I grew up as a semi-professional gamer and have been involved in blockchain since 2013. I started mining Bitcoin with a single graphics card, and from there, my activity grew to using a hydroelectric plant and dedicated wind turbines. In parallel with my entrepreneurial activity, I am active as the Head of Blockchain Research at the Information Systems and Networking Institute (ISIN) of the SUPSI University in Lugano.
In 2020, I decided to sell my mining activities to found a new company, Pepper, which combines my two biggest passions: blockchain and gaming. And it is precisely from gaming that I want to start.
The global gaming market generated revenues of $159.3 billion in 2020, with 2.69 billion registered gamers and a projected growth to 3.07 billion by 2023. These are undoubtedly dizzying numbers for a sector that is currently undervalued by many.
As a team of gamers pushing blockchain games, we initially thought that players did not understand the advantages of cryptocurrencies within games. Now, we believe that many of the criticisms that have emerged are valid. The sector (in general) has problems with monetization.
There are two main reasons why blockchain still struggles to enter the gaming world:
- Games are usually fun because they have nothing to do with reality, but monetization brings a piece of reality into the game.
- Most games are skill-based, requiring a certain type of skill from the player to be completed and/or win, so real money injected into the game’s ecosystem should not bring any competitive advantage to the player (Pay per Win).
The introduction of monetization mechanics that do not affect the gaming experience has always been one of the biggest challenges for video game production companies. The monetization model adopted has been stagnant for years. Almost all games include countless microtransactions, more or less necessary to keep up with other players.
50% of gaming company funds are spent on marketing and user study within the platform, while content and entertainment have taken a back seat.
As a team, we believe that the crypto world, thanks to blockchain technology, can align incentives between players and game developers. For players, we see several benefits, including:
Digital ownership: In traditional games, players purchase digital objects (such as Fortnite skins) that are actually only “rented” from the company, in this case, Epic Games. When game resources become NFTs, there is a new level of guarantee for the player. In case the game stops working, other parties can theoretically intervene to give that asset utility again, or in other cases, it could maintain validity at a collector level.
Secondary markets: Digital ownership allows players to retain the value of their in-game investments if they want to switch platforms. For example, a sword purchased in a fantasy game could be resold on a secondary market, and the value generated from the sale could be invested in buying a car in a racing game.
On-chain reputation: Players can bring their identity into any game by creating cross-chain profiles throughout the ecosystem.
Not only are there benefits for players, but also for developers:
Economic alignment: Sharing a part of the economy with players leads to a lower user acquisition cost and greater loyalty. Improvement of monetization: Opportunities to monetize players more deliberately than the free-to-play model, where, on average, less than 2% of players actually buy game items.
The ability to monetize this “long tail” of users comes from a greater willingness to spend, driven by the advantages for players mentioned in the previous section. Additionally, it is possible to capture the activity of the secondary market that previously would have been lost in peripheral gray markets.
These are just some of the benefits that users and developers can obtain from the integration of blockchain technology within games. Sooner or later, the two worlds will realize they are extremely compatible, and at that point, the evolution of the sector will be a natural process.
But the real missing piece, in my opinion, is exactly halfway between the two worlds, web2 and web3.
The user experience for those who interface with web3 games today is terrible. There are too many technicalities and steps, especially for the new generations, children of the “everything and now” culture.
Just think about how many steps are required to create a wallet (essential for every web3 operation) or the number of transactions between CEX (Centralized Exchange) and DEX (Decentralized Exchange) that a potential player would have to make before being able to obtain the game coin they want to play.
As a gamer and blockchain enthusiast, I have thought of Pepper, a definitive solution that anticipates an inevitable evolution of the gaming industry. A platform that takes care of all the most complex and tedious steps for users who actually just want to spend a few carefree hours playing.
For this very reason, I strongly believe that in order for the gaming market to move towards a more web3 direction, it is necessary to smooth the bridge between the two worlds by reducing technological friction.
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