Cryptocurrency and the gaming industry

3 July, 2018

The cyber worlds of gaming and cryptocurrency are growing inextricably linked. The shift has been coming for some time. Since its initial development as toys for specialized machines, gaming has become increasingly networked and decentralized.

No longer confined to discrete plastic cartridges requiring a blow and a shake to get started, gaming is increasingly an online, connected phenomenon. Games are distributed via the Steam service without a physical medium, and players no longer have to lug their hardware across town to play with one another on local area networks.

The cartridge and the LAN party have been replaced by massive multiplayer games spanning the globe and increasingly sophisticated ways of allowing folks to interact in the game space. Adding cryptocurrency into the mix is changing conventional gaming with tokenized rewards and more complex gaming economies. It's also revolutionizing the gambling industry with provably fair games and payouts that can transcend national boundaries. We're going to take a brief look at the myriad ways that blockchain technology is changing the way we game and what the future of blockchain-enabled gaming might hold.

Gaming Economies

Since cryptocurrencies are the main face of blockchain technology, it only makes sense to start with the ways that cryptocurrencies are affecting gaming economies.

There are two levels to discuss. The first is true in-game economies, in which a character collects in-game currency to purchase in-game items. Think of the "Legend of Zelda" series or other role-playing games, in which a good deal of monster-hacking and dungeon-cracking have to be done to collect money for more powerful weapons and armor. The second is downloadable content economies, which break the fourth wall by requiring a player to use fiat currency or currency earned in-game to buy items directly from the game's publisher.

The difference is subtle but important. In-game currencies really don't leave the gaming world, and for the most part, they hold no value outside of the game. However, downloadable content economies blend the real and virtual worlds in a way that's really only become possible with the increasingly networked nature of gaming. This is the monetary driver for so-called free-to-play gaming, alongside in-game advertising.1

It's this second economy type that stands to experience the most change because of cryptocurrency. Some projects, like Buff and its eponymous BUFF token, use an algorithm to calculate both the time played and achievements earned, allowing the player to "mine" cryptocurrency in the background of a game. These mined BUFF tokens can then be spent on in-game enhancements or even taken out of the gaming world entirely, put on an exchange, and traded for either fiat cash or other cryptocurrencies.2

Gaming at the Next Level

Another interesting project in the gaming sphere is Enjin with its token ENJ. Like Buff, Enjin can be used to incentivize players and generate tokens for in-game spending. Enjin takes this a step further by providing a platform for decentralized game creation. In other words, the cryptocurrency can not only power the game's economy and provide real-life funding for players and publishers alike but also host and run entirely decentralized games. According to the developers, Enjin provides a toolkit for building games from the blockchain up, eliminating the server woes and other problems that currently plague large online gaming communities.3

These kinds of decentralized apps are growing in both popularity and number, and they promise a different kind of gameplay that again blends the real and virtual worlds. Collectible gaming is another solid fit for cryptocurrency, exemplified by projects like CryptoKitties. CryptoKitties is a collectible game in the vein of Pokemon or real-life Beanie Baby collecting. The significant difference is that you can use cryptographic techniques to "breed" and combine your collectible pets, and you can then sell your rare breeds for more cryptocurrency. This is the next evolution of more primitive collecting games like the now-ancient Tamagotchi, and it's a demonstration of just how pervasive blockchain technology can be in the gaming sphere.4

Provably Fair

Cryptocurrency is also making stout inroads into fixed-odds and casino gambling. The root of this development is the concept of provably fair. In a traditional brick-and-mortar casino - or even in a traditional online casino - the house literally holds all the cards. You must assume that the casino adheres either to its own strict fairness guidelines or the guidelines of a government regulatory agency. Provably fair ensures that gamers and casinos alike are kept honest via cryptographic hashes. Vastly simplified, a cryptographic hash for a given roulette wheel spin or card shuffle is generated both by the casino and by a player. Bets are placed, and the results of the initial cryptographic hashes are compared. The combination of the player's hashes and the casinos should yield the final result. Cheating is literally impossible since both parties' information is transparent and available. Moreover, the final result cannot be calculated without both sets of hashes.

This kind of gaming occupies much of the same legal gray area as traditional online gambling. That is, it's illegal to host a website in the U.S. but not illegal for U.S. citizens to play. However, the demonstrable benefits of provably fair gaming are steadily increasing its market share and may yet give U.S. regulators a hook for legalizing online gambling. After all, enforcement is done on a game-by-game level by the code itself, rather than a new (and expensive) government regulatory agency.5

Fantasy Gaming

The final arena where cryptocurrency is turning heads in the gaming world is fantasy sports. This venue is a good fit for cryptocurrency, as the vast majority of fantasy sports are played peer to peer. Projects like Fantasy Gold take the pen and paper and the guesswork out of fantasy sports pools and introduce a measure of accountability.6 Team rosters and game results recorded on the blockchain are inalterable, and the terms of the game are enforceable via smart contract. This adds a level of professionalism to what previously had been very much a handshake variety of game. This professionalism allows for much larger fantasy sports pools with correspondingly higher rewards for successful play. There are no payments to be chased down and no arguing about fudged roster sheets; the blockchain keeps everyone in the game honest.

What's Next

Like most ongoing crypto developments, it's hard to pin down exactly where crypto gaming is going next. A few trends are already clear, however. The blockchain is ready-made for large multiplayer gaming communities, providing an alternative to the centralized servers that were so often a pain point for new game launches. The blockchain is also enhancing the peer-to-peer economic aspect of gaming - downloadable content is no longer a publisher-only gig. Finally, the demonstrably safer benefits of provably fair gaming are likely to steal market share from both traditional online gaming venues and maybe even brick-and-mortar casinos, lending a new aura of respectability to online gambling. The possibilities are almost endless, and the main takeaway should be an increasingly networked and secure gaming experience that really breaks down the walls between the real and virtual worlds.


1) How to Build a Smart Game Economy, TechCrunch.

2) Buff: Game for Fun, Earn for Real, Buff.

3) Enjin.

4) CryptoKitties: Collect and Breed Collectible Cats. CryptoKitties.

5) Provably Fair Games, Explained, Coin Telegraph.

6) Fantasy Gold.