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How Are Bitcoin and Blockchain Changing Online Gaming?

by Jori Hamilton on 12/10/19 10:48:00 am

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

When Steam announced that it would begin to accept Bitcoin in 2016, the gaming world knew that something huge was about to happen. Steam’s heavyweight and tastemaker status not only meant that other gaming platforms would feel the need to follow suit, but it ushered in an era that a specific subsection of gamers long hoped for: seamless, secure, anonymous payments in the gaming ecosystem.

It should not come as a surprise that Steam and its parent company, Valve Corporation, would have an interest in Bitcoin and the blockchain. After all, more and more e-commerce businesses across a vast array of industries now accept Bitcoin and other cryptocurrencies as payment. You can even use Bitcoin to pay for flights on Expedia or a sofa on Overstock.com

Online gaming and cryptocurrency are perfect bedfellows, and the latter has the opportunity to transform the former for the better. Here’s what the potential of virtual currency offers for virtual gaming worlds.

Cryptocurrency Makes Indie Games More Profitable

In the past, you purchased a video game by walking into your local Game Stop — or a specialty store, if you were lucky. While publishers still follow the traditional retail model (a one-time payment for access to the game), their profits continue to lag behind the new freemium model. Traditional games earned $17.8 billion in 2018. On the contrary, free-to-play titles earned $87.7 billion.

How do free games outperform $80 blockbuster titles? They use what are known as microtransactions, which rake in money in small, frequent payments for in-game experiences, like loot boxes. Cryptocurrency simplifies these transactions because it not only makes them instantaneous, but it also allows for peer-to-peer payments rather than relying on a long-list of middlemen. It also has the benefit of falling outside of currency regulations, which means it allows developers to sell loot boxes without running afoul of regulators who deem the practice to be a form of gambling.

Microtransactions should, in theory, make game development more profitable, which is a welcome change for indie game makers, who famously make little-to-nothing via the traditional sales model. The bottom line: game developers can make more cash, and we could get more and better quality indie titles in return.

Cryptocurrency Offers Access to Global Gamers

Perhaps one of the greatest and most expensive challenges a developer faces is releasing a game that makes money around the globe. Despite what the advertising campaigns tell you, accepting global payments isn’t as easy as taking Visa or Mastercard. Developers’ ability to cater to gamers in Brazil, China, India, or South Africa requires them to run a payment processor that accepts both the card and the currency. And this doesn’t even account for people who are unbanked.

The workaround for this is to create a game wallet that allows the user to make a large investment rather than charging the card over and over again for each microtransaction — generating one round of transaction fees instead of a hundred tiny ones. However, it doesn’t remove the need to be able to accept global card payment systems.

Blockchain is changing the way we experience the concept of currency because it removes the customer’s credit card from the equation entirely. The user buys Bitcoin, and then transfers it through the blockchain: problem and processing solved. 

Blockchain Could Prevent (Some) Cheating

As in so many other cases, the interest in Bitcoin in the gaming world comes in part from the increasing acceptance of blockchain as a potential boon to security and the improvement of user gaming experience.

In addition to the need to deploy it to run wallets and facilitate cryptocurrency payments in the game, blockchain could help developers get a better handle on cheating in both multiplayer games and RPGs. As any gamer knows, cheating is rampant in online gaming; only 12% of gamers say their experience has never been impacted by the problem. 

The use of blockchain to facilitate character and resource trading can make the game more transparent and prevent unfair advantages by players with access to hacked skills and characters. Plus, Alena Burdock, managing director of Binary District, told Forbes that it could even lead to secure (and legal) inter-game trading, which opens up a whole new kind of gaming experience.

Blockchain Limits Fraud for Online Gaming Rooms

When gamers/gamblers pay with credit cards, they have the option to report transactions to their credit card company as fraud. These result in chargebacks, which are rampant in the gaming world. Experts say that users who successfully get a chargeback once are 50% more likely to do it again within 90 days.

Chargebacks are also devastating for gambling sites, in particular, because as a gambler loses their money, the money leaves their account, and the card issuer reclaims the funds from the developer. The transactions tend to be bigger than those of video games, but it’s still a hassle for all involved. At present, the best a provider can do is include a clause in its terms and conditions and close the fraudulent account, but only after losing money.

Using the blockchain for transactions means that transactions are irreversible unless the merchant agrees to a refund and issues a new transaction. The benefits also extend to customers; it’s much more difficult to steal a key than a credit card number. It’s possible to hack a wallet, but increased security also means that those who do need to be far more sophisticated than buying credit card numbers from data dumps. However, there are still tax and accounting issues that both casinos and players need to take into account before they dive straight into playing with Bitcoin. 

Bitcoin Could Deliver Bigger, Better Games

As Bitcoin continues to swing wildly in both directions, the future of cryptocurrency may continue to be underestimated — and the currency itself may not live up to even mediocre expectations. However, blockchain offers real solutions to some of the biggest problems for online gaming, including cheating and fraud.

Plus, as online gaming hours continue to grow, gamers can expect to see more experiments on behalf of developers, particularly the small guys who don’t have room to hand over 5% of every sale to various payment processors.

What comes next? It’s hard to say, but the cypherpunks could be leading the way


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