Background

Crypto games have been a popular narrative since last cycle, and have only generated more hype as “consumer social” is picking up as a crypto category. We’ve seen some traction, but we’re definitely in the early innings. Together with my non-crypto normie friend, we’re joining forces to share our take on the crypto x gaming opportunity.

In this short essay, we explore how crypto can enhance in-game currencies. By focusing on crypto as a backend infrastructure, this approach could unlock new game behaviors, dynamics, and economic possibilities while also appealing to both gamers and crypto-natives.

Existing crypto games are built around crypto

Most existing crypto games attempt to strike a balance between gambling, gaming, and cryptocurrency, but often end up only appealing to a narrow intersection of these interests. Based on what we’ve seen so far, their primary focus on crypto integration often comes at the expense of game design and player engagement, resulting in boring, underdeveloped games that fail to attract a broad gaming audience. Consequently, these games remain insulated within the crypto community, largely failing to onboard gamers into the world of crypto.

Moreover, the gambling aspects of these games often fail to entice traditional gamblers, who are typically drawn to established games like poker and blackjack. Gambling, as a cultural phenomenon, tends to follow tradition and is generally averse to radical changes or progression. As a result, crypto games often only manage to attract a small subsection of the crypto community—those heavily invested in the technology and its potential applications. This limited appeal severely restricts the market segment for these games, hindering their ability to gain widespread adoption and achieve mainstream success.

Enter tokenized games: crypto as a backend for in-game currencies

Tokenizing in-game currencies, despite being a relatively simple concept, has far-reaching potential to enhance existing, well-designed games and bootstrap new games in ways that were previously not possible. The implementation is straightforward: convert the in-game currency (e.g., Fortnite's V-Bucks, Runescape gold, or Roblox Robux) into an ERC-20 token, and create AMM pools (e.g., Uniswap) to enable real-time price discovery in dollar terms.

Roblox, a popular gaming platform with a unified in-game currency called Robucks, serves as a prime example. Players purchase Robucks with real money to buy in-game items, while creators earn a portion of spent Robucks in their games. Tokenizing Robucks as an ERC-20 token would enable instant price discovery via an AMM pool, allowing gamers to sell earned items for real value and investors to directly invest in the Roblox ecosystem. As the platform grows, the demand for Robucks would likely increase, potentially appreciating the token's value and creating a new investment opportunity.

Why would you do this?

1. Bootstrap funding for game development: Tokenizing in-game currencies expands the market to include both gamers, who already transact in these currencies, and crypto investors. By purchasing tokens, investors can directly invest in developers and games, potentially transforming game development funding. As the game gains traction and popularity, the value of its in-game currency is likely to increase, providing a return on investment for token holders. This approach could provide much-needed liquidity to support the high-risk, high-cost nature of game development until the game reaches the end consumer, while also offering a new investment opportunity tied to the game's success.

2. Dollar-linked game economies: Tokenizing in-game currencies may also have secondary effects on players, such as enabling the resale of in-game items for real money. This could spur the organic development of a dollar-linked in-game economy, potentially evolving into a core game mechanic. However, it's crucial to emphasize that these are secondary benefits of adapting crypto to enhance an already strong game. Attempting to build a game primarily around a tokenized economy risks falling into the same pitfalls that hinder existing crypto games.

Case study: a new economic relationship between game developers and their players

Leading AAA game developers such as Entertainment Arts (EA), Activision Blizzard, and Ubisoft have attempted to de-risk their game development pipelines by incorporating microtransactions into their games. In recent years, games have pivoted away from charging a one-time upfront fee for the game of say, $60, and instead made games free to play but laden with microtransactions. These microtransactions generate more consistent guaranteed liquid capital compared to traditionally priced games where gamers are hesitant to spend more significant money and revenues can swing dramatically based on cultural hype around the game or lack thereof. However, players despise these microtransaction mechanics, so much so that they’ve led to the downfall of several games, perhaps most infamously, Star Wars Battlefront II (2017). A tokenized currency would de-risk game development by having crypto-investors purchase in-game tokens. The resulting game could then draw in more players by avoiding the need for microtransactions.

Imagine if there was a crypto-token for in-game currency in the heavily anticipated Grand Theft Auto IV. It would go to the moon!

Concluding thoughts: fuzziness is where lies the opportunity

In this essay, we've explored the potential of crypto as a backend for in-game currencies, unlocking many possibilities:

1. A new fundraising mechanism for game development, especially for small game developers and indie game developers

2. The development of dollar-linked game economies

3. A new value accrual model and economic relationship with users / players

Granted, we acknowledge that our exploration may seem somewhat meandering, presenting a series of ideas without a clear, singular thesis. There remains fuzziness around the exact implementation of this thesis. However, we believe this fuzziness is a reflection of the opportunity at hand. Opportunity oftentimes resides in the murky, undefined spaces where ideas are still taking shape.

To move this idea forward, we are looking to chat more with game developers / studios that could benefit from tokenizing their in-game currencies, as well as infra teams that are building gaming infrastructure. Contact: @arnx813 on Telegram