Gaming and blockchain technology stand to gain a lot from one another far beyond the surface-level connection of both supporting digital currencies. Blockchain offers a way for digital assets to be owned and traded in the same way that items can be bought and sold in the physical world.
These assets are called non-fungible tokens (NFTs) – pieces of digital content that are unique, exist as a fixed number and can be bought and traded. The tokens themselves can take many forms, depending on what system they exist in. In gaming for example, they could translate as in-game items. In this context, a blockchain can serve as a decentralised and immutable ledger that maintains ownership of NFTs, rather than a cryptocurrency. The most widely used NFT is the ERC721 standard, developed on the Ethereum blockchain
Using blockchain in games around NFTs ensures that the player rather than the game developer owns their virtual item. This guarantees the rarity of that object and ensures the object is unique and non-duplicable. Also, by its very nature, the blockchain securing these tokens is difficult, if not impossible to hack.
The first wave of collectibles received broad interest despite of the poor user experience they became associated with. Notwithstanding this, they pushed digital tokens into the cultural mainstream along with the digital collectible token standard format – ERC721. This standard allows users to own individually identified digital assets in the same manner as physical ones in the real world, and enables them to identify, own, modify or manipulate a digital asset as they might do a piece of art or car, creating the category of digital collectibles.
Blockchain games du jour
CryptoKitties is by far the most popular and well-known example of a ‘blockchain game’ using this technology right now. In this game, users pay Ethereum to buy what is essentially a picture of a cat. These cats are ‘crypto collectables’ owned by the player, with some of these cats having different physical traits like a long flowing mane or wings. But there are only two things you can actually do with a CryptoKitty – sell it or breed it. The sales are conducted by Ethereum auctions, of which the developers take a cut. Breeding the CryptoKitty with another creates a new cat with some combination of both parents’ traits. Cats with rare traits are more likely to produce cats with those same rare traits, and the thinking behind this is that rarer or discontinued traits will increase in value as they are passed along the CryptoKitties ‘genetic lineage’
This is not a great example of how this technology should be applied to gaming – mostly because functionally, it’s not a game. But the core concept of ownership of digital assets on display here is revolutionary for the games industry.
By using NFTs to secure items in-game, we can create real item scarcity in a way that previously we have struggled to. In-game economies have always been unruly beasts, from massively multiplayer online games to first person shooters, and no matter how meticulously developers set up in-game features like progression and item rarity, there are always people forking over real money legitimately or illegally to circumvent established systems.
Then there is the problem of item duping. Fraudsters dedicated to finding exploits within games are often successful, and exploits that allow them to duplicate what were originally rare and expensive items increases inflation while diluting item value. All of this is before we even discuss the issues of identity fraud in gaming, and the ways in which criminals can use stolen credit cards to purchase in-game items that can sell on with impunity.
Security and ownership
The blockchain and its capacity to provide proof of ownership for all existing assets or items, can fix these problems. It could act as the official record of an in-game economy, storing information about every transactions that occurred around every item, from its creation to destruction.
Beyond that, it could even go some way to eliminate the sunk cost problem that players face when they stop playing a game. Any items they own can be sold on in a way that allows them to recoup some value from NFTs that they will no longer use. The potential for collectibles goes beyond trading – users will increasingly look to manipulate, develop or play with their purchases.
The gaming industry will be profoundly altered by digital assets that are unique, programmable and unequivocally owned by the user. This change, enabled by underlying blockchain technology, will not only alter the way established systems work, but also provide the platform for new game formats to emerge.
The transition to ownership of digital goods will force industry players in the existing $100 billion gaming market to adapt and drive the adoption of blockchain technology to cater for this need. Using NFTs, every character or context in a computer game will become a digital asset and will provide new incentive models for both innovation and engagement, gradually moving towards an ecosystem where all digital assets will be represented by NFTs.