There are millions of people ready to spend billions of dollars on virtual goods, an offset of the popular gaming market. However, we are still struggling to discover the appropriate outlet and payments management technique for this massive market.
The blockchain, the decentralized accounting technology that powers popular cryptocurrencies like Bitcoin and Ethereum, is gaining notoriety for its ability to provide a platform for safe, reliable and secure payments for virtual goods. In many ways, the market for virtual goods and the blockchain seem like a perfect pairing that can bring real progress to this burgeoning marketplace.
The popularity stems in part from video games. Video games featuring engaging plots, lifelike characters and live interactions with other players are creating whole communities and ecosystems that mimic or even supplant reality.
As a result, it seems inevitable that people would want to adorn their virtual lives in the same way that they adorn their actual ones, with unique accessories that project prestige and individuality. These items, known as virtual goods, are decorating characters lives and enhancing virtual reality. This might sound eccentric, but gamers are serious about virtual goods, which is being played out in the billions of dollars that they are spending each year on these items.
With so many players immersed in video games and the virtual worlds that contain these games, a significant market has developed and it’s ready for disruption.
Virtual goods comprise a broad category that encompasses everything from in-app purchases in Pokémon Go to unique clothing and weaponry that trade across platforms. Designated gaming platforms like Xbox and Playstation continue to be wildly popular, but smartphone saturation and the rise of mobile gaming helps explain the booming virtual goods market.
According to The Wall Street Journal, “mobile games are expected to make up 42% of the $108.9 billion in video game revenue projected for this year.” That’s a sizable shift that continues to escalate, and this change is proliferating the demand for virtual goods. While the numbers vary, the virtual goods economy is estimated in the tens of billions of dollars, and these numbers are clearly on an upward trajectory.
Some of this money is being paid directly to developers for things like in-app purchases and game enhancements. Interestingly, the demand for virtual goods has also created a secondary marketplace where virtual accessories are bought and sold. These centralized exchanges operate like a tangible marketplace while taking a cut of all the sales on their platform.
Security is arguably the blockchain’s most valuable feature, and security is one of the characteristics that the current virtual goods marketplaces are most lacking. If users can’t trust that their purchases are valid and their data secure then these virtual marketplaces will begin to deteriorate as legitimate customers take their trading businesses elsewhere.
In addition to improved security for payments, the blockchain can increase the value of virtual items. Megatrends like virtual and augmented reality are changing the nature of gaming by further closing the gap between fantasy and reality. When virtual goods appear life-like, their value increases and their interchangeability becomes more essential than ever before. The blockchain brings stability and capability to augmented reality, which is a performance benefit that cannot be ignored.
Finally, the blockchain enables the virtual marketplace to deal in cryptocurrencies, which have many of the ease of use and security propositions that gamers most desire. A virtual marketplace in which virtual currencies are embraced seems like a natural next step for both platforms, and it may be the future financial expression of this thriving economy.
The future of gaming probably looks a lot more like the real world that we already live in because it will be shaped by the same desires that define our real-world decisions, styles and abilities. For those aware of this trend, it presents a unique opportunity to develop new tools and platforms that enable visual markets to flourish.
Because of its security, capability and cost improvements, it’s likely that blockchain-based platforms are the future of virtual markets, and those looking to make an impact on this sector will need to embrace this system as the way to develop and mature the virtual marketplace. Over the next decade, consumers will spend billions on virtual good and services. Those who deliver the best product will reap the best reward.