Untapped Opportunities for Blockchain in the Video Game Industry
Comments by Konstantin Boyko-Romanovsky, founder of The Abyss and Destiny.Games
The video game industry is on the rise. It is home to 2 billion players and viewers, hundreds of studios and publishers, together with various financiers, stakeholders and brands doubling down on their investments. Given these numbers and market projections, there is an unmatched potential for innovation and new possibilities to encourage participation.
According to market reports, the video game industry generated almost $94 billion last year and has already exceeded $104,6 billion revenue level in 2017. By 2020, it is expected to reach $169 billion mark. The market represents the shift from offline to online business model as physical sales continue to fall and more digital distribution platforms emerge worldwide.
However, there are still many challenges to be solved now and in the future. Digital distribution platforms are bulky and awkward in terms of interacting with developers. Advertising options are too expensive and ineffective if they exist at all. In addition, they have to deal with fraud, cybercriminals and complaints on a daily basis. What is more important, it is harder for smaller developers to reach the audience with their products.
Given a strong overlap between the game and crypto communities, the technology behind major cryptocurrencies is starting to find its way into the video game industry. With a number of companies already accepting Bitcoin, the market is starting to see untapped opportunities for blockchain technology that extends well beyond means of payment. By design, it offers an incorruptible digital ledger able to record anything of value and keep the information tamper-proof.
This puts into proper perspective the challenges of multiple stakeholders of the industry as blockchain-based platforms have potential to deal with transparency and security issues, provide proof of ownership, cut transactional costs, allow for direct distribution of incomes and innovative loyalty programs. All in all, blockchain will further transform the video game industry — here, we explore the most promising areas.
Proof of ownership for gamer-earned digital items.
The value of virtual items and the importance of trading process grow together with more players making a living off putting hours and days into earning rare in-game collectibles. Popularity of virtual assets and trading virtual goods is enabling a full-fledged game economy.
However, companies and platforms see the issue of players falling victims to scams and losing everything. They prefer to keep control of all game assets in order to prevent cheating and fraud. This leads to a situation where most players don’t actually own their inventory, often worth thousands of dollars, and have no ways to verify item’s pedigree or check seller’s reputation outside the game server.
The blockchain technology secures the transparency of registration and transfer of ownership. It enables players to buy, sell or exchange virtual items outside of particular game servers in a P2P manner and helps them ensure that digital assets are authentic prior to closing deals.
Secure and flexible transactions.
Game marketplaces require secure and stable infrastructure designed for transactions of virtual assets at scale. Most attempts to launch a marketplace have led to the value drain for both gamers and publishers not willing to trade only within the platform with no ways to cash out. For indie developers and smaller studios, dependant on timely payments, marketplaces have always meant large cuts of revenues and potential earnings blocks.
And when some marketplaces started integrating blockchain and extending their existing platforms via this technology, the game community responded with interest and joined their quest to build fraud-free and secure environments.
Apart from it, blockchain-based marketplaces cut the burden of transactional costs for smaller and more frequent payments for in-game purchases that go through card companies and various intermediaries charging fees for processing. The technology allows for a fair, timely and direct distribution of incomes.
With platform-specific tokens, those who bought an item outside the game can trade it to any other cryptocurrency holder. For most players, this is a fair way to cash out before leaving the game server and moving to the next one or crowdfunding independent game developers with a currency converted into tokens.
On the other hand, blockchain makes payment processing for video game companies even more secure by freeing them from having to handle customer financial information, and thus minimizing the risks and allowing for the trust building.
Marketing, motivation, referral and loyalty programs.
Verifiable ownership and secure ecosystem for direct trading provides in-game assets with value which motivates players and encourages them to invest more time and funds into games. Blockchain-based platforms can create and distribute tokens that unlock more use-cases and programmable transaction types by utilizing smart contracts that can be run on Ethereum.
One is the reward for community-generated content (game footage, streaming sessions, guides and tutorials) that helps to sustain player’s interest and buzz around the game. It is one way to monetize user-generated content and motivate players to make it professional, since blockchain-based tokens can be exchanged to fiat currencies. This is how the motivational system works. Players can earn from their hobby, while developers can reduce marketing expenses.
And one more important thing to mention. Normally, the referral systems in the video game industry offer bonuses within platform-specific in-game currencies. While blockchain technology allows to introduce the profound multilevel referral system providing the opportunity to earn and easily withdraw the income to cryptocurrency wallet.
We, at The Abyss, are planning to introduce a next-generation digital distribution platform, where gamers can profit from motivational and multilevel referral programs, while developers can reduce marketing expenses and earn even from referral players who have already left for another game on the platform. ABYSS tokens will be utilized for payments, rewards, referral programs and other services. We want to change developers’ interaction model within the platform from being competitive to being collaborative and mutually beneficial. This is a brand-new approach that will change the whole video game industry.
At the moment, we are working towards Token Sale and signing up partners willing to join our platform.