Playing for Keeps: How Blockchain Transforms In-App Purchases to Ownership

Edward A Thomson
7 min readOct 16, 2023

tl;dr: blockchain can improve the IAP model by offering enhanced ownership

Contents:

  • IAP model has deficient ownership rights
  • Improved ownership and ability to sell may improve IAP
  • How blockchain could help

In the shifting terrain of the gaming industry, blockchain technology stands out as a beacon of change. It promises an era where players are not just participants but significant stakeholders, enjoying enhanced ownership and control. However, the reality is more complex — not all game studios are racing towards the utopian ideals of Web 3.0.

Many game developers are eyeing blockchain with a pragmatic lens, aiming for increased revenue without relinquishing substantial control. This is especially true for companies immersed in the mobile gaming space, characterized by the prevalent model of in-app purchases (IAP).

In my recent blogs, sparked by the unconventional success of Baldur’s Gate 3 amidst a sea of IAP-dominated titles, I discussed the popularity of IAP and highlighted a ‘fairness gap.’

It’s a complex space where the ethicality and gaming revenue models are in constant tension.

In this post, we’ll delve into how blockchain might just be the bridge that can span this gap, offering a middle ground where ethical considerations and financial prosperity coexist. I also need to say that it isn’t all about NFTs either.

The One-Way Street of Traditional IAP Models

In today’s gaming ecosystem, especially in realms ruled by in-app purchases (IAP), confer microtransactions, players often find themselves entrenched in a unilateral transactional dynamic. They funnel money into the game, acquiring enhancements, upgrades, or cosmetics to enrich their gaming experience. However, these virtual procurements, though enhancing the gaming experience, are ephemeral, confined within the digital parameters of the game, and devoid of any real-world value.

This monetary asymmetry is a thorn in my side, a persistent itch borne from the nagging sense of an unfair exchange. In my quest for rationalization, I drew parallels between the expenditures in gaming and those in luxury hobbies. The exercise was an attempt to demystify, perhaps even validate, the seeming imbalance ingrained in the IAP model. Yet, despite these mental gymnastics, the fairness gap — that unsettling chasm between tangible investment and intangible return — lingered, imposing and undeniable.

It is within this context that the advent of blockchain technology heralds promise. Envision a landscape where virtual expenditures don’t evaporate into the ether but are anchored, acquiring tangible value. In this reimagined ecosystem, players gain a measure of equity in the virtual domains where their avatars toil and triumph, where every coin spent doesn’t just vanish into a void but contributes to a tangible, ownable asset.

The Quest for Enhanced Ownership

Imagine a gaming ecosystem where every sword bought, every castle built, and every artifact acquired is not just a pixelated asset but holds real-world value, a digital entity that can be traded, sold, or perhaps held as an investment.

In blockchain gaming, the dynamics of player expenditure are transformed. Spending within the game is no longer a one-off transaction but a purchase of a digital item with real-world value. It has value because the items can be traded out of the game for currencies that have real-world values.

Concept art generated using Midjourney

Players become stakeholders, their engagement and expenditure contributing to a vibrant, growing in-game economy where the value isn’t just created but can be owned, traded, and in some cases appreciates over time.

This reimagined ecosystem isn’t a zero-sum game. It’s a dynamic, evolving landscape where players contribute to an economy that grows. Player expenditure nourishes and expands the in-game economy, creating a virtuous cycle of growth. (Caveat: growth can plateau or invert.)

Here, the fairness gap begins to close and perhaps the IAP model could be justified. Financial recoupment becomes possible. Earning a real return becomes possible. No longer is player expenditure solely to the financial benefit of the game developers. This would be a huge improvement for gamers.

That said, blockchain technology by itself won’t remove the ethical quandaries of the IAP model, nor will enhanced ownership fully quash the problems. Encouraging players to overspend without the ability to limit themselves would still be an outstanding issue. Better in-game mechanisms to manage spending could help although there should be less aggressive in-game marketing of purchases.

This is getting to be a bit much (Monster Legends; source)

It’s crucial to scrutinize the nuances of enhanced ownership. Yes, the prospect of trading gaming items for real money is enticing, but often, it comes with strings attached. Developers might limit transactions to specific exchanges and automatically skim a percentage off every trade, all programmatically enforced.

The emerging play-to-earn games echo this trend. Many are bearing hallmarks of the IAP model, offering a semblance of ownership, yet laden with restrictions.

It’s a reminder that even with blockchain at play, the design choices made by developers can still tilt the scales, sometimes against the players. And that’s not factoring in potential pitfalls in the economic design of these games, where an oversight or imbalance could diminish the value of in-game assets drastically. Vigilance and critical evaluation are essential as we navigate this evolving landscape.

Necessary Future Technology?

Blockchain technology unfolds a new chapter in the annals of gaming, yet it is not a magic wand. Its introduction promises unprecedented strides in enabling true ownership of in-game assets through NFTs (Non-Fungible Tokens), yet it’s crucial to dissect the nuances to separate the wheat from the chaff.

In essence, blockchain allows the creation of unique, indivisible, and secure tokens that can represent ownership of specific in-game items. These tokens can be traded, sold, or bought not only within the game’s ecosystem but potentially beyond its borders. Each token is an immutable ledger entry, offering transparency, security, and unequivocal proof of ownership.

The empowerment of players to have true ownership of the assets they acquire or earn in a game could revolutionize the gaming industry. It could transform the act of spending within a game from a consumptive act to an investment. Each purchase becomes a stake in a living, breathing digital economy with the potential for real-world value.

The Shadow of Misimplementation

However, a word of caution — while NFTs and blockchain offer the tools to enhance ownership, their implementation determines their efficacy. Badly implemented NFTs can mirror the restrictive, controlled environment of traditional online games. A unique identifier in a database (blockchain or otherwise) isn’t synonymous with true ownership if the underlying architecture is restrictive.

Full decentralization, where the game and its assets are not controlled by any single entity, is the gold standard for ensuring true ownership. However, the reality is that many companies, wary of losing control, might opt for a more centralized approach. It runs the risk of diluting the essence of blockchain and could end up offering just a tokenized version of the same old restrictive ownership models.

Generated using Midjourney

Striking the balance

While my own preference would be for a decentralized solution, I can see that gaming studios will be more driven to create games in a way that is familiar to them, while leveraging blockchain technology to do something new. Ownership will be enhanced, which will mitigate some of the IAP problems, but there should be an acceptance that some amount of control of the assets will be ceded to the player.

My main request for gaming studios would be to implement NFTs in an honest way that preserves ownership. Conversely, creating NFTs with full trading rights but without function will also not lead to success.

The technology is a conduit, not a conclusion. Decentralization is a spectrum and the best blockchain projects now exhibit multiple facets that do not fit perfectly with the idealism of decentralization.

The success blockchain gaming hinges on implementations that respect the principles of decentralization, transparency, and open participation, combined with accepting the need for certain controls to maintain the integrity and balance of the in-game ecosystems.

I would argue that eventually it should be possible to replicate everything that’s possible in the traditional gaming world in fully decentralized gaming, but there is still much to be done there. I believe that an equivalence can be found, but many of the techniques are yet to be researched. Until that time comes, we will need to work with smart compromises.

A fun image generated by DALLE3 :-D

Acknowledgements

I used ChatGPT to help with structuring and rewording parts of this blog.

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