While Bitcoin struggles to make it above $7000, the value cryptocurrency can provide outside of the trading realm is becoming evident within the billion-dollar gaming industry.
Cryptocurrency and blockchain technology were hot topics during the Game Developers Conference (GDC) that took place in San Francisco last month. As I made my way through the record-breaking crowd of 28,000 industry professionals, I constantly heard “cryptocurrency” and “blockchain” being mentioned.
DMarket, a leading global marketplace that uses blockchain technology to transform virtual gaming items into real world assets, hosted a blockchain and gaming panel discussion during GDC. The purpose of the panel was to provide an explanation as to why cryptocurrency and blockchain technology are having an impact on the gaming sector, which is expected to become a $143 billion global industry by 2020.
Breaking It Down: Why Gamers Understand Crypto
Jared Psigoda, the CEO of BitGuild – one of the companies that spoke on DMarket’s gaming and blockchain panel at GDC – explained that the concept behind digital currencies has resonated with the gaming community for years.
Gamers in particular understand cryptocurrency because virtual money has been a part of gaming for the last 10 years. For example, dating back to the World of Warcraft, there was a one-hundred million dollar market for buying digital gold. This was the main currency used in World of Warcraft to buy in-game assets, like dragons. However, it would take gamers a tremendous amount of time to acquire digital gold, so they would use real money instead to buy in-game assets.
As a result of gamers using fiat currency (i.e.USD) to purchase gaming items, free-to-play games become very expensive to play, which is why gaming companies are able to generate so much revenue.
To put this into perspective, recent findings from SuperDatashow that the gaming industry generated $108.4 billion in revenue in 2017. Mobile games were the biggest sector, generating $59.2 billion, followed by PC games, which generated $33 billion last year. Both the PC and mobile sectors were driven by “free-to-play”games. An estimated $82 billion was spent on these games.
Due to the additional expenses associated with free-to-play games, blockchain-based games are gaining traction primarily because blockchain technology allows gamers to use cryptocurrency to trade virtual gaming items with one another. This eliminates the need for gamers to use fiat currency to purchase items directly from game developers.
The use of cryptocurrency in gaming also solves the problem behind ownership of in-game assets, as blockchain-based games tokenize all gaming items. This means that once gamers acquire assets, they remain in their possession within a digital wallet until they decide to trade or sell the tokenized asset – just like any other cryptocurrency.
Greed can be seen in free-to-play games since lots of money has to be spent in order to acquire certain assets. This is an industry problem, as all of the major companies are driven by profit. But, do these companies value profit over everything? If so, is that good for the player base – probably not. Blockchain technology finally allows gamers to own their in-game items, while providing a strong focus on trade and the gaming economy. Moreover, player ownership of assets allows for a proportion of game revenues to go back to the player base, Psigoda explained.
Cryptocurrency For Fantasy Sports Games
Blockchain technology and cryptocurrency are also having an impact on fantasy sports games, a market that is estimated to be worth more than $7 billion a year.
The blockchain-based fantasy sports platform, MyDFS, is using blockchain and their own token to bring much needed transparency to the fantasy sports industry.
Not all games necessarily need blockchain, but there are quite a few industries that could benefit from the digital ledgers and smart contracts that blockchain technology offers, said Viktor Mangazeev, CEO of MyDFS. In an industry that lacks transparency, MyDFS users can see exactly how scoring works and because of tokenization and smart contracts, users will be able to experience quicker payouts than other traditional daily fantasy sports platforms.
Through blockchain technology and cryptocurrency, MyDFS simplifies the overall fantasy sports experience, while opening it up to more people globally. The platform eliminates complex user verification procedures and complicated gaming experiences, making the system more transparent and easy-to-use.
DreamTeam is also using blockchain technology and cryptocurrency to provide a payment gateway and unique platform for the esports industry, allowing organizations, managers and coaches to grow, manage and monetize their teams. The DreamTeam platform lets users sort out media right sales, sponsorships, player salaries and prize money, all of which is paid in a “DreamTeam Token.”
Investors Betting Big
As the gaming community continues to show increased interest in blockchain-based games, major venture capitalist firms and investors are also finding value in decentralized gaming platforms.
MyDFS reported a major round of funding today from investor, Frank Fu, who is also the managing director at the Chinese technology company, Meitu. Fu invested a total of $2 million to help MyDFS continue building a fantasy sports platform that utilizes blockchain technology.
The union of gaming and blockchain is inevitable. Encrypted blockchain guarantees safe storage of all in-game digital assets, what makes the data transparent to the core. Smart contracts exclude third parties from payment processes, making transactions fast and safe. said Fu. Blockchain technology is the solution we are all looking for, due to the decentralized network and capability to record each transaction to combat fraud. That actually can trigger the gaming industry’s next evolution.
DreamTeam also just announced an investment from the European venture capital firm, Mangrove Capital Partners. Mangrove Capital’s portfolio consists of over 100 prospective companies; among the most successful investments are Wix and Skype. DreamTeam is the first ICO investment that Mangrove Capital has made.
And mytime, the platform for the digital distribution of decentralized games, announced last month a successful funding round of $3.5 million from private investors during a closed session of their ICO.
What This Means For Bitcoin
As the potential for blockchain-based games continues to pique interest from both gamers and investors, the declining prices of major cryptocurrencies could also see a positive shift. The value of cryptocurrencies will become more evident as the gaming community continues to gain more active users through blockchain games.
“The only thing that can save the price of cryptocurrencies now is a use case that will result in mass adoption,” said Psigoda. “If the gaming sector continues to gain active users, then as an industry we can prove that cryptocurrencies are being used for something noteworthy. This could possibly bring the entire industry out of the gutter.”