Will blockchain disrupt the video game monopoly from Tencent


Dominance of centralized game developers

Ten years ago, a 14-year-old Russian kid was obsessed with World of Warcraft and his favorite class in the game is warlock. Unfortunately, one day, Blizzard, the developer of the game cancelled warlock’s Life Siphon spell. The boy is furious about this update and he send multiple emails to complain and request Blizzard to restore the spell. Blizzard said no.

For those who are familiar with World of Warcraft, Blizzard is the supreme god and the only rule maker of this game. If you are not satisfied with his patches, you can either live with it, or you can just quit.

Apart from the rule-making rights, the ownership of digital assets player acquired within online games is also controlled by game developers.

Owen Tao, CEO of Matrix AI Network, shared his game experience:

The first business Mr. Tao tried after he graduated from college in 2005 is to get coins in World of Warcraft and sell it for real money. He developed a system where all the process can be automated. Owen Tao made 10 grand from this business. However, business cannot last for long. Because in the perspective of Blizzard, the assets in the game belong to game developers, therefore, Owen Tao’s business is illegal and Blizzard sued him and made him shut his business down.

This is the reality of centralized online games. Game developer decides everything in the game. Sometimes, they will compromise to players in order to maintain active users. More often, they will sacrifice the fun for monetization.


Three ways for blockchain in gaming industry

Remember the kid we mentioned in the beginning? He chose to quit World of Warcraft when his request is declined by Blizzard. Five years later, he presented a decentralization system to the world – Ethereum. Yes, the kid’s name is Vitalik Buterin.

Another five years have passed. Ethereum has become the second most popular blockchain application in the world. And decentralized apps are running on it. Among all the Dapps, one of the most popular is called CryptoKitties, a virtual game based on smart contract that allows players to purchase, collect, breed and sell various types of virtual cats.

It looks like a normal game, but its core is completely different from traditional online games. What is the core? Trust. If an online game can be easily and frequently changed by a center manager, it certainly will not win the trust from players. Blockchain makes sure the game will not be manipulated by a single party. A blockchain-based game will become a community built together by all players.

It seems a promising direction for blockchain startups. Currently, we can see three focuses in blockchain gaming industry.

  1. Game developer

According to data from DappRadar, there are more than 200 blockchain-based games globally. Aside from the aforementioned virtual pet games, we also see types of management games and lottery games.

  1. Infrastructure

Ethereum is seemingly not a good choice to be the infrastructure chain for a game. Since CryptoKitties alone has already caused serious traffic jam on it. So, startups like Gamechain System and Super Game Chain have aimed at this direction and tries to provide infrastructure chain for decentralized games.

  1. Service provider

Some startups are trying to build a trading platform for blockchain-based digital assets. They will also provide other services like renting and financing through digital assets.


Why blockchain has the potential to disrupt gaming industry?

Why gaming industry needs blockchain for its further development?

Not one online game so far has truly got rid of the control of game developers. No online game has come close to Bitcoin, who was no longer controlled by its creator since Day 1.

Players – Both investors and shareholders of the game

In traditional online games, players can pay for certain additional features of the game, but they cannot enjoy development of the game itself. They are simply a revenue source for developers. They don’t own assets in the game, they just have access to use those assets.

Blockchain-based game will alter this model. Blockchain can implement trust and value in a game for players. Digital assets in a blockchain game will be written on blockchain and players have the ownership. More players participate in a game, the value of the game will grow higher, then, assets in the game will be more valuable and players are better benefited. Players can become investors and shareholders of the game.

Content provider – An opportunity to disrupt monopoly

Internet has facilitated a fast integration of information and resources, therefore helped tech giants to build monopoly conveniently. Take China for instance, Tencent and Netease have grabbed as much as 80% of entire domestic gaming market. Gaming startups in China have a huge mountain to climb every time they launch a new game. And games rely more on user flows than the quality of game itself to become a hit.

Gaming developers are supposed to be content providers, however, the business reality has rendered their ideal colorless. However, blockchain can put game quality back on top for both developers and players again.

A blockchain-based game, if well-received, users will voluntarily expand their communities in order to make their digital asset more valuable. Therefore, as long as it’s a game with high quality, the game community will thrive sooner or later.

There are three major improvements blockchain can bring for gaming industry, said Jia Yinghao, CEO of Hashworld.

First, lowering acquisition cost. By offering players rights to participate in the building of game world, players will have a sense of belonging and better loyalty.

Second, offering a friendlier environment for players. Centralized online games always try to monetize on players. Blockchain-based game will be more transparent.

Third, features like ownership and trading has transformed game items to digital assets and made them more valuable.


Future outlook

For technology itself, it’s relatively easy. Gaming startups can focus on the plot and database, and outsource smart contract layer to blockchain service providers. Blockchain-based games are not all designed to disrupt traditional games, they can be a supplement and a new type of game.

How many stages will blockchain games go through?

Eric Sun, founder and CEO of Bit.Game believes there are three stages.

Stage one, data mapping. In this stage, game developers will map the game items to a blockchain. The game is still centralized, but the game items can be trade freely.

Stage two, data on the chain. In this stage, game items and player data are stored on blockchain.

Stage three, smart contract implementation. In this stage, the algorithm of the game will be written on blockchain, and all mechanisms will be triggered by smart contract.

Despite the stages are pretty clear for startups, the actual path is full of thorns Here are a few difficulties.

  1. Technical barriers

Blockchain-based games require players to know blockchain and the way to operate a cryptocurrency wallet. It would be a burden for regular players.

  1. Payment

It would involve cryptocurrency and require players to learn about cryptocurrency wallet.

  1. Quality

Blockchain is an additional feature, the game itself still need to be high quality to stand out.

Blockchain will be a perfect opportunity for game developers to reshape the world of online games. CyptoKitties has showed us that even the content is old-fashioned, when combined with blockchain, it can be attractive.


PS: Just when I finish this article, I saw news that Tencent is going to launch its first blockchain game on April 23rd, in Tencent UP event. It seems that Tencent has also prioritized blockchain in its game sector. Will this enforece their monopoly in the industry, or will this be a opportunity for other game developers? Guess only time can tell.


Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

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