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by Christopher Tozzi, Jun 06, 2017

Gaming The System With Blockchains


Video Games

The online gaming industry has problems and blockchain technology is poised to solve them.

To understand why blockchain can help make online gaming better, you first have to recognize how the gaming industry has evolved over the past several decades and how important digital assets and in-game purchases have become.

Starting in the 2000s, the gaming industry’s revenue model began evolving in a new direction. Whereas game development companies initially charged gamers a one-time fee to purchase their software, many today offer their games at little or no cost and use in-game purchases and assets to generate a more sustainable stream of revenue.

As a result of this shift, virtual assets and transactions have become central to the way many games are played. Gamers make in-game purchases to gain advantages that can help them advance. Success in games is also often rewarded via digital assets.

 Level Up

While the widespread use of digital assets in gaming has created new opportunities for developers and new types of play for gamers, it has also given rise to new types of challenges.

Among the most daunting of these challenges are: 

  • Fraud. Assets that are stored and managed digitally may be subject to manipulation by hackers and those in the gaming world are no exception. Gaming companies and players need to provide safeguards against fraud and hacking in order to use in-game assets reliably.
  • Slow transactions. Gaming companies often rely on third-party platforms like GOG or Steam to process digital asset transactions. These platforms can take a long time (in some cases, two months or more) to process transactions. In addition to creating cashflow challenges for gaming companies, slow rewards transactions are a turnoff for gamers who win assets in games and want to use them in the real world.
  • High transaction fees. Intermediary payment processors also impose transactions fees when managing in-game payments. This cuts into the profits of gaming companies and the costs are passed onto gamers. Transaction fees also create an impediment for small, independent gaming studios that lack the financial resources to pay for third-party payment processing.
  • Guarantee of asset longevity. What happens if you win digital assets in a game and the company hosting the game goes out of business? What if the company deletes your account or loses your data due to a software error? Today, you’d be out of luck. Most gaming companies manage digital assets on their own servers and offer no guarantee that the assets will remain available in the event that the servers or company stop running.
The Final Boss: The Blockchain


Blockchain can help to solve each of these challenges. With blockchain, gaming companies and gamers benefit in the following ways:

  • Transparent transactions. When transactions are stored on the blockchain, users get a transparent, decentralized record of asset ownership. Fraud and hacking become much more difficult because attempts to manipulate or misrepresent digital transaction records can be detected easily.
  • Instant payments. Blockchain technology obviates the need to rely on third-party payment platforms to manage transactions. Using blockchain-based currency, players can make in-game purchases and receive rewards virtually instantaneously.
  • Minimal fees. Apart from the minimal costs associated with hosting blockchain transactions or exchanging cryptocurrency, blockchain-based payment systems for gaming are free for gaming companies and users alike.
  • Permanent asset ownership. Even if a gaming company goes out of business or shuts down its servers, a blockchain-based record of in-game transactions will remain intact. That’s because the blockchain stores transaction data in a public, decentralized way, rather than relying on gaming companies or centralized servers.

Ready Player One?

The use of blockchains to solve problems in the gaming industry is not just theoretical. It’s already happening.

One example is GameCredits. The company has created a crypto-token called “GAME,” which is based on the Ethereum blockchain. Gamers can buy GAME currency to purchase in-game content from gaming companies, which pay a minimal transaction fee to receive payment via GAME.

FreeMyVunk, which allows gamers to exchange game-based assets for cryptocurrency, is another example. In addition to providing an easy way for players of any game to translate in-game assets into cryptocurrency, FreeMyVunk also offers the option of transferring assets between games. In other words, an in-game asset won by a player in one game can be exchanged for cryptocurrency on FreeMyVunk’s platform and can then be used to purchase an asset in a different game.

In other cases, game developers are creating their own cryptocurrency for use within games. Beyond the Void is one example. The real-time strategy (RTS) game uses Ethereum-based tokens to allow users to make in-game purchases.

The Next High Score?

For now, use of blockchain technology within the gaming industry centers around digital asset transactions and management. But that’s not the only way in which blockchain technology could be applied to the industry.

In the future, blockchains could be used to support what Auryn Macmillan of online gaming company FirstBlood calls “decentralized game logic.” That would involve using the blockchain to help host or even develop games themselves. Decentralized game logic would lower the barrier for individuals to create games and eliminate players’ need to depend on centralized servers owned by gaming companies in order to play.

For now, decentralized game logic remains just an idea. But blockchain technology is already exerting a significant impact on the world of online gaming in other ways. It may be only a matter of time before it fundamentally alters the way games are hosted and played.

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Ken Cottrill

Co-Founder, Chain Business Insights