Blockchain in Gaming: Benefits and Challenges

Blockchain has the power to transform the gaming industry. But how exactly, and why hasn't it happened yet? Learn by reading this article.
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What if you could play some Counter-Strike with friends, earn a few in-game points for winning, send them to your phone’s wallet, and use the earnings to tap-pay for coffee the next day?

With blockchain gaming, there is a chance that in the near future you will be able to do just that.

In this article, we will explore what applications blockchain technology has for the gaming industry and how it can revolutionize a traditionally centralized space. Let’s dive straight in.

Video version


It started with Kitties. CryptoKitties

CryptoKitties was not the first blockchain game, but it was the one that made blockchain gaming mainstream. CrytptoKitties revealed the potential of blockchain applications in gaming to the global community.

CryptoKittie named Dragon was sold for $170,000.
CryptoKittie named Dragon, which was sold for $170,000

In short, CryptoKitties is a dApp (decentralized application) made on the Ethereum blockchain. It is similar to Tamagotchi —  players buy, collect, breed, and sell virtual cats. Each cat has a unique set of characteristics (called cattributes in-game) that pass to offsprings. The rarer the attributes the more expensive the cat.

The goal of the game is to breed a kittie with the rarest features. Players profit from breeding and selling unique cats. Some can get really expensive — a CryptoKittie named Dragon was sold for approximately $170,000 in 2018.

The popularity of CryptoKitties draws attention to the technology which made it possible — Non-Fungible Tokens (NFT). Unlike most crypto tokens such as Bitcoin, NFTs are not interchangeable. This means that every token in the NFT ecosystem is unique and can’t be directly replaced with another token.

Think of non-fungible tokens as collectibles

Gameplay of "Gods Unchained"
Gameplay of “Gods Unchained”

Blockchain Games Today

Despite the popularity of the CryptoKitties, blockchain gaming is still at the beginning of its journey. Online gambling is in the avant-garde of adopting blockchain for game-like applications. After all, this sector requires the highest security and transparency. Card games are also catching up and actively adopting this technology. This is where NFT allows users to safely collect and trade unique cards.

Blockchain gaming is still relatively small compared to the traditional centralized gaming industry. Large AAA studies are yet to enter the market and today, most of the games are made by small indie developers or technology enthusiasts.

Still, hundreds of creators are already involved in the growing industry. And these games are not limited to gambling apps. According to EsportsBets, the most common genres are Card Games, RPGs (Role Playing Games), and RTS (Real-Time Strategies).

Most popular examples include:

Those titles are relatively small, but it is a matter of time for the bigger developers to catch up. Rumors of large studios joining the space are already circulating. But for now, indie developers have a perfect opportunity to make a name for themselves, while the competition is scarce.

Planet calypso from "Entropia Universe" which was sold for $6,000,000
Planet calypso from “Entropia Universe” which was sold for $6,000,000

What Blockchain can do for Gaming

So, why should gamers care? And should they care at all? We believe that the answer is a definite yes. And this is why:

True Ownership of Tradable In-game Assets.

Just like the goal of cryptocurrency is to draw the ownership of the money back to people, blockchain gaming will bring the true ownership of the in-game items to players.

Right now the developers that own the game server own all the in-game items. Developers can delete or take them away from the user, accidentally or on purpose. This is impossible when the game runs on blockchain technology.

Tying assets to players instead of games is an uber-important concept, as some rare variations of in-game items can cost a fortune. In the MMORPG “Entropia Universe” you can buy spaceships, nightclubs, or even a whole planet. This game holds a record for the most expensive purchase of an in-game item — the planet “Calypso” was sold for $6,000,000.

You are probably thinking, “What a waste of money”. Let us stop you there — the purchase was in fact a profitable investment. You see, in Entropia Universe, players (citizens) pay taxes and purchase land on planets for in-game currency. And that currency can participate in the global crypto economy.

Blockchain can blur the borders between global and in-game economies. Usually you make money in the real world and spend them in games. In the future, the picture can flip 180. And not just for e-sports players.

A Decentralized Gaming Economy

Adopting the game economies to blockchain and cryptocurrencies should not be a challenge for the gaming industry. Gamers have been using digital currencies for more than 20 years and they are familiar with making in-game purchases for digital “gold” and exchanging it for fiat.

When building the game economy on the blockchain the developers can follow the hybridized model. In this case, they only have to make the economy run on the blockchain while storing the rest of the game on the centralized servers. This will make the game economies more reliable, eliminate fraudulent items, and create scarcity.

Another important feature of blockchain gaming economies is the possibility to transfer the items between games. This will let players utilize their digital assets while exploring different games. Since gaming items are represented using digital tokens, it is possible to trade those items between games if they are based on the same blockchain.

Players-governed Titles

The centralized games are fully controlled by the developers and they decide the rules for players. Not really democratic, isn’t it?  In blockchain gaming, the majority rules the game, and the game mechanics or content will change only if 51% of players vote for it.

Additionally, developers of centralized games can cancel them whenever they want. For example, the game can become unprofitable or lose the investor or publisher, leaving the whole community in disappointment. The game that runs on decentralized servers has the chance to never die if it is popular enough. In this case, a game fades away only when the players abandon it, not when developers decide to close it.

Fair Gaming Experience

If you are a gamer, you know that every online game has cheaters. The amount of them depends on the power of anti-cheating software, but there are more advanced “personalized” cheats that can pass unnoticed for years.

Decentralization enables the creation of reliable servers, immune to cheaters or hackers. It is impossible to hack a game running on blockchain since there is no single point of failure.

Improved Industry Practices

In addition to the benefits of decentralization for the game mechanics and economy, the blockchain can revolutionize the industry itself. This includes the rules for game revenues and distribution.

To stay alive the game has to be successful for the publisher, and the key metric of success is revenue. That’s why the free-to-play games with loot boxes are so popular – they are simply the most profitable. The established trend of the industry is to give players an interesting piece of content or valuable item only after sucking the most money out of their pockets.

Blockchain gaming will shift the definition of a successful game from revenue towards the in-game currency value. This will refocus the game development efforts to benefit players, not publishers.

Blockchain can also help the industry by recording sales, therefore bringing more transparency and restoring the trust between the game publisher and developers.

The Blockchain Trilemma

What Stops the Blockchain Gaming Revolution?

With the advantages mentioned above, it may seem like every stakeholder in the gaming industry will benefit from the mass adoption of blockchain, but there are still challenges that prevent it.

The main issue compiles down to something known as the “blockchain trilemma” – a triangle with decentralization, scalability, and security where you can only pick two. If it is decentralized and fast it is unsecured. When it is secured and decentralized, it is slow.

Speed appears the main challenge as the economy of the game has to be fast while blockchains like Bitcoin and Ethereum are much slower than centralized networks. This is unacceptable for gaming marketplaces.

For example, just a week after the release of CryptoKitties the volume of player’s transactions pressured the Ethereum network literally to the point of scalability crisis. And we talk about a number of around 100,000 users.

Those are big numbers for a blockchain dApp but very little compared to the popular centralized games. Fortnite, for example, has a playerbase of 300,000,000 people. It is likely that the blockchain networks will be able to find the solutions for the scalability issues, but the industry is just not there yet.

Conclusion

Blockchain needs gaming more than gaming needs blockchain. There is a sense that there are big games with millions of players that can’t wait to benefit from the blockchain implementation. But in reality, the mass adoption of crypto and blockchain will primarily rely on the developers seeing and executing that value.

The most realistic path of the blockchain adoption to gaming is through the smaller teams of indie developers showing the larger studios the benefits of building games on decentralized networks. When the big developers realize the value blockchain offers the adoption will be just a matter of time.

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