Blockchain Gaming: Will Every Online Game be On-Chain in the Near Future?

Key takeaways

• Blockchain gaming integrates online games with public blockchains, using NFTs for in-game items and tokens for rewards and currencies. The play-to-earn market could reach $6,324.54 million by 2031.
• Key components of web3 gaming include smart contracts, blockchain wallets, native tokens, and NFTs, adding real-world value and ownership.
• Blockchain gaming creates economic opportunities and meaningful experiences for players.
• Challenges include building sound tokenomics, blockchain scalability issues, and the need for improved user experience and interoperability between blockchains.

There’s a host of technologies emerging in today’s time and age, blockchain shining out among them alongside AI and the Internet of Things. They are not necessarily newcomers to the tech scene, but it’s certainly their time in the sun now that grassroots-level adoption is imminent. Blockchain has been largely popular for its contributions to a decentralised financial system since its inception in the shape and form we know it today in 2009. Over time, blockchain gaming has become increasingly popular, with thousands of games now integrated with blockchain technology and token-based interactions. 

Fortune Market Insights shares that the global blockchain gaming market was worth $128.62 billion in 2022. Between 2023 and 2030, the market was projected to grow from $154.46 billion to $614.91 billion, at a CAGR of 21.8%. 

These are numbers you definitely want to take note of, and for good reason too.

Blockchain or crypto gaming basically puts your average online game on the blockchain and adds real-world value to it. Nowadays, you can confidently express to your parents that you aspire to pursue a career in gaming and be taken seriously. The earnings are substantial in the blockchain gaming sector.

What is blockchain gaming?

To provide a proper definition: blockchain gaming or web3 gaming involves online games Integrated with public blockchains. These games can incorporate both NFT and fungible token elements. NFTs are linked to items with value, such as land, in-game items, avatars, etc., retaining their value even outside of the game. Fungible tokens can act as reward tokens or in-game currencies.

Further, there are play-to-earn blockchain games gaining in popularity- there are reward systems that pay you crypto tokens when you accomplish particular tasks. As opposed to traditional in-game currency, these tokens have real-world value and can be traded on decentralised exchanges (DEXs), NFT marketplaces, and even centralised exchanges.

It’s to be noted that blockchain-based play-to-earn games are expected to become a $6,324.54 million market by 2031, as forecasted in 2023. 

Blockchain gaming vs. Traditional gaming

There’s a good reason many of us expect all online games to walk the blockchain route soon enough. It’s best explained through a direct comparison of traditional and blockchain gaming:

	Blockchain gaming	Traditional gaming
In-game asset ownership	In web3 gaming, you become the owner of all in-game assets in your possession and can take them outside of the game as well (usually as NFTs).	You do not actually own any of the assets you are provided or win like armour or a particularly coveted character.
Real-world value	Let us reiterate, in crypto gaming you can get paid in tokens that have value outside of the game.	As opposed to that, traditional gaming currency is only good for in-game purchases and has no real-world value.
Decentralisation	There are usually DAOs (decentralised autonomous organisations) maintaining and running blockchain games, as well as making all in-game decisions and bringing any changes to the gameplay. This means all the assets are owned by the community and there is no singular entity that can take away your earnings and accomplishments at a whim.	Traditional games are more vulnerable to the wills of a centralised game maker.
Interoperability	In web3 gaming, the blockchain-powered games can interact with other such games on the same chain or sometimes even inter-chain, with the right technology support. This means the market for the in-game assets have greater potential for expansion.	These games are not interoperable.
Control of data	Along with control of in-game assets, you own all your private data too in blockchain gaming; the data is only shared when you choose to.	Again, not the case.

Well, this explains why blockchain gaming has become one of the most hyped-up web3 and blockchain frontiers. You get the fun of gaming with the added perk of the possibility of making it a valid side-hustle. 

Components of web3 gaming

There are several key components that make up a crypto gaming infrastructure. Let’s get familiar with them:

• Smart contracts: There are very few blockchain applications today that can make do without smart contracts. In blockchain gaming, they introduce trustlessness, executing transactions and ensuring proper gameplay. So far, smart contracts in web3 gaming mostly take care of the creation and movement of in-game items, as well as native crypto transactions. However, in the future, smart contracts are expected to be more involved in the games themselves, such as in determining the outcome of certain aspects of a game.
• Blockchain wallets: These wallets act as a gateway for users into the world of blockchain gaming. A wallet with multi-blockchain support is enough for a user to break through and navigate multiple games across blockchains, all with that one entry pass. While blockchain interoperability leaves something to be desired still, once that issue is addressed, blockchain wallets can enhance the crypto gaming experience even more by becoming a one-stop solution for accessing games, storing assets, and trading them later.
• Native tokens and NFTs: Key to play-to-earn blockchain games, native cryptos in blockchain gaming take the conventional concept of ‘in-game currency’ several notches further. You can earn these tokens by taking part in various quests and activities as dictated by the gameverse, and you’re your own boss with them. You can choose to hold on to them, take the value off the platform, and sell them. Same is the case with in-game items presented as NFTs- you can take them out of the platform and sell/trade them.  However, having an expert design the tokenomics of a play-to-earn game is crucial. Without proper design, token prices often end up falling to zero.

How blockchain gaming bridges the physical and the digital divide

The native tokens and NFTs mentioned above add real-world value to blockchain gaming, bringing ownership and interconnectedness to empower users. Online gaming is not simply a fun activity anymore when you put it on the chain; it is an avenue that combines the passion for gaming with financial value. 

Web3 gaming comes from a very simple base: the enhancement of the traditional gaming experience. This means that while the game rewards its dedicated user base, the play-to-earn model also creates new economic opportunities for non-gamers. Overall, there’s tangible meaning added to the hours players spend with their favourite games, crossing the otherwise wide divide between the physical and the digital worlds. 

NFTs in web3 gaming

Speaking of the real-world value, the in-game NFTs are a core part of that value. Non-fungible tokens bring proof of ownership to the blockchain, assigning the users ownership over their assets with complete certainty. Players have full control over what happens to the NFTs, and they can trade the assets without requiring any intermediary to be involved. 

Pain points of web3 gaming to address, and solutions

No innovation is without its challenges, and the same is true for crypto gaming. The most pressing issues include:

• One major challenge in web3 games is building sound tokenomics. Many web3 games struggle with this, resulting in significant volatility in the pricing of items and the value of rewards. Over time, the value of rewards tends to decrease, which can cause users to stop playing the game. Additionally, blockchain technology is slower compared to traditional databases, creating a lag in the game wherever blockchain transactions are involved. Therefore, it is extremely difficult to move the entire game on-chain.
• In blockchain gaming, players must have blockchain wallets, which is yet another factor traditional players might find difficult. For blockchain wallets, the user is required to keep track of the private key since they are non-custodial wallets, which- while not being directly related to gameplay- may keep the more conventional person away since the small adaptations to web3 technology can add up to create a big hurdle to cross.  This highlights the need for improved UX, specifically for web3 wallets. As the ecosystem matures, we can expect the overall web3 experience to become more accessible and user-friendly, making it easier for players to transition to blockchain gaming.
• Interconnectivity is an issue for web3 gaming too, since most blockchains (and the applications based on them in turn) are yet to become interoperable. The lack of connectivity would mean players would have to create different wallets for different blockchain-based games. This is yet another complexity posed to gamers, to be solved with improved measures for interoperability.
• As blockchains like Ethereum suffer from scalability challenges, it may cause games to lag. Yet another thing for the developers to work on, and something layer-2 solutions can fix with much ease. 

Examples of web3 gaming

There are quite a few prominent blockchain gaming platforms today. From Decentraland to The Sandbox, each one has its unique set of NFTs and other gaming benefits. Let’s take a look at a couple of them:

• Axie Infinity: 

Known for its fairly wholesome gameplay, Axie Infinity brings little in-game creatures called ‘Axie’s that you can raise. You can form your Axie team and even battle monsters called Chimeras or battle it out with other players in the Arena. There are individual rewards for different activities.  

To enter Axie Infinity, users need to purchase three Axie tokens- an essential step for participating in the game. The primary cryptocurrency in Axie Infinity is Axie Infinity Shards (AXS), which allows governance participation, voting rights, staking for passive income, and breeding Axies. AXS holders can stake their tokens to earn rewards and engage in game development decisions. 

The tokenomics of AXS include a fixed maximum supply of 270 million tokens allocated for staking rewards, play-to-earn mechanisms, advisor allocations, and ecosystem funds. User engagement, game developments, and market conditions influence the value of AXS and play a crucial role in the game's economy and player rewards.

• StepN

Moving away from the more traditional sort of gameplay, StepN is a lifestyle game where users purchase an NFT in the form of a shoe. These NFT shoes encourage users to accumulate reward tokens based on their physical activities, such as walking, jogging, and running. Users cannot earn rewards from their movements without owning the NFT shoe.

The future of blockchain gaming

Despite the challenges demanding solutions, blockchain gaming is a fresh front for web3 enthusiasts, one that calls to the common man as well with a fun yet rewarding experience. Of course, it is not possible with current blockchain speeds for the entire game to be on chain. But the future of web3 gaming is bright, especially with the metaverse coming into the picture.

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