The gaming industry is evolving rapidly, as developers constantly search for ways to streamline workflows, enhance security, improve user experiences, and – of course – fund games that make a profit. Across all these areas, the emergence of blockchain technology has provided game developers with exciting new opportunities, adding fuel to the sector’s evolution.
This year, the global video games market is projected to reach a revenue of US$282.30 billion. Some estimates put the number of active video gamers worldwide at 3.09 billion, this is over a third of the entire human population of the world, a huge market by any standards. Taking the United States as an example, in 2024 industry trade association the Entertainment Software Association (ESA) reported that 61% of Americans aged 5 to 90 – 190.6 million people – play video games.
These numbers speak for themselves, and the global video game industry is only expected to grow, with recent predictions putting the sector’s annual growth rate at 8.76% between 2024 and 2027, resulting in a projected market value of $363.20 billion by 2027.
So, what value can blockchain technology add to this seemingly booming industry?
The impressive trajectory of the gaming space is, in part, thanks to its willingness to experiment with and adopt new technologies when they serve a purpose. In this sense, the unique features of blockchain technology offer a number of exciting possibilities for both game developers and gamers, not least in the areas of funding, monetisation, interoperability and security.
The ‘what’ and ‘why’ of blockchain gaming?
Blockchain is a decentralised distributed ledger that securely stores transaction records across a network of computers, with transactions being pooled in ‘blocks’ and approved by consensus of the network. While it’s commonly associated with cryptocurrencies, blockchain for games has vast potential to speed up game development and revolutionise various aspects of the industry.
Essentially, blockchain games are video games that are administered with or built in part using blockchain technology. Depending on the exact way they use blockchain technology, they could be referred to as ‘crypto games’, ‘NFT games’, ‘web3 games’, or ‘GameFi’.
The distinguishing features of blockchain technology mean that blockchain gaming usually differs from traditional video games in a number of notable ways.
Firstly, one of blockchain’s defining features is its decentralised structure. The distributed ledgers of blockchains are – generally – maintained and built upon by decentralised nodes spread around the world, rather than a centralised organisation based in a single location.
Using this structure, blockchain games can be built and maintained by many independent members of a decentralised autonomous organization (DAO) – a blockchain-based member-owned community without centralized leadership – rather than by a corporation or single entity, making it harder to compromise or discontinue them.
Another differentiator of blockchain gaming is its innovative in-game ownership and play-to-earn incentives. Blockchain games present opportunities for users to buy or win digital assets, such as native tokens or non-fungible tokens (NFTs), by playing the game. Gamers can then keep or sell these assets on decentralised marketplaces in exchange for fiat money.
Blockchain games also allow for the use of ‘smart contracts,’ self-executing agreements stored on the blockchain that trigger automatically when certain conditions are met.
This is one of the key benefits of blockchain for developers, as smart contracts can automate in-game transactions, rewards, and even game logic, reducing the amount of manual coding required. By using smart contracts, developers can also significantly reduce bugs, improve security, and accelerate deployment times.
Finally, blockchain provides gamers with interoperability and user portability of data, meaning blockchain-based games can interact more seamlessly with other blockchain games, which expands the potential market for assets or tokens associated with any given game.
This feature benefits gamers and developers alike; gamers have more control of their own data and assets, allowing them to more seamlessly move from one platform or game to another, which in turn reduces redundant work and development cycles for game makers.
But perhaps the most impactful benefit blockchain provides to developers is in the crucial area of funding.
Revolutionising monetisation and funding
The world of game development is challenging, competitive, time-consuming and costly. For this reason, the sector has been experimenting with different monetisation and financing models for some time, with modern games increasingly moving from a one-off payment model to a more dynamic – and lucrative – in-game purchase model.
The emergence of blockchain technology has opened up new funding and monetisation possibilities, by enabling secure asset ownership, decentralised ecosystems, and new economic models.
Developers can use token-based crowdfunding to raise money for their projects by issuing cryptocurrency tokens or NFTs. These tokens can represent a share of the game’s revenue or provide early access to assets. Developers can even launch token-based crowdfunding campaigns (Initial Game Offerings or IGOs), allowing early adopters to invest in the game. Players who invest early can benefit from the appreciation of their tokens or assets as the game gains popularity.
An example of this in action is the game Star Atlas, which raised funds by selling NFTs representing spaceships and other assets before the game’s launch.
Certain blockchains also offers the ability to process large numbers of microtransactions in a very short period of time, enabling developers to monetise in-game content without relying on traditional payment gateways that often involve lengthy approval processes.
Based on these new funding and monetisation techniques, an entirely new sector has emerged known as GameFi (“game finance”). GameFi merges video gaming with decentralised finance (DeFi), which is built on blockchain technology and aims to cut the middlemen out of finance.
Another cornerstone of GameFi is blockchain’s ability to enable decentralised game economies, where players can earn real-world value, and these so-called ‘play-to-earn (P2E)’ models are becoming increasingly popular.
One of the most prominent examples of this is Axie Infinity, a blockchain game developed by Vietnamese studio Sky Mavis. Axie Infinity is a virtual world filled with creatures known as Axies that can be battled, bred, collected, traded and even used to earn resources. The Axies are NFTs based on the Ethereum blockchain and Sky Mavis charges a 4.25% fee to players when they trade Axies on its marketplace.
At its peak in 2021, Axie Infinity had over 2.8 million daily active users, and the record sale for a plot of virtual land in the game reached $2.3 million.
This demonstrates how blockchain can not only help developers fund and monetise games, but also maintain engagement by providing additional monetary incentive to players.
But blockchain games provide players several other notable advantages over traditional gaming.
Blockchain for gamers
One such advantage – already mentioned – is blockchain’s enabling of increased interoperability between different games and platforms, allowing players to transfer assets seamlessly.
On top of this, blockchain can provide enhanced security and fraud prevention.
One of the biggest challenges in game development is dealing with fraud, cheating, and hacking. Blockchain’s transparent and tamper-proof ledger can significantly reduce these risks by preventing asset duplication (e.g., counterfeit in-game items), securing transaction records, eliminating exploits in in-game economies, and providing verifiable proof of ownership.
Reducing fraud and security breaches also benefits developers, by saving them valuable time that would otherwise be spent patching vulnerabilities and mitigating risks.
Another gamer benefit relates to the frustrating and seemingly endless cycles of updates and patches that are a feature of many modern video games and slow down the gaming experience.
Blockchain can allow for the streamlining of game updates and patching, through the decentralised and secure distribution of game updates. Instead of relying on central servers, developers can push updates through a distributed network, ensuring faster and more reliable patches. This can be particularly useful for online multiplayer games that require frequent updates and balancing changes.
Lastly, one of the most significant contributions of blockchain technology for gamers is the concept of true asset ownership. Traditionally, players could spend real money on in-game items, but their ownership was limited to the confines of the game’s ecosystem. If the game servers shut down, those assets would be lost.
Blockchain changes this paradigm by using NFTs to represent in-game items. NFTs are unique, tamper-proof digital assets stored on a blockchain that allow players to own, trade and even sell their in-game items outside the game itself.
Games like Axie Infinity and the digital trading card game Gods Unchained enable players to own characters, cards, and other assets such as NFTs, that can be traded on blockchain marketplaces. This ownership persists even if the game’s servers are offline, ensuring players retain value for their investments.
More than a game
The gaming industry has always been at the forefront of adopting new technologies, from 3D graphics and virtual reality to artificial intelligence, developers have consistently sought innovative ways to enhance player experiences. The industry’s embracing of blockchain technology is in keeping with this tradition, and it is already transforming the way games are funded and developed.
By leveraging decentralised asset management, smart contracts, and innovative new funding models, developers can streamline their workflows and focus on creating fun gaming experiences.
At the same time, blockchain is providing new incentives for gamers to keep playing, whether that’s a more seamless experience, greater control of their data, or new gaming economies and financial rewards.
Thus, as blockchain technology continues to evolve and become more mainstream, it seems certain it will play an increasingly important role in shaping the future of the booming gaming industry.
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