Video games companies have long used in-game token economies. Globalisation is the core reason - it's a lot easier to have a global unit of value that means an in-game item costs the same in New York as it does in Tokyo. It also makes for easier marketing if everything costs the same, plus keeping money in a game builds customer stickiness - gamers will keep coming back if they've prepaid for games.
Blockchain technology is a natural evolution for the security-conscious games developer; the distributed ledger technology is highly secure. However, there's something beyond pure tokens that is likely to make waves in games in the future: a new method of digital ownership. What's coming next is technology to make it possible for in-game digital assets to be owned and traded in the same way that items can be bought and sold in the physical world.
This kind of real world crossover is made possible by non-fungible tokens (NFTs). These are pieces of digital content that are each unique, are in limited supply and can be bought and traded either in or out of game. In video games, these tokens can exist as in-game items. Each token is tied to a public blockchain, which serves as a decentralised and immutable ledger that tracks ownership of the NFTs. The most widely used and best example of an NFT in action is the ERC721 standard, developed on the Ethereum blockchain.
Using blockchain in games for NFTs makes it possible for players to independently own their in-game digital items, completely outside of the control of games developers or third parties. This guarantees the rarity of that object and ensures that it is unique and non-duplicable - introducing the concept of digital scarcity. It has the added advantage that it is completely secure.
This will completely change how we regard digital ownership, with implications reaching far beyond the gaming industry. We think it will impact all creative industries, but that gaming will move first and faster; it's already creating entirely new games categories such as digital collectibles.
Blockchain games du jour
The game CryptoKitties is by far the most popular and well-known example of digital collectibles using NFTs. In this title, individuals use Ethereum to buy a digital representative of a cat, fully owned by the player, and all with different "physical" traits, like a long mane, or wings.
Its gaming aspect is limited - you can sell it or breed it. Breeding one CryptoKitty with another creates a new cat with some combination of both parents' traits. Like a modern form of Tamagotchi, CryptoKitties took off and proved so popular that it overloaded the entire Ethereum network. Other content owners have clearly taken note, with Major League Baseball launching NFT-based collectibles in July.
These first NFT games are the start of something revolutionary. While the first-generation games are run entirely within the Ethereum decentralised application (dApp) platform, meaning that every action requires ‘Gas' (a small payment in Ethereum's cryptocurrency) to complete, future games will be a hybrid between dApps and regular games.
These hybrid games will bridge the gap between crypto-collectibles and mainstream games. The game doesn't run in the Ethereum network, but your Ethereum-secured tokens become your ticket to be part of the game.
Hybrid ticket to take part
So, how does it work? Just like track days or kart racing in the real world, with hybrid driving games you could own a digital car and take it to virtual track days. But unlike the real world, you don't need a racing license to start, and if you and your car are good enough, you can fast track yourself straight to Formula 1. Unlike regular games, you'd own that in-game car, you could customise it however you wish and if you wanted to you could sell it.
It's an entirely new way of looking at the $100 billion gaming market, and could create an entirely new secondary market for these new digital assets. Using NFTs, every character or context in a computer game can be enshrined as an asset, providing new incentive models for both innovation and engagement, gradually moving towards an ecosystem where all digital assets could be represented by NFTs.
Daniele Sileri is CEO and co-founder at Blockchain Studios
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