The Unique Value Blockchain brings to Games
"Couldn't you build all of these mechanics into a game without the blockchain?"
I’m a Product Manager working on Pokémon GO, with previous experience in product and marketing at Figure 1, Rakuten Kobo, and Facebook. (Twitter | LinkedIn)
This is the blog I’ll be using to help structure my thoughts around product, growth, crypto, tech, and games. Feel free to subscribe if you’re interested in them!
Discussing blockchain gaming with many of my traditional gaming colleagues, the same question keeps coming up: What value does blockchain provide to games that games can’t do right now?
Many traditional game developers look at blockchain games on the surface and feel that all the games are offering is a marketplace to buy, sell, and trade game assets. This is theoretically doable with a traditional game without blockchain, and had been attempted in the past. One example was Diablo III’s Auction House where they allowed players to buy and sell items with each other.
The marketplace is actually just one tool that helps unlock some of the deeper underlying value that blockchain brings to these games. Unique value blockchains unlock in games include ownership, liquidity, and incentive alignment.
(The following will assume you have a basic understanding of blockchain, NFTs, and tokens.)
Ownership
In traditional gaming, the developer owns everything you earn and buy in the game, and has wide berth to do almost whatever they want with it outside of certain consumer protection laws.
A couple examples -
If a developer thinks a player is cheating based on their game’s Terms of Service which they dictate, they can just ban the player who will then lose access to all assets earned within the game.
If they think a player obtained an item in a way they did not design for, they can just jump into their systems and take it away.
With blockchain, “Ownership” of in-game assets in the form of NFTs and Tokens changes this. In-game asset ownership would actually be stored on a blockchain like Ethereum so once you obtain it into your wallet, it’s yours and the developer can’t take it away from you.
A nuance I want to note around this though, is that there is a dependency on how “on-chain” the asset is, as it’s possible that the metadata indicating your ownership is on the blockchain but the associated attributes and design assets are stored on the developer’s centralized server that the metadata points to. The developer could theoretically flip those off and you would just be left with metadata in your wallet that indicates ownership but doesn’t point to anything. The ideal case for players is that everything associated with an asset is on-chain so it’s all protected, but there are numerous technical challenges with implementing that scalably that I won’t dive into here.
Regardless, players do have ownership of the asset in some way on the blockchain. The associated benefits of this ownership by default includes the ability to buy, sell, and trade the asset. This can be done via an in-game marketplace or on external marketplaces. Game developers now need to design games with this behaviour in mind and ensure balance can still be maintained. Another important note is that the value of an asset, even when owned in this case, is still dependent on the game existing and its role in the game. Decentralizing the entire game onto the blockchain would theoretically help further protect the players’ assets.
Overall, this type of player ownership of in-game assets has never existed before, and that’s why there is so much potential with blockchain games.
Liquidity
This new type of ownership allows players to take assets out of the game and exchange them in external markets as well. This unlocks a new level of asset liquidity. Players don’t need to go on eBay and execute risky deals to be able to buy and sell in-game items anymore. They can buy and sell assets from the game on widely used platforms such as OpenSea and Uniswap. Other use cases include leveraging the assets in DeFi (decentralized finance) as loan collateral or renting them out to others for fees.
In addition, even people who don't play the game can participate in speculating, purchasing, and holding these NFTs or Tokens, creating more liquidity as a whole. A prime example of this is the SLP token from Axie Infinity which players can earn in-game, but is also actively bought and sold on the decentralized exchange Uniswap.
Incentive Alignment
Finally, by having players gain ownership over parts of the game and their asset values being tied to the overall success of the ecosystem, for the first time there is vested interest by players to support the long-term sustainability of the game as well. As the game becomes more successful, both players and developers will have upside benefits.
If the developer does not keep the game fun and engaging, sales of NFTs and transaction fees will go down so they are naturally incentivized to keep the game exciting. Although, this same general concept is true with traditional games too. What’s new is that players at the same time will want to promote the game and help make the game experience fun for everyone else to ensure the game continues to thrive and their assets grow in value.
Summary
These simple values of ownership, liquidity, and incentive alignment that blockchain unlocks in games will eventually revolutionize how all games are made. In the future, there will be few games that do not provide ownership to players. Why would players play games where they don’t own their hard-earned assets when there are just as fun games where they do?
If the NFT can only be used in one game, the game server can choose to ban certain NFT ids pretty easily, making the NFT useless.
To me the biggest difference vs traditional game is that blockchain based game allows players to participate in the economy while game studios are operating as a federal reserve
Clear and digestible read that's to the point. Looking forward to the next one!