How Blockchain Technology Is Transforming Microtransactions and Revitalizing the Gaming Industry

A gaming model is emerging based on real asset ownership and a new “play-to-earn” structure.

CoinDesk Insights
Nov 11, 2021 at 1:18 a.m. UTC
Updated Nov 11, 2021 at 10:27 p.m. UTC

Microtransactions are a staple of many modern video games, to the point that many have just accepted them. Thanks to blockchain technology, however, new models are emerging that stand to disrupt the norm. Play-to-earn video games are growing in popularity, and new services are lowering the cost of entry. These innovations are set to become the catalyst to create a true vision of the coming metaverse.

A new play-to-earn structure

Modern video games are rife with microtransactions. Whether simple things like costumes or accessories, or more elaborate offerings like characters and weapons, these in-game purchases have largely divided the gaming community. When done right, they can offer new content at a fair price, but when abused, they lead to “loot crates” and a general “pay-to-win” mentality. That creates artificial pay barriers to success for those who can’t simply throw money at a game they have already bought. Furthermore, any money sunk into a specific title is lost entirely when the player moves on.

With the rise of blockchain-based gaming and non-fungible tokens (NFTs), however, this is all changing. A new gaming model is emerging based around real asset ownership and a new “play-to-earn” structure. A prime example is Axie Infinity, a play-to-earn NFT-based online game that has galvanized user interest worldwide, becoming the No. 1 decentralized app (dapp) in the Ethereum blockchain ecosystem.

This revolution in gaming is being called “GameFi.” GameFi encompasses the ideals that gamers shouldn’t just throw money away on in-game content, but instead invest their resources in assets that can appreciate in value and be resold on secondary markets.

NFT technology makes that possible, and the underlying blockchains provide the means for gamers to earn currencies that have real-world value. That has led to a new, all-digital economy, one that not only rewards users for their engagement, but offers financial services that make gaming a potentially lucrative way to generate income.

A new type of paywall

Of course, it often takes money to make money. Many of these games, while offering real avenues for value creation, also have some form of “buy-in” price, an initial payment for either an in-game NFT item or tokens, crucial to the play-to-earn mechanism. Unfortunately, not all newcomers have deep pockets to get involved, leading to a similar situation as the “pay-to-win” model. Consider Axie Infinity. The Pokémon-style game has players battling their “Axies” for a chance to win actual rewards. To begin, however, users need at least three of these virtual creatures. Unfortunately, they aren’t cheap, as each one costs a current minimum of $70 on the Axie marketplace, resulting in a grand total of $210 for newcomers to get started. That is cost prohibitive for many who would like to get involved.

Fortunately, there are innovative approaches being developed to foster greater involvement. For example, new gaming guilds, such as Yield Guild Games in the Philippines, lend assets like Axies to new gamers in exchange for a cut of the gamers’ profits. That means those with lesser means can get involved immediately, and those with more means can earn a passive income. This is a great example of a way that this new virtual economy can benefit players at multiple levels, and inclusivity is going to be essential for building what is becoming known as the metaverse.

Blockchain gaming and the metaverse

If you aren’t familiar with the metaverse, the term is basically the name for the collection of digital services and worlds that are becoming increasingly interconnected and interoperable. It is an ambitious vision, and many traditional platforms struggle to offer true compatibility, meaning various grafted-on systems must be used.

Fortunately, blockchain makes that issue far more trivial. NFTs and other decentralized assets can be transferred seamlessly across multiple platforms as long as they connect to a blockchain. Furthermore, the digital currencies being used stand to become ubiquitous forms of virtual cash that can plausibly be used on virtually any future service. This then stands to build a fully functioning economy that essentially lives in cyberspace, revolutionizing the way gamers interact with their favorite titles, with each other and with the larger economy.

To that end, this new ecosystem stands to have very real benefits to users worldwide. The ability to earn income and explore an immense world of entertainment will come from one, admittedly vast, access point. That will undo many existing paradigms for how value is created and transferred, but the basic infrastructure is being built now.

There’s still work to do

As both empowering and lucrative as all of this may sound, there is definitely still work to be done. For one, developers must still balance things like the kinds of items that are available for purchase, how they may enhance the experience for players and how they interact with other games and markets. If unchecked, there could still be a pay-to-win issue present, an issue blockchain doesn’t fundamentally affect.

What could address the issue is making sure certain items can be equipped only after the user reaches a certain level or otherwise qualifies. For example, metadata baked into an NFT could define an item of clothing or a weapon as usable only when the owner has met specific progression requirements. This means gamers would still be free to buy and trade any item, but a newcomer with deep pockets couldn’t just purchase their way up the ranks. This is just one example, but highlights that the issue isn’t insurmountable.

Another possible stumbling block is that many existing blockchains simply aren’t ready for the transaction volume that the proposed system would require. Gamers aren’t going to want to wait around for transfers to complete over several minutes or more. Transfers need to be resolved on-chain in seconds.

That, of course, could be mitigated by choosing the correct underlying network to build upon. For example, the Polygon Network acts as a second-layer system for the Ethereum blockchain and offers incredibly cheap transactions that take only seconds to complete. That is why Polygon has five times more gaming and NFT dapps than any other chain outside of Ethereum do and why Polygon is already working with a majority of today’s blockchain-based Web 3.0 games and NFT platforms, such as Decentraland, OpenSea and The Sandbox.

Ultimately, it is clear that not only are gamers expecting a new model, but also that blockchain and NFT-powered gaming offers such a model. Progress has been a bit slow, but more developers are beginning to take note, and it won’t be long before the first “killer app” is released. Companies that fail to act soon may find themselves playing catch up before they even know it.


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