Blockchain technology is disrupting the gaming industry, with the technology leading to the emergence of new genres called Web3 and crypto games.
These games, powered by blockchain technology, offer decentralized ownership, allowing players to earn a livelihood by playing.
Unlike traditional games, blockchain games redefine the concept value by leveraging the immutable nature of Web3 technology to grant users true ownership of their in-game items and coins.
Blockchain games allow users to use marketplaces and exchanges to extract value from their in-game assets and currencies. This innovation is what revolutionizes the gaming industry.
Blockchain gaming often incorporates these elements through tokens, which can be fungible or non-fungible.
Fungible tokens, such as ERC-20 tokens within the Ethereum ecosystem, serve as in-game currencies. Meanwhile, ERC-721 or ERC-1155 tokens are utilized for in-game items and characters.
Non-fungible tokens, also known as NFTs, represent unique digital assets tokenized on the blockchain. Utilizing the ERC721 token standard, NFTs enable the minting and circulation of various digital files as crypto assets.
This revolutionary approach allows for genuine ownership and item reselling, as virtual items do not solely exist within the game environment. Instead, they have an independent existence on the blockchain and can seamlessly interact with the game’s infrastructure.
The blockchain provides the necessary framework for both ownership and trade, facilitated through dedicated marketplaces.
NFTs serve as ideal repositories of information for in-game items. They possess distinct characteristics and can be easily identified, bought and sold by players.
NFT, metaverse, P2E
Ledger Academy highlights three types of blockchain games — NFT, metaverse and play-to-earn (P2E).
NFT games are blockchain games that utilize non-fungible tokens within the gameplay in which players truly own their in-game items as tokens stored in an NFT wallet. This ownership grants them exclusive control over their assets, even if the game itself ceases to exist.
Players can also transfer these items to different crypto wallets or engage in their sale on secondary NFT marketplaces. It introduces a new dimension of player autonomy.
In games like Apex Legends or Call of Duty, characters and gun-skins can be represented as NFTs on a blockchain. The uniqueness of NFTs grants players actual ownership of their in-game items, stored as tokens in an NFT wallet.
The metaverse plays a vital role in bridging the gap between traditional and blockchain gaming. It offers a heightened sense of reality in digital gaming, socializing and events, with NFTs as crucial.
Unlike regular games, where players have little control over their environment, the metaverse provides an “always on” environment. Players can own, curate and develop parts of the metaverse through NFTs, even monetizing their creations.
Despite being in its early stages, the gaming sector plays a pivotal role in driving the broader adoption of the metaverse. Leading metaverse games like The Sandbox and Decentraland allow players to own portions of the virtual world through NFTs, such as land, avatars and in-game items.
These assets can be traded within or outside of the game ecosystem, granting players a sense of ownership and creating new avenues for monetization.
P2E is another blockchain gaming mechanism that allows players to earn crypto tokens as rewards for completing tasks, winning battles or advancing in-game stages. These rewards can be native cryptocurrencies specific to the game, such as MANA in Decentraland or popular cryptocurrencies like ETH or USDT.
P2E games operate on a simple principle — the more time and effort players invest in the game, the greater their chances of earning rewards with real-world value, predominantly in the form of cryptocurrencies.
For example, in Decentraland, players can generate a passive income by renting out virtual land. Additionally, various P2E games, including Axie Infinity, allow players to earn points that hold real-world value through the game’s native cryptocurrencies, AXS and SLP.
Blockchain casinos to reach $435 billion by 2028
The blockchain casino industry is projected to reach $435 billion by 2028, with an annual growth rate of 12.1 percent. This growth can largely be attributed to the impact of the pandemic, as people are more inclined to spend more time home and explore innovative gaming models.
As a result, key players in the industry have shown significant interest in crypto games, showcasing the profound influence of blockchain technology on the crypto landscape and casino games. In fact, some casinos now accept blockchain, allowing players to claim no wagering free spins.
One of the key advantages of blockchain technology is its ability to secure digital identities. It allows players to establish and maintain their reputations easily.
These identities can be used for player verification and to combat fraud in the gaming sector. Secure transactions have also become a significant priority in the industry.
“Blockchain is proving very useful in gaming due to its immutability and security,” wrote crypto news outlet Cointelegraph.
“The decentralization factor encourages players to participate in the development and innovation process while monetizing their crypto assets. Its numerous use cases are revolutionizing how games are played, owned and developed.”
Risks in blockchain gaming
It is important, however, to recognize the risks associated with playing blockchain-based games. Technical barriers pose a challenge, as implementing blockchain technology requires significant technical expertise. They can increase development costs and complexity, potentially discouraging developers and players.
The use of crypto wallets and the necessity of acquiring NFTs before participating in certain games can add further complexity for players.
Blockchain technology’s regulatory landscape is still evolving, leading to uncertainty about how blockchain games will be regulated across different jurisdictions. This condition can give rise to legal issues and compliance risks.
Several jurisdictions, such as Dubai and Singapore, have positioned themselves as crypto-friendly destinations. Among them, the U.K. has emerged with a recent regulatory bill focused on cryptocurrencies.
The U.S., however, has adopted a stricter approach towards such companies, with regulatory authorities intensifying enforcement actions. This has resulted in a challenging and uncertain regulatory landscape for the American business community.
Binance.US, a major cryptocurrency exchange, expressed its concerns regarding the “hostile and uncertain regulatory climate” in the U.S. through a social media post in April.
Another consideration is the security of cryptocurrency tokens. While blockchain technology is decentralized, it remains vulnerable to hacking and malicious activities.