In the 10 years since the iPhone was introduced the computer and video gaming industry has been shifting from stand-alone offline platforms (consoles and PCs) to a $multi-billion online industry with a host of new benefits and possibilities. Mass direct connectivity has disrupted yet another market.

Research released earlier this year shows mobile gaming (on smartphones and tablets) is now the largest market segment, accounting for 42% of the total global market and worth an estimated $46.1bn. Mobile gaming is expected to have a 50% share by 2020.

Global Games Market By Segment
How Digital Tokens and ICOs Work for Video Gamers
Source: Newzoo Global Games Market Report 2017

Benefits of online gaming for game enthusiasts include opportunities to compete against other players. Tournaments have also drawn back in as spectators plenty of former players who can no longer invest sufficient time to excel personally. For game creators, they can connect directly with gamers rather than rely on expensive intermediaries, which is particularly good news for smaller publishers and independent game developers.

As a business model, game companies rely almost entirely on direct consumer spending, rather than an advertising-based model used by many digital or broadcast media companies. In addition to the initial game purchase, players buy advantages such as superior weaponry or access to exclusive content that gives them an edge over other players. Natural ability ultimately hits a ceiling, and serious players can spend considerable sums of money amassing virtual goods to be competitive at the top level.

How Digital Tokens and ICOs Work for Video GamersAn example of this is Chronicles of Elyria, the highest earning game crowdfunded on Kickstarter when 10,752 backers had pledged $1.36m by June 6 2017. It was created by Soulbound Studios based in Bellevue, Washington. In addition to enhanced weaponry and other accessories, or accelerating progress by starting the game at a superior level, the biggest backers were able to name locations and characters in the game which made them co-creators in the process.

This income was achieved via cash-only pledges through the Kickstarter platform, though a significant online benefit for game developers is to move away from a direct cash-purchase system to the creation of game-specific tokens. Purchasing tokens can be incentivized with savings against ‘retail prices’ when they are later used, thus encouraging gamers to invest larger sums in advance, boosting the early income stream for the developers. Game developers may also choose to award tokens as prizes to expand the token user base, and a strictly finite supply of tokens for any game also drives demand through FOMO – fear of missing out.

Tokens can usually be purchased with cash or cryptocurrencies including bitcoin and ether. The game tokens can be stored alongside the cryptocurrencies in crypto-wallets until they are required. The same underpinning blockchain technology ensures the tokens cannot be used fraudulently or duplicated, and keeps transaction costs to a minimum.

How Digital Tokens and ICOs Work for Video GamersAge of Rust, a futuristic game of intergalactic warfare and rogue artificial intelligence developed by Space Pirate Games, uses Rustbit tokens as a means for players to enhance their performance. In addition to setting a fixed limit of 100 million Rustbits they were sold at an escalating price equivalent to 100,000 tokens for the value of a bitcoin in week 1 to 50,000 tokens pegged to the value of a bitcoin by Week 5.

The emergence of this market has attracted entrepreneurial fintech innovators. Rustbits were created for SP Games by Counterparty. Counterparty-generated tokens can be used for a wide range of purposes and act as their own cryptocurrency, while still running on the Bitcoin blockchain. In effect, game developers are thus releasing their own ICOs – Initial Coin Offerings.

Other providers in this market include GameCredits Inc whose ambitious mission is to create and provide game developers with GameCredits that become a globally-recognized universal currency of the entire gaming world, and thus inter-changeable from one game to another. TokenMarket operates on a wider scale with any blockchain-based business or organization that wants to raise funds for projects through a token or ICO crowdsale.

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