I love playing video games growing up. I used to sneak off from my bed at midnight to play pokemon until 3 AM in primary school. Pokemon was also how I learned English. So I was intrigued with the application of blockchain in gaming. I have been following the blockchain space since 2017.
It started with the previous Bitcoin all-time-high (ATH) of $20,000. Then I competed in the International Blockchain Olympiads in 2019, where I explored different blockchain applications from real estate, supply chain, healthcare communication.
But I did not think of gaming. At that time, we already started exploring non-fungible-token (NFT) like Crypto Kitties. I was intrigued but couldn’t put the two together, blockchain and gaming. After a few years, I learned that gaming is the second-best application of blockchain, after finance. And so I will discuss this further.
We know that the best application of blockchain currently is finance. Since 2017, the decentralized finance has grown to impressive levels, with AAVE, Uniswap, and Pancakeswap. Finance is a big place with different things to disrupt using blockchain due to high transaction volumes. What is the next best thing that has high transaction volumes, in-game purchases?
Why is gaming a better application for blockchain for scalability?
Other applications of blockchain are great. However, each industry is burdened by either old, slow-moving industries with low transaction volume and risk-averse users.
Since blockchain is a completely new technology, early adopters are most likely to use the platform, typically millennials and gen z. Who never grew up with games and hated it when their kids play games growing up? Baby boomer and gen x.
Who grew up with games and even started monetizing games to make it one of the largest industries in the world? Millennials. So, of course, gaming might have the best chance of adoption right now for blockchain, thinking in terms of the target audience. That is also what I see since 2017, where people no longer look at Bitcoin but the blockchain application as a whole.
I have worked on Immunodex since its inception in 2019. Yet after 2 years, I have seen prolonged growth. The problem was the network effect. Immunodex is a platform that provides vaccination management and covid 19 screening to aid the return to normal.
However, there are 3 main contact points: the hospital, the user, and the government. This triad makes it extremely hard to scale. Think about Uber. It was tough to get both initial users and drivers to have a running machine. But Immunodex’s high barrier to entry, if successful, will also be its advantage point in the future.
I explored on my own a few other whitepapers for the application of blockchain in real estate and supply chains. The main obstacles are that adoption is low, and it is tough to scale and compete with the existing mature market without substantial competitive advantage.
Blockchain protects your data and provides an additional layer of privacy and trust, even the small blockchain user base. Not many people understand technology. Real estate stakeholders are not the right demographics since most transactions are between gen x and baby boomers with money to afford real estate.
We are competing with Walmart and the Amazon tech team for the supply chain to provide a supply chain management system that they will eventually use. With their resources, it is hard to make a profitable case for a blockchain start-up.
However, for gaming, it makes sense. Blockchain can solve any legacy problems. As a gamer, I would love to own my game items, especially the rare ones.
NFTs allow users to do exactly that! Users can own their in-game assets from land to rare items, preventing the challenges of account theft. You can even transfer your NFT across different games, opening up new ways for building value. And decentralization can allow smaller developers to gain a share instead of big gaming studios dominating the space.
Where is gamified blockchain now?
We have seen a few companies in the space: Decentraland, Axie Infinity, Cryptokitties. These concepts for blockchain in gaming are implemented and used across the world. These companies have been generating revenue and have seen tremendous growth in mid of 2021 due to the new ATH of Bitcoin, bringing people into the space.
Axie Infinity alone generates 6000 Eth after 4 years of inception, equivalent to $12 million in revenue. The growth is coming surely as it recently got large San Francisco venture capital investors and Mark Cuban. This is still a nascent space, and I expect other players to enter soon.
Blockchain is great for gaming because you can have unique items and protect players’ progress. Your time and money spent on games will forever stay there. This concept is brilliant for game design.
Personally, I have spent countless hours of my youth on games, but it would be nice that it becomes an actual intangible value that I can store.
Challenges in gaming and blockchain
Although Ethereum has been launched since 2015, many exciting whitepapers have come about, but none has taken off in a meaningful sense yet. The majority of gamers are still in the centralized server universe.
Some people compare blockchain games to having pet rocks. Crypto to the mass is still the wild west, meaning it is highly speculative and unstable.
Gas fees (or transaction fees o Ethereum is expensive and is getting more and more so. Games like Axie Infinity have moved onto their own side chain, while VR metaverse Decentraland has migrated to layer two platform Polygon. Ethereum’s scalability issues and high transaction fees hinder the growth of blockchain apps.
Legacy blockchains have high barriers to entry. Users need a balance of native platform tokens, which need exchanges and crypto-wallets. However, the current format hasn’t solved the challenges gamers asked to be solved.
Chinese walls from centralized companies guard massive multiplier online games like World of Warcraft. In the gaming world, gamers want to modify the game in their own way to make their virtual world more personalized.
However, this is not welcomed by large gaming studios. This is also what blockchain games want to solve as a decentralized virtual world, where all create it. However, the implementation of this concept is still in development and hasn’t shown significant progress.
Gaming needs to be more open-source, which right now it isn’t. And blockchain should work great in gaming due to its nature of openness and decentralization. But developing game logic on smart contracts isn’t sustainable for complex games, especially with Eth’s high gas fee. So some developers operate in a hybrid manner, with centralized servers. However, this blocks players from accessing the servers, meaning they are not empowered to create their own modifications (Nasdaq).
Application-specific blockchain is what is needed to have a successful merging of blockchain and gaming. Individual games should continue to have different economic incentives, so the solution is to base a single game on a single blockchain. Essentially, we can have a blockchain technology where multiplayer communities power the network. The gaming universe can be infinitely modifiable and expandable, owned by the community, and run on decentralized economies that reward content creators (kind of like what we have on social media now!).
Each game doesn’t need to have its own platform. Using a blockchain core written in generic coding language, developers can create complex blockchain apps powered by Unity cross-platform gaming engine.
The core can have built-in features particular to game development that are typically missing in traditional blockchains. Many games rely on random number generators, which is opposite to the deterministic characteristics of a blockchain.
Right now and in the future, we will see more proof of concepts of blockchain and gaming. We will have an open API that will allow players to create their own mods and content and marketplace to sell with. The game should be free to play without needing a starting balance of a certain amount of crypto. The flexibility of these games should allow the marriage of gameplay by decentralized and open-source technology (JC Kim).