The global video gaming industry continues to enjoy impressive annual growth figures and it is tipped to be worth $300 billion by 2025. It has firmly established itself as the world’s most popular entertainment medium and it is extremely alluring for entrepreneurs from all walks of life.
It is therefore easy to see why cryptocurrency pioneers are keen to pile into the gaming sector, and they have a great chance of success. It is also an innovative industry, at the forefront of technological advancements, and gaming executives have been major players in initial coin offerings. Cryptocurrency and video games go hand-in-hand, and they have the potential to flourish in tandem in the years ahead.
Digital Coin Pioneers
Developers and publishers have been using their own digital currencies for in-game purchases since the early 2000s, so gamers are already blessed with an innate understanding of cryptocurrencies. It was a natural development from Sonic the Hedgehog gathering rings and Mario headbutting his way to securing coins.
Asian studios pioneered the in-game microtransaction model in the 2000s and Riot Games brought it into the mainstream in western culture with the launch of League of Legends in 2009. Gamers have been trading in fiat currencies for more than a decade and spending the in-game virtual currency on skins, abilities, upgrades and loot boxes.
This is the business model of the world’s most popular esports, including League of Legends, Dota 2, CS:GO and Fortnite. Developers Riot Games, Valve and Epic Games make more than $1 billion per year each through these microtransactions, but the technology underpinning it is currently inefficient and blockchain should lead to huge improvements.
A Thriving Sector
The industry is soaring in popularity, with 454 million fans across the world right now. Some of the world’s biggest brands are sponsoring tournaments and teams, and the industry is worth $1.1 billion in 2019 thanks to media rights, commercial tie-ins, and ticket sales. Millions of fans even place bets on the action at sites like Unikrn, while popular streamers can charge eye-watering sums to promote content. Yet in-game microtransactions are by far and away the biggest revenue stream for the publishers.
In future, Blockchain technology can underpin these transactions in a seamless fashion. The sector has been primed towards digital currencies for a long time, making it ripe for crypto to revolutionize the transaction model. Blockchain technology can make in-game transactions a lot quicker, easier and more secure, benefitting both the players and the gaming studios.
Many developers have used third-party platforms like Steam to overcome the obstacles that arise with international payments. Yet bitcoin and other cryptocurrencies are international by their very nature, seamlessly circumnavigating international borders and allowing secure, rapid transactions. Blockchain technology is decentralized, allowing in-game transactions to be completed, logged and monitored, without middlemen taking a cut and holding up the process.
A Significant Economy
The potential is vast. More than two-thirds of Fortnite’s 250 million players have spent on additional in-game content, with an average spend of $84.67, so Fortnite’s V-bucks form a significant economy in their own right. A raft of popular free-to-play games follow this model, including LoL, CS:GO, Dota 2, Hearthstone, World of Tanks, Smite, Clash of Clans, Apex Legends, PUBG, Pokemon Go, StarCraft II and many more. Publishers of games like FIFA and NBA2K also make massive piles of cash from charging for extras after gamers buy the initial title.
Hundreds of millions of gamers regularly use virtual currencies like V-bucks to purchase tools, cosmetics and more, so it will not be a difficult sell to get them into crypto. Streamers are often tipped in virtual currencies, and fiat currency is less relevant to this community than most others.
Crycash and DAppChains
A number of gaming brands are already adopting blockchain technology and cryptocurrency to address longstanding issues surrounding international payments. Atari has launched the Atari Token as part of a blockchain-based digital entertainment platform, while the coins will be incorporated into existing games. Crytek is launching a cryptocurrency called Crycash to support payments within its popular first-person shooter series, Crysis. DAppChains, high-performance sidechains to Ethereum that allow for scalable games and social apps, allow developers to make money through their own coins.
Blockchain-based games like CryptoKitties, My Crypto Heroes and Gods Unchained are soaring in popularity. Virtual reality represents the future of gaming and a VR platform called High Fidelity is creating a new virtual world powered by the EOS blockchain. It hopes to support billions of potential VR users in a universe of virtual reality worlds, coined the Metaverse. “To reach this scale and to deliver safely on such a promise, VR must be decentralized, including deeply using blockchain technology,” said chief executive Philip Rosedale.
Decentraland is a virtual reality platform powered by the Ethereum blockchain. Users can create, experience, and monetize content and applications. You can even buy plots of land and build your own neighborhoods.
Crypto Firms Pile into the Gaming Space
Several crypto firms are launching ambitious, innovative projects to target the gaming sector. Bitrefill, a crypto-trading platform, enables gamers to purchase a wide array of gift cards for online gaming services, such as Steam, Xbox Live and Blizzard’s Battle.net, with Bitcoin.
A crypto marketplace called Gypsybee facilitates the purchase of gaming hardware via BTC, Ether and Bitcoin Cash, while Caseking follows a similar approach. The Worldwide Asset Exchange aims to become a hub where in-game assets are traded for digital currencies. Enjin makes it easy for developers to integrate digital tokens by fuelling a modular blockchain development platform for creating, integrating and scaling tokenized gaming assets. Monetizr, Vreo, Unity, KIN and Egretia are all targeting the industry.
The two worlds are colliding and the opportunities are vast. There are bound to be a number of teething problems, and gamers will have to put up with a bit of trial and error, but in the near future we should see crypto neatly integrated into video games.
Crypto can offer significant benefits for the microtransaction model, reducing the cost of individual payments and improving efficiency in the chain. It is also a lot more private and secure, so gaming is likely to be one of the most important industries for the crypo sector in future.