July - Sept, 2021Media & Entertainment8IN MY OPINIONhe use of blockchain technology by game companies is nascent but growing. As a transaction based-technology, blockchain is well suited to manage in game economies through tokenized game assets and the use of cryptocurrency for payment. This also provides a benefit to players in that they can truly own their assets, as opposed to just having a terminable license as is the case with most traditional online games. Users can actually make real money from these assets. A recent article suggests that gaming industry use of blockchain may lead to mass adoption. Game technology has been used in many ways beyond pure entertainment. For example, game mechanics have been used for training, simulation, employee onboarding and gamification, among others. One of the technical features of blockchain that enable these advantages are digital wallets. Digital wallets are software to implement blockchain transactions to buy or sell digital assets. The name is a bit of a misnomer as the assets are not actually stored in the wallet. Rather, the wallet uses a public key as an address and a private key for the user to digitally sign transactions. The transactions and ownership are maintained on a distributed ledger on the relevant blockchain network. One problem that has slowed blockchain adoption is the onboarding of users. Acquiring a digital wallet is not as easy as just downloading software. Because digital wallets enable users to receive and transfer value (digital assets), often there is a requirement to comply with anti-money laundering (AML) and know-your-customer (KYC) procedures. This friction deters many would be users. However, to the extent gamers are motivated to own digital assets, they may be more incentivized to jump through the hoops to acquire a digital wallet. Once they have a digital wallet, it can be used for blockchain transactions beyond games. This is one way in which blockchain games may drive greater blockchain usage. Another blockchain technology relevant to games is non-fungible tokens (NFTs). Many blockchain games use the ERC-721 NFT standard, which allows each game asset to be unique via its own "serial number." One of the problems with many existing token designs is that they require deploying a separate smart contract to the blockchain for each asset type. Another NFT standard, the ERC-1155 token, takes a WILL BLOCKCHAIN GAME USE DRIVE GREATER OVERALL BLOCKCHAIN ADOPTION?James GattoTJames Gatto, Social Media and Games Team Leader & Intellectual Property Partner, Sheppard Mullin Richter & Hampton LLPBy
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