The above statement was made in a recent podcast that I hosted with Robbie Ferguson, the Co-Founder of Immutable who are the company behind the popular Gods Unchained blockchain card game. It struck me as a brilliant catchphrase, but to what extent might this actually be true?
It is no secret that many early crypto adopters self-identify as gamers. Those participants in the space that grew up playing video games tend to have a proclivity for computers and tech in general. They often exhibit a solid understanding of both the hardware and software underpinning the machines of today, with many having built and optimised their rigs (or gaming PCs for the uninitiated) across multiple iterative generations of components. It seems to have transpired that these individuals acclimatize quickly to the world of digital assets, largely due to them possessing many of the characteristics one might expect from a “crypto native”. What’s more, many of them actually found crypto through games and/or related tech forums. Whilst the low hanging fruit has likely already been plucked, perhaps there is room for further saturation of this audience.
It’s evident that on the surface, the implementation of blockchain technologies in the context of gaming seems to have an exceptionally well-fit user base that are likely able to cope with the inevitable teething pains that this corner of the industry in particular suffers from (UX).
Key gamer characteristics of relevance:
- Natural curiosity & urge to “beat the system”
- Native understanding of digital currency & value transfer
- Tend to exhibit above average technological competence
- Intuitive understanding of esoteric digital value (MMORPG items, skin markets, etc)
Whilst there are many, some of the key value propositions of blockchain in games are:
- Security & immutability
- Increased financialization of game worlds
- True asset ownership/portability & digital property rights
- Transparency into virtual goods (history, supply, authenticity)
- Ability to legitimize evident demand for peripheral grey markets (e.g. item trading)
Granted there is some way to go in terms of experiences available and abstracting away the blockchain component, but the path to get there is well-lit with a variety of solutions coming to market. I’m confident that more complex games tapping into an extensive web of blockchain-enabled virtual economies aren’t as far away as many think, and that the above value propositions are sufficiently resonant to draw in meaningful crowds once they arrive. So what does this market we hope to address look like?
The video game industry continues to boast very impressive growth statistics. Some people are still surprised by the fact that it has grown to be the largest entertainment industry on the planet at almost twice the size of the film and music industries combined. With the next generation of consoles imminent, virtual reality getting into its stride, an additional few billion people coming online this decade, and the COVID tailwinds serving as additional propellant, it seems highly unlikely that these formidable growth trends will cool anytime soon.
Amazingly, March of this year was the first ever month where global video game spend breached $10B. We have since had multiple other months to match that, and with tightening lockdown measures rolling out across various countries we can expect more of the same.
One aspect that deeply fascinates me about this emerging landscape is the effect that increased internet penetration will have on this (and other) markets over the coming decade. It’s easy to forget whilst getting tangled up in the web and all that comes with it, but 40% of the global population is still offline.
As we can see, some of these regions are beginning to register in a meaningful way from a user numbers perspective, if not quite for their economic impact yet. If we can provide useful and robust tools that allow for technological leapfrogging in these emerging markets, then we can accelerate their maturation phase. The virtual economy is unique (emphasis my own):
“The anonymity afforded by the Virtual Economy obviates the traditional characteristics that would preclude the unprivileged from accessing the opportunities presented by great industrial change. The Virtual Economy is notably distinctive in that it is possible for almost anyone, young or old, rich or poor, regardless of gender, ethnicity, religion, location, heritage or social status, to succeed as long as they have the intellect, decisiveness and the technical capacity to see the opportunities emerging within it.” — L’Atelier’s: The Virtual Economy
One of the most fascinating aspects of my evolving metaverse thesis was recognizing the ability with which virtual game worlds can truly level the economic playing field globally. Whilst it may sound far-flung, virtual labour arbitrage operations have existed for years across a variety of games. They are only growing in sophistication. As someone who works for such a business, would you not seek the optimal yield on your time? Through blockchain gaming, we are beginning to see better-defined “play to earn” environments that, unlike existing games where the majority of this activity takes place, are not adversarial to these dynamics. I’ve touched upon it before, but this is an excellent example of Axie Infinity literally lifting hundreds of people out of poverty in the Philippines.
This isn’t some unique celestial alignment. There are literally hundreds of millions of connected people across the globe who, no thanks to COVID and a variety of other forces, are growing increasingly desperate. Don’t underestimate how quickly word of mouth can spread across these communities as more and more people stumble upon these opportunities. We’ve heard hollow echoes of “banking the unbanked” throughout the industry for years, but what if this is how it manifests? What if games, leading the virtual economy, really are the trojan horse for getting blockchain and crypto in the hands of billions globally?
Of course, the key assumption for most of this is that there are “whales” in richer parts of the world who are sufficiently thrilled by the games and experiences on offer to want to invest capital (not necessarily time as it can now be legitimately outsourced!). We have already seen some brilliant examples of this, with certain blockchain game assets reaching staggering price tags despite the ecosystem still being in its infancy. I always feel it important to note the degree to which most gamers are severely irrational economic actors, which can only be bullish in this context. Think about the hundreds of billions of dollars spent on FIFA packs, loot boxes, character skins, and other virtual goods that sit in heterogeneous centralized servers that are owned by a single company, provide no way to generate cash flows, and offer no real ownership or control prospects for the user. When players are convinced they want or need something in these games, there is no stopping them. The allegiance to an idealised view of a future avatar or collection of goods pushes people to make all sorts of questionable investments. As we gravitate towards a more participatory and P2P virtual economy, why shouldn’t value trickle down to those that need it the most rather than towards Electronic Arts’ bottom line?
A final component of this taps into the creator economy in which artists, in the broadest sense, are being able to monetize their works directly via non-fungible tokens. We have seen an explosion of activity around Crypto Art as an early use case of this that seems to have found particularly strong product-market fit. Not only have individual artworks fetched north of $100K, distinct creators are already gravitating towards this space, with Miquela and Beeple announced most recently. NFTs can ultimately be used to represent all sorts of virtual assets and creations on-chain, which we are only just scratching the surface of. It’s no coincidence that three of the top games globally by player count – Minecraft, Roblox, and Fortnite – have a creator component. These sandbox games provide rich grounds upon which players can experiment and build a stunning variety of content. Early blockchain examples such as Cryptovoxels, Somnium Space, and Decentraland are allowing builders to truly own and their creations and sell game assets and services in novel ways. If creators feel like they are better rewarded for their time and effort via blockchain they will ultimately flock to these new platforms.