Let's explore the impact of blockchain on gaming within the entertainment sector

Cryptocurrency and NFTs are the latest crazes. These applications are powered by blockchain—a secure system of recording information, which is impossible to hack. Blockchain enables a decentralised structure, trust, security, and privacy. The finance, healthcare, non-profit, and government sectors have already benefited from this technology. Another critical sector in which this technology has immense potential in the entertainment industry. This article focuses on its impact on gaming within the entertainment sector.

An example of the application of this technology can be found in Axie Infinity, an NFT-based online video game developed by Vietnamese studio Sky Mavis. The game uses blockchain and has become a significant source of income in countries such as Brazil, the Philippines, Venezuela, and Vietnam. In fact, it has become so popular in the Philippines that the government plans to tax Axie players.

Game play revolves around small creatures called Axies and it uses Ethereum-based cryptocurrencies like Axie Infinity Shards (AXS) and Smooth Love Potion (SLP). The player actions are around battling with the Axies, breeding new ones, and raising them. The NFTs in this game are Axies and land. AXS is the governance tokens and players earn these by playing the game. The game uses a "pay-to-play" model where new players need to purchase at least three Axies to begin playing. Players exchange in-game assets (Axies and virtual land) as NFTs. Axie Infinity allows users to cash out their tokens every 14 days.

The three main components of a popular blockchain game like Axie Infinity are the game loop, players, and economy design. Each of these needs to have attributes that will ensure the game is self-sustaining.

Game loop: The game loop is what differentiates a fun game from a mediocre one. Games must combine elements of both the daily grind and long-term aspiration. For Axie Infinity, the daily grind constitutes breeding with SLP tokens (the strategic part), raising the Axies, and battling with Axies (the fun part). The Axies have varying levels of attributes such as health, defence, and offense. That ensures there is no single winning strategy. The daily actions give you game currencies (SLP and AXS), which lets you progress along the aspiration path of creating and collecting better Axies or cashing out for real money.

Players: There are three main parties involved in play-to-earn games: the grinders, the payers, and the investors. The grinders are involved in the daily grind action of breeding and growing Axies. Grinders work on increasing the value of NFTs (Axies and land). They are motivated by the payment they receive. The payers are driven by the aspiration element and are willing to pay for it. The aspiration for Axie Infinity is the collection of powerful Axies and winning battles with them. Investors are a new breed that is not found in pay-to-play games or free-to-play games. By virtue of the pay-out involved in play-to-earn games, there is often an entry cost involved. Investors come to the rescue here by sponsoring grinders who will pay out part of their earnings in return.

Economy design: NFTs are items of value and it is recommended earnings are based on the active use of NFTs in-game and are dependent on players' skill level. This helps to avoid bots and the creation of multi-accounts in the game, leading to the devaluing of the currency and the diluting of returns for real players. Though the system lets one play to earn, the entry can still be either free to play or pay to play. Free to play lets a large user base build-up, but it can also attract bots. A pay-to-play entry system creates a more serious player base, though the entry cost can increase over time. Getting three base Axies to start playing Axie infinity can cost $500 to $600 at this point. This is where the investors come in and reduce the barrier to entry and create a source of passive income for themselves. A serious challenge in blockchain games is the inflation of the economy over time. The players would need the game currency (SLP) to create NFTs. The players then use the NFTs to earn more currency (SLP and AXS). As more players enter the fray, more currency is generated and a larger number of NFTs are created. The system will need constant tweaking of parameters for currency generation and NFT creation to ensure balance. The game developer makes an earning either at an entry fee in a pay-to-play model or by taking a cut from the market when NFTs are traded.

Blockchain has been evolving rapidly and gaming has emerged as a new area where we are seeing applications of this technology. The systems around how blockchain can revolutionise gaming are still evolving. The recent surge in players, payers and investors in this ecosystem has captured the imagination of traditional game developers. This could usher in a new era in gaming with technology providing the next quantum jump in how we play.

Author:

Gins Lukachan is an associate General Manager at Zynga. He has a Master's degree in microelectronics and was a chip designer before moving to B2C product management. Other than playing games and trekking, Gins is interested in technological breakthroughs that impact the way we play games and interact with each other.