The global games industry is $138Bn by revenue and has grown $67Bn in the last five years, driven by the explosion of mobile gaming. Hence, today blockchain-based games are a small but growing piece of the global gaming industry. Video Game Addressable Market \tThe global games industry is $138Bn by revenue \tThe industry has grown $67Bn in the last five years, driven by the explosion of mobile gaming \t~$5Bn in total transactions1 were processed on the Ethereum, EOS and TRON blockchains in 2018 \tHence, today blockchain-based games are a small but growing piece of the global gaming industry Blockchain-Based Gaming Rationale Smart Contracts for Fair Gameplay \tToday most gaming software (the graphics, the gameplay and the currency) is all proprietary \tEverything is controlled by operators, which puts players at the whim of changes by game developers and publishers \tWith blockchain-based games, developers can program open-source smart contracts to determine payout functions, ensuring fairness in gameplay Fungible Tokens as Currency \tBlockchain-based games can use cryptocurrencies (fungible tokens) as a cross-platform payment mechanism \tMany existing games have their own in-game currency. Unless they are cryptocurrencies, their value is not transferable to other games \tCryptocurrencies as a payment mechanism are the only way that smart contracts can process and issue digital assets Non-Fungible Tokens for Digital Assets \tA non-fungible token (NFT) can be used to uniquely identify an asset in a game (i.e. a rare sword won from a particular boss or a gamer’s reputation) \tIf many different games use the same NFT standard for in-game assets, creations will have resale value outside of their game and be traded in marketplaces Blockchain and Video Gaming Have an Interconnected History It’s arguable that digital assets in video games led to the emergence of cryptocurrency World of Warcraft Gold \tWorld of Warcraft has an in-game currency (which was uncommon at the time) called World of Warcraft Gold \tThe process was simple: purchase the gold with fiat currency and then use it to buy things in the game. Certain items that could be stolen from some of the toughest bosses became extremely valuable \tGiven the popularity of WoW, this marked the emergence of digital assets with real value at scale Digital Asset Farmers \tGamers who recognized the emergence of digital assets with real value began “farming” these rare items and selling them for a premium at a later date \tThis is seen by many as the predecessor to crypto mining \tBrock Pierce, Jonathan Yantis and Steve Bannon (then of Goldman Sachs) joined forces at Internet Gaming Entertainment (IGE), entered around this concept WoW Gold vs. Crypto \tWoW gamers became comfortable with these online transactions, digital markets, & converting their digital money back into fiat \tThe difference between WoW Gold and Bitcoin is that the Gold is centrally owned and possessed by developers, while Bitcoin is owned/possessed by players in their digital wallets \tThe central ownership of Gold allowed developers to halt transactions and ban users from “misbehaving” The Blockchain Gaming Stack Two Types of Blockchain Games Today Roleplay or Collectibles \tMost blockchain-based games in the market today are either roleplay games or digital collectible games \tRoleplaying games are essentially dynamic digital collectible games, where items in the storylines develop tradeable value Gambling \tBlockchain gambling dApps have become the easiest onramp to gambling for users, as most blockchain gambling sites are not licensed \tCryptocurrency, decentralization, and smart contract integration helps to bring transparency to payout models in online gambling and solves many of the industry’s fundamental pitfalls Digital Collectibles Have Proven, Real-World Value How much would a fan pay to own an original character of Fornite legend Ninja after he retires? \tIf blockchain can prove players truly own certain assets, the gaming community is passionate enough that they would pay substantial amounts for certain items \tThe limited number of games that have integrated blockchain have proven this to be true How to Access Blockchain-Based Video Games For now, all blockchain-based video games are PC and mobile based. Players are connected through hot wallets Blockchain Game Analytics DappRadar is the main analytics platform and ranking engine for blockchain dApps that tracks number of users, number of transactions and transaction volume per game dApps with the highest usage are games, despite the hype around decentralizing all types of applications Top 5 Blockchain Games on DappRadar Today Rankings as of 6/18/19, ranked by number of users. Unclear today how much usage is real vs. artificially created by bots. Leading investors for blockchain gaming Challenges for Blockchain-Based Gaming 1. Onboarding: \tGetting gamers to join the blockchain is a pain \tCan developers make the blockchain invisible? 2. Item-first gaming is expensive: \tYou need to buy items to play \tCan we make games F2P? i.e. Cryptage Origins 3. Transactions are expensive: \tWriting data on the blockchain costs time & gas \tCan we make Tx fast & free? I.e. Loom, Efinity, Tenfold (layer 2 solution examples) 4. Immature & inaccurate data analytics: \tHow much volume is real vs. generated by bots? This is part one of a three part series. Click here for part 2. -- Wave Financial, LLC is a Registered Investment Advisor (CRD#292343). This article is for general informational purposes only. Nothing herein is an offer to buy or sell, or the solicitation of any offer to buy, any security or interest in any investment, nor is it intended to be used for marketing purposes to any existing or prospective investor in any jurisdiction, and is subject to correction, completion and amendment without notice.