- Insider spoke with industry experts about the potential of gaming to bring crypto to a wider audience.
- According to DappRadar, venture capital investments in blockchain games reached $2.5 billion during the second quarter of 2022.
- This article is part of “Master Your Crypto”, an Insider series helping investors improve their cryptocurrency skills and knowledge.
The Blockchain game raised $2.5 billion in funding during the second quarter of 2022, according to a DappRadar report. The burgeoning space has attracted some of Silicon Valley’s biggest names, with Andreessen Horowitz launching a $600 million fund for game startups in May. Animoca Brands, a Hong Kong-based game developer and crypto investor, also secured a $75 million raise to a July valuation of $5.9 billion.
Total investment in the sector this year, in some respects, exceeds that of last year by around 33%.
Franklin Bi, director of portfolio development at crypto hedge fund Pantera Capital, previously told Insider that now is the “perfect time” for blockchain gaming to “take off.”
“The gaming industry moves in cycles. New cycles are historically marked by new technologies or new business models or new user experiences. Crypto and NFTs opened up all of the above,” Bi said in a communicated.
There have been a slew of household names jumping on the blockchain gaming bandwagon. Microsoft Corp. announced plans in January to acquire Activision Blizzard Inc. — commonly known as the publisher of franchises like Minecraft and Call of Duty — for $68.7 billion. Microsoft says the deal will help develop “building blocks for the metaverse,” according to a statement from CEO and chairman Satya Nadella.
With a gaming market valued at nearly $200 billion this year, it is possible to onboard a critical mass of users through blockchain gaming. Insider spoke with industry experts about the fledgling space and its potential to bring crypto to a wider audience.
NFTs as a way to own in-game assets
Gaming can be a major driver of widespread crypto adoption, says Pavel Bains, CEO of blockchain startup Bluzelle.
“I have three kids who grew up on Fortnite, Minecraft and Roblox,” Bains told Insider in a statement. “Virtual currencies and acquiring in-game digital assets is what they already know.”
He added, “The power of crypto can help turn these virtual goods into tangible assets for engaged gamers. It’s a natural progression for the generation to come and they’ll use it as a vehicle to learn valuable financial lessons. at the same time.”
In traditional games, players usually buy virtual skins or cosmetics for their characters. It is a market, per DMarket trading platform, which generates around $40 billion in annual revenue. These assets belong to the studio, not the buyer, which could make NFTs an attractive alternative to the traditional game model.
“So what’s happened with the advent of blockchain games is that now these virtual goods and items can be put on chain and you can have actual ownership of them,” said market co-founder Justin Kan. NFT Fractal, to Insider. “The only difference is that these companies themselves give up control and what they get in return is a more robust economy.”
NFTs verify ownership of a player’s asset as it is recorded on a public ledger via the blockchain. Instead of holding these assets with a Web2 game studio, participants can hold tokens in their crypto wallets or another more decentralized custodian.
“We believe that owning digital assets will open up a new layer of excitement and experience for gamers, as they now have extra motivation to play the games they enjoy,” said Kyu Lee, partner of the venture capital firm CRIT Ventures, to Insider in a statement.
Games are fun and people want to play them
The game is an effective integration tool, says STEPN’s Shiti Rastogi Manghani, because it is entertaining and accessible to a wider audience. STEPN, dubbed a “mobile app for earning”, allows users to earn game tokens by exercising.
“Anything fun, social, engaging will get users in,” Manghani, the startup’s chief marketing officer, told Insider in a statement. “We’ve seen this time and time again in many industries like retail, e-commerce and social media. It meets basic human needs. Games or any utility application that checks these boxes will become mainstream. If it benefits users in the process, that’s the icing on the cake.”
The younger generations, in particular, have long been accustomed to playing video games. Games have always been “at the forefront of emerging technologies” because humans like to be entertained, said Shahaf Bar Geffen, president of Web3 startup UnCaged Games.
“The Tetris game was designed by Alexey Pajitnov to make computers less intimidating and more accessible to people,” Geffen told Insider in a statement.
Barriers to Blockchain Gaming
Any new technology – and especially one that is in a volatile market – comes with many hurdles.
Amid a crypto bear market, blockchain gaming has also shown signs of slowing down. Axie Infinity, the game that once had the largest user base in the industry, had 83% fewer participants in the second quarter than in the first quarter, according to DappRadar. The downward trend in player numbers intensified following a $650 million hack on its Ethereum-linked sidechain, Ronin.
“While gaming activity still dominates the overall landscape, we have also started to see the first cracks appearing in the industry, and many top blockchain games have started to show weaknesses,” the DappRadar report states. .
Potential barriers to mainstream adoption are a game’s usability, said Steven Goldfeder, CEO and co-founder of Ethereum scaling solution provider Offchain Labs. Is it fun or do people only play for the returns and financial rewards?
“A good blockchain game should be a game first, and a blockchain app second,” Goldfeder said in a statement to Insider. “The incorporation of blockchain technology should be purely additive, enhancing the gaming experience for users who want to engage with blockchain, but not limiting accessibility to those who just want to play the game.”
He added: “Ironically, for blockchain to become mainstream, it needs to be able to run in the background, and at the heart of that is ease of integration, fast confirmation times, and low transaction costs that are subtracted to users.”
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