The era of cryptocurrency opens new possibilities for game publishers and developers. However, it is not yet a fully-developed market, and there are many things that should be taken into account before entering it.
Among the “cons” are law problems (including anti-gambling laws), the “human factor” (i.e. the gamers who do not behave in accordance with rules), the safety dilema, and the volatility of cryptocurrency rates.
Among the “pros” are the independence of cryptocurrencies from any country’s economy, the great potential of the market, and the high level of control that can be provided by blockchain technologies.
In general, the situation is such that cons can be turned into pros if a professional approach is applied in key areas like:
finding the right business-model that will be legal, provide profits, and be interesting for gamers;
finding the right technical solution that will provide paling aman and enable the control of the game economy;
organizing an efficient system of game rules that will persuade the players to contribute to legal game economy.
When Bitcoin was first issued in 2009, it wasn’t perceived as harbinger to a global change to the world’s economic system. But, although a revolution didn’t happen with the appearing of Bitcoin and other cryptocurrencies, it did become a part of the evolution process of the world currency market. During some 8 years, cryptocurrencies have taken 0,1% of all the world money operations, which is actually a quite significant part: even the ubiquitous and growing yuan has only 1,78% in world payments. There are many reasons for this: cryptocurrencies are an innovative way of payment, their conversions are decentralized and are completed inside a impian network, making it safer than many other means of payments, and more independent than any currency.
Today, total capitalization (in its classic meaning) of cryptocurrencies is also growing rapidly. In 2017 the total capitalization of cryptocurrencies hit a historical maximum, reaching a sum equal to more than 200 Billion dollars – in the same ballpark as some countries’ economies or GDP’s. And, although there are still a lot of technical questions (mostly connected with the blockchain protocol, on which cryptocurrencies are based), it is already clear that impian currencies are already changing the market and that, most probably, there is no way back. World’s leading banks have already organized workgroups focused on utilizing blockchain technologies. Developed countries like Switzerland and Japan have already legalized cryptocurrencies both as a form of property and means of payment. Also investors worldwide have noticed the uprising of the new segment. For example, in October 2017, there were about 300 ICOs (Initial Coin Offerings) running simultaneously. Experts say it is just the start: “I believe that there will be one or more digital currencies competing with fiat currencies for transactions, sooner rather than later” – says Aswath Damordan, NYU Stern Professor of Finance in his blog. And there are reasons for this, such as the growing number of international transactions, that can be the driver to the further development of the cryptocurrency segment: “To transact, you can’t just hand over a dollar bill,” says Balaji Srinivasan, CEO and cofounder of 21.co – “You need an international currency for that. It might take a while but there’s going to be more of a need to transact across borders than there is today”.
This makes the cryptocurrency market quite attractive for investments – especially in the technology sphere.
One of the directions, where the era of cryptocurrency and blockchain has opened new possibilities is the gaming industry. The gaming industry is a very stable segment, with a loyal audience of technically literate users. And the segment is growing, along with the evolution of mobile technologies and the spread of Internet – this is why this segment is attractive for investors. For online game developers and publishers, the development of blockchain and cryptocurrencies made feasible the idea of integrating cryptocurrency into a game’s economy.
The intertwining of real and impian economy did not start all at once. The first efforts were made in the Entropia Universe game and Second Life, where players were given the option to trade impian in-game currency back for real (fiat) money.
Today there are already several examples of businesses which show that online games are becoming a part of the crypto-economy. For example, a Swiss company, EverDream Soft, has started three MMO (Massively Multiplayer Online) games, where deals are protected by blockchain and a cryptocurrency can be used as intermediary for trading. One of them, the ORB Project, enables players to transfer their in-game money into other assets, including cryptocurrency, and then exchange it for fiat money. In the other two games, Spell of Genesis and Force of Will, players can use special Counterparty tokens stored in one wallet for deals inside both of the games.
Another recently launched project – Lordmancer II by ActiveGames, a company I have been working for as CEO from the beginning of the project – has gone even further and allows gamers to earn cryptocurrency through acquiring game assets and trading them on the in-game market.
Special attention is paid to the mobile gaming segment, which shows very good growth during the recent years: “The growth in downloads and usage proves that apps are becoming increasingly central to people’s lives, and this value is translating to rising revenue for the industry.” – says Matt Miller, expert from data firm App Annie commenting his “The Q3 2017 Recap” report on in-app consumer spending. The figures in the report also look convincing: they say that combined spending on iOS and Google Play was $17 billion for the period, and amounted to a 28% year-on-year growth.
Meanwhile, this phenomenon has not yet become massive: the cryptocurrency gaming segment is very young and there are several pros and cons to entering this new and volatile field. Let’s have a look at the main “pro” and “con” points.
One of the strongest points against using cryptocurrency in an MMO is potential legal issues. There are still not enough laws around cryptocurrencies that will ensure your business model will work, or that it will provide enough safety. Attitude to the cryptocurrency differs from country to country. Russia`s government is preparing additional taxation regulations for the cryptocurrencies, EU Parlament went further with developing a proposal for crypto-currency regulations, that will require cryptocurrency exchanges and cryptocurrency wallets to identify suspicious activity. In Germany Bitcoin can legally be used as unit of account, and in Switzerland cryptocurrencies are equal to any foreign currency and can be exchanged at a given rate. But in China, banks are not allowed to operate with virtual money, despite this country is one of the main contributors to the crypto-economy. The other large contributor, South Korea, has not yet given a final sah status to cryptocurrencies, but the state structures pay special attention to all organizations that operate with it.
So, if anything happens – should you plan a new business model, start a new project, etc., it is not easy to predict the country’s legal reaction. For example, a game developer/publisher can get into a tricky situation if the company decides to allow to trade in-game rare items for real money or “fiat” – it can get banned for violating South Korean anti-gambling laws. The same law actually forbids any form of gambling, auctions and roulettes inside a game, where real money or cryptocurrencies can be involved. So things like roulettes in Counter Strike will not work in South Korea and countries with similar regulation for gambling.