While such breakthroughs in technology are few and far between, throughout history, technologies occasionally emerge that disrupt industries and changes the way humanity lives their everyday lives forever. The internet and the smartphone are two of the most powerful and transformative examples of such technologies in recent years. Even video games are arguably a disruptive technology that forever changed media and ushered in an age of digital artistic expression through gaming.
Now, as Facebook launches its own cryptocurrency and with Ubisoft exploring blockchain technology as the basis of its online gaming infrastructure and ecosystem, it’s clear that the next disruptive technology to change the face of the video game industry is the same technology underpinning Bitcoin.
Bitcoin was the first-ever cryptocurrency, and alongside its birth was a powerful technology called blockchain – a distributed online ledger anyone can access that is completely transparent and cannot be modified. Since Bitcoin’s inception, many other companies have also created comparable blockchains and cryptocurrency tokens native to these new, alternative blockchains.
While the emerging technology’s application in the world of video games may not immediately be apparent, like the internet before it, blockchain and cryptocurrency could completely revolutionize the video game industry, both benefiting consumers and the developers who create the games we love to play.
Game Over for the Publisher Monopoly
Bitcoin was designed to put the control and ownership of money back into the hands of individuals. The decentralized, self-sustaining design prevents any one party from ever gaining control over the network and influencing it in any way.
With blockchain technology and native crypto assets applied to video games, it too can remove the need for powerful controlling parties – or in the case of the video game industry, publishers like Electronic Arts, Ubisoft, Steam, or Activision.
Veteran video game developer Rajat Ojha – who has had a hand in developing virtual reality experiences for a number of major AAA franchises like Resident Evil, Battlefield, Gears of War, and Final Fantasy and knows emerging technologies well – says that out of the average $60 retail game purchase, publishers like the ones mentioned above gross a little more than half of the cost, with the rest going to marketing, logistics, costs of goods, and the retailer’s cut.
Of the $33 gross that publishers receive, developers on average only receive a tiny portion of that money – between 20 and 30%, says Ojha. This equates to only 10 to 15% of the retail game sales, or the equivalent of about six bucks per game sold at retail that eventually make its way back into the pockets and purses of developers. This doesn’t take into account discounts, promotions, or sales that further reduce the gross total publishers receive, further diminishing the scraps that are left over for the talented developers that poured their hearts and souls into making the game.
Thanks to blockchain, and crypto tokens born from something called the Gaming Token Offering (GTO), there’s finally an opportunity for developers to remove publisher’s hands from their pockets, and self-fund their own projects. Not only does this provide ample opportunity for game developers to fund their own development, it provides an opportunity for the game’s fans to take additional ownership stake in the product they care about – if they so choose to do so.
Game Token Offerings: The Next Big Thing in Gaming
Enter the Game Token Offering, the video game version of the Initial Coin Offering, a crowdfunding method involving the creation of new crypto tokens that are offered to supporters of the project in exchange for initial funding.
In the early stages of a project, companies can obtain funding and financial support that they otherwise wouldn’t have access to without the help of a publisher, by offering tokens directly to consumers. These gamers who are able to buy into the tokens early on, both have an opportunity to profit from the sale of the tokens in the future, but also to own a piece of the game’s ecosystem.
An innovator in the GTO space, with the goal of creating a “fairer environment” across the gaming industry and for the companies and consumers that support it, is Magic Cube.
Magic Cube is a decentralized, blockchain-based, entertainment ecosystem, that through specially-designed code called “smart contracts” allows developers to have more control over their games, finances, and even the game’s economy itself – and can alleviate the need to involve publishers who will be ready with their hands-out, looking for a cut regardless of the game’s success
Despite being a network focused on an emerging technology, Magic Cube has already amassed over 15.3 million gamers globally, showing there’s a clear demand for change in the current publisher regime. The company is also backed by major firms such as NEO Global Capital, Plug and Play, Blackstone Launchpad, and more, who share a similar vision for the future of gaming.
Through the Magic Cube network, developers and other content producers can determine incentives that users receive in exchange for helping to fund the game development. These incentives need to be attractive in order to entice consumers to want to commit their funds toward a project.
The tokens distributed to early supporters during the GTO can be held in anticipation of their value growing, sold to others, or potentially utilized in some way. In some cases, if the developer so chooses, these tokens can also power in-game digital economies – just one of the many potential applications of these emerging technologies.
What’s most interesting and offers the most potential is the fact that developers – some of the most talented creative minds in the technology sector – can come up with their own incentives and applications on how to leverage such a technology. Much like was the case with online gaming and the internet, we won’t truly understand the potential for many more years to come, and the full potential may never be fully realized given the world of possibilities.
The Emergence of the Token Economy in Video Games
Video games have long had their own economies. We’ve all spent our fair share of time “grinding” to earn experience and more gold in order to buy supplies that’ll help on the journey to beat the next boss. World of Warcraft introduced “gold” as far back as 2004, which sparked its own in-game economy and a digital gold rush. Even black markets have emerged for World of Warcraft gold, and the in-game currency even has an exchange rate against the US dollar like many real-world currencies do.
A recent change to the supply and demand to WoW “tokens” was enough to cause an uproar in the community, and the value of the in-game currency has even surpassed the value of real national currencies.
The value and potential of these in-game ecosystems and token economies cannot be understated. Other games utilize similar digital currencies in their games, which can be used to purchase in-game items, downloadable content, or more. These platforms for buying pieces of digital game content have grown to become massive marketplaces driving millions of dollars of revenue.
However, before blockchain and crypto tokens, the publisher or company offering the in-game items, even though they were purchased with the user’s money, remain under the ownership of the publisher. This means that the game download you think you “bought” was actually buying a license to be able to play that game, on that one platform you purchased it from.
In a digital token economy, ownership of digital goods can be retained by the users themselves, and users can even sell that digital goods to other users without permission or intervention from a publisher who would otherwise want a cut of the action. What won’t happen in this case, is a publisher locking out the user over a licensing issue, or because they’ve made the hardware obsolete through future product updates.
Take the Nintendo Wii for example, with its robust virtual console. Gamers spent thousands of dollars building up a library of digital games to relive the nostalgia of the NES glory days. However, when the subsequent Wii U and Nintendo Switch were released, those same digital gamers weren’t automatically available to the gamers who believed they had purchased the game, entitling them to ownership.
Digital ecosystems of this kind are booming – from smartphones, to home consoles, and more. Blockchain, cryptocurrencies, and other emerging technologies like VR and AR are vital to unlocking further potential in these existing technologies, and Gaming Token Offerings are the key to removing publishers from the video game development equation, and putting the earnings power and control back into the hands of the developers and even the gamers who support and play each game.
This exact ethos is what Bitcoin, blockchain, and all cryptocurrencies were based on, and is what will help shape the future of the video game industry in the coming years as more innovators break new ground with creative, game-changing ideas, and further place ownership and control back into the hands of consumers.
What are your opinions on blockchain and cryptocurrency in gaming? Let us know in the comments below!