What is Blockchain gaming and why is Epic Games betting on it

In a surprising turn of events, the gaming industry seems divided on the subject of blockchain games. After Valve announced that games that use blockchain or allow users to exchange NFTs or cryptocurrencies will be banned from its online game store Steam, its key rival Epic Games told The Verge that it will not block such games on the Epic Store. 

However, Epic Games has said that there will be some limitations that will apply to blockchain games and developers. For instance, they will have to use their payment systems and comply with financial laws.

Epic Games Store will welcome games that make use of blockchain tech provided they follow the relevant laws, disclose their terms, and are age-rated by an appropriate group. Though Epic's not using crypto in our games, we welcome innovation in the areas of technology and finance. https://t.co/6W7hb8zJBw

— Tim Sweeney (@TimSweeneyEpic) October 15, 2021

What do blockchains do in games?

Age of Rust was one of the first games to be banned on Steam for promoting NFTs. “At this point, we will put our energy back into game dev, creating more NFTs, & empowering the community than try to fight Steam alone. We will continue to publish our @madewithunity game elsewhere," the game's creators said in an official post on Twitter after the ban.

Steam's point of view is that items have value and they don't allow items that can have real-world value on their platform. While I respect their choice, I fundamentally believe that NFTs and blockchain games are the future. It's why I started this journey with all of you.
3/4

— Age of Rust (@SpacePirate_io) October 14, 2021

Widely used in banking, insurance, land title registry, and health record management, blockchain technology helps create a decentralized gaming system, and ensure authentic ownership of gaming assets. Essentially, it tags in-game items and assets to a blockchain, making their ownership immutable and near impossible to defraud users. 

Despite being in nascent stages, Blockchain games are building a loyal userbase. Blockchain platforms such as Xaya.io allow game developers to create blockchain games and decentralized applications which can be scaled for an unlimited number of users. 

What are Blockchain games?

In a typical online game, the creators control every element from the game’s development to its data assets. A blockchain-based game, on other hand, is decentralized and the data assets are not stored in one server. The core logic and assets are distributed among players and are governed by smart contracts, which allows entities other than the creator to analyse and reuse the game or even make another version of it. Blockchain games can issue their own token, which can be used within a particular game, or they can use commonly accepted cryptocurrencies including, like Ethereum, for any exchange of assets.

What is the role of crypto in gaming?

NFTs or non-fungible tokens can be used to define ownership of digital assets, including in-game items. It can be anything from artwork, animated GIFs, or songs. In video games, NFTs can be any item of value, such as a weapon, skin, or loot boxes in a battle royale game. Most of the modern-day battle royale games, like PlayerUnknown's Battleground (PUBG) or Fortnite have scope for NFTs as they already use some form of tokenization or virtual currency that can be used to buy an asset.

Using blockchains, game developers can lay down norms for fair in-game currency and asset trading. Once a player decides to leave the game, he/she can trade all their assets as NFTs to other players. No single creator-controlled game allows such freedom to its players. In fact, they restrict and even ban players from trying to sell or trade their in-game assets.

Moreover, in play-to-earn models, game makers reward players with their own crypto tokens in order to incentivize them. Games like Axie Infinity reward users with these tokens for performing specific activities, and these tokens can then be traded on crypto exchanges.

In some cases, game makers can use a specific kind of cryptocurrency — called governance tokens — to actually give gamers a say in the game's development. Governance tokens are cryptocurrencies, which offer their holders specific voting rights in a company's decision making. A person holding more tokens will have more rights, and so on. So, players could theoretically stop a company from discontinuing specific features, or at least have a say in introducing new ones when needed.

Why is the industry divided?

Valve’s Steam dominated the PC gaming market for years. Epic Games’ online store was the first major challenger to it with games such as Fortnite exclusively available on them. Despite being launched only in 2018, Epic Games has garnered a huge following with its exclusive titles and resources for Unreal Engine developers, which is a gaming engine the company makes. 

Valve’s stance on cryptocurrencies and NFTs is another opportunity for Epic Games to expand its user base. This move will also add to their revenue as the popularity of blockchain games has been rising.

As per a report by DappsRadar, 50% of unique active crypto wallets played a blockchain game in Q3 2021, while in-game NFTs amounted to $2.3 billion in sales during the same period.