By all accounts, the games industry is doing really well right now. It’s on track to making $137.9B by the end of this year (more than double the global box office and music industry revenue combined). So, why does it need blockchain?
Let’s examine the process of producing and maintaining a game…
Building and maintaining games
Big (AAA) gaming companies: They have huge amounts of money and hire lots of developers to build what they think is going to be the next billion-dollar game. They spend heaps of money on marketing and release it to millions of excited fans. A lot of games now cannot only rely on the game’s upfront price to sustain their massive development teams, so developers are always thinking of ways to make more money from their users. They work to make sure that the game is available on every device and console, and lobby to ensure that cross-play is facilitated across all platforms (of course, this is very difficult). They continue paying fees to platforms that distribute their game, including Apple and Steam.
Indie developers: They bootstrap, or get private investment, to fund a small but dedicated team of developers to execute their vision of creating their dream game. They use tools like Unity and Unreal, which makes it much easier for them to create a ready-for-market game. They launch their game — mostly on distribution platforms like the App Store, Steam or Google Play — in order to reach the widest number of audiences with the lowest marketing budget. Hopefully, the game is success and they can use the revenue to sustain their development team, build our their community and create even more games!
What are the issues?
The above models highlight some issues that game developers have to deal with:
- There’s a huge maintenance cost in keeping a game going. You have to maintain teams of developers to create new content, fix bugs and cater to the feedback of your gamers. You must bear this as long as the game persists.
- Most games now launch as free-to-play (or cheap-to-play) and need to constantly find ways to monetize off existing players in order to maintain profitability. This is no easy feat, involving considerations of game economics and player psychology to keep them engaged, not enraged.
- When distributing your game, you often have to play by the rules of those platforms. For example, if they give their players a 24 hour money-back guarantee, you’re obliged to allow gamers to play your game for 24 hours then give them their money back.
- Obtaining payments from users can be a pain in the a$$. There’s credit card fraud and chargebacks to deal with — issues which can cripple small game studios and seriously inconvenience the larger ones.
- It takes a lot of work to build a robust ecosystem around your game. Sure, streamers and eSports have helped to create a secondary community of people interested in your game. However, when it comes to enabling modifications or extensions, these things can jeopardize your game’s integrity.
- Your game ends when you decide not to maintain it anymore — when it is no longer profitable to maintain the teams required to keep the game alive. This is the end of your community and your profits.
The thing is, blockchains comprise of a number of key features that can actually solve some of the problems above. I’ve outlined the key ones below.
1. Blockchains provide an in-built payments system.
⚙ How does it work?
Blockchains make it very easy to store and transfer value. This is because this is the purpose for which they were originally built (Bitcoin). As such, when you create game items on the blockchain to sell, you are transferring the ownership of that item to a particular user in exchange for a cryptocurrency payment. All transfers of value, whether it is of payments or of game item tokens occurs in a cryptographically secure, free (or relatively cheap) and permissionless way.
Your code can ensure that the account that you receive the payment from is the same account that receives the game item. If it is not, the game item will not be transferred. This eliminates fraudulent transactions where people use credit cards that don’t belong to them to purchase items.
Further, you can state in the item’s code that whenever it is sold, you get a percentage of the sale price in all future transactions.
? Does it really need blockchain?
Yes, because all payment facilitation services (even the better ones like Square and Stripe) are not permissionless. At the end of the day, they are run and maintained by teams (who rely on fees or subscription costs in order to survive), and require you not only to have a verified account with them, but connect to a number of other centralized institutions, like banks and credit card merchants, of which you also need to be a verified member. If you are not part of a financial system that enables you to participate in the network that Stripe and Square has created, then you cannot use these services.
Further, whether games use external payment services to process their customers’ data or they process payments themselves, any centralized hub of financial information is a single point of vulnerability for people looking to access it.
Finally, all payments processors will charge fees, whereas these are minimal on the blockchain.
? Why does this benefit game developers?
Currently, game companies and platforms spend millions of dollars fighting refund and chargeback fraud. This includes refunding sales purchased using stolen credit cards whilst paying the card issuer (like Visa) penalty fees per chargeback. Fraud is such a huge issue that one of the first things that the creators of Fortnite did with its enormous amounts of cash from the game was to acquire a game security firm.
According to the LexisNexis True Cost of Fraud study, every $1 of fraud cost merchants $2.40 in 2016. This issue is especially crippling to small game studios for whom the costs of dealing with fraud can start at the tens of thousands and escalate into the hundreds of thousands.
2. Games built on blockchain are infinitely extensible.
⚙ How does it work?
Games built on blockchain are open by default. This is because code that is written on the blockchain is completely visible to everyone. As such, it becomes possible to write software that utilizes others’ code and create complementary applications and services.
Further, when other people write programs that use your code, it doesn’t affect your code. In the words of Dieter Shirley, CTO of CryptoKitties:
“All [the secondary application developers] can do is create value for us. They can’t take value away. With any other game, when there’s some sort of mod or extension to it, you can always screw the game up, but because of the nature of CryptoKitties and the nature of blockchain, people can build stuff on top of it without modifying our game in any way.”
? Why does this benefit game developers?
Each game that is deployed on the blockchain can spawn its own ecosystem of applications built on top of it. Your game’s community becomes more robust, because not only does it consist of your end gamers, but of the developers and companies that are building applications for it. These secondary applications can create more value for your users and can potentially increase the value of your own game’s assets if they are required to be used in these games.
What interesting things can games do with this?
As stated above, all others can do is add value to your game — they cannot detract from it in any way. A simple example is that an enterprising company can decide to create additions to your game, for example, hats for your cats, skins for your weapons or even dance moves (‘emotes’) for your character’s victory celebrations. If your users want to purchase and utilize these items, they can. If they don’t want to, they can just ignore them.
A more complex example would be a game that takes the achievements that your character has accomplished, or ‘badges’ that you’ve earned for in-game feats, and enables them to have significance in a different virtual world, ie. another company can develop a ‘training school’ for a particular game whereby only people who had high levels of achievements in the first virtual world qualify as ‘instructors’ in the second. Additionally, virtual ‘clubs’ can be created that only allow in provably elite members of existing games.
3. Your game (or game items) can live on forever and you, and others, can always profit from that.
⚙ How does it work?
Once code is deployed on, say, Ethereum, it exists there forever. So, if an individual or company writes a smart contract for the creation of a game item, even after the individual or company ceases to exists, the asset lives on — whether it is in other games that are built using these assets, or as collector items that are still traded on virtual exchanges or marketplaces.
In this way, virtual game items gain the value and status of physical game items — like trading cards that still retain collectors’ value despite the game no longer being popularly played.
Additionally, it is possible to encode into your item’s smart contract that, say, for every sale or trade of that item, you can always ensure that a particular address (yours) will receive a percentage of that transaction.
? How does this benefit game developers?
Game developers can continue profiting from their game because the game item exists forever. If their game items are still in circulation and being traded, it’s possible for them to continue collecting fees. This makes game companies more sustainable as these funds can go towards creating future games and projects.
Further, because your code can be relied on not to change, even if you stop supporting it or maintaining it, your game assets will still live on within the ecosystem of other games and applications that have been built on it.
Hoard Exchange Article Part 1
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