Video Games on the Blockchain

For this particular case, I will be discussing one special instance of this that was discussed mostly up front within the media, but not as much in detail as I will be doing today. As free-to-play video games as of 2023 take up about 80% of the market today, due to the constantly expanding world of payments of microtransactions, newer versions of this model have arrived to the world of blockchain technology through GameFi.

As the term suggests, GameFi is simply the merge of words ‘Gaming’ and ‘Finance’, yet how it strives to expand upon the way users interact with entertainment regarding personal finance is still relatively a new concept that is not common to the media just yet.

Now, in the past, you may have heard of the subjects of NFTs, or non-fungible tokens, a format at which assets are created and distributed to users in return for cryptocurrency tokens as a reward. Usually, since this it out of a traditional way fo exchanging financial resources, a lot of this activity takes place in the ‘grey market’, which is the area where unofficial stocks or assets are traded until they appear on the NASDAQ.

This is where some of the major platforms come into play, at which these titles follow through a method of interoperability in the application of blockchain technology to video games, at which something called cross-chain technology takes place. I will expand upon this in future workshops, but to simply put, this allows a flexible transfer of managed data between external systems that can get a hold of the DLT (distributed ledger technology) in order to make use of smart contracts in the process when checking verifiability.

This paradigm of GameFi helps to bring a new perspective of platforming entertainment to those who are seeking to earn a reward in return for the distribution of their creative outlets. Since the expansion of the network thanks partially to crypto miners, GameFi can range from the US to the continent of Asia, as well as countries such as India that are well known for adopting the blockchain itself.

The key thing to note here, is the magnitude of collaboration it takes for such a platform to come together, with an extension of that according to a study being that investing into GameFi through time spent on titles as well as the return in currency ranging within three elements, these being the active notion of the community for about 67% of the process, the team running the application being that of 51%, and finally the gameplay aspect which is 51% of the process.

Keep in mind, these statistics are all separate, mainly because several existing platforms focus on these different key aspects at a time. Notable platforms include Decentraland, or THE SANDBOX, all creative outlets of experimentation that are yet in early development to define the next generation of technology from Web 2.0 to Web 3.0.

Now, you may be asking a key question, what kind of technology through all of these factors should be made use of to make this investment, even remotely possible? To simply put, what takes place is a tokenized asset system, at which ownership over in-game assets typical of what is seen in a game you’d play (ex. Weapons, pets, food items, etc.) can exist under the pre-existing notion that the buying and selling of this will take place through a special method called the ‘atomic swap’.

The ‘atomic swap’ makes use of cross-chain technology by allowing the logging of sales within the blockchain, by taking the assets or tokens in question that are being traded and instead of transferring it to another blockchain, you are removing it and generating the equivalent of it to another blockchain. What this does altogether, is create parallel blockchains through the earlier mentioned cross-chain technology, in order to remove the reliance on a centralized entity to take ownership of the token, and to fulfill online markets that want to run token exchanges in order to enhance interoperability within flexible systems that favor automation by adapting smart contracts on different channels of the blockchain at once.

All of this technology at once, allows a global trade of assets regardless of what country or ISP is being made use of in that moment, creating a ‘top-down’ approach to how customers want to meet their needs towards video game companies versus that of centralized corporations that could favor profits over community renditions at the interest of investors. Remember, this is done thanks to the business models modest shift from play-to-play (P2P) to a free-to-play model (F2P) model that engages people’s time over a higher chance of spending money on asset in the long-run.

In order to further emphasize on the projects extending from this topic, I will mention a particular Web 3.0 game that more or less makes use of these models, which as a side note, make use of a trilemma that takes three factors that define the success of such a project, and prioritizes two factors of it that makes up for the statistics I mentioned earlier, these being a combination of decentralization, scalability and security, at which two of the three chosen will define the platforms differently from one another.

The game I’ll be mentioning goes by the name, ‘My Neighborhood Alice’, which makes use of the F2P model and as an extension, uses the play-to-earn model as mentioned earlier to foster a healthy environment where virtual lands can be built, creating a game economy with direct communications in order to invest time into the game to both purchase lands, and incorporate assets on top of it. To be more specific, think of it like a game of Monopoly, but rather you’re creating the lands mentioned throughout the game, and are openly sharing it within a DeFi space to open financial opportunities.

Going back to the direct communication aspect of the game, players must take on the responsibility on being vigilant about how they interact with players, especially considering that a lot of the code that makes up of the game itself is publicly disclosed and can divide communities on what the rules of the game should be, which is generally displayed under the game’s white paper.

As you can tell, the general scene of GameFi requires the sacrifice of different factors that affect the team working on the project and how it translates to the network, versus the toll it can take on the community as well. On one hand, you can reduce computational power distributed across the functioning of transactions to save energy costs, but that would raise concerns about security, so altogether based off of the trilemma, the equilibrium relies on whether or not you want your platform in association with the blockchain network to be ‘cheap, good, or fast’.

As these projects are still early in development, one other concern is that they are not regulated by the government or with any policy putting restrictions on theft, as the next major problem next to security vulnerabilities is theft itself. With NFTs in particular, the Web 2.0 generation may easily download or screenshot digital work available otherwise on the Web 3.0 platform, unless they are known or discovered by the owner of the property itself.

Altogether, this is an investment worth making for the future, but currently a risk that is better taken within a small circle at which properties are supported amongst people you know.