Blockchain in Videogames

A Note

This was an assignment for my Design Thinking for Digital Innovation module at Warwick Business School, taught by Isabel Fischer for the 2020-2021 academic year. We were asked to write a 500-word board paper on a digital innovation developed using design thinking and write a 2000-word scholarly blog that convinces the reader that you are an expert on the topic and that your opinion matters. You can find the original document, with its accompanying board paper, here:

Blockchain in Videogames

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Imagine you could share your character inventories across different videogames? What if you could craft items using materials from various universes?

Gaming is the driving force of innovation, thus guiding IT hardware development. Rapid development in the videogame industry has resulted in fascinating digital innovations, with notables including facial and voice recognition, 3D, AI, AR and VR technologies (Widjaya, 2020). Today, we discuss:

(1) design thinking's (DT's) influence on videogame experiences,

(2) how it develops solutions for in-game asset ownership,

(3) the shortcomings of such developments and,

(4) the potential for extended application.

The second wave of IT-driven transformation, "the rise of the internet" (Porter and Heppelmann, 2014), gave way to online gaming in the 1990s. Then, Steam's 2003 launch as a digital storefront permitted gamers to buy and review games online. A year later, Blizzard Entertainment launched World of Warcraft ©, the first Massive Multiplayer Online Role-Play Game (MMORPG) to eclipse 10M active players. By 2009, online gaming moved mobile, and Minecraft © sells nearly 180 million copies, making it one of the bestselling videogames to exist. Fast-forward a decade, and AR mobile games such as Pokemon Go © generate millions in downloads and revenue (Iqbal, 2020) through smartphones. In 2019, the videogame industry's value surpassed $152bn (Jones, 2020), and experts predicted it would progress to $300bn (Lanier, 2019) by 2025. In 2020, former luxury fashion editor, Lucy Yeomans, created Drest ©, an AR-integrated luxury fashion gaming app where you can order your in-game curated outfits from intermediary Farfetch. In between it all, we saw the rise and fall of games like Angry Birds © and Fortnite ©.

What do you notice about each of these digital innovations in the videogame industry?

They build on top of one another. It has to remind you of iterations and the 'fail fast' mentality. Some may say this is just pure evolution of technology, whilst others passionately argue it's a result of DT: 'a dynamic, iterative means of apprehending problems and considering solutions' (Beverland et al., 2015).

The efforts regarding identifying consumer pain points are similar to those of opportunity identification. Would you say design thinking is critical for corporate entrepreneurship?

Design thinking is an incredibly enduring and iterative process, one holding conflicting views across various industries. To some, it's simple hype (Tjendra, 2014), used to beautify analytical thinking. Meanwhile, for others, DT enriches the entire project, like spices to foreign cuisines. Simply put, it's a methodology that guides innovation by encouraging a deep, intimate understanding of a consumer problem. Experts (Brown, 2019) stress the importance of 'falling in love with the problem' through personas and customer journey mapping. Sean Carney, Chief Design Officer at Phillips, insists that DT is useless without 'thinking designers': the entire concept revolves around empathy.

In the videogame industry, most players are males aged between 20 and 45 years, i.e. no older than the youngest GenX'ers. Older consumers are generally Laggards or Late Adopters (Rogers, 1962), thus unlikely to be avid gamers. As seen in the personas illustrated above, they will likely have some professional or competitive gaming history. Typically either a mid/senior-level professional or businessman, they aren't fond of extensive social spheres, opting to avoid parties, large gatherings and similar public activities. They tend to play videogames during weeknights or weekends and have a deep interest in games involving quests or crafts.

However, when playing, say, Diablo ©, consumers complain that a weapon would be excellent in StarCraft © - except it's not available in that universe. Next, they complain they can't use an epic potion they created in World of Warfare © for Guild Wars 3 ©, nor can their specialist mage character be used in another game produced by a different studio.

So, as per design thinking, what is the problem statement?

Gamers cannot own their in-game assets or log them in a virtual inventory accessible to their favourite videogames. There is no incorruptible, distributed method of logging the transactional data of these virtual valuables. Nikolas does not have a way to inform all the other players that he, alone, owns the Wolfbang Dagger or rare Elixir Potion he earned and crafted on quests. If he wanted to trade that dagger or potion with other players, he can't do that on a transparent and secure marketplace external to the game.

A transparent and secure marketplace that logs all transactional data of valuables. Ring any bells?

It's blockchain! In an interview with Isabel Fischer at Warwick Business School, Matt Lucas, an IBM cloud architect and world-expert on distributed ledger technology, explained this technology. Blockchain is a 'shared, replicated, permissioned and confidential ledger'. It involves (typically smart) contracts encapsulated in unambiguous code, leveraging four key advantages:

• Finality: an agreed source of truth,

• Immutability: an append-only data structure (permanently-recorded transactions),

• Provenance: historical, traceable transactions and,

• Consensus: every participant agrees on a transaction occurring.

Now, developers went ahead and created a "gamified blockchain" (Bridgwater, 2019) called CryptoKitties © back in 2017. It allows you to breed, collect and trade unique cats that players own 100% in a virtual world that uses cryptocurrencies as the medium of monetary exchange. Built on the Etherium blockchain, most cryptocurrencies are usable in CryptoKitties © , and players incur a "birthing fee", which covers the cost of adding a newly-bred cat onto the blockchain.

Meanwhile, GALA Games is a platform, again Ethereum-built, that develops various games wherein gamers own everything they've earned. You can collect, trade and gift your in-game assets compared to traditional incumbent developers, who generally disallow external transactions. Therefore, by being heavily user-centric, 'Our mission is to enable freedom for anyone on this planet through play.', GALA ensures gamers have complete freedom over their play, acknowledging that its future is in their hands.

Design thinking, consequently, facilitates the creation of innovations that empower consumers, advancing digital transformation.

How do these impact the industry? Firstly, it clearly shows that blockchain applications for in-game asset ownership are wholly possible. Second, it requires a marketplace platform to function. Design thinkers would use this existing platform to build new, better ones, and since the code is public, anyone can take the code and make adjustments. What does this mean? It's iterable, facilitating co-creation!

DT involves countless prototyping and testing phases before returning to "define" the problem with more informed empathy. It's non-linear and repetitive, resulting in user-centric, incremental innovation. Polkadot, for example, rivals Ethereum because, despite the many similarities, including its architecture and composability (Yoo, 2019), Polkadot holds great potential by allowing users to create a blockchain using the Substrate Framework in its backend development. LOOT, a marketplace aimed at solving in-game asset ownership, was developed using Polkadot's network in 2021. However, a disadvantage to LOOT is its manual operation: players input and value their assets themselves, thus holding little credibility over asset acquisition and perceived valuation.

In 2016, Don Tapscott, Canadian business strategist and co-founder of the Blockchain Research Institute, believed that blockchain was the next generation of the internet and will drive digital innovations for decades (TED, 2016). Three years later, the number of gamers, globally, exceeded 2.5bn (Koksal, 2019), illustrating continued industry growth. Now you're asking, 'How does this affect business?'. According to EY, 2019, videogames integrated blockchain technology to primarily increase game security [23%], followed by establishing user trust [19%]. It also reduced costs, managed microtransactions (in-game purchases), and protected IPs. Convinced that it's game-changing (get it?), yet?

So what did we develop to solve videogame ownership using DT practice? Our inspiration was LOOT and CryptoKitties © - and we first fixed the issue of asset credibility: Named Yosei, after the Japanese word for 'bewitching spirit' or 'fairy', our platform uses Polkadot and connects to multiple videogames from various developers using an API. Then, Yosei requests a transfer of the player's in-game assets to the blockchain, where it's added to the network's "cloud inventory".

Doing so incurs a fee equivalent to $10, which is less than that required for CryptoKitties ©, making it an attractive price according to our pilot studies.

Some mobile games, e.g. Clash Royale © (Down, 2019), have already integrated blockchain, making their in-game currency a cryptocurrency accessible to external wallets. Accordingly, we ensured Yosei supports all cryptonetworks, including Ethereum and XRP Ledger. Regardless, we've advised videogame developers to create cryptocurrencies and blockchain-supported videogames since we believe they will soon profit from such an endeavour. To illustrate: Bethesda Game Studios will call their token BTH, Blizzard Entertainment: BLZ and Nintendo's will be NTD. These developers have created well-received games, from Overwatch © to The Elder Scrolls V: Skyrim ©. Therefore, given the decentralised nature of crypto and that public perceptions influence valuations (i.e. how much consumers bid for a token), we expect these potential currencies to steadily moon.

Why don't we expect them, and thus Yosei, to immediately skyrocket? Awareness and trust. Design thinking is human-centred. Granted, it can become exhaustive, but it provides an enriching customer experience the closer designers get to solving the unmet need. The problem with Yosei, LOOT and GALA Games is that they're too new. Agreed, they provide a functional solution, but the technology is unfamiliar outside of the finance industry. Whilst we noted earlier that consumers older than GenX are late adopters, the fact remaining is that most of our consumers are risk-averse. Nikolas, Hameed and possibly Juno are gamers whose profiles hesitate, requiring strong encouragement from peers or factual data. Resultantly, we hit a barrier we wouldn't know how to resolve without the DT practice of rapid prototyping: we re-wrote Yosei's code to allow users to keep backups of game-specific-assets in their games without it duplicating the asset. The in-game item loses its in-game monetary value but still operates as normal. When playing, it's pulled out of Yosei.

Comparatively, players like Antonio are much more welcome to Yosei. These players are well-informed and make long-term investments in all sorts of industries. As such, the segment most likely to trust us is Early Adopters (Rogers, 1962), given their likelihood to act upon the idea that the lines between the virtual and real world are fast becoming blurred.

At this point, one may wonder, 'So is Yosei disruptive?'. My answer is no. According to Christensen in an HBR article on disruptive innovation, Yosei would need to be targetting the least-demanding segment, outclassing incumbents. Arguably, Yosei does target these consumers because of our customer personas, and the lack of trust in such a technology is further evidence of this (unfamiliarity; quieter target market). However, understanding their cognitions informs this is more simply anxiety resulting from ambiguity than disinterest. In any case, this market is small and developing itself by consistently improving existing code. It's like a neverending testing stage. At some point, game-developers themselves may collectively decide to create a universal blockchain and cryptocurrency for mutual benefit. However, this may lead to Game Theory (Nash, 1951) in Economic Market Structures, and we could end up seeing it crumble.

Conveniently, this shines a light on DT's effectiveness. Whilst it provides valuable insight into consumers, a significant shortcoming is its lack of distinct practicality. Although methods like Stanford's D.School, IBM's Loop, and Google's Design Sprint Process all outline up to six steps, the issue is that when applied, the ideas and thoughts end up just being a series of post-it notes that don't have any clear structure. Thus, to be effective, DT requires focused, experienced facilitators and designers. Consequently, 'iteration' is the most critical element of the entire cycle as it provides room for refinement. Business must prepare for a long list of failures before discovering profitable outcomes. Furthermore, once prototyping begins, it can quickly become inefficient, especially in bureaucratic settings where speed is limited. Conclusively, design thinking is an excellent tool for bridging the dehumanized business-customer relationship (Malbon, 2016) by assisting user-centric product development, but is not a requirement.

Is there potential for DT in other industries? Well, its videogame blockchain applications can inspire political usage. The immutability provided by blockchain means you can't have double-voting in elections, votes are non-retractable and traceable. Whilst blockchain supports anonymity, we won't have issues ever again about how many votes there were for a candidate or where they were from (read: 2020 U.S. Election drama). Design thinking means we can create blockchains for elections, and we can test them on a university, regional and national scale, allowing for incremental improvement.

Useful Links

Blizzard Entertainment About: https://www.blizzard.com/en-us/company/about/

CryptoKitties: https://www.cryptokitties.co/

GALA Games: https://gala.games/

GALA Games Node Ecosystem: https://gogalagames.medium.com/the-gala-games-node-ecosystem-9760d8156af7

Polkadot: https://polkadot.network/technology/

LOOT: https://loot-solutions.netlify.app/

LOOT Studio API: https://app.swaggerhub.com/apis-docs/Loot5/NFTAPI/1.0.0

Substrate Framework: https://substrate.dev/

References

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