Key Takeaways
- Crypto gaming is a form of gaming that uses blockchain technology as a foundation, rewarding players through a play to earn model.
- Blockchain gaming challenges the traditional gaming industry by allowing players to own parts of the gaming experience, via crypto and NFTs.
- Key components of crypto gaming include blockchain, native currencies, NFTs, and smart contracts.
- Popular crypto games include Hamster Kombat, Axie Infinity, The Sandbox, and Decentraland, each offering a different gaming experience.
The humble roots of gaming began all the way back in the 1950s when scientists started to design the first computer games. Over the years, gaming has grown from a niche hobby to a global phenomenon worth billions of dollars, bebcoming so popular that it was even featured in the 2020 Tokyo Olympics.
Gaming is also one of the many industries that has been disrupted by blockchain technology. The rise of cryptocurrencies, NFTs, and smart contracts has given rise to crypto gaming, a subset of computer games that incorporate elements of blockchain technology. But what exactly are crypto games, and how do they differ from regular gaming?
In this article, we’ll take a deep dive into crypto gaming, what it is, how it works, its pros and cons, and how you can take your first steps.
What is Crypto Gaming?
Crypto gaming, also known as blockchain gaming, represents a new chapter in the video game industry, offering players novel experiences and incentives.
Traditional video games are centralized. The game and all in-game assets are controlled by the development company, not the players. The points and gaming assets you earn inside the game disappear the moment you switch off and can’t be sold or used elaewhere. In other words, players don’t own anything, and there’s no crossover between the game and real life.
Crypto gaming changes that, straddling the gaming experience and real life by giving players rewards with real value.
Instead of a privately owned platform that controls your assets, crypto games (and the whole of Web3) use blockchain as their foundation. This means players can retain ownership of in-game items like weapons, skins, characters, or land, usually represented as non-fungible tokens (NFTs). They can trade these NFTs on secondary markets, fostering a gaming asset economy that extents beyond the game itself.
Another key characteristic of crypto gaming is the play-to-earn (P2E) model, which sees players rewarded with crypto for engaging with the game. This is a stark departure from traditional gaming, where players often invest vast time and money without any possibility of financial returns. The exception here would be esports but that’s a whole other level of dedication that most people simply don’t have.
How Does Crypto Gaming Work?
Crypto gaming fundamentally differs from traditional gaming because of its reward structure and its reliance on blockchain technology. The core idea is simple: players earn real value in the form of cryptocurrency or NFTs as they play. These rewards can be traded, sold, or used in different games, thus enabling a real-world value proposition for players.
The entire system is powered by several technological pillars that support the decentralized, transparent, and secure environment of crypto gaming. These pillars are:
- Crypto Gaming Assets
- Blockchain
- Smart contracts
Crypto Gaming Assets
Crypto gaming assets are central to the play-to-earn model, since they reward players with items that can be sold for real value outside the game. They fall into two broad categories: native gaming currencies and NFTs. Let’s have a look at each of them.
Native Currencies
Most gammes have their own native token that players can earn through engagement. This might include completing quests, winning challanges or other in-game activities. The tokens are legitimate crypto, and can then be traded for other cryptocurrencies or fiat on centralized exchanges and decentralized exchanges. Alternatively, you can also purchase these tokens on the crypto market and then use them in-game through your crypto wallet.
For example, in the popular blockchain-based game Axie Infinity, players earn the native token, AXS, by breeding, battling, and raising their Axies. AXS can be traded on cryptocurrency exchanges, giving it real-world value. Another example is The Sandbox, which uses SAND as its native currency. Players earn SAND by creating, owning, and monetizing their gaming experiences within the virtual world.
The significant advantage of using cryptocurrency is that it links the virtual economy to the real world. Players can trade or sell their earned cryptocurrency for fiat currency. This also creates an additional layer of engagement, as players are motivated to continue playing and improving their skills to earn more rewards (hello P2E).
In some cases, games offer staking mechanisms, where players can lock up their tokens in return for additional rewards or governance rights within the game’s ecosystem.
NFTs
Non-fungible tokens are another key element of crypto gaming’s play-to-earn model. Unique, non-interchangeable items like characters, land, weapons, or skins all take the form of NFTs, which users can sell and swap outsided the game.
For example, in Decentraland players can own virtual land, represented as NFTs, which they can sell or trade on secondary markets. But a land NFT is inherently much more valuable than a skin for a character.
When it comes to NFT security, the ownership of these digital assets is recorded on the blockchain. Besides enabling users to own these digital assets, this blockchain foundation also means you can use your NFTs across different gaming environments, provided they use the same underlying blockchain network. This gives users significantly more ownnership over their gaming experience.
Blockchain
Blockchain technology is the foundation behind crypto gaming, and the infrastructure that enables the play-to-earn model. Simply put, it’s a distributed ledger that records all transactions across a network of nodes. By doing so, it ensures transparency and security.
In crypto gaming, blockchain serves as a record-keeping system for ownership of assets and in-game transactions, and is what enables players to own their galing assets and currency.
Blockchain also permits interoperability between different games that use the same network. This fundamentally changes the gaming industry’s normal structure, because it gaurantees that no single entity controls the game or its assets.
Blockchain tech also enables the creation of decentralized autonomous organizations (DAOs), a structure frquently used in the Metaverse to confer control of the game upon its community. In a DAO, players can vote on key decisions affecting the game, such as governance rules, reward structures, new features, and more.
Smart Contracts
If blockchain technology is the foundation of crypto gaming, smart contracts are the neurons that make everything possible. They’re self-executing contracts with the terms of the agreement directly written into code. Smart contracts automatically execute and enforce transactions when certain predefined conditions occur.
In crypto gaming, smart contracts play an important role in automating processes like transferring ownership of assets, distributing rewards, and managing in-game economies.
For instance, when a player sells an NFT representing a rare item in a game, the smart contract handles the entire transaction. It transfers the asset to the buyer, and sends out the cryptocurrency payment to the seller.
Through the use of smart contracts, there is no need for intermediaries. Instead, players can perform transactions directly with each other. As a result, the whole process is much faster and more secure.
As a final note, smart contracts also ensure that the terms of in-game transactions are honored, reducing the risk of disputes.
Pros and Cons of Crypto Gaming
Crypto gaming offers numerous advantages over traditional gaming, but it also comes with some drawbacks. Here’s a comparison of the key pros and cons:
| Pros | Cons |
|---|---|
| Ownership of in-game assets | High volatility in token value |
| Play-to-earn model incentivizes engagement | Regulatory uncertainties |
| Interoperability of assets across games | Potential for scams and fraud |
| Transparency and security of transactions | High gas fees on some blockchains (e.g., Ethereum) |
| Decentralized governance through DAOs | Complex onboarding process for new players |
Popular Crypto Games
Over the years, crypto gaming has continued to gain traction and games have evolved. We’ve seen different genres and mechanics pop up and take center stage. Here are five of the most popular blockchain games:
Hamster Kombat – HMSTR (Market Cap: $316M)
Hamster Kombat is a crypto game that combines quests and challenges to engage players. Players earn HK tokens by completing quests, solving puzzles, and battling other players.
The game’s reward structure focuses on puzzles, with players gaining more rewards as they acquire skills and expertise. The HMSTR token is available on crypto exchanges and players can use it for in-game upgrades, items, and power-ups.
Axie Infinity – AXS (Market Cap: $727M)
Axie Infinity is a Pokemon-inspired blockchain game where players breed, raise, and battle creatures called Axies (which are NFTs). The game’s native token is AXS and players can get a hold of it through successful battles and the breeding of Axies.
Players can then sell or trade their Axie NFTs and tokens on the open market. The game gained massive popularity in 2021, with some players opting for the game over a full-time job. Ever since its launch, the game has continued to develop.
Nowadays, the game has changed quite a bit, offering a variety of game modes such as Origins, Homeland, Classic, Raylights, and Project T Prototype.
The Sandbox – SAND (Market Cap: $624M)
The Sandbox is a virtual world where players can create, own, and monetize gaming experiences using NFTs and the native token, SAND. Players can build their own worlds, interact with other players, and trade virtual assets like land and characters.
Players praise the game for its creative potential as it allows users to design their own games within the platform. Furthermore, The Sandbox has a voxel-based art style, similar to Minecraft and that’s most likely an attempt to attract players from the best-selling game.
Decentraland – MANA (Market Cap: $569M)
Decentraland is a decentralized virtual reality platform where players can purchase land, build virtual structures, and explore various user-generated environments. The platform uses the MANA token as its currency, allowing players to buy land, items, and experiences.
Players can also sell their virtual real estate for profit on secondary markets, creating a dynamic digital economy. The game’s focus on virtual reality and the open-ended creation of user-generated environments makes it a popular choice for VR fans.
Gods Unchained – GODS (Market Cap: $59M)
Gods Unchained is a blockchain-based trading card game where players battle each other using cards represented as NFTs. Players can earn the game’s native token, GODS, through gameplay and use it to purchase new card packs or trade existing cards on the marketplace.
As a result, players have complete ownership of their cards and can sell them for profit outside the game. The value of the cards can vary depending on the current meta and their rarity. In September, Gods Unchained held the GU “Flashback: Genesis” tournament, gathering the top 256 players.
How to Get Started with Crypto Gaming
Getting started with crypto gaming requires some initial setup, especially for players who are new to cryptocurrency and blockchain technology. The first steps you need to take include:
- Choosing a Game
- Creating a Crypto Wallet
- Buying Native Currency
1. Choose a Game
First and foremost, select a game that you actually want to play. Check out the official website and maybe view a few videos on YouTube to get a better understanding and figure out if it’s your type of game.
Next, figure out which blockchain the game is based on. Some of the most popular blockchains for crypto gaming include Ethereum, Solana, Avalanche, Binance Smart Chain, TON, and others. For example, all of the games we’ve mentioned above are running on Ethereum except for Hamster Kombat, which is on TON.
2. Create a Crypto Wallet
Once you’ve picked up a game, you’ll have to create your very own crypto wallet. You can think of your wallet as the place where you’ll store your cryptocurrency and any NFTs you earn or purchase.
Choose a wallet that supports multiple blockchains such as MetaMask. This will allow you to use it for different games, based on different blockchains.
3. Buy Native Currency
Most blockchain games use their own native cryptocurrency as in-game currency. Others use the native coin of the blockchain they’re based on. In both cases, you’ll most likely need both of those, one for transactions and another for in-game assets.
Get the currency in your wallet before you start playing. You can buy native tokens on cryptocurrency exchanges like Binance, Coinbase, or KuCoin. Alternatively, if you already have some crypto lying around, you can opt for a decentralized exchange such as Uniswap or Sushiswap.
4. Play-to-Earn
Now you’ve got your wallet, some crypto and a blockchain game in your sights, it’s time to start your play-to-earn journey. Every game has its own rewards system, so start by deciding what strategy you’ll use to maximize your crypto rewards. It can also help to join the Discord or Telegram community to find tips and stay updated on events such as airdrops.
Risks of Crypto Gaming
Crypto gaming has a number of benefits but it also comes with some specific risks that players should be aware of. Some of the most common risks of crypto gaming are:
- Volatility
- Regulatory Risk
- Scams and Fraud
- High Transaction Fees
Volatility
Cryptocurrencies and NFTs are still highly volatile, meaning their value can fluctuate in short periods. A token or asset that is valuable today may be worth significantly less tomorrow. For example, back in 2021, the price of Axie Infinity’s in-game token SMP dropped from $0.33 to $0.08 over the course of two months.
Regulatory Risk
The legal landscape surrounding cryptocurrencies is still largely unregulated. Some governments may introduce regulations that could affect the value or legality of crypto gaming assets.
Scams and Fraud
The decentralized nature of crypto gaming is both a blessing and a curse. Users don’t need an intermediary but on the downside, there are plenty of fraudulent parties in the space. Players should always be cautious and do their due diligence before investing in any game or platform.
High Transaction Fees
Some blockchains, such as Ethereum, have gas fees that can make transactions expensive depending on network activity. Players need to be mindful of these costs when trading or transferring assets.
The Future of Crypto Gaming
Crypto gaming continues to innovate in different areas. Games have evolved over time and new mechanics and new genres keep popping up. With blockchain technology becoming more mainstream, the adoption of blockchain games might hit the main stage.
Despite the positive outlook, the industry still has a lot to improve upon when it comes to security, regulation, and volatility.
