Three Innovative Ways Player-Powered Decentralized NFT Games Are Revolutionizing the Gaming Industry
From in-game earnings to democratic game design, Illuvium and other decentralized gaming platforms are changing the very fundamentals of online multiplayer games. Here we discuss three innovations through which this new breed of games is changing gaming industry dynamics.
Blockchains, Decentralization, and the Gaming Revolution
The unprecedented success of blockchain-based decentralization has brought security, autonomy, low costs, transparency, and tamper-resistance to a wide range of solutions and applications. From decentralized finance (DeFi), healthcare, and governance, to education, entertainment, and manufacturing, blockchain and decentralization have changed the way the world works.
The same can be said of the decentralized gaming space, a rapidly growing market that is changing publisher-player dynamics, game earnings, revenue generation, democratized game decision-making, and more.
To understand the implications of these changes we can look at Illuvium, an open-world RPG built on the Ethereum blockchain. Illuvium’s unique governance model, tokenomics, incentivization structure, and gaming protocols are empowering players, unlocking untapped potential and changing the entire online gaming landscape.
Here are three noteworthy developments that centralized game development studios and players alike should watch out for.
To understand how groundbreaking decentralized gaming platforms are, we need to understand the basic revenue fundamentals of centralized gaming platforms. On these platforms all game-related proceeds – from the initial purchase price of the game to in-game purchases of all sorts – go to the owner of the game. Decentralized games, however, have flipped the paradigm to create democratic player-focused games that shift this balance of power.
With Illuvium, for example, game economics is set up so that 90% of funds coming from all game-related purchases go back to the players. One of the biggest obstacles to in-app or in-game purchases is that such purchases tend to be sunk costs and involve a one-directional flow of funds. In other words, once a purchase is made, the funds go to the game owner alone, and the items or powerups purchased typically cannot be used for anything other than the initial purpose for which they were purchased. Tokens, coins, diamonds, or other in-game items, once used, have been consumed. Even with other types of in-game purchases, if they cannot be traded, they represent sunk costs to the purchaser.
While traditional game developers may shun the idea of keeping only 10% of game revenues and redistributing 90% to the players, they would do well to realize how much more willing players would be to spend on games if they knew they could recover funds/resell items after-the-fact. 10% of a much larger pie will – we believe – eventually dwarf revenues that can be generated by sticking to centralized models.
Such lucrative income streams can suffice the average gamer as a source of livelihood, and as games and ecosystems become more and more detailed, intertwined and mature, we expect many new income, trade, and investment synergies to open up for players in this space.
Empowerment of True Ownership
The second revolutionary new change that decentralization is bringing to online gaming is the concept of true ownership of game items, whether tokens, collectibles, or NFTs.
In most games, players do not truly own the items that they purchase, find, or unlock in-game. For example, if you purchase gems in a game, you can only use them for specific purposes, but you cannot trade them with other players, nor can you sell them outside the game for fiat or crypto income. Furthermore, the game owner can unilaterally remove those in-game items from your inventory. This does not reflect true ownership.
Because of this, it is no surprise that black markets have sprung up in which players attempt to game the system by doing exactly what centralized game owners try to prevent, i.e. trade with other players and sell their game items wherever they can.
With decentralized games such as Illuvium, players own their in-game items the same way they own tokens or assets in wallets that they control. Those items can be sold and traded in-game and/or on third-party exchanges. This does away with illicit activity and can even lower operational costs by obviating supervisory/fraud-prevention expenses.
The interesting thing here is that centralized game developers disallow true ownership of game items to maintain control over the earning potential of those items. However, they overlook the fact that by providing players with true ownership over their own game assets, players are more likely to spend more on games rather than avoid the sunk cost of making a one-off in-game purchase in a centralized game in which the purchased item has very limited utility and cannot be used elsewhere, traded, or redeemed for crypto or fiat.
Decentralized games such as Illuvium take things even a step further by combining true ownership with functionalities not seen with the typical in-game item or collectible. We discuss functionality next.
Functional NFTs, Items, and Collectibles
New technologies typically embark on a predictable trajectory between inception and mass adoption. During this time, as the technology and markets for it develop, people innovate and the entire ecosystem grows. For example, DeFi investments, layer-2 blockchains, off-chain oracles, and similar developments were only possible once the groundwork of developing highly performant blockchains was achieved.
In gaming, the trajectory we see has been from the creation of decentralized blockchains to the creation of unique, collectible, and tradable items and NFTs. Games that are built in this manner around tradable assets that are owned by players means players must be incentivized to not just collect something and sit on those items hoping that they appreciate in value; rather, those same items have intrinsic functions and can be utilized in different ways to earn even more, such as by staking tokens in liquidity pools or trading unique items on exchanges or selling them for crypto or fiat.
By adding these functionalities to game items, game developers can create entirely new ecosystems where players, publishers, gaming partners, exchange platforms, aggregators, liquidity pools, and other participants can come together to grow the ecosystem and add new services that add further depth and value to the space as a whole.
We are still in the early innings of the decentralized gaming space, but change is occurring at a rapid pace. While decentralized games still only represent a small fraction of the overall value of the gaming industry, the value propositions of player-centric, blockchain-powered games such as Illuvium are undisputable. While the world clamors for change (for example, in finance via DeFi), for transparency and democracy, and against censorship and centralization, the moment is now to seize the opportunity for people to regain their independence and generate new, self-owned and controlled income streams via groundbreaking games such as Illuvium and others.
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