Blockchain gaming shows promising signs

Blockchain technology is beginning to integrate with the gaming industry. Once the industry matures, the gaming market may offer one of the most compelling use cases for blockchain.

Let’s talk numbers

The global games market generated over $137.9 billion in 2018. Research from market insights firm Newzoo predicts this will grow to $180.1 billion in 2021. The industry that started with rudimentary video games such as Atari’s Pong in the 1970s is now a major growth industry that is becoming increasingly immersive, and popular across all demographics.

The impact of the gaming industry on popular culture goes beyond its revenue-generating value. Data suggests there are more than 2.5 billion gamers across the globe, meaning that approximately one in three people are gamers.

For blockchain gaming, the young upstart in an already envelope-pushing market, revenue is booming. The market for blockchain-based one of a kind in-game items is highly valuable, estimated to be $50 billion. With developments expected to unfurl at a rate consistent with that of its parent sector, the blockchain gaming sector is likely to continue to grow in terms of both popularity and revenue in the years ahead.

Blockchain for gaming

The blockchain and cryptocurrency communities began to explore ways to leverage the technology for use in a gaming context as soon as Bitcoin was deployed in the wild. Initially dominated by crude gambling games, the blockchain-based gaming industry is just beginning to mature into a gaming sector that boasts a wide array of games across different genres.

Furthermore, the potential of blockchain technology is being recognized across the larger gaming sector. Earlier this year, the French gaming giant Ubisoft, the company behind the popular Assassin’s Creed and Far Cry games, announced that blockchain technology will be leveraged in several games currently in its production line.

Moreover, a number of notable companies – namely Ubisoft, Enjin, Ultra, ConsenSys, Alto.io, EverdreamSoft, Gimbl, and B2Expand – have come together to explore the advantages of blockchain technology under the Blockchain Game Alliance umbrella.

The crossover of blockchain technology into mainstream gaming software architecture is informed by the relevance of the features which the innovation possesses. Developers are waking up to the possibilities that arise from adding blockchain to the underlying software structure of a game because this can allow gamers to prove unique ownership of virtual items, even across different virtual environments.

For players who spend extended amounts of time and money creating intricate worlds within the confines of a game, creating provable ownership of their online efforts would a game-changer. Blockchain technology, through the emergence of Non-Fungible Tokens (NFTs), makes the creation of finite, one of a kind digital assets a possibility.

It is important to note that in the scenario of blockchain-based games, the user retains control and ownership of his creations and acquired in-game items. In a marked departure from mainstream gaming, which is proprietary with control deferred to the manufacturer, customers can control their digital assets until they sell them. This increased level of control is a recurrent theme within the blockchain gaming sector, down to the code used to create games. Due to the open-source nature of the blockchain sector, gamers can rest easy knowing their favorite games can never be withdrawn from the market as they could simply recreate the gameplay from the source code.

Additionally, blockchain technology may increase game transparency. For gamers, provably fair gameplay is imperative. Thus, the innovation lends itself to applications within the gaming sector since it is backed by mathematical code. It is an advantage for all relevant stakeholders as gamers will be pleased to participate in gameplay, which is both entertaining and ‘provably fair.’

Furthermore, blockchain is helping the gaming industry to expand to real-world profits. As referenced earlier, distributed ledger technology supports the digitization of any asset within the gaming environment. While this allows gamers to have a visual representation of their effort, blockchain tech could also allow gamers to trade their digital assets. Additionally, if players win any prizes in the course of gameplay, there is the opportunity to convert these wins to real-world cash.

Lastly, blockchain technology makes cross-game ownership possible. Most games currently exist in isolated environments, unable to interact with each other. Blockchain technology makes it possible to create applications that support entire ecosystems, many of which can be interlinked. Gamers benefit from a scenario where they do not need unique avatars for each game rather one singular one for a multitude of games. For instance, the popular Ethereum Dapp CryptoKitties is part of the wider ‘Kittyverse’ universe.

Scalability is a concern

While blockchain technology has the potential to provide several unique advantages to the gaming industry, there are a few challenges ahead. Notably, network capacity at scale. As referenced earlier, the gaming sector is very popular, as a result, the platforms hosting these large numbers of people need to be able to effectively and efficiently meet the demand for throughput, connectivity, and storage.

For the Ethereum blockchain, upon which many gaming Dapps are based, gas costs rose to dizzying heights during times of high network congestion such as during the CrytptoKitties boom of 2017. The network consistently slows down during periods of high activity. Moreover, the higher gas fees during such times are a strong disincentive. Unfortunately, this is not isolated to the Ethereum blockchain. The same issues arise across many of the blockchain networks supporting gameplay.

Furthermore, the UI/UX of most blockchain games remain rudimentary when compared to the cutting edge games. However, this will improve as the market matures.

Blockchain gaming industry by sector

The blockchain gaming industry is dominated by three major sub sectors. The first of these is gambling games. Most early blockchain-based gaming activity constituted of online bitcoin gambling and faucet games. This first generation of games merely lived on the Bitcoin blockchain and did not further leverage the merits of blockchain technology.

The most popular blockchain-supported games are collectibles. This segment includes game-focused digital currencies as well as NFTs. Arguably, the most popular among these is CryptoKitties, which went viral in November 2017. Other examples of NFTs are CryptoPunks, EtherRockets, CryptoPets, CryptoZombies, and Etheremon while game-based utility digital assets include WAX. This iteration of recreational offerings represents the second generation of blockchain gaming.

Virtual reality and e-sports constitute an important emerging section of the blockchain gaming market. At the cutting edge of innovation, the combination of blockchain technology, game theory, artificial intelligence, and virtual reality is exciting to many, and where the industry will head in the next decade. The decentralized virtual reality game Decentraland is an early example of this intriguing new intersection of technological innovation.