According to industry analysts, gaming will be the first genuine use of blockchain technology, altering the industry and making games more immersive. The method in which the gaming sector overcomes the remaining obstacles will serve as a case study for other industries investigating the broader use of blockchain technology.

When it became clear that cryptocurrencies were not the only purpose for blockchain, the technology was heralded as potentially revolutionary. Currently, the game-changing applications of this technology seem to be more theoretical than practical, and many individuals think that it has been oversold.

The opposite is true with gaming. According to industry analysts, a paradigm change is imminent, and the gaming industry will be the first to use blockchain technology extensively. It is feasible that blockchain technology might dramatically reorganize the business, invert the monopolistic console market, establish a multiverse, and cause games to be more immersive and genre-bending than ever before. How the gaming industry overcomes the remaining obstacles will serve as a case study for other sectors considering widespread adoption.

“Far Exceeded in Demand”?

Does high-level criticism indicate future challenges for blockchain technology? According to Wells Fargo CEO Tim Sloan, the answer is affirmative. According to Ajaypal Banga, the chief executive officer of Mastercard, which has the third-most blockchain patents in the world, the blockchain idea is “not proven.”

Even Bitcoin, which introduced the word “blockchain” to the broader public in 2009, continues to face regulatory challenges. After hitting their peak in 2018, cryptocurrencies are often seen as gambling. There are allegations of blockchains being compromised, which was previously considered an oxymoron and impossible. These findings do not alleviate any concerns.

There are other applications for blockchain technology other than bitcoin. There is also the prospect of its use in different industries. Blockchain can disrupt several sectors, including business solutions, data security, and energy solutions. The money spent on blockchain initiatives continues to climb, with over 108 million dollars being invested in venture capital in 2019. Irritability is prevalent in today’s culture and may be to blame for apprehensions. It should not come as a surprise that blockchain, a technology that can reconfigure some of the world’s most vital infrastructures, is encountering a few roadblocks along the way.

Microsoft founder Bill Gates has described blockchain as a technical tour de force. Bob Greifeld, the chief executive officer of the NASDAQ, described it as “the broadest opportunity set we can imagine over the next decade.” If Bill Gates and Eric Greifeld are authentic, the effects of blockchain technology will be revolutionary, immediate, and overwhelmingly advantageous.

Blockchain has the potential to become the industry standard for the user experience, the exchange of digital goods, and the back-end infrastructure of games themselves in the gaming industry. How, why, and when the gaming sector uses blockchain technology are indicators that other businesses will want to monitor closely.

The primary use of blockchain technology within the gaming industry is Liquid Gold Liquidity.

Given that gamers are already familiar with tokenization, the inclusion of blockchain technology into the gaming industry is, in many ways, a no-brainer. Some of the first games ever developed had applications for virtual currency. Due to games’ advancement and incorporation into the internet, in-game gold and items may now be purchased using real-world (fiat) currency. Unfortunately for the game’s makers, most transactions occur outside of the game itself. Blockchain technology can standardize and guarantee fairness in the exchange of in-game currency and assets and link these transactions to the real world in a rational and meaningful manner. This may be especially useful for the free-to-play business model popularised by Fortnite, in which most gaming revenue is generated via in-game purchases (such as skins) paid for using digital currency. This may be especially beneficial for the free-to-play business.

The success of Fortnite by Epic Games is probably an indication that blockchain will be successful in the gaming business. Fortnite earned $2.4 billion in 2018, making it the highest-grossing game in gaming history. In 2018, free-to-play video games produced 80 per cent of the total revenue made by the global gaming industry. In 2018, free-to-play console games had 458% more revenue than the previous year.

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The second application relates to structure. So far, the variety of blockchain-based games has been entirely restricted, and they may be grouped into one of two basic categories: decentralized or hybrid. In the first model, the game is governed by a blockchain, preventing the developer from modifying the experience without obtaining user consent. A hybridized paradigm is one in which the game is still hosted on a centralized server, but its assets are traded via a decentralized marketplace. In any event, blockchain technology provides legitimacy and long-term value to in-game goods by making them as possessive as feasible.

Also read: What is Money Laundering and Wash Trading In NFT?

As the gaming industry shifts its focus to in-game assets, blockchain technology may provide solutions to some issues associated with this shift, such as the elimination of fraudulent items, the creation of scarcity, and the encouragement of more purchases by allowing objects to be transferred between games (more on that below). According to a survey done by Worldwide Asset eXchange (WAX), a blockchain network for virtual items, 62% of gamers would be more inclined to invest in digital assets if they could be transferred across games. Similarly, 84% of developers would create in-game items for the same reasons. Tim Sweeney, the chief executive officer of Epic Games, has not ruled out blockchain technology or cryptocurrencies categorically. An application comparable to Fortnite may be sufficient to move the game industry toward widespread use of blockchain technology.

The gaming industry may benefit from a range of other blockchain-based technologies, such as the ones listed below:

Giving users permanent ownership of in-game stuff will avoid the theft of items caused by hacking and selling fake in-game assets. Linking assets to individuals rather than games protects the time, and money users have invested in games independent of game creators’ decisions.

Protecting users from adverse actions performed by writers; enables players to gain control of the game, increasing its longevity and user-generated content. (Decentraland, a virtual reality game, is an excellent example of this.) Using a distributed ledger to record sales restores confidence between video game producers and distributors.

Developing a decentralized network for video game distribution.

Developing games with more realistic financial mechanisms.The definition of a successful game is shifting from revenue to the value of the in-game currency, resulting in a reorientation of game development efforts to benefit players rather than creators.

Participation would be encouraged by offering players dividends and enabling them to vote on game design choices.

A problem plaguing cloud gaming endeavour endeavours (such as Sony’s PS Now) that is characterized by high expenses and low earnings may be remedied by spreading the server throughout a blockchain network. Fostering competitive game development in regions not controlled by monopolistic industries such as console manufacture and game publishing

“Gaming does not need blockchain, but blockchain needs gaming,” said Josh Chapman, managing partner of Konvoy Ventures, a venture capital firm specializing in esports and video gaming. Once blockchain has shown significant value to the ecosystem of the video game business, only then will it be widely accepted and used.

“There are 2.6 billion video game players in the globe, and hundreds of studios have digital assets and intellectual property. Chapman observed that most other industries are forty years behind the gaming sector. In the past four decades, the video game industry has used the notion of tokenization. The founders of Blockchain Capital had significant experience trading digital assets in the massively multiplayer online game Second Life (more on this topic is provided below). Then, using their expertise, they determined that a brand-new kind of digital currency, Bitcoin, had significant value and invested heavily in it.

According to data given by Pitchbook, blockchain investments surged by a stunning 280 per cent between 2017 and 2018, and blockchain gaming investments have hit an all-time high. Ripple, a transaction blockchain, and Forte, a blockchain gaming company, teamed together in 2019 to establish a $100 million venture to combine blockchain technology with gaming. In 2018, the prominent investor in Skype and Wix, Mangrove Capital, gave $5 million to the esports and blockchain platform DreamTeam. A blockchain known as Tron invested one hundred million dollars in its blockchain gaming fund known as Tron Arcade in the same year. By 2020, it is estimated that the global gaming business will have produced 143 billion dollars in revenue.

Chapman’s assertion that “blockchain needs gaming” rings particularly true when one considers the client acquisition strategies of blockchain companies investing in gaming. They are not investing $100 million but making it accessible to other gaming companies. This action is effectively a customer acquisition effort by Ripple and Tron.

This firm is expanding rapidly. The shakeout of investments made in blockchain-based gaming will likely resemble the shakeout of other conventional IT rivals. This time, the game is not digital storage but digital asset transferability. As a corollary to Chapman’s assumption, blockchain will continue to be an integral part of the video game industry’s technical fabric once it discovers a method to deliver meaningful value inside the ecosystem.

Please Step Into the Multiverse.

According to Toptal Java Developer Jonathan Sterling, who specializes in solutions for financial institutions and cryptocurrencies, another possible repercussion may be “more akin to a Second Life experience.” He was referring to the prevalence of online virtual worlds. Avatars are virtual representations of players that may interact with other players, places, and things in the game environment. Users are permitted to create their digital items and places inside Second Life, and the game contains virtual money that can be swapped for real-world currency. In 2015, the game’s economy was valued at $500 million US dollars. In 2018, one of the original co-creators of Second Life got a $35 million Series D investment headed by Galaxy Digital Ventures, a blockchain investment firm. This fact demonstrates the existence of unmistakable ties between Second Life and the blockchain.

In reality, Second Life users are referred to as “residents,” and the platform’s creators do not refer to it as a game. Sterling states, “for many individuals, it may even become their primary existence.” [Bibliography required] “Perhaps it used 30% of your life, but now it may consume 40% since you can cross-tie the assets,” which implies that “your gaming assets can be exchanged for real-world stuff and vice versa… what is the game and what is real life?”

Interoperability refers to the ability of various game environments to interact with one another. Blockchain technology can blur the line between the physical and digital worlds. Blockchain technology might enable the transfer of things between several games and game worlds, establishing a digital multiverse. According to Chapman, “I could buy a fantastic Mario Kart skin and then transfer it to Counter-Strike and apply it to any in-game asset of my choosing.” He believes that this is a possibility. To create game world fluidity would require unprecedented studio cooperation; if successful, it would have the ability to alter the landscape of network gaming significantly.

A Scene That Is Continuously Changing

Like other uses of blockchain technology, gaming has potential adverse side effects. Sterling suggests that adoption might be motivated solely by “regulatory arbitrage.” Many tax and regulatory issues are involved in selling in-game currency outside the game. “Why doesn’t Blizzard provide gold?” he inquires, alluding to the creator of World of Warcraft and Starcraft. (Blizzard is the name of the company as well)

Sterling has previously written for Toptal about his scepticism about the utopian undertones of blockchain technology. According to him, blockchain technology also devalues the whole gaming experience. “Shouldn’t you be able to acquire great material if you play a video game for hundreds of hours every single day? If you can sell the game for $5 on a network, the game’s value for those who intend to play it is diminished. You contribute even more to the problem if you use Blockchain technology and enable the product to be traded on a secondary market. The game’s creators are embracing this tendency, even though they should be fighting against it for the game’s long-term sustainability.

Early in his career, Sterling worked for Jagex, the firm that created RuneScape, currently the world’s most popular free-to-play massively multiplayer online role-playing game. He saw what seemed to be an in-game pyramid scheme consisting of networks of accounts transmitting “gold” from the game to a single, centralized account, which then sold the gold for real money outside the game. “Game developers have also begun to embrace this paradigm where they are the official resellers of gold since they realised they couldn’t stop it,” a commentator notes. It diminishes the quality of the gaming experience, but they are aware that this tendency will continue anyway, so they may as well capitalize on it and earn money. “Game companies have also begun to embrace this paradigm in which they are the authorised vendors of gold.”

A related concern is that blockchain technology might make the success of games like Fortnite solely reliant on money resources. However, blockchain technology may be able to solve this specific problem. If player accounts were recorded on a distributed ledger, the mechanism by which they get items might also be verified for authenticity. The game makers may then restrict the use of certain things based on the player’s achievements, requiring the user to invest more playtime time to use the item.

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Why is the general adoption of blockchain technology in the gaming sector still in the works when so many stakeholders stand to profit? Time is one of the reasons why blockchain technology has not yet achieved commercial critical mass. A blockchain trilemma is a term used to describe a significant challenge. Like the age-old dilemma of project management — “cheap, good, or fast: choose two” — blockchain faces the difficulty of achieving a balance between decentralization, scalability, and security.

The Catch-22 of Blockchain Technology

Scalability is the most evident issue. The online tool DappRadar suggests an insufficient number of users for DApps, also known as decentralized apps, and includes blockchain games when examining their traffic.

As was the case in the early days of Bitcoin and Ethereum, transactions on blockchain networks are infamously slow, and the networks themselves are notoriously sluggish. When it comes to speed, gaming shares an issue with other applications of blockchain technology. The introduction of the blockchain game CryptoKitties in 2017 led the Ethereum blockchain to become so congested that it approached a crisis point, necessitating the formation of a specialized emergency task force.

Also prevalent are problems with the underlying infrastructure. Participants in blockchain games are now obliged to produce private keys for each game they play; if these keys are lost, their accounts are made unretrievable. As with CryptoKitties, the requirement that participants pay a charge for each transaction deters a considerable proportion of prospective consumers.

Prevalent game players have learned to expect a high degree of ease. The use of blockchain technology in the mainstream gaming business might someday tip the scales, although the bulk of blockchain-game goods is not even comparable to high-profile titles. Moreover, development activities are absent.

An Interruption in the Flow of Events?

Initial solutions to the trilemma seem to be preliminary draughts. Using less processing power for each transaction is one possible answer; nevertheless, this creates an unacceptable risk to the blockchain’s security. Instead of depending on a single core network for all transactions, the Ethereum blockchain is experimenting with creative ways to reduce stress, one of which is to divide the network into “shards.”

Specific organizations are using the blockchain’s underlying technology to create new types of distributed ledgers. Nano employs a “block-lattice architecture” and allocates a distinct blockchain to each account. Nano users use their computer resources to feed the network and expedite transactions.

The distributed ledger without authorization requirements. IOTA offers a further alternative for achieving blockchain-like results without actually using a blockchain: The name for its organizational structure is the Tangle. Each transaction in a pay-it-forward system is contingent upon the validity of two of the system’s previous transactions; after that transaction has been validated, it becomes contingent upon the validation of a subsequent transaction, and so on. IOTA now runs with a centralized structure, but the firm has said it will shift to a decentralized network soon.

It is possible that future blockchains will not resemble blockchains at all. It is feasible that future generations would see blockchain as a failed experiment that gave them critical lessons for developing more complicated and effective distributed ledgers. In any event, blockchain technology or a system similar to blockchain will not reach a tipping point in the gaming industry unless its trilemma is addressed. The gaming company’s method of accomplishing this purpose might serve as a model for other businesses with the same objective.

Continue, Save, or Try Again?

Chapman thinks that blockchain should stay in the background, and he anticipates its current popularity era will be brief. “I believe that blockchain users will be unaware that they are using it in the not-too-distant future. As a consumer, I am unaware that five intermediaries are involved when I make a wire transfer, for example. This issue is relatively similar. I have never once heard a consumer express a desire for more insight into the process behind developing their digital assets. Consequently, the issue for which you are seeking a solution is not a problem experienced by clients, which is typically the beginning of a failing company. I think this is the future if blockchain is used as an efficient tool for back-end infrastructure, but customers are never notified of its presence.

In the gaming industry, the future of blockchain technology will be examined. Gaming is an effective learning tool not just for blockchain but also for other applications. Some even assert that the computer game Sim City inspired a whole new generation of urban planners. Real money may be earned or lost while using blockchain, but the transaction occurs inside a game setting. This makes it the perfect location for assessing blockchain’s prospects for mass adoption.