The worlds of gaming and cryptocurrency have started to converge, transforming digital entertainment by offering more immersive and interactive gaming experiences, where players can truly own their in-game assets. Here’s what you need to know. 

What is the connection between crypto and gaming? 

The current annual spending on in-game assets is reported to stand at $54 billion, according to Statista. This is a huge market, but their appeal has been limited because they are largely controlled and managed by centralised entities, such as game developers or publishers. 

This restricts the control a player can be said to have over their in-game assets, and therefore their value. These assets will often expire in-game, and in their hunt for profits, companies are motivated to limit the asset’s shelf life. However, the advent of decentralised technologies – including blockchain technology and cryptocurrencies – has introduced a paradigm shift:

• Digital ownership: Cryptocurrencies enable players to truly own their in-game assets through the use of Non-Fungible Tokens (NFTs) and blockchain-based tokens. This ownership is verifiable, secure, providing players with control over their assets independently of centralised authorities.
• Decentralised economies: Games built on blockchain platforms allow for decentralised economies where players can buy, sell, and trade assets directly with each other. This fosters a more open and transparent marketplace, where the value of items is determined by supply, demand, and player-driven interactions rather than by game developers alone.

A notable example of digital ownership in gaming can be found in the game Axie Infinity. Axie Infinity is a blockchain-based game where players collect, breed, and battle digital creatures known as Axies. Each Axie is represented as an NFT, making it a unique and verifiable digital asset owned by the player. The game utilises the Ethereum blockchain to ensure that ownership of Axies is securely recorded and can be transferred seamlessly between players.

What are gaming cryptocurrencies?

Gaming cryptocurrencies encompass a variety of digital tokens and assets specifically designed for use within gaming ecosystems. These cryptocurrencies serve several purposes within games:

• In-game currency: Cryptocurrencies can act as a universal medium of exchange within games, replacing traditional in-game virtual currencies like gold or credits. Players can earn, spend, and trade these currencies for virtual goods, upgrades, or access to exclusive content.
• Non-fungible tokens (NFTs): NFTs represent unique digital assets such as characters, items, or virtual real estate within games. Each NFT is distinct and can be bought, sold, or transferred between players. Games like CryptoKitties and Decentraland have popularised NFT-based gameplay, where ownership of digital assets is recorded on the blockchain.

How do they work?

The mechanics of gaming cryptocurrencies and NFTs are rooted in blockchain technology:

• Blockchain integration: Games leveraging cryptocurrencies typically operate on blockchain networks, which provide a decentralised ledger to record transactions and ownership of digital assets. This ensures transparency, security, and immutability of in-game transactions.

• Smart contracts: Smart contracts, powered by blockchain technology, facilitate automated and trustless transactions within games. These contracts can govern various aspects of gameplay, such as item trading, rewards distribution, and gameplay mechanics.

Sign up for Luno and get ZAR 200 worth of Bitcoin when you buy or sell ZAR 500.00

*This information should not be construed as a solicitation to trade. All opinions, news, research, analysis, prices or other information is provided as general market commentary for information purposes only and is not investment advice or recommendation. Luno always advises you to obtain your own independent financial advice before investing or trading in cryptocurrency.