• Why Is the Gaming Industry Fueling the Next Wave of Branded Tokens?

  • The gaming industry, which gave birth to NFTs in the form of CryptoKitties, has long been a forerunner of new forms of customer engagement and monetization.

    While NFTs are not new to gaming, their applications are maturing. Branded tokens and stablecoins are also being investigated for use in games. This will have a significant impact on gaming and related industries ranging from consumer brands to sports, eSports, and entertainment.

    Games demonstrate the drawbacks and benefits of cryptocurrency.

    Games allow players to explore and even create their own virtual worlds. Players can create avatars, collect rewards and treasures, and do other things from within the game. In some ways, playing a game is similar to living a virtual life. However, there are limits to how closely that life reflects the real world, particularly in terms of a game’s economics.

    A gamer who puts time and money into a virtual world is at the mercy of the game’s operators. In general, anything invested in a game other than the pleasure of playing benefits the game creators but disappears as a sunk cost when the player stops playing. Cryptocurrency has the potential to change that.

    Non-fungible tokens (NFTs) aid in the codification of a player’s relationship with a game. Gamers can establish custody of a digital object using NFTs via a tamper-proof online registry. They can then use an exchange or auction house to trade or sell digital objects.

    ryptoKitties makes a compelling case for understanding how this works in an ecosystem dominated by and driven by NFTs. When there are other components in the game, NFT dynamics can become complicated – consider the failure of Blizzard’s Diablo 3 auction house.

    Branded tokens and stablecoins bring a new element to the gaming ecosystem, helping to connect and stabilize the tokenomics of a system with or without NFTs. Stable cryptocurrency, in particular, provides players with a medium through which they can transition from game economics to real-world economics – or “seamless, borderless payments for a global network of participants,” as Tatiana Koffman put it in a recent Forbes piece.

    Game developers benefit by attracting gamers with new gaming features and benefits. Gamers benefit from a system that can reward their participation in the virtual world with real-world financial gain.

    While the gaming industry is worth hundreds of billions of dollars worldwide and is expected to exceed $314 billion by 2026, it is a decidedly niche and complex market, made even more so by the introduction of tokenomics.

    So, why should anyone be concerned? Because the manner in which games tokenize their infrastructure will determine how consumer-facing brands gamify their consumer engagement. In short, games will be played with cryptocurrency, and the creators of social apps, celebrities, athletes, artists, and other near-game industries, such as sports and eSports, will be inspired by the winning innovations.

    Other industries that could benefit from tokenized gamification

    In contrast to Bitcoin and other cryptocurrencies, NFTs can have a graphical user interface or front end, making them highly relatable to average consumers.

    Furthermore, their singularity can inspire new forms of engagement, as in the case of “The Fungible,” an open edition piece sold in collaboration with Pak. More excitingly, NFTs will aid in the connection of the digital and physical worlds of art, music, service, and more.

    In the world of music, NFTs will give power to musicians who have traditionally been at the mercy of producers. By issuing NFTs linked to digital music files, musicians can sell these files and connect directly with their fans without the use of intermediary platforms such as Spotify and iTunes.

    A single superfan can catapult an artist’s career. Artists will have a better chance of monetizing their work, making music more accessible and diverse.

    Consider tokenizing a sports contract. That is also happening. Spencer Dinwiddie, an NBA player, announced last year his intention to launch a digital token associated with his contract. Some of the more speculative aspects of the project were rejected by the NBA. Dinwiddie was eventually successful in selling his securities-backed SD8 tokens.

    The athlete sees this as a way for athletes to use their talent to create debt instruments and, as a result, more financial freedom. Freedom stems from the athlete’s ability to bypass an intermediary – in this case, a sports league – and connect directly with fans, as it does in the music industry.

    NFTs have gained popularity among hobbyists, creatives, athletes, and even charities. David Datuna, best known for eating a $120,000 banana at Art Basel 2019, collaborated with Dole on an NFT-powered campaign to raise funds and awareness for hunger.

    What role do NFTs play? The artist and corporate partner Dole believe that the digital tokens will help generate awareness of the critical need to address food insecurity.

    Branded stablecoins, like NFTs, have the potential to propel cryptocurrency beyond the realms of developers, economists, and traders and into the hands of the general public. Companies in the United States generate over $50 billion in reward points each year, with consumers wasting one-third of them.

    The promise of cryptocurrency is that it will make rewards look and behave more like money. The more straightforward and transparent a rewards system, the more likely it is to attract and reward loyal customers.

    The customer benefit is a reward that can be easily used within a specific brand ecosystem or ported to another, sold on an exchange, or leveraged in some way to gain interest. In other words, stablecoins increase the liquidity and fungibility of brand rewards programs.

    From gaming to retail, art, entertainment, and everything in between

    The gaming industry created the original NFT, but adoption remains a challenge.

    To begin, developers must consider building NFTs on infrastructure that ensures accessibility and liquidity, which means low transaction costs and the ability to handle large transactions without negatively impacting the network.

    Second, to ensure interoperability between games, the gaming industry, and other markets, games will require a backing platform and payments network native to the ecosystem that can operate across cash, crypto, NFTs, and branded stablecoins.

    All of this will take a lot of trial and error, as well as a lot of money. The end result will be well worth it, reaching far beyond the niche – albeit thriving – gaming market.

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