How cryptography and esports can advance each other

When cryptocurrency exchange FTX announced a 10-year, $210 million sponsorship and naming rights deal with leading esports club Team SoloMid (TSM) in June 2021, the massive terms sparked a wave in the crypto and esports worlds. shock wave.

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TSM CEO Andy Dinh (left) and FTX CEO Sam Bankman-Fried lead the crypto/esports trade.

But this isn’t the first major move by the two burgeoning, tech-centric industries to form an alliance. A few years ago, popular teams such as OG and Team Vitality launched cryptocurrency fan tokens through the Socios platform to generate revenue while attracting fans, allowing them to vote on team decisions.

Later, a flurry of sponsorship collaborations emerged during 2021 as cryptocurrency companies such as Coinbase , FTX andUniswap forged alliances with major esports teams, tournaments and leagues. This trend continues into 2022 with the development of NFTs and Web3, initiatives from teams and alliances, and the rise of NFT-based competitions.

What’s Driving the Continued Convergence of Esports and Crypto? Decrypt interviewed leaders from both industries to discuss the opportunities they see, how esports teams and leagues are pursuing deeper Web3 initiatives, and how esports can help elevate and attract more attention to NFT-driven gaming potential.

From Direct Messages (DMs) to TSM FTX

There is a clear overlap between players in esports and cryptocurrencies: both industries are largely male-dominated, with young tech-savvy young people who grew up in the video game industry. They value digital products, and they have seen esports and crypto grow from niche interests to major industries.

Not only is the FTX-TSM deal the largest public collaboration between a cryptocurrency and esports company, it’s also an ideal case study. Believe it or not, the conversations that led to the $210 million deal — hence the name TSM FTX for the team — culminated in a Twitter private message.

Walter Wang, VP of operations at TSM, told Decrypt that as Dinh’s obsession with cryptocurrencies furthered, team CEO and founder Andy Dinh suddenly sent a private message to FTX founder and CEO Sam Bankman-Fried .

Bankman-Fried is a well-known League of Legends fan, and TSM is one of the most famous teams in the North American League of Legends Championship (LCS). They apparently came together because of a common interest, and then one thing quickly led to the other.

“They chatted and then came up with the idea of ​​a partnership through private messages and a couple of phone calls. From that moment on, it was full speed ahead.” He explained that it took two months to sort out the terms of the deal, shoot the marketing video, and make the announcement. “It was one of the craziest moments of my career.”

Last year, the image of Bankman-Fried wearing a TSM jersey went viral. Of course, he is richer and more famous than most of his target audience. But beyond that, he’s a crypto-savvy, plug-in gamer, typical of what TSM and FTX hope to replicate at scale.

FTX doubled down on its esports investment in August 2021, when it announced a seven-year deal to sponsor Riot Games’ League of Legends Championship (LCS) league (terms were not disclosed). In April, the exchange added another team, signing a one-year deal with Brazilian team Furia for a total value of about $3.2 million, the team told Esports Insider.

In addition, FTX has invested heavily in traditional American sports — with deals with Major League Baseball, the NBA’s Golden State Warriors and the Miami Heat — while Tom Brady and Stephen F. Stars like Steph Curry have also become investors and ambassadors. In an appearance on Decrypt’s podcast in January, Bankman-Fried assessed the impact of its esports initiatives.

Bankman-Fried said: “The esports space has far greater brand power than the non-esports space, which is traditional sports.”

“Again, it’s a different audience, and to some audiences — not most, but some audiences — it’s the most powerful thing in the world,” he continued. “It’s a more targeted kind of thing, targeting specific audiences that we think are highly overlapping.”

Bankman-Fried clarified that some of the metrics they track for cryptocurrencies and esports are “surprisingly high,” but FTX doesn’t consider these metrics to be “all and the end” to justify such investments. “It’s hardly a parameter-driven thing in a way,” he added.

Interestingly, there are also some well-known esports industry leaders who have a strong presence in the crypto space.Ryan Wyatt , now CEO of Polygon Studios , previously worked in Major League Baseball before running YouTube Gaming, which broadcasts esports games. Meanwhile, Benoit Pagotto was the brand and marketing director of the Fnatic team before co-founding RTFKT Studios (NFT startup, later acquired by Nike).

“Not for the faint of heart”

Crypto companies need esports viewers, and esports startups need funding. It’s an open secret that esports teams have long spent a lot of money in the short term, hoping to attract more attention as the industry develops and eventually reap the rewards. Countless teams and leagues crumbled and fell in the process.

As esports teams go public – including David Beckham-backed Guild Esports – the difficulty of funding a team becomes more apparent. Guild, for example, lost nearly $6 million in the most recent half-year and was forced to lay off staff. The Astralis team posted a net loss of $5.2 million in 2021 after a loss of $7.9 million in 2020.

FaZe Clan went public on Nasdaq in July through a merger with a SPAC at a valuation of $725 million. The company disclosed that it lost $36.9 million on revenue of $52.9 million in 2021. On the other hand, Danish esports club Copenhagen Flames celebrated a $6,351 profit in 2021, making it the only team to share positive financial details for the year, according to Hitmarker.

“Running an esports team is a work of love and a commitment to someday producing big results,” said Mark Donovan, co-founder and CEO of Web3 startup Kolex, which provides NFTs for esports teams . “Even running an esports organization has a lot in common, and it’s been that way for 20 years. It’s not for the faint of heart, that’s for sure.”

Even the most successful esports teams were not immune to the recent recession. In July, TSM FTX and 100 Thieves (which Forbes called the two most valuable teams in esports) both laid off employees, like many crypto companies.

While the pandemic has boosted viewership in the digital-first industry, these leagues have yet to attract the same funding or mainstream attention as the leading traditional sports leagues. But as Bankman-Fried points out, esports sponsorships may offer greater value for audiences that may have significant overlap with cryptocurrencies.

“It’s not expensive to sponsor these leagues right now, given their audience size and fit with these companies, relatively speaking,” Donovan said. “It’s much more expensive to go out and sponsor a [traditional] sports league, and Probably not worth it.”

Sponsorships are a major source of funding for teams, and these types of crypto deals have been growing steadily since the beginning of last year. Coinbase sponsors well-known clubs such as Team Liquid, Evil Geniuses, and BIG. Among them, BIG was a “multi-million dollar transaction,” according to the Coinbase team, while Uniswap voted for Team Secret through the DAO.

Coinbase has also signed major event operators ESL and BLAST. Team Vitality joined blockchain platform Tezos as a major sponsor earlier this year, while exchange Bitstamp sponsored teams Immortals and Guild. Bitstamp’s three-year guild sponsorship will cost the cryptocurrency company about $5.5 million, while terms for Immortals have not been disclosed.

And that’s just the tip of the iceberg of crypto esports deals that put the names of crypto exchanges and blockchain platforms on team jerseys, Twitch streamers, Twitter feeds and widely watched game broadcasts.

Blockchain Backlash

But this collaboration hasn’t always been smooth sailing, mainly because of some gamers’ resistance to cryptocurrencies, especially NFTs. Common complaints include the environmental impact of certain blockchains, the prevalence of crypto scams, and the belief by many that game publishers will use NFTs as another way to scam players out of cash.

An NFT is a blockchain token used to prove ownership of an item. In addition to content such as avatars and sports collectibles, players can also present avatars, weapons, or digital game items that can be developed and monetized in Metaverse games.

Proponents of NFT-backed games believe that the technology will shake up the traditional game distribution model, offering players more benefits through the ability to resell items in the secondary market, through “play to earn” (or “play to earn”) and earn”) model to generate reward tokens, have a say in governance, and potentially use interoperable NFT props across multiple games.

“We believe that over time, people will create a lot of fundamental value through NFTs, crypto and blockchain,” said TSM’s Wang, who sees continued crypto education as key to delivering the perceived benefits of Web3 technology to players.Last fall, TSM FTX also partnered with the Solana project Aurory to develop an NFT game.

Epics sells NFT trading cards, inspired by Counter-Strike: Global Offensive (CS:GO) and PUBG players and teams, and launched Ethereum NFTs in 2019. Donovan realized the potential of NFTs after seeing player demand for rare, in-game Counter-Strike: Global Offensive weapon skins, which have sold for hundreds of thousands of dollars apiece.

“The people at the forefront of esports are very into it because they’re gamers and they’re technically forward thinking. But if you look at what happened with Discord, there’s a whole bunch of gamers who absolutely despise NFTs too,” he said. He also said that players need to be educated that NFTs are more than just expensive avatars.

Chris Hana, VP of business development at Kolex and former CEO of esports business publication The esports Observer, believes NFTs exploit people’s desire for digital status symbols, much like the Counter-Strike: Global Offensive skin. He also sees other similarities, including the fact that cryptocurrencies are facing a similar rebound to esports.

“It’s the same resistance, right? There are always some people who like it,” he said. “There are also people who think, ‘Oh no, it’s crap, it’s useless. It’s just a hoax.’ There’s always a lot of it. skeptic.”

But he also sees Web3 being seen as a buzzword by startups, like esports before — a trend that makes companies look tech-savvy and try to raise money. “It seems like ‘cryptocurrency’, ‘blockchain’ and ‘Metaverse’ are new terms you have to come up with to be considered cutting edge,” Hana said.

However, blockchain technology can bring tangible benefits to the way the esports industry operates. Leagues and teams have failed in the past due to issues such as unpaid players and staff, unfair financial segmentation and an overall lack of transparency.

Last spring, startup Community Gaming , which raised $16 million, is developing a tournament platform that uses blockchain technology to provide transparency on a public ledger, ensure competitors are effectively paid with fewer fees, and revenue shares are distributed , and allow tokenized ownership of league franchises.

Esports Teams in Web3

Even with doubts, esports companies are still growing in Web3. Popular team G2 Esports announced a Solana-based collection of NFTs in January as an entry pass into the private “Samurai Army” fan community. The previous NFT agreement between G2 Esports and cryptocurrency platform Bondly fell through due to lawsuits caused by esports organizations.

While Solana is billed as an eco-friendly blockchain platform and uses less energy than platforms like Ethereum, G2 Esports still faces a backlash from fans. Ivana Brecek, head of digital and innovation at G2, once again pointed to the need for enhanced crypto education.

“At G2, we believe that NFTs and blockchain are the technologies of the future that will fundamentally change the way we interact with digital products,” Brecek told Decrypt. “We want to be at the forefront of this technological revolution.”

Another popular team, 100 Thieves, launched a free NFT minting via ethereum scaling solution Polygon , and managed to give away over 300,000 of these collectibles within 24 hours — though they didn’t use the NFT term. Meanwhile, Team Vitality plans to release NFTs via Tezos , and ESL has already launched an NFT platform on Immutable X , an Ethereum scaling platform.

For esports organizations, however, competition is only part of the business model. The team has its own streamers and influencers who are developing lifestyle content and fashion merchandise and more. For example, TSM has tech services like esports analytics and training app Blitz, and 100 Thieves is even developing its own game.

Creating the Web3 platform and experience is another potential plan for the team.

Misfits Gaming is a prime example. The organization, which runs franchise teams in League of Legends and Call of Duty, announced plans to launch a new Tezos-based platform called Block Born. The platform will publish NFT games and launch tournaments and related content around them. Block Born aims to highlight tournament-ready games.

“We were trying to find a unique opportunity to do something,” Block Born senior vice president Will Pazos told Decrypt when the platform was announced in March. Competitive gaming.”

Meanwhile, the hugely popular FaZe clan has turned its founder and influencer into an internet celebrity, heralding a major advance in the Web3 space.

In a recent GQ article about the team, FaZe CEO Lee Trink said it would be “completely unsurprising” if 80% of the team’s revenue within 10 years would come from Web3. In the same article, Tarek Mustapha, the company’s head of Web3, appeared in digitally enhanced photos as Mynt, the digital avatar he created for the Metaverse.

FaZe Clan Chief Strategy Officer Kai Henry participated in a panel discussion on the Ethereum Metaverse game The Sandbox at the NFT NYC event in June . He and Sandbox co-founder Arthur Madrid revealed some unannounced FaZe activations in the game, and Henry talked about how FaZe Clan was built in Web3.

“We’re taking our time to make sure we’re aligned with those who have our community’s best interests at heart, that we’re being honest and not forcing us to do what they think we should be doing,” Henry said. In a year or so, you’ll see that we’ve made some significant progress on this front.”

Even esports leagues are looking to the Metaverse to change the way fans watch and experience professional events. In July, Activision Blizzard’s Call of Duty League and New York’s subbliners teamed up with Mountain Dew to host a video game at the ethereum-based Metaverse game “decentralized.” Watch the party live and watch the game live.

“It’s about participation, right?”

The constant convergence of cryptocurrencies and eSports is in the loop. We’ve already seen Counter-Strike: Global Offensive modified to offer players Bitcoin rewards via the Lightning Network , and now NFT game developers are running their own tournaments and are preparing to offer massive bonuses.

Axie Infinity , a Pokémon-inspired, monster-fighting NFT game that was once in the spotlight, has recently struggled due to the recession and hacking attacks. Most recently it announced plans to host an official world championship at the AxieCon event in Barcelona in September. A total of $1 million in A X S tokens will be offered across the three games.

Community Gaming is the official event operator for developer Sky Mavis ‘ Axie Infinity tournament. The company also partners with other Web3 game developers to host competitions with prize pools and prominent esports commentators, helping to increase awareness and create a competitive community around these games.

“It’s about engagement, right? People are tired of playing matching games all day, and they want a more social experience,” Chris Gonsalves , the company’s co-founder and CEO, told Decrypt. “When you bring everyone together for an organized event, that’s a very important and valuable aspect of the community.”

Immutable’s competitive card battle game, Gods Unchained , is another long-running NFT that has been promoting esports ambitions for years, but has yet to host any major tournaments.

The game’s website notes that $570,000 has been accumulated so far, but Immutable recently announced that it will begin hosting small, community-run tournaments. Justin Hulog, chief studio officer at Immutable Games Studio and a former member of Riot Games, told Decrypt that the initial competition has already attracted hundreds of players, with more events to come.

“Esports is an intrinsic part of Gods Unchained because skill and strategy are at the heart of it,” Hulog said. “We’re here to challenge the misconception that Web3 games are not fun, and believe that esports can help showcase what players love – like competition.”

It’s easy to overlook fun in the Web3 gaming space, and speculation on NFTs and token prices helped drive Axie Infinity’s surge last year and hasten its demise. Some early NFT games were more like decentralized finance ( DeFi ) applications masquerading as games , rather than powerful games with ancillary NFT or token elements added around a compelling core.

Gonsalves said the Web3 gaming market is undergoing a transformation as veteran developers of the traditional gaming industry enter the space, and both creators and players have learned from the Axie-driven boom and bust of “play for a living” .

He said the next wave of games will make NFTs optional, but also desirable, which will drive player demand for digital states while ultimately seeking to provide fun free-to-play games to the masses. He highlighted online shooters like EV.IO, BR1, and Undead Blocks, each recreating the tried-and-true genre using NFT-powered enhancements.

Community Gaming partnered with NFT gaming marketplace Fractal to host a $10,000 tournament for EV.IO this spring.Fractal co-founder Justin Kan (who is also co-founder of twitch) said he sees such events as both beneficial marketing and a beneficial refactoring of non-gameplay and competition, rather than prioritizing speculation.

“We’re seeing more and more Web3 games use esports events as a go-to-market strategy,” Kan told Decrypt. “I think it’s a good cultural shift because it puts gaming first. Players love Fun and competition. To gain players, a blockchain game should provide a great gaming experience, and a great tournament is the best way to get that experience.”

He added: “After all, games are about fun!”

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-cryptography-and-esports-can-advance-each-other/
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