Anyone who hasn't been living under a rock probably knows that the gaming industry has been in an absolute tear. It is one of the industries that has benefited greatly from the COVID-19 pandemic.
That said, the average investor may not know the following growth figures:
- The global gaming market is currently worth $ 180 billion, the fastest growing form of entertainment in the world. For reference, the global film industry is worth $ 100 billion and all North American sports combined are $ 73 billion in terms of annual revenue.
- Experts predict that the number of online streamers of online games will rise to 1 billion by 2025, one in nine people today.
- Three of the four most-watched sporting events in America in 2018 weren't even traditional sporting events. They were electronic sporting events. For example, the League of Legends championship had 30 million more views than the AFC Championship and 45 million more views than the NCAA Soccer Championship.
- Travis Scott did a live presentation on the popular Fortnite gaming platform last April. It received more than 12.3 million views and earned Scott more than $ 20 million for TechCrunch and GamesIndustry.biz.
So what is happening here and where is this growth coming from?
We can attribute much of this simply to the rise of technology and exponential growth. Technology continues to transform how we communicate, how we gather, how we create and consume information, how we transfer value, and how we form online communities.
Howard Shultz, a former CEO of Starbucks, popularized the idea of โโa "third physical space" with his concept of a coffee shop. He believed that humans needed a "third space" to meet outside the office and at home. Starbucks was the answer.
We see this same concept developing today among the younger generations. Except the new shared space is digital and it's called a metaverse. This is where kids are hanging out more and more these days. They go there to interact with their friends. listen to music or play video games. We can think of this as the next iteration of digital communities: AOL chat rooms, then Myspace. Facebook and finally the metaverse.
Now we have concerts in the metaverse. Burning Man has been digitized. And we are just beginning.
Game history
The first video games came out in the late 1950s, a simple game of tennis similar to Pong. Later, Atari was invented in 1977. Nintendo started releasing popular games in the early 80's with Mario Bros, The Legend of Zelda, Donkey Kong, etc.
It is important to note that the business model has changed significantly over the years. We used to pay $ 60 for a game on, say, GameStop, and we left. It was a one time cost with unlimited play. The games were released similarly to how Hollywood movies would be promoted and released. 90% of the income would come in the first two weeks.
This model is already available. The freemium model is now available. Users play for free and are induced to make in-game purchases to improve their skills, disguise avatars, buy weapons, improve animations, etc. We see this today in Roblox, Fortnite, and other popular games.
This is a much more profitable model for game creators as it keeps its users engaged and always updating to compete with their friends. We are moving into a world where social signaling occurs among the younger generations in the metaverse through an in-game avatar, the weapon they wield, and the masks they possess. Welcome to the future.
Why games will move to blockchains
- Today's games happen on walled data networks. This means that users cannot own their assets in the game (skins, avatars, abilities, etc.). The platform owns them. Axie Infinity is disrupting this model because users own their assets, such as non-fungible tokens (NFTs) in Axie and can sell them in a free market / gambling economy for profit. Below is a view of the revenue earned by Axie Infinity users since May of this year:
The annualized revenue from Token Terminal moves to $ 2.7 billion for this permissionless open payment blockchain game. Important note: blockchain technology is the vehicle through which users can own their assets in the game. This is not possible with the technology that is used today.
- Blockchains allow gaming economies to form organically. Users can be paid to play. Once again, Axie Infinity is leading the charge here. Axie users make investments to acquire Axie NFT and the native token AXS to start playing. From there, they can earn the SLP token by playing / competing, as the obtained tokens can be exchanged for other crypto assets or fiat, etc. Many users in the Philippines earn multiple times their usual monthly salary simply by playing Axie Infinity, all during the economic hardships brought on by COVID-19, which is pretty good. Let me ask you this: if you can get paid to play a game on a blockchain rather than not get paid to play a non-blockchain game, which one would you choose? As Charlie Munger says: "Show me the incentives and I'll show you the result."
- Public blockchains are open to everyone and without permission. Do you have a cell phone and an Internet connection? Great, you are welcome to participate. This is not really how it works in today's closed data architecture, especially if you live outside of the United States. Not only can you participate in a blockchain, but you can also earn income. As smartphone adoption continues to scale with the growth of 4G and 5G technology in emerging markets, we should expect more and more users to access cryptocurrency and blockchain-based games in the near future.
- Open protocols collapse and compress the cost of existing technologies. Public blockchains are open protocols. Ethereum is an open protocol. Anyone can create games on Ethereum. By doing so, you basically outsource much of your capital and operating costs to Ethereum's base layer blockchain, which means it's much easier for entrepreneurs to start a game. Low barriers to entry increase competition. Ultimately, this benefits end users. We have seen this game over and over in history. Blockchains are simply the next iteration of open source technology.
- Decentralization. Because blockchains are open and permissionless, anyone can build on them. This means that we should look forward to a future where there are blockchain games built on top of various layer one blockchains, for example Ethereum, Solana, Cosmos, etc. Users will be able to switch games with ease and will be able to bring their assets such as NFT in the form of skins, avatars or weapons with them. This is something that is not possible today. Additionally, users will be able to trade their NFT assets for profit if they wish, or may wish to create NFT. Go ahead, you don't need to have a gaming rig to do it.
Gaming economies are the future and will happen on blockchains.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade move involves risk, you should do your own research when making a decision.
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