People buy digital assets in games every day. In fact, 89.5 percent of all commerce associated with gaming in 2022 was digital, per The Digital Entertainment and Retail Association. True ownership of those digital assets, however, remains a huge, intrinsic problem for the gaming industry.
In practice, the sales of these assets are more akin to buying temporary licenses to use them, rather than true transfers of ownership. Gone are the days of selling your old game cartridges or trading them with friends. Today’s purchases can now only linger, bound to your subscription with one particular company.
The issue with this model is that a temporary license with one company inherently carries less value than the true ownership of an asset, with all the powers that ownership implies; this is why carrier-locked cell phones are cheaper than unlocked ones and why owning land is often considered preferable to renting. There is utility and therefore value in having exclusive control over the things that people purchase.
And what happens when the life of the company that holds your purchases should end prematurely? As we’ve seen with the crash of FTX, the losses could be substantial, with $8.9 billion worth of customers’ digital coins seemingly disappearing into thin air.
The advent of decentralized architecture
Decentralized system architecture has emerged, creating the basis for such concepts as non-fungible tokens and zero-knowledge proofs, to deliver a new way to give true ownership back to those purchasing new classes of digital assets.
These decentralized systems are distributed across a network of computers and do not rely on a central “trusted party” that decides who can participate, which transactions are valid or who owns an asset, among other factors.
In a sense, decentralized systems follow a mantra similar to the popular slogan from “The X-Files”: “Trust no one.” Instead of a single source of power, these systems use consensus algorithms and cryptographic techniques to validate all interactions with the system.
Benefits for gamers and game designers
Decentralized systems offer new opportunities for gamers and game designers alike. The first and foremost is proof of ownership of in-game assets. These technologies enable players to truly control their in-game assets through verifiable ownership over virtual items, characters or currencies.
This proof of ownership lets people trade, sell or transfer assets between players or systems, which fosters a vibrant player-driven economy within the game. Further, game designers might choose to monetize these premium assets to be used across multiple systems. For example, a player’s favorite character skin might be usable across different companies and platforms so, for example, their World of Warcraft character might be used as their avatar in the Meta’s Horizon Worlds, a VR chat and community space.
Beyond asset ownership, decentralized game systems offer other benefits, including:
- Increased player autonomy. Players may host their own game instances, creating customizable environments and rule sets; allowing for unique gameplay experiences and fostering creativity and individuality among players.
- Improved transparency and fairness. Game data and transactions can be stored on a shared ledger that is visible to all participants so there is a reduced risk of cheating or manipulation. This model creates a more level playing field where players can trust the integrity of the game’s mechanics and outcomes.
- Potential for community governance. Through consensus mechanisms or voting systems, players are able to participate in decision-making processes, such as introducing new features, balancing gameplay mechanics or resolving disputes.
- Resilience to censorship and downtime. Because game operations are distributed across multiple nodes, there is no central authority with the ability to shut down or restrict access to the game. This architecture ensures players can continue to engage in the game even if certain nodes or servers are temporarily unavailable, reducing disruptions and enhancing the overall player experience.
- Enhanced privacy and data security. By leveraging cryptographic techniques, personal information and sensitive data can be protected. When players have greater control over their data, there’s a reduced risk of unauthorized access or exploitation by third parties. This aspect is particularly important in an era where data breaches and privacy concerns are increasingly prevalent.
Problems with decentralized systems
While there are many benefits to using decentralized systems, some issues exist – particularly for massively multiplayer online games (MMOs), where quality of service and latency are critically important to delivering a positive gaming experience.
Because decentralized systems must distribute game operations across multiple nodes, achieving consensus introduces additional network latency. This delay can impact the responsiveness and real-time nature of the game, potentially hindering the overall gaming experience, especially in fast-paced, competitive games.
In addition, decentralized system architecture adds complexity to the game system; making synchronicity and consistency difficult to maintain across systems or nodes.
The likely path forward
Just as some people lease cars and some people buy them, the market for licensed vs. owned digital assets will likely both continue to exist. This duality presents players and game makers with new and enticing options to monetize premium experiences with regard to digital assets purchased via decentralized systems.
For games where speed and synchronization play a significant role, however, game makers will likely need to find opportunities to create a hybrid or compromise model, where a centralized system governs the majority of real-time play and a decentralized system is consulted at key points for the validation of virtual items, characters or currencies.
Two prime examples of where this type of consultation with a decentralized system might be incorporated occur at game start-ups or at in-game auction houses, where purchased items generally get sent to the player’s inbox, outside of real-time gameplay.
With all the benefits of incorporating decentralized systems into the gaming world and the limited detractors of latency and added complexity, it is clear that the future of gaming will include elements of both centralized and decentralized architecture. Game designers who incorporate these concepts into their games will enjoy the ability to offer a greater breadth of in-game offers that can satisfy premium customers.
Nevertheless, finding the right balance between the two types of system architectures will be key.