Before 2020 began, I did a series of predictions around what the growth areas may be in relation to new areas of underwriting. Esports was at the top of my predictions list as the industry had been set to top billions in revenue in 2020. This has only been fuelled by the pandemic as more people are at home and available to stream and spectate.
Global esports has in fact now surpassed the $1.1 billion revenue mark, which is an important milestone to hit for any fledgling industry and shows a +15.7% growth over last year. However, although this is an important metric, it still pales in comparison to other professional sports categories like the national hockey league which has revenue over $4bn.
In parallel to the rise of esports, is the rise of another emerging technology that may enable esports to achieve even greater heights: cryptocurrency. They are, in effect, star-crossed lovers brought up against the backdrop of different circumstances but both struggling for the same thing. And they’re often dismissed by society and ridiculed by incumbents only to rise again and gain even more ground. Esports and cryptocurrency are a modern tale of Romeo and Juliet. In this article, I'll explain why in five points.
1. Cryptocurrency is programmable money
Cryptocurrency is fundamentally smarter money, as you can program your holdings to behave in certain ways depending on outcomes and environmental factors.
Imagine a world in which you could program your money to find the best deal on a particular item and then let it self-execute once it finds it. Imagine the time saving. In relation to esports this is important as you can program your holdings to execute on the outcomes of certain games. This is vital with respect to players receiving their winnings, as players complain that their winnings are sometimes not available when they do win. This could be due to insolvency, disappearance or fraud. With cryptocurrency, this completely changes, as the winnings would already be locked inside a smart contract that would automatically be paid to the player’s wallet once the game and outcomes were verifiably completed.
Having a programmable means of value exchange takes out the counterparty risk that is still inherent in the system today. If only Juliet hadn’t relied on an apothecary (counterparty) and had instead programmed a message to be automatically sent to Romeo, things may have turned out different.
2. Two worlds collide
Much like Romeo and Juliet, two different houses have been united by the love of two of their children. These children fought against prevailing societal and culturally norms to love each other and to tragically show a better world to their families through their deaths (spoiler alert).
Esports and cryptocurrency are two houses which are united through their common purpose of transforming our commerce and leisure from atoms to bits. All this against the overwhelming rhetoric from society that esports is not really a sport and cryptocurrency is not really money. Two industries which have been told that they won’t amount to anything of major significance have finally found each other. Denied separately, but stronger together. Two worlds have collided and just like any good relationship, perfectly complement each other’s strengths and weaknesses.
3. Game assets that can be traded and saved
As gamers play, they rack up in-game currency that can be purchased for skins, weapons, loot boxes and other items that can enhance the experience of the game. Most games now will have some sort of micro-transaction functionality which means that people can convert their ‘real’ money into in-game currency. Here in lies the problem.
As soon as you spend your money in a game, it is locked to that game, no matter what direction the developers decide to take that game. It also means that if there is any error in the game (which tends to happen when developers need to meet very tight deadlines) you can lose your in-game currency or purchased items. If you ever want some nice bedtime reading, look at the Reddit comments of any game, you will see thread upon thread of gamers losing their game assets. The only recourse you have is to raise a complaint with developers but more often than not they can’t do much to rectify the situation.
With cryptocurrency, this all changes. If there were ever a situation in which a gamer lost any in-game asset, the blockchain would be the persistent ledger that showed that a transaction took place and when it happened. It would make losing anything in-game very difficult. It also paves the way for gamers trading their game assets to each other, which opens up a new secondary market for players investing hundreds of hours playing a game. Instead of having those hours wasted, gamers can sell on their hard work to others who would pay for the luxury of those game assets without having to work for it. To an extent, there is already this functionality, but using a blockchain would make the transaction much more efficient and would enable two unknown parties the ability to transact with confidence.
4. Gamer sovereignty
Gamers can spend literally hundreds of hours mastering in-game technique and can make a good living out of streaming their gaming to other people using platforms such as Twitch and YouTube. These people that enjoy their content can donate to the gamers to help keep them producing content they like. The problem lies with the development team as developers can become insolvent or take the game in a direction that the gaming community doesn’t like. Imagine putting hundreds of hours into something and then having it taken away from you? It would be like mastering the piano only to find out that no more pianos were in production and that model your using is prone to being out of tune (with no one to fix it).
Gamers put their livelihoods into the hands of the developers which is an asymmetric power dynamic. However, there is a way to counteract this: by giving gamers the ability to ‘cash out’ of a game. By using cryptocurrency as a means of exchanging value between gamers and their audience, gamers are able to make ‘convertible’ money that can convert to other currencies. In Verona terms, it’s Romeo and Juliet finally waking up to the reality that their parents potentially don’t have their best intentions in mind.
5. Manipulation of currency
Just like with ‘real’ money, in-game currency can be manipulated and item rarity can shift. There is a constant struggle with gamers and developers about the in-game frequency and quality of item drops, gamers want more and developers want to entice gamers to just buy the items, so they have a vested interest in making the games drop less. Developers can currently change the drop-rate at any time and at their choosing which leaves gamers feel as though they are being cheated.
With blockchain, it is much easier to track drop rates and hold developers accountable. With code that is visible to all, each gamer can see the drop rate of different items and therefore know what to expect for each item. In a world where there are bound to be more crackdowns on micro transactions targeting children, having a fair, open and transparent system can only help. Blockchain and cryptocurrencies can help hold developers accountable and not devalue the in-game currency to the detriment of the gamers who have spent hundreds of hours mastering and acquiring.
In an ever-evolving digital age where we increasingly turn to online mediums for entertainment, allowing players to make a fair living playing esports should be encouraged. Cryptocurrency and blockchain technology make that future a fairer one:
- For the developer, who attracts gamers to their platform due to their transparent and fair structure.
- For gamers, who can earn convertible currency for playing their favourite games.
Just like Romeo and Juliet, who struggled for a fairer society that didn’t judge them based on pre-conceptions, cryptocurrency and esports are struggling together for the same aim. The struggle for a fairer society predicated on the fairer distribution of wealth and technology but are hindered by how incumbents view them.
Only time will tell if this Romeo and Juliet story will end more triumphantly than Shakespeare’s tragedy. Will these two star-crossed lovers be able to change the ruling powers and accept them for the weird and wonderful changes to society they bring about? Or will they be doomed to the fringes of society and held in history like two people taken before their time? Oddly enough, I think the insurance industry can play a big part in helping shape these young industries by seeking to learn about and underwrite without having a ‘one-size-fits-all-decline’ approach. Digital assets, blockchain companies and esports can help reshape an economy that is badly in need of saving.