and exciting experience at home. With the launch of Bitcoin in 2009, I can say that cryptocurrencies are also a relatively new technology. People have found ways to integrate blockchain and cryptocurrencies within their games with the intention of creating a more interesting experience for them.

Crypto games allow players to own digital assets, trade them with other people, and sell them. While platforms such as Steam already had their internal markets that allowed players to do such actions, they weren’t blockchain-based.

I’ll go through some of the interesting differences between digital ownership on platforms such as Steam and blockchain-based online games. Besides that, there are many concerns as much as there is hype for them.

Cryptocurrencies in online gaming

What is often referred to as one of the advantages of blockchain technology is its transparency and security. Developers saw these traits as applicable to gaming transactions and decided to integrate blockchain with their games.

Crypto games usually have multiple digital assets, and they are usually:

  • Governance tokens
  • Game token
  • Various NFTs

Governance tokens are used by stakeholders to vote on decisions regarding the project. This isn’t necessarily tied to online gaming, so there’s no need to cover this topic. On the other hand, game tokens are used to make in-game purchases or to be converted to other cryptocurrencies such as Bitcoin, Ethereum, or stablecoins such as USDT.

While you can’t withdraw, for example, gold from your World of Warcraft account, with the use of extension or hardware wallets, you can claim any NFTs or tokens from a crypto game. This allows users to have higher security of their belongings and minimize the risk of data breaches.

Steam has experienced data breaches just like other platforms, but crypto owners can take responsibility for their digital assets personally.

The Role of Cryptocurrencies in Online Gaming Industry

I’m constantly mentioning Steam, but they are one of the largest gaming platforms. They banned any games that contain NFTs, and they aren’t accepting cryptocurrencies as a form of payment because of their high volatility.

On the other hand, American-based Epic Games has decided to embrace this internet trend and allowed crypto games in its store. The amount of projects that are related to crypto is growing, as well as the number of big industry players who are considering investing in such projects.

Advantages of using blockchain for gaming

Some of the advantages that crypto video games possess are already mentioned in the previous chapter, but let’s have a closer look. Blockchain allows users to have complete ownership of the in-game assets. As mentioned earlier, you can withdraw cryptocurrencies from the game and convert them or send them to someone.

These transactions happen transparently, and everyone can observe the dates of these transactions and who received them. This increases the security against hacking or theft. Non-fungible tokens, or NFTs, are a unique type of cryptocurrency that usually represents an in-game asset.

On a large scale, transparency allows both players and developers to observe the economy of the project and evaluate whether there’s someone exploiting it or using fraud.

For example, metaverse projects often have houses or land in the form of NFTs. Nobody else can possess your NFT, or in this case, house. Some crypto games offer additional utilities for NFTs, such as staking or in-game advantages.

These NFTs can be interoperable, which means that you can transfer a digital asset from one game to another without losing any value or data. Of course, this has to be made possible by the developers of the project.

What attracted many people to play these crypto games is the possibility of earning money through entertainment. Play-to-earn is the term that’s used for these games, and we’re going to dive deep into some of the most successful projects in this category.

Concerns about cryptocurrencies in gaming

Now, let’s get to the most important part of the use of cryptocurrencies in gaming. When you read or listen about blockchain and crypto, you might get a sense as if it’s either the best or the worst thing that happened to humanity. I don’t want to sound cliché, but it’s neither completely evil nor good.

There are many benefits, such as the ones that I mentioned in the section earlier, but it’s important to emphasize the important concerns about this industry. It’s been almost a year since Luna crashed and a couple of months after the FTX fiasco, and the wounds are still fresh.

Of course, there’s an insignificant amount of people that invested a fortune in play-to-earn projects, and scams were present in online crypto games as well. Many NFT and Play-To-Earn companies have abandoned their projects or even rug-pulled. This led to an increase in mistrust about them.

The NFT industry experienced a rapid increase during 2021, which also led to an increase in projects of various quality. Some of them had successful funding rounds and are constantly working to improve their product. But there were too many cases where there were funding rounds for projects that didn’t even have a beta version of their game.

Unfulfilled promises, market crashes, and rug pulls are serious problems that this industry experienced. While this was trending, many projects focused on the earning aspect of their games rather than on the gameplay itself. Companies that were promoting their products which had incorporated concepts of traditional games such as Pong or Snake and combined them with “Play-to-earn” mechanics, were sprouting like mushrooms.

Cryptocurrencies are quite volatile, and people that are looking to invest in them are aware of this. While they can reach incredible heights, it’s just as expected of them to crash. The problem with crypto games is that their in-game assets and tokens are usually tied to the crypto market as a whole.

Learning what is a cryptocurrency and what are some of the signifiers that a project won’t live up to its expectations can help you avoid potential scams.  

People would grind for hundreds of hours on games such as Runescape or World of Warcraft to obtain the wanted amount of gold. While this gold can’t be converted to real money, its in-game value will remain unchanged. Now imagine grinding for hundred hours just for your effort to be ruined by a random crypto regulation or a market crash.

Examples of successful crypto gaming projects

In the past few years, there have been a couple of crypto gaming projects that have a player base that can be compared with popular online video games. If you’ve done at least a basic level of research about Play-to-Earn, you’ve probably heard about Axie Infinity. This game will be at the top of many crypto gaming lists.

The Role of Cryptocurrencies in Online Gaming Industry

This project is Ethereum-based, and players can use their NFTs, which are called Axies, to battle with other players and trade. The game has an international following and up to 100,000 daily players. However, its currency has experienced a drop of 99.42% since its all-time high.

Another project that stood the test of time is Decentraland. This is a virtual reality platform where players can, similarly to Minecraft, construct various buildings and create their own world. Many brands are considering starting their marketing in Decentraland as it offers useful features for that. Their daily visitors vary from a couple thousand to up to 40,000 maximum.

The future of crypto in gaming

People have always found ways to get their dose of entertainment. Video games have been one of the most popular forms of spending spare time, and this industry has certainly advanced. It’s unclear whether crypto is going to have widespread adoption in the gaming industry. Trust in cryptocurrencies often varies depending on the state of the market.

Another rather philosophical critique is that there’s no need to mix “earning” and playing video games. The main goal of video games is for people to have a pleasant activity that will help them forget about their work and responsibilities for a bit.

While there are many indie game developers, as well as AAA studies, that rarely disappoint, games that include cryptocurrencies are often made purely for profit rather than for the satisfaction of their fan base.  

Jeremy Edwards
Jeremy Edwards
On Chain Analysis Data Engineer. Lives in sunny Perth, Australia. Investing and writing about Crypto since 2014.

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