In 2021, blockchain-based play to earn (P2E), games stole the show. They went from being a hobby to a prominent part of the decentralized space. These games helped people from developing countries eat. They also allowed them to sell items and farm in-game currency to other players. This is something that many non-blockchain massively multi-player online games (MMOs), frown upon.
As the P2E rocketship headed for the moon, the mainstream gaming industry was watching. Its flight left the industry in a bitterly fractured state. Top executives of leading games companies like Square Enix and Ubisoft set their sights on the new marketplace, seeing new business models and new revenue streams — and can always tell investors that they are in on the cool kids’ activities to score some bonus points.
Related: The next generation of platforms is coming soon with play-to-earn gaming
However, gamers were less enthusiastic and slammed blockchain initiatives from their favorite developers. It seems that developers aren’t eager to embrace this new tech. A major poll revealed that 70% of game developers don’t want blockchain or crypto. The 30% who are most interested in crypto or blockchain technology are also interested, though this is a negative sentiment.
Interestingly, some developers expressed concerns about the possibility of developing games on blockchain. They mostly covered the usual criticisms that the crypto community is used to, such as the environment impact, scams, and monetization concerns. Let’s clarify this once more, focusing on the gaming industry.
Blockchain doesn’t need to light the Earth on fire.
Blockchain’s environmental impact is the easiest thing for critics to focus on. However, this may be more due to the industry’s perception than the actual reality. Although Ethereum is the second largest blockchain market cap by market capital, its proof-of-work consensus system has a large carbon footprint, there’s no reason to stop developing on Ethereum.
Related: How blockchain technology transforms climate action
It is no secret that sustainability is a major factor in the DeFi fight for Ethereum’s throne. Numerous other blockchains, including Cardano, Avalanche, WAX, and BNB Chain, boast low energy consumption to attract eco-friendly developers. Blockchain gaming is no exception. The vast majority of game developers use eco-friendly chains to build their projects.
While building on Ethereum has its merits, it is also important to remember that you are entering a highly developed ecosystem with an estimated value of almost $310 billion. This is better for your bottom line and more profitable than one with a lower market capital. Cool projects can bring in more transactions and people to any blockchain network. This drives up its market cap and token price. Developers will find it easy to migrate their apps to Ethereum, once the network has reached proof-of-stake, because dozens of chains support Ethereum Virtual Machine.
Developers can also go one step further by incorporating sustainability into their economic design. Developers can embed royalty payments to carbon offset providers in their tokens and NFTs, making it easier to commit to eco-friendliness. Finance and energy are already looking for carbon credits so it might make sense to follow a similar strategy in the larger effort for eco-friendly centralization. This would be a cost-cutting move for the studio, but it is worth the effort to ensure sustainability.
Blockchain isn’t just about frauds
There is a problem with crypto — it’s undisputed. Scammers, fraudsters, and hackers have been able to extort $14 billion in cryptocurrency over the past year. There are many types of crypto scams. Everybody who enters the space should be aware about the potential risks.
Related: Avoid sophisticated scams and rug pullings that target crypto users
However, mainstream gaming has a problem. It actually exploded in 2021 as Lloyds Bank discovered. COVID-19 has brought more people and money to gaming. Scammers use all the tried-and-true techniques from phishing and malicious third-party websites claiming to provide in-game currency. The survey also revealed that only 8% of gamers had received tips on how to spot fraudsters.
There are instances of developer behavior that is questionable in both industries. There are many scammers on the mainstream stage, from crowd-funded projects that sit dormant for years with no updates to early Steam releases that never saw further development. Similar scammers are involved in crypto, with developers losing their tokens and other money.
Fraud can occur in any space that contains anything of value. It could be a magical sword to help your character fight off those pesky dragons, or real estate. Education must play an important role in eliminating scams, both for mainstream and crypto games. Developers who work on blockchain projects need to make sure that gamers are taught the ABCs of fraud prevention at all times.
The crypto space also offers additional protection against scams. Developers can access their code on-chain when integrating with decentralized services such as yield farms or exchanges. Developers can also use specific protocols’ maturity and market caps to determine their security. These are indicators of greater investor trust and stronger protections.
Blockchain isn’t bad to monetize
At first glance, the concern about potential monetization problems seems somewhat misplaced. The blockchain protocol was created from the ground up to transfer value. This is conducive to monetization. P2E games must have strong economic components that allow players and developers to make a profit.
However, this is not a good idea. Every blockchain game is part of the larger ecosystem. The ecosystem is volatile, unpredictable, and speculative. This means that both developers and players must be prepared to take on these risks in order to get involved. One quick example: In order to play an NFT-based game, you will need to pay the initial cost of buying your NFTs. You will need to first buy the native token of the game’s chain. This exposes you to the fluctuations and allows you to sell your NFTs later. The value of any fungible tokens in-game will also fluctuate with the overall crypto market. Or will they?
Again, it all depends on what choices the developers make. Studio can choose to build the game’s economy around stablecoin, which is stable no matter what the cryptocurrency market goes through. Teams rarely do this because they want a fast-growing token economy. This is impossible with a dynamic coin. This creates additional instability in addition to the general crypto market movements. An economy built this way could collapse as soon the token flips, or player base growth slows.
Related: Cointelegraph Research Report analyzes GameFi’s record 2021 and 2022 trends
Developers can avoid this problem by being more creative in their monetization. Developers can make use of the programmable nature blockchain tokens to control the price dynamics by burning and minting them according to market fluctuations and demand. They can also add indirect monetization via second-market fees for NFT sales. This would create an endless revenue cycle, aligning their interests with the users, and allow them to monetize indirectly. Developers who release NFT content that players like will be able take a cut in any subsequent resales. This compensates for the loss they made by raising their token’s cost.
Blockchain is like any other technology. Smart developers can minimize the protocol’s design flaws by making smart design decisions. Although not all games should embrace blockchain technology, it is possible to experiment with its benefits in game design. However, doing so in a safe, sustainable way is a matter for the individual.
This article is not intended to provide investment advice. Every trade and investment involves risk. Readers should do their research before making any decision.
These views, thoughts, and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.
Adrian Krion, a Berlin-based blockchain gaming startup Spielworks founder, has a background in mathematics and computer science. He started programming when he was seven years old. Since then, he has successfully bridged business and technology for over 15 years. He is currently working on projects to connect the DeFi ecosystem with the gaming world.
Eileen Wilson –Technology and Energy
My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of topmagazinewire.com with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.