The gaming industry and crypto

This text was written by Manuel Valent, director of research at Coinhouse.

The video game market is today the leading industry in terms of expenditure in the field of leisure, far ahead of the cinema for example. We can therefore legitimately ask ourselves the question of whether this market will establish close links with that of crypto-assets. Let’s take a closer look at the arguments for and against this development.

First of all, it is important to distinguish between two main player profiles. On the one hand, there are PC or console gamers, mostly young men but not exclusively, who focus on graphically advanced games with high difficulty – we can think of the Call of Duty series for example. On the other, there are mobile gamers, with a more diverse profile, who focus on simple games to pass the time – for example Candy Crush Saga.

Even if some players may correspond to both types of profiles simultaneously, most of the time we are dealing with well-separated populations, and this is also the case in their consumption habits.

This dichotomy is most asserted in the types of purchases these players make: in the context of mobile phone video games, it was established early on that microtransactions are perfectly acceptable: a player stuck in a difficult level or wanting quite simply progressing more quickly can buy, for a few euros, enough to unlock its progress.

Many mobile games are in fact built to frustrate players with progressively slowing progress, in order to trigger these acts of purchase which ultimately represent the main source of revenue for developers.

In the world of classic video games, these methods are not, until today, accepted. Players expect to buy the game and not have to pay more, except for substantial evolutions of the latter. Paying to evolve your character faster is frowned upon, and considered cheating by other players.

The only exceptions to this rule are the decorations (skins) of the character and its weapons, for which a certain number agree to pay, for example in Fortnite.

And that’s good, since when we think about the relationship between video games and crypto-assets, one of the first notions that comes to mind concerns NFTs. It would not be very difficult to convert the current clothes that players exchange and transform them into NFT, via a marketplace like Opensea.

But the interest is rather limited, insofar as most of the time, these accessories cost little money, and the real interest of an NFT would be to be able to use it in several games. However, if we can conceive that several games from the same publisher like Ubisoft, quite advanced in this field, can become compatible for the accessories of the characters, the collaborations between publishers are almost non-existent.

The few attempts to push microtransactions into the realm have been met with stiff resistance from players, especially in cases where these gave substantial advantages over others.

Conversely, in mobile video games, these resistances do not exist and players are used to this concept. It is therefore a priori easier to design a game that has a direct relationship with crypto-assets. So it’s no wonder, for example, that the most successful blockchain-related game, Axie Infinity, is a game made on mobile.

What type of proposal can we conceive in this case? The current model of mobile games can be easily adapted so that players can pay with crypto-assets instead of paying with euros. However, keep in mind that platforms like Google and Apple earn commissions on transactions. They would therefore not welcome players using an alternative payment method that would reduce their commissions.

Read by the same author: Ethereum: what are the challenges of the arrival of PoS for this blockchain?

More generally, such a development would only be of interest if players have the possibility of using the same currency on several different games, otherwise they might as well continue to use euros.

Latest development on the market: play to earn games. Axie Infinity has already been mentioned, and this model is spreading relatively quickly. The only problem is that the rewards distributed to players are in the form of crypto-assets created by the platform that manages the game. So there is a constant dilution of the value of tokens distributed, and we can bet that in the long term , their value will logically tend to zero. No play to earn game has found a fair balance so far, which would require that the sums paid out come from the losing players for example.

Moreover, if we introduce the notion of winning into a game, players will quickly adopt the strategies recognized as winning. We then move away from the notion of play as leisure.

The use of crypto-assets in the field of video games is therefore currently quite limited. Between the strong resistance of traditional players and the lack of interest that there may be in the field of mobile games, the model is still very young and is looking for itself: latest evolution to date: games in move to earn like STEPN, which are similar to the Pokemon Go model, with a notion of gain. But where there would be real interest would be in collaborations between different games or studios, and the industry hasn’t moved in that direction yet.

Only big positive point: players are usually tech savvy, quick to adopt new technologies such as crypto-assets. We can therefore bet that if interesting and paid applications emerge, they will be able to adopt them relatively easily. Finally, the development of metaverses could reshuffle the cards: universes like Decentraland and Sandbox provide for the creation of video games within their platforms, we would then have a perfect opportunity for the convergence between video games and cryptos.

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