What Attracts Investors to Blockchain Gaming?

Blockchain is transforming the financial industry right before our eyes, with many market onlookers anticipating a complete replacement of existing payment, trading and banking infrastructures. Blockchain and finance seem like the perfect match, but there are other sectors, for which the technology may play a game-changing role. For one particular industry, the latter adjective isn’t figurative at all, because blockchain can do just that – change the gaming market. This is a unique chance for investors, and it seems like they don’t want to miss it.    

During the last few years, the gaming industry has been pampered with several innovations at once – virtual reality (VR), augmented reality and artificial intelligence. But it is blockchain that can have the greatest contribution, bringing more transparency and trust to the gaming space.

Investors don’t want to be simple observers and are jumping on the blockchain gaming bandwagon. For them, the technology has a disruptive potential that can be converted into profitable deals. Thus, they consider this emerging technology to be a breakthrough in the gaming industry. 

Transforming gaming at all levels

But how can distributed ledger technology (DLT) help both developers and gamers? Blockchain’s capabilities are limitless in terms of use cases, so there are many ways it can transform the gaming industry:

  • Blockchain can help developers remove grey market trading of in-game assets — game developers have designed their games to be closed ecosystems, which ensures that any value inputted into the game cannot be extracted. For instance, players were not able to sell their assets for money, use them in other games or trade them for another game’s assets. This led to the creation of grey markets where players could come together to facilitate these types of activities. Blockchain technology enables publishers to embed rules into their tokenized assets that enforce a transaction fee upon each transfer of the asset, regardless of where that asset is being sold. As a result, users are free to trade their assets as they see fit, and publishers can continue to generate revenue beyond the primary market. 

  • Blockchain enables projection of value to intangible assets — everyone realized the close interaction between DLT and gaming when CryptoKitties came out on Ethereum. The game allows players to purchase, breed and trade unique virtual kittens with cryptocurrencies. This collectible game uses so-called non-fungible tokens (NFT) since each digital kitty is unique. So far, players have spent millions of United States dollars for the kitties, with the most expensive one being sold for 600 Ether (ETH) — over $173,000 at the time. Games like CryptoKitties demonstrate the power of DLT through the tokenization of assets. This ensures that each asset can be proved to be unique or rare; it ensures that users have ownership over their digital assets; and it allows these assets to interoperate with other applications outside of their original ecosystem. These features all contribute to a greater perceived value by the user, which increases the propensity to spend real dollars within the app. While CryptoKitties showcased the attributes that DLT could bring to gaming, it failed to create an engaging experience that would entice a wider audience. Next generation blockchain-enabled games, like Epics Digital Collectibles, seamlessly integrate DLT with a consumer-centric, captivating and gamified experience.

  • Blockchain can help with buying, selling and storing in-gaming assets — with DLT, the issuing and trading of in-game assets reach the next level.
    Developers can create games that allow players to buy in-game assets with cryptocurrencies, which makes the process easier, more rapid and secure. Also, cryptocurrencies can address the challenge of microtransactions. However, publishers understand that the average consumer is not ready to make a transaction in cryptocurrencies, and thus, they obfuscate these crypto mechanics behind a familiar fiat payment gateway.
    Moreover, developers can create specialized frameworks for digital assets used in games. As mentioned, CryptoKitties was built on Ethereum, but there are already blockchain-based standards focused exclusively on gaming. One such example is dGoods, which is a token framework developed initially for the EOSIO protocol.
    Mythical Games is one of the creators and developers that has used dGoods for its in-game assets. The company is set to launch its first game, called Blankos, in 2020. Blankos is projected to be the biggest launch of a blockchain-enabled game to date, accessing the wider gaming communities on PC, console and mobile.
    Soon, more developers will begin leveraging digital asset frameworks and will collectively improve the operation of in-game assets.

  • Blockchain can help developers reach higher engagement rates and improve the Average Revenue Per Paying User (ARPPU) — NFT’s can be used to increase player engagement and improve the ARPPU. Game publishers have been noticing that blockchain-enabled games produce much higher ARPPU metrics due to the greater perceived value by the user. NFT’s are changing the way brands interact with their consumers. This new form of marketing is non-intrusive and offers the end consumer value, which ultimately drives up engagement rates. For instance, Azarus runs a challenge network on the Twitch streaming platform that rewards players for watching their favorite esports streams with AZA tokens that can be redeemed for in-game goods and items. Rewarding users with in-game items related to the game they are watching incentivizes them to continue viewing, which increases the likelihood of them spending more time playing the game. Given the engagement results that these new forms of marketing are producing, it is no surprise that game publishers are starting to invest marketing dollars in this industry. 

Contributing to market growth

The gaming market is huge, and blockchain has attracted many investors who are now driving the industry’s expansion to new levels.

Today, there are over 2 billion gamers who either play on computer devices or smartphones. Games and esports analytics firm Newzoo estimates that the total number of gamers is 2.5 billion, suggesting that 1 in 3 people play video games. By the end of this year, they will have spent a combined $152.1 billion on games, which is a 9.6% increase compared to 2018.

Gaming is one of the fastest-growing industries in the world right now, and blockchain plays an essential role in polishing its image by bringing a new set of possibilities through a more open and trusting environment. This, in turn, attracts investors, many of whom are looking specifically for gaming firms that adopt DLT.

Some prominent blockchain-oriented investors have been including gaming firms in their portfolios. For instance, venture capital firm SVK Crypto has invested in Mythical Games, Azarus and High Fidelity. The latter is a VR platform co-founded by Philip Rosedale, the founder of the popular game Second Life, that uses blockchain technology to manage the ownership of in-game assets and currency.

SVK Crypto is part of Block.one’s EOS VC syndicate alongside Galaxy Digital and FinLab AG. Interestingly, FinLab AG has also shown interest in gaming firms, as it invested in Upland. Elsewhere, Galaxy Digital recently took part in a funding round held by Immutable, a Sydney-based blockchain gaming startup.

All in all, blockchain-oriented institutional investors don’t want to stay aloof from the rapid growth of the gaming space. Therefore, they might play an essential role in driving the industry’s expansion. 

British Virgin Islands Announce US Dollar-Backed Digital Currency

Blockchain startup LifeLabs announced that it is developing a digital currency dubbed BVI~LIFE in partnership with the British Virgin Islands (BVI).

According to a press release on Dec. 3, the currency is part of a broader initiative to grow the local fintech sector and will be presented during the BVI Digital Economy symposium. 

The coin will be a stablecoin pegged 1:1 to the U.S. dollar — which the BVI have used since 1959 — and its use is expected to reduce transactional fees, increase transaction speed and be accessible to outsiders such as tourists. 

LifeLabs is also developing Rapid Cash Response, a fund meant to provide aid in case of a national emergency. The local government already announced this initiative in April. BVI Premier Andrew Fahie said:

“The importance of blockchain technology and the significant benefits it offers the BVI, are paramount to the Territory. We welcome this innovation with open arms. Our partner, LIFElabs, has demonstrated with their proven track record that their ideology is not just mere words, and we look forward to continuing our partnership with them on the rollout of BVI~LIFE, our digital currency.”

According to cryptocurrency data website Coin360, the Life token’s price increased by nearly 31% over the last 24 hours, reaching $0.000083.

While the BVI may be considering a dollar-pegged stablecoin, the Marshall Islands are developing a token in an effort to move away from the United States’ fiat currency. Earlier this year, officials announced that the Pacific island nation would develop a digital Sovereign that would be easily transmittable over the many islands that make up the country.

Deutsche Boerse’s DLT Security Lending Platform Sees First Transactions

Commerzbank, Credit Suisse and UBS carried out the first transactions on Deutsche Boerse and HQLAX’s distributed ledger technology-enabled (DLT) security lending platform.

According to a Deutsche Boerse press release on Dec. 3, the company jointly developed the platform with fintech firm HQLAX, which was launched by R3 and uses Corda DLT technology to provide liquidity and collateral management products.

The platform was able to swap ownership of a basket of German government bonds and a basket of corporate bonds between UBS and Commerzbank while employing Clearstream Banking as a custodian. 

It also conducted a cross-custodian swap between UBS and Credit Suisse, which exchanged the ownership of a basket of corporate bonds at Clearstream Banking and a basket of German government bonds at Euroclear Bank.

Per the report, this approach did not require the physical movement of securities between the collateral agents since the change in ownership was recorded on HQLAX’s registry built on Corda Enterprise. Head of new markets at Deutsche Boerse Jens Hachmeister commented:

“The go-live of the HQLAX operating model demonstrates the power of innovation that DLT is already bringing to the financial services industry. […] It proves how new technology can successfully be combined with trusted market infrastructure – and the positive reception of the model in the market speaks for itself.”

A broad collaboration

Per the release, Commerzbank, Credit Suisse and UBS have been working with the HQLAX since the initiative started. Furthermore, the project involves over 15 market participants including CIBC, Citi, Goldman Sachs and ING. JPMorgan is in the process of becoming the third tri-party agent in the HQLAX operating model, alongside Clearstream Banking and Euroclear Bank.

As Cointelegraph reported in late October, Deutsche Boerse and Commerzbank have previously collaborated on a joint pilot transaction settlement of post-trade securities using digital tokens and DLT.

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