The global video game market topped INR 15 trillion in 2021. As more gamers across the globe become fully engrossed in online gaming worlds, it stands to reason that cryptocurrency will play a bigger role.
A handful of games already integrate crypto directly into their game economies.
“Play to Earn” or P2E, games reward players by paying them in cryptocurrency or digital tokens based on how much they achieve or play the games.
By earning cryptocurrencies, players can profit from their skills or enthusiasm for gaming. But before players take the plunge, it’s good to understand the pros and cons of crypto gambling.
What is cryptogaming
While virtual video game money is not a new concept, the use of blockchain technology has created opportunities for crypto game developers to add an element of real economy to their games.
Crypto players can earn non-fungible tokens (NFT) or cryptocurrency by playing and winning a game, and these digital assets then become the player’s property.
In many cases, in-game digital tokens can be exchanged for stablecoins on either centralized or decentralized cryptocurrency exchanges. These digital assets can be sold or traded on online marketplaces or directly converted into fiat currency.
How crypto games work
There are a number of different business models in crypto gaming.
P2E games offer users different ways to earn or buy game tokens, said Adrian Krion, founder and CEO of blockchain gaming platform Spielworks.
“People can monetize these tokens by buying them early and [hoping] too many players to enter the game after they bought the tokens, says Krion.
Some crypto games make money via advertising or selling in-game items, such as certain weapons, skins or even virtual lands.
The developers then encourage players to devote more hours to the game by paying them in crypto or NFTs to complete missions. These quests are usually simple tasks that involve interacting with the game in some way, such as killing a certain number of enemies or collecting a certain amount of resources.
Other crypto gaming platforms offer ways for crypto investors to gamble their currency on casino games and other games of chance.
BitStarz, 7bitcasino and mBitcasino are among the three most popular cryptogambling platforms.
Top Game Tokens
The global gaming token market is worth more than INR 1 trillion, according to data collected by CoinMarketCap.
These tokens may only be useful in a specific game or gaming ecosystem, but the top tokens also have significant value in the real world. Here are the top three by market value:
ApeCoin (APE)
ApeCoin (APE) is the most valuable gaming token, with a market cap of INR 177 billion.
ApeCoin is the initial coin of the Bored Ape Yacht Club, a collection of non-fungible tokens built on the Ethereum (ETH) blockchain. Third-party developers have incorporated ApeCoin into their games. For example, players of the P2E mobile game Benji Bananas earn special tokens they can easily exchange for ApeCoin.
Decentralized Land (MANA)
Decentraland (MANA) is the original token for Decentraland, a virtual world built on the Ethereum (ETH) blockchain. Users can buy and sell digital real estate, interact with other users and even play games in Decentraland.
Players use MANA to purchase Decentraland NFTs that define virtual land parcels or exchange them for other in-game goods and services.
MANA’s market cap is more than INR 143 billion.
Sandbox (SAND)
The sandbox is another metaverse, or digital world, that runs on the Ethereum blockchain. Sandbox (SAND) tokens facilitate various game transactions, including the purchase of plots of digital land called LAND.
SAND has a market capitalization of around INR 127 billion.
How to make money with crypto games
Crypto players can think of in-game rewards as small paychecks they receive for completing missions or other requirements.
Harry Turner, former hedge fund manager and founder of The Sovereign Investor, says in-game items such as weapons, armor, skins and other equipment can have enormous value in the real world.
“By completing missions and collecting NFTs, investors can generate a profit through the sale of these items,” says Turner.
DMarket is just one example of an online marketplace for NFTs and other in-game virtual items, many selling for millions of dollars.
Zain Jaffer, founder and CEO of Zain Ventures, says that like investors who buy stocks, crypto players who invest early in a successful game are likely to be the biggest winners.
In 2001, RuneScape players received digital party hats for free as part of the game’s Christmas promotion. Twenty years later, Jaffer says these party hats are now worth billions of in-game gold. The most sought-after color of the party hat was sold for 57 billion gold pieces (close to INR 5 lakh), according to Runescape.
“It will not be surprising if history repeats itself and early investors in crypto gaming platforms and currencies will be the ones to reap the new real rewards,” says Jaffer.
Crypto gambling risk
Unfortunately for crypto players, there are many risks associated with crypto games and tokens at this stage.
A major risk for crypto game tokens is that they are subject to supply and demand dynamics related to the game’s popularity. When players leave a game, demand for an in-game currency can dry up completely, rendering tokens worthless.
“Because these games are very new and their persistence has not yet been proven, there is no guarantee that their assets will remain valuable over long periods of time,” says Jaffer.
Turner says there are also significant risks associated with keeping currency in the game.
“The volatility of the market can directly affect the value of your in-game assets. For example, if you are holding a stockpile of Aurum (the in-game currency of Crypto Raiders) that you plan to use to purchase virtual items, the value can drop dramatically overnight and give you far less purchasing power than you had before, says Turner.
Because cryptocurrency is relatively new and not well regulated, criminals are always looking to take advantage of crypto players via hacks and scams. Just because a game’s underlying blockchain is secure doesn’t mean the engine or marketplace is secure. Digital wallets that store crypto game tokens can also be hacked or abused.
Earlier this year, hackers stole INR 49 billion in Ethereum and USD Coin (USDC) from users of the crypto game Axie Infinity. Axie Infinity is one of the most popular crypto games and had a peak monthly active user base of more than 2.7 million players before the hack. In June, Axie Infinity developer Sky Mavis said it would only refund about a third of the crypto users lost in the hack.
Axie Infinity is considered the most popular game for making money.
