Digital games have experienced a meteoric rise in the last decade to become the dominant form of entertainment, with a 2017 Newzoo industry report showing that digital gaming revenue eclipsed that of music, film, and television. This growth was fueled in large part via an increase in mobile gaming on the heels of the launch of the iPhone in 2007 and has been driven higher by the changing business models of games themselves. Historically, individuals would pay a fixed price for a title release, which typically contained a single-player mode and potentially a multi-player element. Nowadays, there can be multiple purchase events for any given title – often there is a base game which still includes a single-player and multi-player element (although not always both), as well as a number of downloadable content (DLCs) packs that continue to add content to a title after its release. In an ever-increasing number of games, particularly those that are free-to-play (FTP), there also exists microtransactions associated with specific characters, skins, or other cosmetic items. These microtransactions can either come in the form of discrete items, or bundles that are randomly generated via “loot boxes”. However, these items are often unable to be traded or sold (in particular on console platforms), limiting their utility to individuals who either don’t want a particular item, or may find themselves spending less time in a particular game’s ecosystem.

Enter blockchain technology. While cryptocurrencies have seen their fair share of ups and downs over the past few years, the blockchain technology underpinning many tokens and coins has the potential to be applied in practical, real word situations. Some of the most clear-cut applications of blockchain technology exist in finance and logistics, there is also an opportunity for the technology to be applied to industries such as gaming. Specifically, blockchain technology could allow for the purchase and sale of in-game items and cosmetics, as well as establish provenance and authenticity of the items in question. While some game developers may be loathed to allow for secondary transactions of in-game items, if the structure of these transactions is designed to allow for monetization at the developer or publisher level then it could stand to better all parties involved.

Another potential positive outcome of the application of blockchain technology in gaming could be the mitigation of third-party programs that provide an unfair advantage to select players. Scripting programs are some of the most notorious cheats implemented in mechanically demanding games such as Counter Strike: Global Offensive (CS:GO) and League of Legends (LoL) – these cheats often map multiple actions to a single hotkey which can provide a material advantage as compared to an individual who has to accurately time and strike keys individually. While many games already have some anti-cheating mechanisms, it stands to reason that these could be further improved with blockchain technology.

While blockchain technology has the opportunity to enhance existing game structures, it also can serve as a standalone platform for which new games can be purpose built. However, as evidenced by CryptoKitties last year, poorly thought out or unoptimized games have the potential to bog down the blockchain on which they operate. In addition, as it stands today, there are no standalone blockchain games that come remotely close to the experience offered by a Triple-A title, or even some of the better constructed mobile games. Furthermore, the cryptocurrencies (and associated regulatory uncertainty and volatility) associated with blockchain-first games could deter some individuals from adopting what could otherwise be compelling game offerings.

At the end of the day, blockchain in gaming is still in a nascent form. There is the potential for both native blockchain gaming use cases in which entire titles are built specifically to leverage blockchain technology, as well as situations in which existing Triple-A titles could implement elements of blockchain technology in an effort to offer new, innovative features to existing gaming infrastructure. Only time will tell if once approach prevails over the other, or if blockchain will have a material impact on the gaming industry at all.

How can we help?

Teknos Associates is uniquely positioned to identify and analyze the current and anticipated trends within the blockchain and gaming industries.  From our significant knowledge of how the blockchain and gaming industries have developed, to our first-hand experience providing advisory services to organizations at all stages of development and growth, our team is ready to help organizations navigate through all types corporate governance and strategic initiatives. Our vast experience includes providing valuations, offering structural guidance, and delivering strategic analyses. To learn more, contact Teknos Associates at info@teknosassociates.com .