Gamers probably are the best kind of people out there. They are playful (pun intended), instinctively strategists, and always up for something new. So when blockchain and the crypto realm shook hands with gaming, it was a no-brainer. Legend says that the advent of Ethereum also has its roots in gaming. Vitalik Buterin, the founder of Ethereum, realized the power of decentralization when Blizzard (a gaming company) nerfed his character.
While the entire story is a different blog post altogether, today, we intend to talk about what gaming tokens are. Have we finally hit the sweet spot between these two giant industries? Or is it still at a nascent stage? What are the pros and cons of gaming cryptocurrencies? Let us unfold this step by step.
What are Gaming Tokens in Cryptocurrency?
As we spend more time digitally each day, our virtual lives are becoming equally valuable. For example, social media presence was optional about a decade ago, but now, most individuals are found on at least one social media.
The point I am trying to make is that your possessions in a game are as important as your real-world possessions. You are emotionally attached and financially vested in these in-game assets.
For non-gaming readers, we are talking about certain characteristics of the avatar, like strength, speed, agility, weapons, skins, etc.
Do you see where this is going? Yes, what is a better way to prove the ownership backed by permanence other than NFTs? NFTs or non-fungible tokens are permanent, unique, immutable digital assets on the blockchain.
Imagine that you own a potion in the game that gives immortality to your character for a specific period. Now imagine if you could own this potion, take it to another game or maybe sell it to someone for real money. Makes the entire proposition juicier, right?
Gaming tokens are these in-game assets represented as NFTs. Each player who plays hard to level up is awarded these tokens, and it is up to them what they wish to do with that asset/token.
What is Blockchain Gaming?
Blockchain gaming is a gaming sector that incorporates blockchain and NFTs to design a game. It often starts by associating the in-game assets with NFTs so that players can leverage the trade-ability and ownership aspects of these assets.
Blockchain gaming aims to revolutionize the typical model that exists today. Let us go back in time to understand the evolution of the gaming industry.
Up until a few years ago, publishers would create a game and expect users to pay upfront to play them. Think FIFA, where you would buy CDs supported by Playstation and Xbox.
Later, games were given away for free or at fairly low prices with the expectation of generating revenue from in-game purchases. Examples, call of duty, league of legends.
Then, blockchain gaming flipped the entire model with Play-to-Earn. Here, the players are paid in some cryptocurrency to play the game. And these gaming companies make money by charging a percentage of the fee from the in-game transactions between these players.
While blockchain-based ownership saw the light of day with a game called Crypto Kitties in 2017, P2E caught real fire in 2021, with some of the biggest names in the industry announcing their intention to explore this space.
Use Cases of Gaming Tokens
A prudent question to ask here is, “Why do we need tokens and blockchains in the good old gaming ecosystem?” Turns out that blockchains enable certain use cases which otherwise won’t have been possible.
1. True ownership
If it were not for tokens, your in-game assets would have been in the custody of the gaming company. In other words, they have the right to control or get rid of that asset. All you can do is watch that happen from a distance.
However, gaming tokens now offer you an opportunity to prove your ownership of those assets. This ownership can be really helpful in case of hacks and failures. Also, if you choose to create multiple accounts for some reason, you don’t have to start from scratch. It is easier for games to ask you to connect your wallet and bring in all your earned and owned assets with you.
This comes in handy once the interoperability kicks in. Multiple games could map your strengths in their own game and allow you to move your assets.
When was the last time you earned some real-world cash because of a stupendous performance in a game? Now you can. These tokens also enable the secondary sales of in-game assets. You could now sell your level 42 (say) sword to a newbie willing to pay to advance faster in the game.
This could have been enabled by web2 systems as well, but with blockchain tokens in place, it has become fraud-proof. You can list your items in the marketplace within the game or on any platform that allows buying/selling of NFTs. So you end up with a more secure, wider distribution network.
3. Hold and earn
And what if you are not a gamer? Is there no way you could take part in the burgeoning gaming industry? Thanks to these tokens, now you can. Simply buy them on a crypto platform and wait till the price appreciates. This is a function of the token model and all the due diligence.
Mudrex even has a Gaming Coin Set, a crypto basket consisting of the tokens representing the best crypto gaming projects for you to invest in.
4. Monetary incentivization
Some folks in the Philippines have actually adopted P2E games as a legitimate career option. That’s how big the potential is. You can not only entertain the gamers but also give them the option of picking these games as a full-time gig if need be.
5. Customer acquisition
Since blockchain transactions are completely transparent, it offers a great opportunity for cross-brand promotions. Say you come up with a game and believe it is better than any of your competitors. You can run hyper-niche campaigns to promote that.
Simply tap into the competitor’s blockchain data and find the people who would be most interested in your offering. You can do this by analyzing their on-chain transactions. Airdrop your tokens to them, and viola! You have managed to get a foot in the door like never before.
From a customer standpoint, you don’t have to compromise your data to enable your discovery. All communication starts with incentivization (airdrop) directly.
How Do Gaming Tokens Impact the Economy?
The ethos of blockchain is the democratization of wealth. The overall aim has always been to take the power from the hands of a select few individuals and distribute it amongst the masses. That is exactly what it is trying to do in the gaming economy as well.
1. Play to Earn (P2E)
P2E stands for Play to Earn. What sounded like an oxymoron a few years ago has become a reality with blockchains. P2E models flip the traditional method of charging customers to play the game and change it to paying them while they use your product.
2. New customer segment
Although gamers are pretty serious about their games, P2E or gaming tokens open up a new market altogether. Non-gamers who believed that games are a waste of time can now explore them as a side gig that generates revenue.
3. Value onboarding
Initially, the gaming companies relied on user loyalty and marketing to make sure that people jumped onto their games and stayed back. With gaming tokens, things are likely to change. Most of the onboarding would happen through token airdrops that would incentivize the user from day zero to try out your product. This is way beyond a ‘free sample’ strategy because it relies on experience alone. However, with gaming tokens, you also share the monetary value to ensure that the user’s time is paid for.
Should You Invest in Gaming Tokens?
Gaming tokens are relatively newer as compared to their other peers in the crypto industry. While some believe that the next bull run in cryptocurrency will ride on the back of gaming tokens, significant price discovery is yet to happen.
This means that despite the fundamentals being clear and sound, a sustainable model to support P2E games is still in progress. All the big players in the market are figuring out a way to maintain the token price. If the token prices fall below a threshold, the gamers may not find enough incentive to play the game and hence quit. On the other hand, if the price rises too much, they may sell their assets for tokens and hold them.
Other than that, virtual land-based gaming tokens like $MANA and $SAND have established a sound model that works but are facing tough competition from Meta, erstwhile Facebook.
What Are the Best Gaming Tokens to Watch Out For?
Yeah. We know you have been waiting for this section. So here goes. A curated list of some of the top gaming tokens is shared below.
P.S. This is not financial advice.
Do you know Tiktok is valued at $300B without ever creating a video of its own? UGC, or user-generated content, is an extremely valuable business.
Decentraland tries to leverage UGC in the virtual land business. Users can purchase a piece of land and develop their creations on top of it. It is an open-source 3D platform where anyone can buy land as NFT and build on it.
The native currency of Decentraland is $MANA, used for buying/selling/renting the land in the game.
2. Axie Infinity
Axie Infinity is a game of strategy and luck. The game involves purchasing an Axie as a character and creating a team of three. Each of these Axies comes with a different set of skills and characteristics. Then this team would get into a player vs player match with an opponent. Your skills would decide which fights to pick based on the opponent’s characteristics. The aim is to climb up the leaderboard.
$AXS token is mandatory to start playing the game.
Sandbox is another virtual world game. It has been doing rounds in the media since it collaborated with Snoop Dogg, who created a virtual world called ‘Snoopverse’ in Sandbox. Ever since, many big brands have purchased land on this platform to attract an audience.
$SAND can be used to purchase the land on the platform.
What Is the Best Place to Invest in Gaming Tokens?
Most of these tokens are readily available on the world’s major exchanges; the difficult step is to nitpick which one would perform as compared to the others.
In such cases, we often suggest investing in the overall theme rather than betting on individual tokens. This way, you invest in a powerful narrative without worrying about individual players.
The easiest way to do so is by using Coin Sets. Coin Sets allow you to pick themes such as NFTs and Metaverse to invest in.
Future of Blockchain in Video Games
With companies like Meta betting big on the virtual worlds, we believe a long-due polarization will evolve faster than ever. Rather than Meta eating up everything, the community will be divided into two parts; one which values the ownership of the assets, and the other one which barely cares. This way, blockchain will power a new era of video games after breaking away from the traditional scavenging models where users are not compensated enough for their time financially.
Secondly, developers would need to integrate blockchains into great games and NOT create shabby games around the blockchain. This is a recipe for disaster. Ask yourself, would you play a crappy game just because you get to own the assets? No right? This balance needs to be struck before we see mass adoption.
Third, the P2E narrative is still very nascent. Although the potential is huge, some significant challenges, like sustainable economic models and network effects, must be solved.
1. What are crypto gaming tokens?
Crypto gaming tokens are NFTs that represent the gaming assets like weapons, skins, skills, customizations, etc. These tokens are a provable source of ownership that are immutable.
2. What are gaming tokens used for?
Gaming tokens are used to enable true ownership and trading of in-game assets. Certain gaming tokens also enable token holders to participate in the project’s governance.
3. What cryptocurrency is used for gaming?
Each crypto gaming project has its own cryptocurrency as the heart of the ecosystem. For eg., Axie infinity uses $AXS and $SPL.
4. What is NFT in gaming?
NFT is a blockchain-based token that can represent any asset being used in the game. For example, you purchase new rocket-powered shoes that allow you to fly. These shoes can be represented by an NFT that will allow you to trade them and take them to another environment.