Gaming as a business forms one of the largest markets across the world and the profit generated in this market runs into billions of dollars. The use of technology has continued to evolve for gamers and developers seeking ways to improve the gaming experience and one such technology is blockchain.
Blockchain technology that most people know from its applications like cryptocurrency providers and the opportunity to record data without a centralized authority.
Regarding gaming, it modifies the entire ownership and trading concepts of the in-game assets and offers players more control of their virtual gaming world while assisting game developers in exploring new horizons.
In this article, the aim is to describe what can be understood by blockchain in gaming, its advantages and disadvantages, and potential future changes that can shape the field.
Table of Contents
What is Blockchain?
Blockchain is a distributed records system that enables data to be decentralized across various computers. The data is open, tamperproof, and secure. In simple terms, one can say that a record of certain transactions is distributed in digital form on many nodes (or computers) within the network and is therefore very hard to modify or forge once created.
In its most concise definition, blockchain diminishes the role of middlemen like banks or a centralized server, which makes P2P communication possible. Each transfer of data in a blockchain network involves consensus to achieve a universal validation where there is no central reference needed.
How Blockchain is Changing Gaming
1. Ownership of In-Game Assets
In most cases, items that exist within a game range from skins, weapons, and characters, and as such, are owned and hosted by game developers. Although players have control and possession of these assets and are responsive to these games they do not own them in a legal and economic sense.
In case the game is closed, the player’s account gets blocked and he is rendered without any access to the mentioned assets.
Players have in-game assets that are not only delivered and controlled by the game’s smart contract but are also backed up by blockchain. In this way, virtual items can be owned by players using non-fungible tokens (NFTs), which are digital tokens to represent the ownership of an item.
NFTs can be bought, sold, or even ported to other games or domains as needed. This transfer of power is the most marked, returning control over one’s digital commodities, or better yet, game assets, to the player.
For instance, a player could directly buy a sword in the game or a skin asset that is hashed on the blockchain. They can then sell it to another player on a decentralized marketplace or they can use it in other compatible games creating a digital economy.
This is already in part realized in games like Axie Infinity and Decentraland, where the NFTs are represented as the in-skill assets that can be sold and traded for some amount of real-world currency.
2. New game economies Decentralized Gaming Economies
There are possibilities that blockchain would give birth to entirely different economic models of gaming. Through decentralization of the gaming economy developers can build inducements that could enable players to earn, trade, and spend virtual coins within the gaming environment.
One example of that might be “play-to-earn” where users get paid tokens or NFTs for achievements, maps, quests, etc.
3. Games Interoperability
Interoperability between various games using blockchain is likely to be one of the most exciting parts of blockchain in gaming. In the traditional gaming model, each game is siloed and assets and progress are separated.
The progress of your character is limited to the worth of the game world you’re playing in and a sword you win in one game won’t be usable in another game.
However, blockchain in the game allows developers to create standards for in-game assets, enabling the transfer of in-game assets between different games or platforms.
This makes it possible for a player’s achievements, characters, and items to move more freely without the need for resetting in a new game or game series. Say a character skin in one game is rare and offered in another; a unique item can also be transferred from one virtual world to another.
Interoperability of this type would necessarily involve working with developers and standards. Like most ambitious visions, however, it is an open door to a wider game and digital universe world.
Companies are already building a blockchain-based game assets ecosystem, including Enjin, which aims to make it easy for developers to incorporate blockchain into games.
4. Transparent and Fair Game Design
Blockchain’s level of transparency can also imply more transparent and accountable gaming experiences. Developers control loot drops, randomized rewards, and player progression in traditional games through game mechanics.
Sometimes, because of this centralization, people can accuse you of being unfair or manipulating things, in games where the loot boxes or there’s microtransactions.
Additionally, players can use blockchain to see the progress they are making and to know they are being compensated appropriately for the time and effort they put into the game.
Trust can be facilitated by this transparency, and the chances of disputes or accusations of pay-to-win mechanics, such as players spending money receiving unfair advantages, can be reduced.
5. Game Mechanics Smart Contracts
A smart contract is simply a self-executing contract with the terms of the agreement directly written into code. Smart contracts can also take traditional gaming mechanics and make them smart and can deploy highly complex, player-driven interactions that would not be possible nor practical in standard games.
That could be something like smart contracts market in-game economies and automatically rewarding players for their actions or better-developed smart contracts for decentralized governance structures where players are voting for changes to the game.
Player-to-player transactions could also be enabled by these contracts, with trades and transfers being completed transparently and securely without an intermediary.
The benefit of smart contracts is that developers can create dynamic game environments, able to react to player input and behavior in a more engaging and interactive environment for the player. It makes game design much more open to players having more agency and control of the game world.
6. Preventive Security and Anti cheating Mechanisms
Of course, blockchain’s best security features can also have positive outcomes for preventing cheating and fraud in online games.
Decentralized blockchain transactions are made in a ledger that’s unchangeable and cannot be tampered with, making it virtually impossible for a player to adjust or cheat the system. Imagine a game where players can buy or sell their in-game items, blockchain is there to ensure that players’ items transfer ownership is verifiable and traceable.
Challenges and Considerations
However, while blockchain has immense potential for use in gaming, there exist issues and considerations that must be addressed before the embrace of blockchain by the gaming community as a whole.
1. Transaction Costs and Scalability
Currently one of the most challenging aspects of blockchain technology is scalability. While the blockchain may become slower and costlier to use the more users it has and transactions to process.
In gaming and particularly microtransactions where paying in real time may be required, current blockchain infrastructure cannot support a high volume of microtransactions.
For example, the Ethereum blockchain — the most popular used blockchain to create NFTs and gaming projects — has had congestion and high gas fees during its peak usage. These problems can make blockchain-based games less accessible to a large user base.
Developers are looking for ways to address these problems by testing out other blockchains, Layer 2s, or scalability enhancements. There are already technologies in the works to reduce transaction costs and scaling.
2. Environmental Impact
Proof of work (PoW) systems like Bitcoin and (particularly) Ethereum have earned criticism over their high energy consumption from mining and validating transactions.
Ethereum no longer has a proof of work (PoW) consensus mechanism, instead reverting to proof of stake (PoS), which is more energy efficient, however, still runs afoul of the environmental concerns associated with blockchain in general, particularly with NFTs and other resource-intensive applications.
With blockchain-based gaming increasingly in demand, developers and stakeholders need to think about how these technologies lie on Earth and how to minimize their carbon footprint. It could include using a more eco-friendly blockchain, or, over time, offsetting your emissions through sustainability initiatives.
3. Regulatory and Legal Concerns
Simply introducing the concept of real-world value into these through cryptocurrency, and NFTs creates a bunch of regulatory and legal questions. The laws about digital currencies, intellectual property, and online gaming are different in different countries and developers may have problems finding their way in these complicated legal walls.
Unresolved questions exist about taxing virtual goods, whether in-game gambling mechanics are allowed, or whether intellectual property rights can be protected in a distributed conception.
The gaming industry needs to establish a close working relationship with regulators to guarantee that games based on blockchain comply with the laws as well as rules.
4. User Adoption and Education
The benefits that come with blockchain technology are still great, but for developers as well as players alike, it’s still an advance that requires a learning curve. For many gamers, it’s unclear or even scary to embark on a new technology like blockchain or NFTs and cryptocurrencies.
However, for mass adoption, the gaming industry will have to put user education first, and space should be opened up for blockchain-based games to have more accessible interfaces. Players should be enabled to connect to blockchain elements without having to understand the underlying technology. It should be as ‘swipe’ as possible.
Conclusion
Blockchain could introduce a new era of gaming that is far more player-centric and equitable by offering players the true ownership of digital assets and the means to fuel decentralized economies and make possible new levels of interoperability and transparency.
While the technology proves, it lacks scalability, environmental impact, regulation, and adoption. While these issues are mitigated, the gaming industry will most likely experience increasing numbers of blockchain-based games and experiences that bring new kinds of gameplay and forms of economy.
Undoubtedly, blockchain technology will shape the future of gaming, and as the ecosystem continues to develop, players, developers, and the industry as a whole will need to embrace change and adapt to this exciting new frontier.