The gaming industry has been through various transformations since its early days. The latest transformation has been fueled by the widespread adoption of blockchain technology, which has become a crucial tool for protection and management of digital assets. As blockchain-based games continue to be on the rise, players have gained unprecedented control over their in-game items and virtual currencies.
This surging trend both has opportunities and challenges for the future of the gaming industry. The blockchain-based game sector continues to see a growth in investment, which has led to developers embracing decentralization, transparency, and security which blockchain can offer players for their digital assets.
The financial surge behind blockchain gaming
2024 has been a crucial year for blockchain gaming. The blockchain gaming sector drew USD 1.1 billion in investments in Q2 of 2024 alone, which is a 314% increase compared to the previous quarter. These numbers reflect a steady commitment from investors, recognizing that there is great long-term potential for blockchain gaming.
Blockchain gaming activities statistics also back up these numbers. In Q3 of 2023, blockchain gaming accounted for 35% of the average daily active wallets, and on-chain game transactions surged by 3,000% from 2020 to 2022. It is therefore clear that there is a growing interest in decentralized gaming platforms.
The appeal of blockchain in gaming
A key benefit of integrating blockchain into gaming is the concept of true asset ownership. Where traditional centralized gaming platforms are built around in-game items being controlled and stored on company servers, blockchain is instead allowing players to have full control over digital assets through NFTs.
In other words, gamers can buy, sell, trade, and transfer assets from one platform or game to another, a concept called interoperability. The concept of decentralized ownership is becoming a driving force for blockchain games.
The role of crypto wallets in securing digital assets
At the core of protection and management of digital assets in blockchain gaming are crypto wallets. This is a feature which secures digital repositories for cryptocurrencies and NFTs, which ensures that players store and manage in-game items independently of centralized game servers. There are two types of crypto wallets and various operators offering crypto wallets. It is therefore important to research the best crypto wallet online and compare various operators, while also consider which type of crypto wallet is most fit for the purpose.
Hot wallets is the one most often linked to online exchanges and platforms. These are connected to the internet, providing easy access to digital assets. This is making hot wallets a convenient solution for regular gaming and trading, however it also makes them more vulnerable to cyberattacks. Cold wallets, on the contrary, store digital assets offline, which offers a higher level of security against hacking attempts. However, this also makes them less accessible for day-to-day use.
Blockchain’s role in combating fraud
The decentralized ledger technology of blockchain provides an effective solution to a problem which has been in the gaming industry for years: fraud. The number of cybercrime incidents has been increasing in the past years, including online fraud. In the United States, there were around 467,000 cybercrime incidents in 2019. This number has surged to more than 880,000 in 2023. In 2020, the gaming industry lost around USD 5 billion in revenue in 2020 due to cybercrimes such as scams, hacking, and fraud. This number is expected to reach more than USD 10 billion in potential losses in 2024. These numbers reflect why blockchain technology is crucial to combat these numbers and reduce the risks with the inherent cryptographic protection and distributed nature.
One example is NFTs. With NFTs in games, ownership records are ensured to be publicly verifiable and secure. This makes it almost impossible to alter or duplicate digital assets. Another example is blockchain smart contracts. These contracts automatically execute actions based on pre-defined conditions, which helps enforce secure transactions. Smart contracts can be leveraged for various activities, including trading an item and purchasing a new character skin. What they inherently ensure is that both parties uphold their end of the deal, but without the need for an intermediary, which reduces the possibility of fraud.
Play-to-earn models: A new era of gaming economics
Play-to-earn (P2E) models are on the rise in blockchain gaming. In these models, players get rewarded with cryptocurrency or NFTs when participating in games. Already now, this model is attracting millions of gamers, as it not only provides players with financial incentives to engage in the games; it also democratizes digital asset ownership, which makes it accessible to a broader audience.
There are some inherent risks in the P2E models. The cryptocurrency market has a volatile nature, which means that the value of in-game rewards can fluctuate a lot. Throughout 2023, some metaverse-based tokens, including some of the popular ones from P2E games, saw steep declines in value. However, even though these challenges are present, the overall blockchain gaming sector is robust for both players and investors.
Future outlook
The blockchain gaming industry continues to evolve, but it is facing its biggest challenge, which relates to scalability. Various blockchain networks, which power many gaming platforms, are struggling with high transaction fees and slow processing times. This is a product of the heavy usage of the networks. However, developers continue to explore alternatives and develop blockchain technology to make it more accessible to mainstream audiences.
