The video game industry is at a crossroads. While the current regulatory framework fails to keep pace with innovation in the digital world, player-owned economies, facilitated by the use of blockchain technology, are becoming increasingly popular. These distributed systems are poised to democratize virtual asset ownership and offer unprecedented transparency in gambling transactions. However, as we enter this new world, a big question arises: will these technologies be the answer to the nagging problems of gambling addiction, or will they open new doors to addiction and exploitation?
The promise of real ownership
Player-owned savings represent a radical departure from the old gambling model. Players can own digital assets, unlike buying objects that will always remain locked in a gaming ecosystem, using blockchain technology. These items come in the form of non-fungible tokens (NFT) or cryptocurrencies, meaning that a player can trade, sell or transfer their items to other platforms and games.
The changes are enormous. A unique piece of armor that took months of gameplay to acquire might not lose its value after the game's servers shut down. Gamers could earn real money through their in-game talent, creating a new kind of digital entrepreneurship. This model will lead to a convergence between the interests of gamers and developers in a way that wasn't possible before.
However, this promise of real value creation brings us dangerously close to gambling. As soon as a direct relationship exists between what happens in the game and a financial reward or loss, the distinction between video games and gambling becomes even more blurred.
Regulatory vacuum
The conventional approach to gambling regulation assumes that there is a clear distinction between games of chance, games of skill, entertainment and financial speculation. These well-defined categories are broken down by the savings held by gamblers. Existing regulatory frameworks, which were developed to govern and regulate traditional casinos and centralized online casinos, cannot cope with the decentralized nature of blockchain-based gaming.
This is made all the more difficult by the fact that these platforms are global. A game created in one country might be hosted on servers in another, while players come from dozens of countries. And this game could be managed by a decentralized autonomous organization (DAO). Which jurisdiction applies? How do you manage a system that is not centralized?
Some governments have tried to treat certain forms of blockchain gaming as gambling in order to overcome these challenges. This approach, however, in many cases relies on old definitions that cannot reflect the true nature of today's gambling economies. The result is a patchwork of regulations that satisfy no one.
Anonymity, a double-edged sword
Another complication relates to blockchain technology's emphasis on confidentiality and decentralization. Although technically blockchain transactions are public and stored on an immutable ledger, the identity of participants tends to be pseudonymous. This creates opportunities for anonymous betting that traditional online gambling platforms, with their know-your-customer (KYC) requirements, cannot offer.
The anonymity aspect is two-sided. On the one hand, it could enable problem gamblers to bypass self-exclusion programs and spending limits. On the other, it could reduce the social stigma that prevents some people from seeking treatment for gambling addiction.
Market dynamics and technical infrastructure
The meteoric growth of blockchain gaming has generated unforeseen repercussions throughout the technology industry. The market for graphics processors has been greatly affected by the computational demands of these platforms, coupled with widespread interest in cryptocurrency mining. GPU mining operations are competing with gamers for the same hardware, driving up prices and creating supply shortages that impact both casual gamers and serious blockchain game enthusiasts.
This hardware shortage has created its own speculative market. Previously, graphics cards were only used as gaming accessories, but now they've become an investment, and their price changes according to cryptocurrency values and the profitability of mining them. The irony is palpable: the technology that was supposed to democratize video gaming in some senses has also made it less affordable and more expensive.
Transparency versus exploitation
Supporters believe that thanks to the transparency of blockchain technology, the damage caused by gambling could be minimized. All transactions are stored in a shared ledger, so it's theoretically easier to track problem gamblers and take action than in a more conventional system. Smart contracts could automatically implement spending limits or rest periods.
Nevertheless, this transparency may be more abstract than real due to the complexity of blockchain systems. According to Webopedia, the distributed nature of blockchain technology means that although transaction data is public, interpreting and acting on it requires considerable technical expertise that most regulators and consumer protection agencies don't currently have.
What's more, for blockchain transactions it's not easy to link activity on the blockchain with actual identities. A player can simply create multiple wallets to bypass any protection system.
Debate on skill versus chance
Conventional gambling regulation is based on the distinction between games of chance and games of skill. For example, poker may be regulated differently from slot machines because of the skill element, which is important for long-term results. Player-managed economies make this difference strangely complex.
An example of a strategy game where chips are valuable and players can earn them by playing well is a blockchain-based game. So is it gambling when the chips are real money? And what happens when the game adds randomness like loot boxes or random encounters? We don't lose the skill component, but there's now also a component of chance.
This vagueness leaves room for innovation as well as exploitation. Studios could create games that appear to be skill-based, but are actually luck-based, and players could come up with a genuine skill-based strategy that can bring consistent profits.
Economic incentives and player behavior
Adding real economic value to a game radically changes player behavior and motivation. Free-to-play games are created to be played and enjoyed, and monetization is via subscriptions, cosmetic items, or a one-off purchase. With a player-owned economy, an element of profit is introduced, creating a psychological difference in the game.
This transition can be beneficial, as it motivates players to master real skills and create new types of online business. However, it can also trigger the same psychological mechanisms that are at the root of gambling addiction. Rare loot, the "near-loss" of a large sum of money and the illusion of spending more money to try and recoup losses are always present, and even more so when real money is involved.
The future: possible solutions
The way forward is probably a mix of technological innovation, regulatory development and industry self-regulation. Consumer protections could be programmed into smart contracts, for example by automatically limiting spending amounts or requiring rest periods. Regulatory systems could evolve to accommodate the nature of blockchain gaming in light of adequate consumer protection.
Self-regulation in the industry with the help of DAOs and community management could be more flexible and responsive to change compared to traditional regulatory methods. Rules and protections could be voted on by the players themselves, establishing a more democratic form of consumer protection.
Conclusion
Player-owned economies represent both the greatest potential and the greatest threat to the video game industry today. They guarantee to deliver unprecedented value to gamers, challenging all assumptions about the link between video games and gambling. Technology is neither good nor bad in itself, its effects will only be determined by how we decide to use and control it.
The question is not whether blockchain games can help or worsen gambling problems, but whether we can be careful enough about how we go about making them as beneficial and as low-risk as possible. A lot is at stake, and the time to get it right is running out. Our actions today regarding the savings held by gamers will determine what video games will be like for generations to come.
