The gaming and cryptocurrency industry

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

The video game market is today the leading sector in terms of spending in the leisure sector, far ahead of cinema for example. We can therefore legitimately ask ourselves 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 players, mostly young but not exclusively, who focus on graphically advanced games with high difficulty – think of the Call of Duty series for example. On the other hand, there are mobile players, with a more diverse profile, who focus on simple games to pass the time, for example Candy Crush Saga.

Even if some actors can correspond to both types of profiles at the same time, most of the time they are well separated populations, and this also applies to their consumption habits.

This dichotomy is most established in the types of purchases these players make: in the context of mobile phone video games, it has been established from the outset that microtransactions are perfectly acceptable: a player stuck in a difficult level or who simply wishes to progress faster. he can buy something for a few euros to unlock his progress.

Many mobile games are in fact built to frustrate players with progressively slowed progress, in order to trigger these acts of buying that ultimately represent the main source of income for developers.

In the world of classic video games, these methods are not, until today, accepted. Players expect to buy the game and do not have to pay more, barring substantial changes to the game. Paying to make your character evolve faster is frowned upon and considered a cheat by other players.

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

And it is positive, 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 outfits that players exchange and turn them into NFT, via a market like Opensea.

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

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

Conversely, in mobile video games, these resistances do not exist and gamers 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 devices.

What kind of proposal can we conceive in this case? The current mobile gaming model can easily be adapted so that players can pay with cryptocurrencies instead of paying with euros. However, be aware that platforms like Google and Apple earn transaction fees. Therefore they would not welcome players using an alternative means of payment which 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 interesting if players were able to use the same currency on several different games, otherwise they could also 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 the 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 the tokens distributed, and we can bet that in the long term, their value it will logically tend to zero. No game played for profit has so far found the right balance, which would require that the sums paid come from, for example, the losing players.

Also, if the notion of earning is introduced into a game, players will quickly adopt recognized winning strategies. We therefore move away from the notion of play as entertainment.

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

One big plus point: Gamers are usually tech savvy, ready to embrace new technologies like cryptocurrencies. We can therefore bet that if interesting and paid applications emerge, they will be able to adopt them with relative ease. Finally, the development of metaverses could reshuffle the cards: universes such as Decentraland and Sandbox provide for the creation of video games within their platforms, we would therefore have a perfect opportunity for the convergence between video games and crypto.

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