Cryptocurrency Is Revolutionizing Gaming Virtual Economies
The online gaming industry has proliferated across the world, with more people than ever before using their free time to play video games and escape from reality. According to a 2017 report from Newzoo, there are 2.2 billion active gamers in the world, which is 30% of the entire global population, and 1 billion of these gamers spend money while playing. This generated an estimated USD 108.9 billion of in-game revenue in 2017.
This has led to the creation of a virtual economy where players purchase in-game items, like shields, weapons, food, in-game currency like World of Warcraft gold, and even virtual real-estate. There are both primary markets, i.e. an official market that is created by the game’s developers usually within the game itself, and secondary markets, which are unofficial peer-to-peer markets developed and operated by players.
A study by LendEDU found that players spent on average USD 84.67 in a game, and all of this is spent via microtransactions. Indeed, the shocking fact is that free to play games that integrate microtransactions generated the highest revenues, such as League of Legends, Fortnite, Dungeon Fighter Online, and CrossFire. Players spend real-world money in order to gain an advantage in the game, and often games are designed to become very slow and unsuccessful if the player does not spend any money.
Cryptocurrencies Make Gaming Virtual Economies More Secure
This is where cryptocurrency comes in. Instead of using fiat payment methods, players could instead use cryptocurrency, and this has multiple advantages.
The first major advantage is security for both the player and the game developer in a primary market, and security for the buyer and the seller in a secondary market.
Cryptocurrencies like Bitcoin and Litecoin are pseudo-anonymous, meaning no personal information is associated with a transaction, although transactions can be tracked via the block explorer. That being said, using Bitcoin is much safer than giving over your identity and credit card information to a trader in a secondary market. Even better are cryptocurrencies like Monero and Zcash which are completely stealth, allowing players and traders to buy and sell in-game items without any risk of identity fraud.
Indeed, the Fortnite merchandise store has begun accepting Monero.
Too cool: the Fortnite merch store (https://t.co/KNL4IFCFHk) lets you pay in Monero, so now you can purchase that sweet Durrr Burger onesie without your friends / family / coworkers judging you. https://t.co/XYs1NjGvGp
— Riccardo Spagni (@fluffypony) January 1, 2019
Another facet of security is the immutability, i.e. irreversibility, of cryptocurrency payments. It would be quite easy for someone to spend a lot of money on microtransactions in a video game with their credit card, and then call the card company and say that their card was stolen, causing the game item merchant to lose all of their revenue, their items, and pay heavy chargeback fees. To be fair, it’s also quite possible that someone’s credit card really could be stolen by someone who wants to buy in-game items. In either case, chargebacks cut into profits and may cause merchants to go out of business, damaging the virtual economy.
Cryptocurrency payments can never be reversed once they are sent, protecting the video game developers in primary markets and the traders in secondary markets. The immutable nature of cryptocurrency has the potential to increase the profitability and efficiency of virtual economies.
Additionally, there are numerous reputable cryptocurrencies with low transaction fees that are suitable for microtransactions, and even Bitcoin can have almost zero transaction fees when using the Lighting Network. The Fortnite merchandise store which is already accepting Monero is considering accepting Bitcoin via the Lightning Network.
Lack of privacy, but they’re considering LN because it restores *some* privacy to Bitcoin.
— Riccardo Spagni (@fluffypony) January 1, 2019
Cryptocurrencies Turn Video Games Into A Way To Earn Real Money
Aside from using pre-existing cryptocurrencies, video game developers could create a brand new cryptocurrency specifically for the game. For example, the game ClanPlay rewards players with a cryptocurrency called Good Game for in-game actions. Theoretically, this cryptocurrency can then be traded on an exchange for Bitcoin, allowing players to earn real money from playing a video game.
There are several other examples of games that have their own native cryptocurrency or offer ways to earn cryptocurrency. The game Huntercoin rewards players with Huntercoin (HUC). The collectible card game Steem Monsters rewards players with the Steem cryptocurrency. Stormplay users can earn Bitcoin, Ethereum, or the Storm cryptocurrency. The building and real-estate simulator Worldopo has in-game mining farms where users can earn Bitcoin, Ethereum, and Worldopo’s WPT token. There is also an app called Sweatcoin where users earn 1 Sweatcoin for every 1,000 steps they walk. The pirating game Privateers allows players to earn Ludum (LDM) for participating in the manufacturing of in-game items. Finally, the game Alien Run offers players some Bitcoin for playing.
Thus, integrating cryptocurrency with video games makes it possible to earn real money by just sitting back, relaxing, and playing a video game. The cryptocurrency earned in the video game can either be fed back into the virtual economy to buy in-game goods, or cashed out to buy things in real life.
Non-Fungible Tokens On The Blockchain Improve In-Game Item Trading
Video game markets can also benefit from using blockchain non-fungible tokens (NFTs), which allow each in-game item to have a unique private key.
Typically in-game items are indistinguishable from other items of the same type, and also the in-game items cannot be traded outside of the game. In the case of NFTs, each in-game item is solely possessed by the person who holds the private key for it, making items distinguishable from one another. Also, NFTs make it easy to trade in-game items on secondary markets, since the items can be transferred on the blockchain, versus the typical case where players transfer items to each other in the game itself.
Video game giant Ubisoft is looking to integrate blockchain NFTs for the reasons described above.
Cryptocurrency Makes Gaming Virtual Economies Better
In summary, cryptocurrency has the ability to revolutionize primary and secondary virtual economies in the gaming industry. Cryptocurrency is well-suited for microtransactions, and cryptocurrency helps prevent identity fraud and credit card fraud, making the gaming virtual economy safer and more efficient. Also, games can reward players with cryptocurrency, turning gaming into a way to earn real money.
Due to the merits of using cryptocurrency in video games, perhaps in the not so distant future, cryptocurrency will be the number one payment method in virtual economies, and perhaps cryptocurrency could eventually be integrated into every facet of the gaming experience. This would not only make gaming more interesting than ever before but would also be a major leap forward for cryptocurrency adoption.
As Mike Novogratz, the Founder of Galaxy Digital says “We believe that gaming — and specifically players’ interaction with in-game economies and virtual goods — will play a key role in how the masses first discover the true potential of the blockchain”.
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Zachary, Khareem Sudlow
