What are Blockchain Games?

Blockchain gaming has popped in the last couple years, bolstered by the crypto craze and the stuck-at-home pandemic effects. According to the latest BGA Blockchain Game Report from analytics site DappRadar, a wave of 804,000 unique active players connected to blockchain-based games in July 2021. The uprise shows that the gaming sector is expanding its network of users globally and blockchain gaming is becoming a recognized industry. So, what's Blockchain gaming?

To understand Blockchain games, one must understand blockchain technology, the one that powers Bitcoin and other cryptocurrencies. This technology is at the heart of blockchain gaming.

What is Blockchain?

Source: Invesco

According to investment management company Invesco, a ‘blockchain’ is simply a ledger, or a complete record. The technology allows electronic recordkeeping of the transfer of currency, information, or assets, between multiple participants. This collection of records represents an unalterable, single version of truth, removing the need for a central authority for reconciliation.

Blockchain for Dummies version

The non-technical and simplest way to explain is coined by Tim Kulp, director of emerging technology at Mind Over Machines. He came up with the "school lunch" explanation which any K12 student can understand, and it goes like:

“Imagine a school lunch table with a bunch of kids sitting at it. Two kids want to trade lunches. Kid A says: ‘I’ll trade you lunch if you have a cookie’ to Kid B. Kid B states that he does have a cookie and the two-trade lunch. As the kids trade lunches, the Principal comes over and asks: ‘What’s going on here?’ At which point all the kids at the table speak up and say Kid A traded lunch with Kid B.

In this story, Kid A and B are ‘participants,’ also known as actors, in the blockchain. Lunch is the asset. The lunch trade is the transaction. Whether Kid A’s lunch contains a cookie is a smart contract. Finally, the Principal’s review is the validation of the transaction.

How do Blockchain Games work?

Now that we've spoon-fed you the blockchain explanation, it's time to talk about how Blockchain games work. As most people know, gaming is a centralized activity with everything developed from game skins, in-game currency, and assets confined to the game itself. As a result, game developers retain ownership of everything, and nobody can create an alternative version of the game, unless authorized.

In a blockchain game however, most of the core logic and data are governed by smart contracts (programs stored on a blockchain, that run when predetermined conditions are met), and that can be analyzed and reused. And because all blockchain transactions are immutable, the ownership of assets is unquestionable and there's no risk of duplicating assets. An asset earned in a blockchain game is securely transferred to the user's digital wallet via the smart contract, so you know they own it outright.

Players or users can choose to trade or sell their assets (e.g., a cool sword used in the game). It also has intrinsic value outside of the game and will exist similarly to cryptos in user's wallet even if the game itself shuts down. In some cases, assets could even be used in other games, as blockchain games have the potential to interact with each other.

Finally, many blockchain games’ assets are non-fungible tokens, or NFT’s. This means some tokens are guaranteed to be rarer and more valuable than others, creating an active marketplace. These NFTs can be sold for hundreds, thousands or even millions of dollars.

How to play Blockchain Games

There are loads of blockchain and crypto/NFT games available from collectables or role-playing to casinos. If you're interested in playing, check out the DappRadar's large list of available blockchain games. In most cases, players need a blockchain wallet, which is digital wallet that allows users to store and manage their Bitcoin, Ether, and other cryptocurrencies.

How you can invest in Blockchain Gaming

There's no pure-play publicly listed blockchain gaming companies since most of them are still private start-ups. However, there are many blockchain companies to invest in, mostly involved in digital asset mining, blockchain & digital asset transactions, blockchain applications, blockchain & digital asset hardware, and blockchain & digital asset integration.

The best way to get a diversified exposure is through exchange-traded-funds (ETFs).

There are multiple blockchain related ETFs in the market investors can look at:

• Invesco Elwood Global Blockchain UCITS ETF (BCHN)
• Global X Blockchain ETF (BKCH)
• Harvest Blockchain Technologies ETF (HBLK)
• Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF
• Amplify Transformational Data Sharing ETF
• Invesco Alerian Galaxy Crypto Economy ETF
• First Trust Indxx Innovative Transaction and Process ETF
• Capital Link NextGen Protocol ETF (KOIN)
• ETFS Fintech & Blockchain ETF
• Siren Nasdaq NexGen Economy ETF (BLCN)

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