Cryptocurrency in the gaming industry is emerging as a successful combination. Axie Infinity, one of the most popular crypto games, has amassed a staggering $1.2bn in revenue.
Crypto gaming is garnering a lot of press attention and interest with 128 blockchain gaming companies receiving investment in the first quarter of 2022. But it appears to be a cutthroat world, where investors and players quickly turn from one project to another. So it’s increasingly important for gaming investors to understand the details of this sector. What is crypto gaming and how does crypto gaming work? This article will show you the answer.
What is crypto gaming?
Traditional games are centralised, which means all items and experience (XP) gained while playing cannot be used in other games. Crypto gaming changes this by introducing blockchain technology. Players can now use their rewards and items across different crypto gaming projects.
Crypto gaming also offers a way for players to earn money. This is called a play-to-earn model and players can do this in a variety of ways. Take Axie Infinity, for example. Users can buy characters called Axies, level them up, then sell them at a higher price. Players can also battle with their Axies to earn SLP and AXS, which are Ethereum-based crypto gaming tokens.
This introduces a whole new element to the industry – the idea that gamers can earn crypto while gaming. Worldwide Asset Exchange found this is a welcome development, as three out of four gamers wished they could use their currency on other platforms. But is it just gamers playing?
Who is playing?
Statista tracks the user count of NFT games over the past 30 days. Alien Worlds, Axie Infinity and Splinterlands are the top three NFT games, with a combined monthly user count above two million.
Although research into crypto gaming demographics is lacking, it’s clear the main target users are gamers. Crypto payments gateway Triple A reported that millennials are the largest age group, with 38% of crypto gamers aged between 21 and 38. Out of all millennials who own cryptocurrency, 55% were already gamers.
Asia-Pacific is a major player in this industry, with 22.6 million gamers holding cryptocurrencies. This was followed by 5.9 million gamers in Europe and 5.8 million in the Middle East and Africa. Surprisingly, North America had the fewest crypto gamers, numbering just 3.3 million.
How does crypto gaming work?
Traditional games already possess many elements found in crypto alternatives. Players can use fiat currency to buy in-game money, they can collect items and level up their characters. So, what attracts investors and players to crypto gaming?
Ownership is part of the reason that crypto gaming has taken off. Unlike traditional games, their crypto counterparts give players tenure over what they collect through blockchain technology. Players can own their in-game items, trade them or even sell them. Whether it’s a Splinterlands creature card or a purple Axie with green thorns, the marketplace dynamic has attracted players.
Earning money from gaming also entices players. Certain games have been criticised before for having a pay-to-play model, in which players have to invest money to get the best out of a game. Before crypto gaming, investing money would only improve your experience, such as being able to level up faster. Crypto gaming does the opposite: the play-to-earn model now allows people to make profits from their investment through crypto gaming coins. For some players in the Philippines, this has even enabled them to earn an income.
What are the risks?
Despite its advantages, crypto gaming does come with drawbacks. There are access barriers that affect some games more than others. Axie Infinity, for instance, requires players to have three Axies before playing the game. The lowest-priced Axies cost around the $100 mark, which means you must spend at least $300 before you can start earning. This high level of investment can put off the average player, as most traditional games do not cost more than $100.
There is also the risk of losing your tokens and NFTs. This can happen when you try to send them to a wallet that does not support the NFT type or if you fall victim to a scam. This is not unknown: in July, the founder of the crypto game Hedgie reported being scammed out of more than $1m in NFTs. Similarly, Ronin, the blockchain behind Axie Infinity, was victim to a hack that saw more than $600m drained from its funds.
This is an even bigger risk for crypto games compared to cryptocurrencies, because operators do not usually have to comply with certain standards, such as anti-money laundering, which can increase the risk of fraud.
As well as malicious attacks, players can also lose money through volatility. Crypto game tokens are susceptible to price changes, just like non-gaming cryptocurrencies, but some games limit how often you can withdraw tokens. This means that if a crypto gaming coin such as AXS falls (it’s currently around half the value it was in 29 April 2022, for example), players may not have time to cut their losses.
Combining two of the leading technologies also exacerbates a major flaw to which both are susceptible: gambling. Video games have started implementing a new feature called loot boxes, where players can pay to open a virtual box of random items. A report found that loot boxes are “structurally and psychologically akin to gambling”. Crypto games have embraced loot boxes as well. For example, Splinterlands allows you to buy packs of random cards. With gaming’s millennial user base, health experts are concerned that gambling is now part of everyday life for young people, and crypto gaming is only going to fuel this.
The future of crypto games
There’s a growing demand for crypto gaming and investors want to be a part of it. Blockchain companies also want to get on board, and both Solana and Polygon have started investing in early-stage blockchain games that incorporate decentralised finance (DeFi) into their systems. With more and more investors strong-arming crypto gaming platforms, the industry could see a growing market.
Hope this article can provide you with a better understanding about what is crypto gaming and how does crypto gaming work.
