Analysis: Blockchain-based game economy is the top five reasons for the future
Anyone who knows nothing about the outside world may know that the game industry has been undergoing rapid development. It is one of the industries that have benefited from the COVID-19 pandemic.
In other words, ordinary investors may not know the following growth figures:
The global gaming market is currently worth 180 billion U.S. dollars and is the fastest-growing form of entertainment in the world. For reference, the global film industry is worth 100 billion U.S. dollars, and the total annual income of all sports in North America is 73 billion U.S. dollars.
Sources of revenue in the global gaming market: Bloomberg, Pelham Smithers, GamingScan.com
Experts predict that by 2025, the number of online game anchors will rise to 1 billion.
Of the four most watched U.S. sports events in 2018, three were not even traditional sports events. They are e-sports events. For example, the “League of Legends” tournament has 30 million more views than the Football League Championship and 45 million more than the NCAA Rugby Championship.
U.S. e-sports audience source: MBA@Syracuse
Travis Scott performed live on the popular gaming platform “Fortnite” last April. According to data from TechCrunch and GamesIndustry.biz, it received more than 12.3 million page views and brought Scott a net income of more than $20 million.
So, what happened here? Where does this growth come from?
We can attribute most of it to technological development and exponential growth. Technology continues to change the way we communicate, gather, create and consume information, transfer value, and form online communities.
Former Starbucks CEO Howard Shultz popularized the concept of “third physical space” with his coffee shop concept. He believes that humans need a “third space” to gather in places other than the office and home. The answer is Starbucks.
We see the same concept in the younger generation today. It’s just that this new shared space is digital, called the meta universe. Now more and more children are playing here. They go there to socialize with friends, listen to music, or play video games. We can think of it as the next iteration of the digital community: AOL online chat room, then Myspace, Facebook, and finally Meta universe.
We now have a concert in the meta universe. Burning Man Day (“Burning Man Day” started in 1986, and its basic purpose is to promote community concepts, tolerance, creativity, fashion, and anti-consumerism.) has been digitized. And we are just getting started.
The history of the game
The first video game appeared in the late 1950s. It was a simple tennis game similar to “Pong”. Later, Atari was invented in 1977. Nintendo has released popular games since the early 1980s, such as “Mario Bros.”, “The Legend of Zelda” and “Donkey Kong”.
It is worth noting that over the years, the business model has undergone tremendous changes. For example, we used to buy a game at GameStop for $60, and then we left. This is a one-time payment and can be played unlimited times. The distribution method of the game is similar to the promotion and distribution method of Hollywood movies. 90% of revenue will be generated in the first two weeks.
This model is now obsolete. The freemium model prevails. Users experience the game for free and are attracted to make purchases in the game to upgrade skills, dress up characters, buy weapons, and enhance animation effects. Today we saw this in Roblox , Fortnite and other popular games.
For game developers, this is a more profitable model because it allows users to immerse themselves in it, and constantly upgrade to compete with friends. We are turning to a world in which social signals are generated in the younger generation through the characters in the game, the weapons they use, and the skins they have. Welcome to this future.
Why the game will be transferred to the blockchain
Today’s game takes place on a closed data network. This means that users cannot own their own in-game assets (such as skins, characters, abilities, etc.), while the platform owns them. Axie Infinity is breaking this model because users have their own assets on Axie , such as non- fungible tokens (NFT), and can sell these assets in the free market/gaming economy for profit. The following is the income of Axie Infinity users since May this year:
Source of Axie Infinity’s total revenue: Token Terminal
According to data from Token Terminal, the annualized revenue of this open and license-free paid blockchain game is approximately US$2.7 billion. Important note: Blockchain technology is a tool by which users can own their in-game assets. This is impossible with the technology used today.
Blockchain allows the game economy to form organically. Users can pay to play games. Axie Infinity leads again in this regard. Axie users start the game by investing in Axie NFT and AXS native tokens. From there, they can earn SLP tokens by playing/competing, because the earned tokens can be exchanged for other encrypted assets or fiat currencies, etc. In the case of economic difficulties due to the new crown pneumonia, many users in the Philippines earn several times their usual monthly salary by playing Axie Infinity, which is cool. Let me ask you a question: which one would you choose to get paid for playing games on the blockchain versus not getting paid for non-blockchain games? As Charlie Munger said: “Show me the incentive mechanism, and I will show you the results.”
The public blockchain is open to everyone without permission. Do you have a cell phone and internet? Very good, you are welcome to participate. In today’s closed data architecture, this is not really how it works, especially if you live outside the United States. Not only can you participate in the blockchain, but you can also earn income. With the development of 4G and 5G technologies in emerging markets, the scale of smartphone adoption continues to expand. We can expect that in the near future, more and more users will be exposed to cryptocurrency and blockchain games.
Open agreements will collapse existing technologies and reduce costs. The public blockchain is an open protocol. Ethereum is an open protocol. Anyone can build games on Ethereum. In doing so, it is basically outsourcing most of the operation and capital costs to the Ethereum base layer blockchain, which means that it is easier for entrepreneurs to start a game. Low barriers to entry increase competition. This ultimately benefits the end user. We have seen this situation many times in history. Blockchain is just the next iteration of open source technology.
Decentralization. Since the blockchain is open and permissionless, anyone can build on it. This means that we should expect blockchain games built on various first-level blockchains, such as Ethereum, Solana, Cosmos, etc., in the future. Users will be able to switch games easily, and they will be able to carry their own assets such as skins, avatars or weapons in the form of NFTs. This is impossible today. In addition, if users choose, they will be able to trade their NFT assets for profit, or they might want to build an NFT? Do it-you don’t have to own a gaming platform to do this.
The game economy is the future, and they will happen on the blockchain.
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