5 reasons blockchain-based video game economies are the future

Anyone who hasn’t lived under a rock before probably knows that the gaming industry is in an absolute chasm. It is one of the industries that has benefited greatly from the COVID-19 pandemic.

However, the average investor may not be familiar with the following growth numbers:

  • The global gaming market is currently the fastest growing form of entertainment in the world at $ 180 billion. For comparison, the global film industry is valued at $ 100 billion and all North American sports combined have annual sales of $ 73 billion.
Revenue from the global gaming market. Source: Bloomberg, Pelham Smithers, GamingScan.com
  • Experts assume that the number of online game streamers will rise to 1 billion by 2025, that is one in nine people today.
  • Three of the four most watched sporting events in America in 2018 weren’t even traditional sporting events. They were electronic sporting events. For example, the League of Legends championship had 30 million more views than the AFC championship and 45 million more views than the NCAA soccer championship.
Electronic Sports Viewers in the United States. Source: MBA @ Syracuse
  • Travis Scott made a live performance on the popular Fortnite gaming platform last April. It received over 12.3 million views and grossed over $ 20 million for Scott for TechCrunch and GamesIndustry.biz.

What is happening here and where does this growth come from?

5 reasons blockchain-based video game economies are the future
5 reasons blockchain-based video game economies are the future

Much of this we can simply attribute to the rise of technology and exponential growth. Technology continues to transform the way we communicate, how we collect information, how we create and consume information, how we convey value, and how we form online communities.

Howard Shultz, a former CEO of Starbucks, popularized the idea of ​​a “third physical room” with his concept of a coffee shop. He believed that people needed a “third room” to gather outside of the office and at home. Starbucks was the answer.

We see the same concept developing among younger generations today. Except that the new shared space is digital and called a metaverse. This is where the children depend more and more nowadays. They go there to interact with their friends. Listen to music or play video games. We can think of this as the next iteration of digital communities: AOL chat rooms, then Myspace. Facebook and finally the Metaverse.

Now we have concerts in the Metaverse. Burning Man has been digitized. And we’re just getting started.

Game history

The first video games hit the market in the late 1950s, a simple tennis game similar to pong. Later, Atari was invented in 1977. Nintendo started releasing popular games with Mario Bros, The Legend of Zelda, Donkey Kong, etc. in the early 80’s.

It’s important to note that the business model has changed a lot over the years. We used to pay $ 60 for a game, let’s say GameStop, and that’s what we did. It was a one time cost with unlimited play. The games were released in much the same way that Hollywood movies were advertised and released. 90% of the income would come in the first two weeks.

This model is already available. The freemium model resides in the users who play for free and are induced to make in-game purchases to improve their skills, dress up avatars, buy weapons, improve animations, etc. We see this in Roblox, Fortnite, and other popular games today.

This is a much more profitable model for game developers as it keeps users busy and constantly updated to compete with their friends.. We are moving into a world where social cues occur among the younger generations in the metaverse through an avatar in games, the weapon they carry and the masks they possess. Welcome in the future.

Why games will switch to blockchains

  • Today’s games take place in isolated data networks. This means that users cannot own their in-game assets (skins, avatars, skills, etc.). The platform owns them. Axie Infinity is changing this model as users own their assets, such as non-fungible tokens (NFTs), in Axie and sell them for a profit in a free market / gambling economy. Below is the revenue Axie Infinity users have made since May of this year:
Axie Infinity’s total revenue. Source: Token Terminal

Token Terminal’s annualized revenue is $ 2.7 billion for this permissive blockchain open payment game. Important note: Blockchain technology is the vehicle through which users can own their in-game assets. This is not possible with the technology used today.

  • Blockchains enable the organic formation of gambling economies. Users can be paid to play. Again, Axie Infinity leads the way. Axie users are making investments to purchase Axie NFT and the AXS native token to start playing. From there, they can earn the SLP token through games / competitions as the tokens received can be exchanged for other crypto assets or fiat etc. Many users in the Philippines are making many times their usual monthly salary just by playing Axie Infinity, all during the financial hardship caused by COVID-19, which is pretty good. Let me ask you this: can you get paid to play a game on a blockchain vs. you aren’t paid to play a non-blockchain game, which one would you choose? As Charlie Munger says, “Show me the incentives and I’ll show you the result.”
  • Public blockchains are open to everyone and without permission. Do you have a cell phone and an internet connection? Great, you are welcome to participate. This doesn’t really work in today’s closed data architecture, especially if you live outside of the United States. Not only can you participate in a blockchain, but you can also generate income. As smartphone adoption continues to escalate with the growth of 4G and 5G technology in emerging markets, we should expect more and more users to access games based on cryptocurrencies and blockchain in the near future.
  • Open protocols collapse and compress the cost of existing technologies. Public blockchains are open protocols. Ethereum is an open protocol. Anyone can create games on Ethereum. This way, you’re basically offloading a large part of your capital and operating costs to Ethereum’s base-tier blockchain, which makes it a lot easier for entrepreneurs to start a game. Low entry barriers increase competition. Ultimately, the end users benefit from this. We have seen this game over and over again throughout history. Blockchains are simply the next iteration of open source technology.
  • Decentralization. Since blockchains are open and without permission, anyone can build on them. That means we should look forward to a future in which there are blockchain games built on top of different Layer-One blockchains, for example Ethereum, Solana, Cosmos, etc. Users can easily switch between games and share their assets like Take with you NFTs in the form of masks, avatars or weapons. That is not possible today. In addition, users can trade their NFT assets for profit or create NFT if they wish. Go ahead, you don’t need a gaming rig to do this.

Gambling economies are the future and will take place on blockchains.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade move involves risk, you must conduct your own investigation when making a decision.

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