Q&A: Does the Next Generation of Gaming Actually Need Blockchain?
Blockchain represents a novel innovation in the gaming industry – the first in years
d1sk/Shutterstock.com modified by Blockworks
The inherent value to owning in-game assets is hard to measure. Critics have argued that the technology doesn’t provide inherent utility because the growth is rooted in speculation.
And if gamers can transfer assets to other players without using blockchain, then does a certificate of ownership on a blockchain have any value to the gamers who just want to use the asset?
According to Canaan Linder, CEO of Stardust, blockchain offers something that publishers don’t: the open invitation to build upon user and developer generated content. While users may have the ability to transfer ownership of assets in closed ecosystems, publishers are unwilling to provide that type of ownership that grants full creative freedom. This type of utility has the potential to offer more than hype.
His company created a seamless, low-code solution for developers to integrate NFTs into their games for millions of mainstream players. Blockworks sat down with Linder to learn why the gaming industry as a whole could still benefit from blockchain.
Blockworks: What are the biggest challenges that game developers face, and how can blockchain technology address them?
Linder: The gaming industry has primarily been focused on mobile gaming in the past 10 years with a lack of innovation and a reliance on user acquisition through advertising. Blockchain represents a novel innovation in the gaming industry – the first in years. This innovation comes at an incredibly serendipitous time, the recent changes to IDFA (Identifier for Advertisers) by Apple have made user acquisition more expensive for all games. This has resulted in declining margins for developers, who are now looking for ways to innovate and provide value to players through more rewarding and entertaining experiences..
NFTs (non-fungible tokens) offer a way for game developers to give value back to players in order to keep them engaged. Instead of paying for user acquisition through advertising on Facebook and Google, game developers can utilize NFTs to incentivize and retain players, giving that value back to them and creating a new model for user acquisition. Going even further, NFTs allow game developers to work together to increase the total utility in the gaming ecosystem, building composable ecosystems that every developer and player can contribute to.
Blockworks: What are some ways that NFTs can give value back to the player?
Linder: Digital assets today are valued only by the utility given to them by a single developer, and that item can only be used in that ecosystem. With NFTs, players truly own their items, and can take them outside of the game into any other ecosystem, application, or game. This true ownership that the player has means they can have full control over what they do with that item, whether they sell it, use it in another ecosystem, or even destroy it to forge a more powerful item in another game they want to play.
This increased utility not only brings more value to players, but the items themselves. I have personally spent thousands of hours in League of Legends and Fortnite (yikes), and the ability to bring those items, skins, and rewards into other games, use them in other applications, even potentially attach them to my resume as I applied to Riot out of college, is incredible.
Blockworks: What types of web2 games could benefit from this type of integration?
Linder: MMOs are a great example of a category that could benefit from NFTs. I grew up playing Runescape, and there are many elements in the game that NFTs could supercharge. MMOs such as Runescape are centered around virtual economies, extremely rare items, and grinding for resources – all elements where NFTs can improve the player’s experience and Lifetime Value (LTV).
Blockchain and NFTs are all about interoperability and composability, where game’s and item’s functionality can be extended by others. Runescape has a long history of players wanting to contribute their innovation to the game, look no further than RuneLite, an open source Runescape client as an incredible example of this. Opening up Runescape’s economy to blockchain and NFTs, players and developers can now contribute to Runescape by creating secondary marketplaces, different DeFi products, other games that leverage Runescape items, and an infinite amount of innovation all driven by NFTs.
Blockworks: Is gaming Interoperability a must have for this industry?
Linder: It’s important to realize no one’s hair is on fire because they don’t have NFTs in-game today, but like all 10x innovations, blockchain and NFTs represent a new form of growth that we cannot even comprehend. Pointing to other innovations, such as the internet, tablets, and smartphones which were not initially seen as necessary, what is seen as a must-have today will be very different to how we see it in 20 years from now.
Interoperability represents a new and exciting innovation for the gaming industry, built on a technology that hasn’t fully yet been matured or seen to its full potential. Every other huge innovation has these same characteristics in its first few years, early, not easy to understand, but gives the potential for real and exciting change. Gaming must embrace this interoperability based mindset with blockchain technology, it is the future of the gaming industry.
Blockworks: How does this permissionless environment translate into value for the users?
Right now interoperability between games is largely limited, but this permissionless ecosystem has generated a layer of utility outside of the gaming world. For example, a player may be able to use an NFT as collateral to borrow money from a lender through a decentralized finance (DeFi) platform. In this case, the NFT serves as a way to secure the loan, with the lender holding onto the NFT as collateral until the loan is repaid. While NFTs right now are usually gaming items, they could be any other collateralized good, such as a home, car, or painting.
A small, but great, example of interoperability is a verified profile photo on twitter, where NFT collectors can show off their NFT as a validated digital good. I know for certain I will be buying the NFT that has the ability to show up as a skin in Fortnite.
Blockworks: Why other types of opportunities can these gaming NFTs offer?
Linder: Right now, NFTs are locked into gaming environments and have very little crossover with other applications. We’ve seen interoperability with gaming NFTs as verified profile badges on twitter, but not much more than that.
Starbucks Odyssey is Starbucks’s blockchain reward program, with NFTs, Starbucks can partner with games to offer free coffee for anyone who gets to a certain level, or the Warriors can partner with Fortnite to give unique fan experiences to anyone who finds a Steph Curry jersey in game. This interoperability hasn’t existed today in an open and permissionless environment, and with blockchain, the level of innovation will not only increase in gaming, but will for every business that interacts with this open technology.
Blockworks: What are the biggests challenges for developers wanting to integrate these NFTs into their games?
Linder: One of the major challenges that game developers currently face in the web3 space is user onboarding. The onboarding process for web3 games currently is cumbersome and confusing, it must be a one-click experience. While many solutions in the market today say they are better, they still take forever and offer foreign non-game like user interfaces, with high friction for the end user. Games that have the lowest “time to fun” are much more successful, and user interface design is one of the key components in onboarding a player into your game.
Stardust offers game developers the ability to create custodial wallets for players, allowing them to pick up and use in-game items without necessarily understanding that they are interacting with NFTs or blockchain technology. This makes it easier for game developers to contextualize NFTs into their games and helps to keep players engaged – which is a must-have for acquiring millions of users.
This interview has been edited for brevity and clarity.
This content is sponsored by Stardust.
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