Introduction to the Blockchain Gaming Space

Before 2003, most games were sold in boxes at retail stores. Publishers created the games and all of their content, and competed for shelf space to sell copies to players on discs and cartridges. Players owned only the disc or cartridge they purchased. Then digital distribution came along and disrupted the market, sidelining most retail stores.

In 2007, the App Store and free-to-play games disrupted the market again and brought new customers to gaming. Publishers still create games and content, and they own any game content their players create. They compete for attention in app marketplaces and “rent” content to players in the form of in-app purchases.

The next major disruption in gaming is just beginning.

Blockchains like Ethereum and Solana recently evolved from secure public databases tracking virtual currencies to something much more exciting for the future of online gaming: they gained the ability to execute code. One form this takes is the “smart contract,” which created an explosive new market for “NFTs,” or Non-Fungible Tokens.

Tokenized currency, like physical currency, is fungible: a dollar bill or Bitcoin can be substituted with any other dollar bill or Bitcoin, and observers of the exchange agree they have same value. A tokenized digital asset, like an original work of art, is provably unique. A copy — no matter how perfect — cannot be substituted for it and hold the same value.

But what does blockchain technology actually do for games?

Many — perhaps most — of the transformative uses of blockchains in gaming have yet to be imagined. At the simplest level, it enables developers to authenticate and trace valuable game assets, eliminating many hacking vulnerabilities that can destroy in-game economies and ruin players’ enjoyment of their achievements. An interesting application emerging in properties like Axie Infinity is the ability for players to tokenize (and thereby own) content they create or unlock in a game. These “play to earn” mechanics enable players to sell or trade digital assets they generate to other players, sometimes for cryptocurrencies with real monetary value.

This is a revolution in the value chain supporting a $178 Billion global industry:

• Players can own the content they use in games, from the character they level up in an RPG to a track they design in a racing game
• NFT sales can take the place of content “rentals” to monetize games
• A game world can become a player-governed metaverse and marketplace
• System logic for game economies can be stored and executed on functionally un-hackable blockchains

I believe the companies that will dominate the aftermath of this disruption are those which prioritize empowering players over protecting old monetization paradigms.