It's been five years since the blockchain+gaming lightbulb went off over my head.
I know that because it was a very specific moment; sitting in an afternoon session at Pocket Gamer Connects 2018. (I’m currently travelling down to London for the 2023 edition as I write.)
I had heard about crypto previously, had even set up a paper Bitcoin wallet, but hadn't really gotten my head around what it meant.
A couple of hours from the likes of Alex Amsel, Peter McCormack and Shaban Shaame, however, and it all became crystal clear. Games were already running large scale economies using soft-value tokens.
Why wouldn't they want to start printing their own money, converting these into real economies and running their own banks?
It's a statement I still think has resonance, even as it's become clear that for all the possible upsides, turning a game into a bank comes with a lot more complexity than I naively imagined back then.
Indeed, the sort of regulatory risk that comes with running a bank has — to my mind — been the main reason why the large public western games companies have at best only dabbled their toes into the sector.
Interestingly it hasn't had the same impact on public South Korean game companies, which have all eagerly embraced the new technology. The Japanese market seems to be following a similar trajectory.
The other key development since then has been the growing understanding that running sustainable real-money economies is fundamentally much more complex than soft-money economies in which the developer has immediate control over the creation and destruction of currency.
As the velocity of games such as Axie Infinity highlights, operating a game with immutable assets requires an enormous amount of caution in terms of the issuance of those tokens and plenty of flexibility in their utility, given the potential volatility of their value.
Yet, in neither case do I think the problems are insurmountable. Running a bank isn't that complex. You just have to know the rules and structure your company with that level of compliance in mind.
Indeed, the beauty of blockchain games is you can launch them with very little bank-like oversight required, unless you're taking control of players' assets via a custodial wallet. And even in that situation there are now plenty of third party service providers with banking licenses who will handle those features and their related risk for you.
This Substack is sponsored by Hiro Capital: investing in the future of gaming since 2018
Similarly when it comes to tokens, their double-edge nature is clear to everyone, which means developers are now much more cautious about how they issue them, in terms of timing, amount and utility.
At worst, tokens aren't being launched until their game is live. Even better, in some games, tokens are only generated as rewards from skilled play.
Equally, as I always argue, the fact that the value of 99.999% of gaming tokens have dropped 99% isn't as significant as the handful of projects that have created real-world money from nothing more concrete than their vision, operational skill and the shared belief of their communities.
Without getting too excited about it, the fact that Axie Infinity's AXS token – alongside those from the likes of The Sandbox, Decentraland and Gala Games – are some of the best performing crypto of the year-to-date – up over 100% – isn't an accident.
For, in my opinion, gaming is going to be the big trend in blockchain in 2023. There are just too many experienced teams releasing high quality products across multiple platforms, genres and business models.
Even Axie Infinity (circa 2023) isn't your grandpa's Axie Infinity (circa 2021).
Certainly we're not there yet. There are many more things to learn and plenty of adversities to overcome.
But five years on, my conviction is only growing that blockchain gaming will be the sector’s next and greatest evolution.