The gaming industry and crypto

This text is written by Manuel Valent, research director at Coin house.

The video game market is today the leading industry in terms of leisure expenses, far ahead of e.g. the cinema. We can therefore rightly ask ourselves the question of whether this market will establish close links with crypto assets. Let us take a closer look at the arguments for and against this development.

First of all, it is important to distinguish between two main player profiles. On the one hand, there are PC or console gamers, mostly young men, but not exclusively, who focus on graphically advanced games with a high degree of difficulty – we can think of the Call of Duty series, for example. On the other hand, there are mobile gamers, with a more diverse profile, who focus on simple games to pass the time – for example, Candy Crush Saga.

Although some actors may correspond to both types of profiles at the same time, we are mostly dealing with well-separated populations, and this is also the case in their consumption habits.

This dichotomy is most claimed in the types of purchases these players make: in the case of mobile phone video games, it was early established that microtransactions are perfectly acceptable: a player who is stuck in a difficult level or simply wants to advance faster can buy, for a few euros, enough to unlock its progress.

Many mobile games are actually built to frustrate players with gradually slow progress, to trigger these buying actions, which ultimately represent the main source of revenue for developers.

In the world of classic video games, these methods are not, until today, accepted. Players expect to buy the game and do not have to pay more, except for significant developments of the latter. Paying to develop your character faster is frowned upon and considered cheating by other players.

The only exceptions to this rule are the decorations (skins) of the character and its weapons, which a certain number agree to pay for, for example in Fortnite.

And that’s a good thing, because when we think about the relationship between video games and cryptocurrencies, one of the first concepts that comes to mind is NFTs. It would not be very difficult to convert the current clothes that players exchange and convert them into NFT, via a marketplace like Opensea.

But the interest is quite limited, as far as most of the time this accessory costs little money, and the real interest in an NFT would be to be able to use it in multiple games. But if we can imagine that several games from the same publisher as Ubisoft, quite advanced in this area, could become compatible with the characters’ accessories, the collaboration between publishers is almost non-existent.

The few attempts to push microtransactions into the world have been met with fierce opposition from players, especially in cases where these provided significant advantages over others.

Conversely, in mobile video games, these resistors do not exist and players are accustomed to this concept. It is therefore easier in advance to design a game that has a direct relationship to cryptocurrencies. So it’s no wonder, for example, that the most successful blockchain-related game, Axie Infinity, is a game made on mobile.

What type of proposal can we imagine in this case? The current model of mobile gaming can be easily adapted so that players can pay with cryptocurrencies instead of paying with euros. Keep in mind, though, that platforms like Google and Apple earn commissions on transactions. They would therefore not welcome players who use an alternative payment method that would reduce their commissions.

Read by the same author: Ethereum: what are the challenges of getting PoS to this blockchain?

More generally, such a development will only be interesting if players have the opportunity to use the same currency on several different games, otherwise they might as well continue to use the euro.

Recent market developments: Games to earn games. Axie Infinity has already been mentioned and this model is spreading relatively fast. The only problem is that the rewards distributed to players are in the form of cryptocurrencies created by the platform that controls the game. So there is a constant dilution of the value of distributed tokens and we can bet that in the long run, their value will logically turn to zero. No games to earn games have found a reasonable balance so far, which would require that the amounts paid out, for example, come from the losing players.

Moreover, if we introduce the concept of winning in a game, players will quickly take the strategies that are recognized as the winner. Then we move away from the notion of play as leisure.

The use of cryptocurrencies in video games is therefore currently quite limited. Between the strong opposition from traditional players and the lack of interest that can be in mobile games, the model is still very young and looking for itself: latest development to date: games in move to earn like STEPN, which is similar to the Pokemon Go model, with a notion of gain. But where there would be real interest would be in collaborations between different games or studios, and the industry has not moved in that direction yet.

Only major positive point: players are usually technically savvy, quick to adopt new technologies such as cryptocurrencies. We can therefore bet that if interesting and paid applications emerge, they will be able to adopt them relatively easily. Finally, the development of metavers could mix the cards: universes like Decentraland and Sandbox provide for the creation of video games within their platforms, and we would then have a perfect opportunity for the convergence between video games and cryptocurrencies.

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