The crypto investor’s guide to blockchain gaming

With blockchain gaming poised to disrupt the global gaming industry, opportunity is abundant for investors armed with these expert insights

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Artwork by Crystal Le

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Blockchain gaming is revolutionizing the gaming industry by merging cutting-edge blockchain technology with the immersive world of video games. As cryptocurrencies and decentralized finance (DeFi) gain momentum, blockchain gaming presents a new frontier for investors seeking high-growth opportunities. 

By understanding the fundamentals, staying informed about regulatory developments, and adopting a prudent investment approach, investors can seize opportunities in this transformative and rapidly evolving domain. This investor’s guide, boosted with insights from experts at Polemos, provides a comprehensive understanding of blockchain gaming’s advantages, investment potential, and challenges.

Key takeaways

  • Blockchain gaming offers true ownership of assets via NFTs, ensures secure gameplay with smart contracts, and opens financial avenues through DeFi integration.
  • It’s essential that prospective investors understand what exactly they are purchasing. Oftentimes, Web3 participants confuse “casino chips” for “shares of casino ownership.”
  • With significant market growth and potential, investing in blockchain gaming requires thorough due diligence but can yield substantial rewards despite market volatility and regulatory uncertainties.
  • The synergy of blockchain, NFTs, and DeFi is reshaping gaming, offering true ownership of digital assets that can be freely traded.

Investment Opportunities in Blockchain Gaming

In the long term, experts forecast substantial long-term growth for blockchain gaming. As technology evolves, blockchain gaming could become a mainstream form of entertainment, bridging the gap between traditional gaming and digital asset ownership. 

Like any emerging industry, blockchain gaming carries inherent investment risks and has already mourned many failed projects. Market volatility, technological challenges, regulatory uncertainties, and competition can all play a role in impacting investment outcomes. However, early investors with a strategic and diversified approach may reap substantial rewards in this dynamic sector.

When evaluating blockchain gaming projects, prospective investors should conduct thorough due diligence. Key factors to consider include the team’s experience, project goals, partnerships, revenue streams, gameplay, and tokenomics. It’s also essential to understand what exactly is available to purchase as an investment vehicle. Oftentimes, investors are buying blockchain gaming utility tokens under the incorrect belief that their purchase represents ownership in the project and will appreciate as the project succeeds, similar to how traditional shares of a company function.

“There’s a difference between owning shares in a casino and buying their chips. If you own shares in a casino, you can reasonably expect a return—they find it quite hard to lose money. If you own chips in a casino, you can reasonably expect to lose everything you have over time. Similarly, if you’re investing in a blockchain game, it’s essential to know whether you’re buying shares in the ‘casino’ or the chips. You need to make sure that what you’re doing is investing in something like the shares of the project that will pay a return as the game is successful.”

Richard McLaren, COO & Co-CEO of Polemos

NFT renting is another promising prospect that could one day be a lucrative investment vehicle. Renting NFTs is a more affordable way to access high-value in-game assets and also allows gamers to try out different NFTs before purchasing them.

Parallel, a highly-anticipated upcoming sci-fi trading card game, enables players to share the NFT cards they use in battle with other players for XP rewards. | Source: Parallel X

NFT rentals can also scale up to NFT Land parcels in large-scale open-world games and metaverse platforms. An exciting prospect to many Web3 participants, believers look forward to one day providing virtual world access to large brands that want to establish a tangible presence in the metaverse. Landowners could earn revenue via a rental fee, a percentage of revenue generated on the land itself, or some other agreed-upon avenue.

The Advantages of Blockchain Gaming

As the gaming landscape evolves with the introduction of blockchain technology, certain industry norms are transforming, paving the way for a better gaming experience for all.

Ownership of Digital Assets

Traditional gaming models often restrict players from owning in-game items, characters, or virtual real estate. In contrast, blockchain gaming leverages non-fungible tokens (NFTs) to grant true ownership of digital assets. 

NFTs are at the core of blockchain gaming, enabling the creation of unique in-game items that players can own and one day potentially transfer across games through advancements in NFT interoperability. These items, ranging from virtual weapons and armor to rare collectibles, can be traded and sold in open marketplaces, creating a thriving market of collectors and investors. 

Star Atlas, a blockchain-based, space-themed, grand strategy video game built on the Solana blockchain, enables players to own a variety of in-game NFTs, like spaceships, resources, and collectibles.
Star Atlas players will own an arsenal of deployable in-game assets, including spaceships and resources | Source: Star Atlas X

Decentralization and Trustless Gameplay

Blockchain gaming operates on decentralized networks, eliminating the need for central authority control and putting power into the hands of the players. Smart contracts, the backbone of blockchain technology, facilitate trustless interactions between players, developers, and other stakeholders. This transparency and security build player confidence and enable fair and tamper-proof gameplay.

Understanding the Mechanics of Blockchain Gaming

Blockchain gaming is bringing unprecedented changes to virtual worlds and in-game experiences. Digging deeper, we uncover several core mechanics driving the evolution.

Smart Contracts and Gaming Protocols

Smart contracts are self-executing contracts with predefined conditions written into their code. In blockchain gaming, smart contracts govern various aspects of gameplay, asset ownership, and reward distribution. These protocols ensure fairness and automation, minimizing the need for intermediaries.

Gaming on Public and Private Blockchains

Blockchain gaming can take place on public or private blockchains, each with its advantages. Public blockchains, like Ethereum, offer greater decentralization and access to a global user base. On the other hand, private blockchains may provide better scalability and customization options for certain gaming platforms.

Integration of DeFi in Blockchain Gaming

DeFi protocols are making their way into blockchain gaming, enabling players to participate in yield farming, staking, and lending using gaming assets as collateral. The integration of DeFi creates a new dimension of financial opportunities for both gamers and investors.

The Play-To-Earn Experiment

Blockchain gaming began with the introduction of play-to-earn models, where players could earn cryptocurrencies and in-game assets by participating in gameplay. These economic incentives were designed to attract players looking to monetize their gaming skills and time by participating in a global marketplace of digital assets. However, as time progressed, it was found that play-to-earn game systems have a strong tendency to generate catastrophic consequences for game economies, leading to investor losses and the shutting down of projects.

“We do see the term “play-to-earn” discredited in general by now, and when it comes to any mentioning of earning potential (as a result of digital asset ownership and potential trading capabilities), then it is important to emphasize that this isn’t going to be available in every game, and where it is, it won’t be something the majority will be able to achieve. Also, for those that do, it is likely not going to be material enough to become anyone’s side hustle.”

Sascha Zehe, Co-Founder & Co-CEO of Polemos

Blockchain Gaming’s Challenges

The blockchain gaming space is still in its early stages of development, and as a result, there is a lack of quality games. Many blockchain games are simply clones of existing games with blockchain features added on top. Others are poorly made and lack the polish and gameplay that gamers expect. There are several contributing reasons for this.

From a technical standpoint, building blockchain games is significantly challenging due to the current limitations of blockchain technology. Blockchain’s inherent scalability issues, transaction costs, and the need for a deep understanding of smart contract programming add layers of complexity that can make the development process more complicated compared to traditional gaming platforms. There are not many experienced developers who know how to build high-quality blockchain games. 

Additionally, many potential players lack familiarity with cryptocurrencies, digital wallets, and blockchain mechanics, which adds significant friction and complexity to the process of getting started. As a result, the blockchain gaming market is still relatively small, which means that there is less incentive for established, well-funded developers to create high-quality games.

Acquire your edge

Blockchain gaming represents a new paradigm in the gaming industry, offering exciting opportunities for both players and investors. As the industry evolves, investors should stay informed about the latest trends, project developments, and regulatory changes.

When it comes to staying informed about blockchain gaming, there’s no better platform than Polemos. An information provider, lending and staking service, and community, Polemos is a premier destination for anyone interested in gaining an investment edge in this sector of crypto. To get insights delivered to your inbox every Friday morning, subscribe to their weekly newsletter.

This content is sponsored by Polemos.


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