Blockchain games too complicated for you? If you're looking for an article that provides a simple explanation, you've come to the right place.

This article will focus on mobile games and here's a summary of the content:

Blockchain and blockchain games

1. Common terms in blockchain games
2. The birth of blockchain games
3. Players of blockchain games
4. The current state of mobile blockchain games
5. Let's get started.

1. Blockchain and blockchain games

What is blockchain?

Before diving into blockchain games, it's important to understand the concept of blockchain. By definition, blockchain is a decentralized collection of data blocks managed by a global computer network. These data blocks are linked to each other using cryptography. With the help of cryptography, they can record information, usually transactional information. Once information is recorded, it cannot be edited or deleted. Additionally, the transaction history of the network is publicly visible. You can think of blockchain as a network-based public notary.

Due to its association with cryptocurrencies, blockchain has become a well-known term. Today, it seems like everyone is investing in cryptocurrencies. Cryptocurrencies are digital currencies created within the blockchain technology. The primary role of blockchain is to track their value fluctuations. With blockchain, everyone knows the ups and downs of cryptocurrencies like Bitcoin and Ethereum.

What are blockchain games?

Blockchain has created new opportunities for virtual economies, including gaming economies. In blockchain games, it serves as another monetization avenue within the game. Unlike traditional centralized games, blockchain games are decentralized. The assets of blockchain games are not stored on centrally controlled servers but are distributed among the players. These assets have their value and are based on blockchain technology. The two most common blockchain elements in these games are cryptocurrencies and non-fungible tokens (NFTs).

How do blockchain games work? Cryptocurrencies and NFTs

Many games based on blockchain are referred to as "something-crypto" or "something-bitcoin" games. The main selling point of these games is the possibility of earning cryptocurrencies. In blockchain games, cryptocurrencies are used for in-game transactions. Players own in-game assets that can be exchanged for cryptocurrencies and real-world currencies.

NFTs might be a bit harder to grasp. Non-fungible tokens are unique data units stored on the blockchain. The term "non-fungible" means they are one-of-a-kind and cannot be replaced. For example, Bitcoin and a dollar bill are fungible. You can exchange one dollar for another with someone else, and you both have something of equal value.

However, when it comes to trading NFTs, it's different because they have different values. NFTs can take various forms such as digital images, music, cards, skins, and more. They represent ownership of any type of digital asset. In blockchain games, players can earn or purchase NFTs. Once they do, the asset belongs to them completely and has its in-game value. From the moment they earn NFT rewards, players have full ownership of those assets. NFT assets have value not only within the game but also in external markets, where they can be traded or sold.

2. Common Terminology in Blockchain Gaming

To truly understand blockchain gaming, it is important to familiarize yourself with the associated terminology and concepts. Here are some common terms:

Play-to-Earn Games

As the name suggests, play-to-earn games allow players to earn rewards by playing the game. Prior to the blockchain era, these rewards were primarily in the form of money and sponsorship packages. Today, when someone refers to play-to-earn games, they are likely talking about blockchain-based games.

For example, in NFT-based games, players can earn various in-game assets. These can be skins, weapons, currencies, or other content specific to the game. These assets are the rewards for players' gameplay and participation. These assets have their own value, and players decide how to handle them.

On the other hand, crypto-based games offer small amounts of cryptocurrency as rewards for playing. The process of earning money in these games is often slow and gradual but can be truly realized. Some players take play-to-earn games very seriously, considering them as important sources of income. These games are particularly popular in developing countries, where players see them as a means to meet daily needs, pay bills, and debts.

A mother of three children from the Philippines commented to CNBC about such a game, saying, "It's important to have money so we can eat, avoid debts, and get through each day. It (referring to the game) fulfills our daily needs, pays our bills, and debts."

Pay-to-Earn Games

In pay-to-earn games, players need to purchase in-game assets upfront. This concept largely applies to NFT-based games. However, this only covers the "pay" aspect of the term. The earning potential in these games lies in the value of the in-game assets that players purchase. In fact, the value of these assets can appreciate over time. Players have the agency to make strategic decisions to maximize their benefits from these assets. They can continue playing the game and upgrading the assets to increase their value or dispose of them early. If they wish, they can transfer the assets outside the game and sell them to others, without the knowledge of the game developers.

GameFi

The term GameFi is a combination of "Game" and "Decentralized Finance" (DeFi). Essentially, it describes the intersection of these two domains. It refers to the gamification of finance on blockchain networks. Decentralized finance, also known as DeFi, encompasses various financial services conducted on the blockchain. Popular cryptocurrency applications like Coinbase or Crypto.com are often referred to as DeFi applications. GameFi, on the other hand, describes various types of games that allow players to earn profits through gameplay, including both pay-to-earn and play-to-earn games.

Metaverse Games

Recently, the term metaverse has gained increasing attention, especially since Facebook rebranded itself as Meta. Simply put, the metaverse is a name for a digital space where people can connect across various domains. This space includes digital services, augmented reality, virtual reality, games, videos, and more. Essentially, the metaverse promises to tightly integrate people's digital and physical lives. Some argue that anything based on blockchain technology belongs to the metaverse, including blockchain games. In fact, certain media outlets refer to these games as "metaverse games."

3. The Birth of Blockchain Games

It All Started with CryptoKitties

In 2017, this online game completely changed the gaming industry. CryptoKitties was the first widely recognized blockchain game. In this game, players could own, breed, and trade cats, which were the only assets in the game. It belonged to the play-to-earn category. To join the game, players first needed to purchase Ethereum cryptocurrency. Once they had this currency, players could buy a virtual pet, which was essentially an NFT. These pets could compete with bids from other players in virtual auctions.

Each pet had its own unique ID and different DNA attributes. Each pet was 100% unique and 100% owned by the player who possessed it. To increase the value of the pets, players could breed them with other pets. This would create new offspring with mixed DNA and brand-new NFTs. The rarer their attributes, the more valuable they became. Essentially, these virtual cats were just static images that could be bought, bred, and sold. The game itself had no other objectives. During the game's popularity, some NFTs skyrocketed in value. In fact, one cat was sold for $172,000 (Cnet). This game became headline news due to that transaction.

Axie Infinity Takes the Lead

Axie Infinity is another game that involves digital pets. This online game was launched in 2018 and became one of the most popular blockchain games ever. Let's understand how it works. This game is composed of Axies, which are digital pets. Players can collect, breed, trade the pets, and use them for battles in the game. Many describe this game as the "blockchain version of Pokémon," but the main difference between these two games is that Axie Infinity is a play-to-earn game. Axies are actually unique digital items (NFTs) stored on the game's own blockchain.

To start playing the game, players need to purchase at least three Axies. They can buy them on the game's marketplace. For this, players need to have some Ethereum cryptocurrency in their digital wallets. The game includes two types of tokens: AXS (Axie Infinity Shards) and SLP (Smooth Love Potion). Consider them as two in-game currencies.

AXS serves as a governance token. Players who own it can vote for changes within the game. This appeals to players who desire power and in-game democracy. On the other hand, SLP functions like a hard currency. Players can earn it by completing challenges or battles. This currency has its own value and can be sold to other players. Additionally, players can use it for breeding and upgrading their Axies. Essentially, players can sell three types of assets from this game: SLP, AXS, or Axie. By doing so, they can earn varying amounts of cryptocurrency.

However, Axie Infinity experienced a decline in popularity in 2022, losing up to 40% of its user base since the first quarter of 2022. This was due to the Ronin hack and the devaluation of SLP. However, despite reaching its lowest point in May 2022, Unique Active Wallets (UAW) began to grow again since June 2022 (DappRadar).

Here are the top blockchain games in the second quarter of 2022 based on daily average Unique Active Wallets (UAW) statistics (source: DappRadar):

• Splinterlands (283,000)
• Alien Worlds (188,000)
• Farmers World (124,000)
• Upland (45,000)
• Axie Infinity (33,000)
• Second Life (30,000)
• Gameta (19,000)
• MOBOX: NFT Farmer (19,000)
• MiningNetwork (16,000)
• Pegaxy (16,000)

4. Blockchain Game Players

How do players perceive blockchain games and their concepts?

In a study conducted by Newzoo and Crypto.com, 4,569 individuals from the major blockchain gaming markets of the United States, United Kingdom, and Indonesia were surveyed. Here are some of the research findings that we can read and refer to:

13% of the respondents have played blockchain games before, while 5% are currently playing. 40% have an interest in playing blockchain games, and 22% of the respondents are not interested in playing blockchain games. Others are either confused about the prospects of blockchain games or have never heard of them. From the perspective of all players, the gender ratio is fairly balanced. However, blockchain game players tend to be more male-oriented (60% male, 40% female). The majority of blockchain game players belong to the millennial and Generation Z demographic, with a moderate to high income level. The game genres most likely to be played by blockchain game players are adventure, fighting, shooting, battle royale, and arcade. The main reasons why blockchain game players spend money in the games are to unlock additional content, level up characters, personalize their avatars, gain advantages, receive special offers, invest, and accelerate progress. The primary reasons why blockchain game players do not spend money in games are high prices of content, the game being entertaining enough without additional content, the ability to earn items through effort, the investment requirement being too early, uncertainty about how long they will play, lack of bundled offers, and a lack of customization options. The reasons why blockchain game players play blockchain games include earning some extra money on the side (34%), increasing their crypto assets (30%), building NFT collections (24%), enjoyment (23%), exploring virtual worlds (20%), making a living through hobbies (17%), collecting items (15%), customizing characters (15%), and socializing (13%). It is evident that blockchain game players are mostly from the younger generation. In terms of player mindset, blockchain game players not only enjoy the games but also aim to profit from them. Most players do not have a complete understanding of the world of blockchain games but hold curiosity and interest in them.

5. Current Status of Mobile Blockchain Games

Blockchain games have been around for several years, and to a large extent, successful blockchain games have primarily been online games. You might wonder, "Why haven't mobile games taken the lead? Aren't they more popular than online games?" This is a valid question. In fact, there are many mobile blockchain games. However, so far, there hasn't been a breakthrough mobile game that can firmly hold the throne.

What are the reasons?

These games have not successfully addressed the major challenges faced by blockchain mobile games. Some of these challenges include scalability and speed. Therefore, major mobile game developers are striving to develop high-quality infrastructure before entering this industry. Let's take a look at how blockchain operates in current mobile games.

Blockchain and the Mobile Game Economy

All mobile game developers share a common goal - creating a profitable in-game economy. Nowadays, these economies rely on in-app purchases to drive revenue. If players want to access premium content or progress faster, they can use real currency to purchase in-game items. They can directly buy these assets or use another asset called in-game currency.

In blockchain mobile games, all in-game assets are "tokenized." You can think of them as actual tangible tokens that used to represent currency. They exist within the game, players own them, and they are stored in their wallets. These tokens are based on a blockchain network, which gives them their own value beyond just the value of traditional in-game currency. This leaves developers with a lot of design choices. Some games may have only one type of token, while others may have multiple, and so on. In the traditional mobile game economy, players don't actually own anything. They only have the opportunity to rent some items from the studio. However, in the concept of blockchain games, players own in-game assets, which changes the power dynamics.

In-App Purchases vs Cryptocurrency-Based Mobile Games

Whenever a mobile game player makes an in-app purchase, the app store takes a portion of the profits. This means developers lose 15% or 30% of each transaction. More and more developers are looking for ways to bypass this issue. For example, they release their games on new app stores that charge lower commissions.

In cryptocurrency-based games, this problem doesn't exist. Since cryptocurrency is the payment method, there's no need for Google or Apple to process the transactions. We haven't seen how app stores will handle this issue yet. However, another middleman will take a share from the developer's revenue - the blockchain platform. How much they will take remains to be seen and will be revealed when the platform is launched.

Running Blockchain Games on Mobile Devices

Starting to play a blockchain mobile game is a rather complex process. In addition to downloading a blockchain game, players also need to install a mobile blockchain wallet. In the wallet, they can store all their owned digital assets. Currently, players have to download these wallets through the app store. This is a deterrent for mobile game players as it involves too many hassles. They are accustomed to having everything centralized in one place, and they expect the same for blockchain games.

Conclusion

We have presented the basic concept and current development status of "blockchain games" from a historical, market, and player perspective. The market model for blockchain games is not yet fully mature and it presents some challenges in attracting new video game players. However, with increasing investments in the blockchain gaming industry, the involvement of more talented individuals, and the passage of time, we believe blockchain games can find sustainable business models. The future development of the blockchain gaming world remains to be seen, and we eagerly await its progress.