Sports gaming is an industry on the rise, with new technologies driving interest even further. This year, the total revenue from the sports gaming industry is estimated to be $10.24 billion, and it is expected to reach $13.80 billion by 2027. In-game advertising is expected to make up a majority of this figure, with in-app purchases closely following.

There are challenges that the industry faces and there are use cases from new technologies like blockchain that aim to address these gaps. For example, the decentralized and transparent nature of blockchain transactions can address longstanding issues in traditional sports gaming, particularly in areas like asset ownership and reward distribution. This can hinder the industry from achieving its full potential.

Challenges in the traditional sports gaming industry

There is a lack of transparency in transactions and ownership in traditional sports gaming, especially since these are mostly under the control of game operators. By lacking the ability to freely trade or transfer their in-game content, players thus do not have true ownership of these items. Reward systems can also be unclear, which results in poor confidence from the community. Players are unsure of fair compensation for their efforts and achievements in the game ecosystem.

There is also a security concern, with traditional sports gaming platforms having centralized storage of player data. This can potentially expose information and in-game assets to hacks or breaches. This can include data from both players and developers such as the distributed-denial-of-service (DDoS) attack on Blizzard Entertainment games. Hackers also have a variety of reasons for attacking gaming platforms or even individual gamer accounts–from stealing hard-earned in-game assets to seeking revenge on opponents, or even bringing down the entire game itself.

The bottom line is that players have limited control over their gameplay, which results in a lack of trust in the community and ecosystem.

How blockchain improves asset ownership and community involvement

Blockchain technology’s primary benefits are in its decentralized, transparent nature and the immutability of transactions. This means that once transactions are confirmed by the consensus mechanism, the ownership of assets is also established across the entire network.

The establishment of non-fungible tokens or NFTs has become a game-changer with the way these non-physical items represent both digital and real-world assets, including player cards, virtual merchandise, or exclusive rewards. NFTs are becoming so popular as an asset that global revenue is expected to reach $2.378 billion in 2024, growing a CAGR of 9.10 percent to a forecast of $3.369 billion by 2028.

NFTs provide verifiable ownership and control over such assets, and these can be traded not only within the same game ecosystem but also across other marketplaces as well. This means that NFTs can be used across different games and can even be used as investments, providing new economic opportunities within and beyond the gaming ecosystem.

“NFTs are unique because they satisfy all requirements for digital property rights, facilitating efficiently-run marketplaces. They also fulfill an important social function, that of an enabler for self-expression, creativity and ownership,” says Flora Li, Director at Huobi Research Institute, referencing the Institute’s Global Crypto Industry Overview and Trends report.

Blockchain use cases in enhancing gaming ecosystems

Several sports gaming platforms have successfully utilized blockchain technology in making significant improvements in asset ownership and player engagement.

GameOn is pioneering using NFTs as representations of player avatars in fantasy sports. Users truly own these avatars, which allows them to participate in games. This is not limited to a particular league, but it can be across different platforms. The avatars can even be traded on NFT marketplaces, which adds to the value of engagement. Players have a tangible stake in their own virtual assets. To enhance the seamless integration of Web3 and blockchain technologies, GameOn has announced a strategic partnership with Arbitrum, a Layer 2 blockchain network with $3.13 billion in total value locked (TVL). As part of this collaboration, GameOn has also secured a grant from Arbitrum.

Expanding on their approach, GameOn utilizes blockchain technology to offer flexible rewards with these NFTs. For instance, if a user’s LALIGA players are in the off-season and not earning rewards, they can spend a small fee to temporarily convert players into a participant in another league or even as a UFC fighter that earns rewards.

ZED RUN is a digital horse racing platform that uses NFTs for breeding, racing, and trading horses. Each horse has its unique traits and attributes, and these influence the performance on the virtual track. Owners can earn rewards based on their horses’ race results, which creates a dynamic of a competitive environment.

F1 Delta Time, meanwhile, was an Animoca Brands-owned platform that focused on Formula 1. It enabled players to collect and trade unique cars, drivers, and car parts as NFTs, with the highlight of being officially licensed by the FIA. During its time, the assets can be utilized in virtual races, and the performance was also influenced by the rarity and the attributes of the NFT. The games also featured a staking mechanism, wherein users can earn rewards by staking their tokens into the system. F1 Delta Time had the highest-value NFT sale of its time, although the system had to close after its official license from the FIA expired.

Finding a balance between technological advancement and user benefits

Blockchain technology’s transformative impact is on reward distribution. For one, such rewards can be defined through smart contracts or self-executing agreements with predefined conditions that automate the reward payouts for maximum transparency. This eliminates the possibility of human error or manipulation, enhancing confidence among players that they will receive rewards in a fair manner.

According to Matt Bailey, Chief Executive Officer of GameOn, it is important for NFT-driven sports gaming platforms to deliver the benefits while ensuring technical advancements in the background. “It’s super important for blockchain to be in the background technically, with only the benefits marketed on the front end.”

He stresses that for consumers to better realize the advantages, they should not have to think of it as an NFT platform but rather one that is focused on sports and gaming. “We are a fantasy sports and games company, made better by Web3. Fans do not care about the three-letter acronyms and the tech jargon. They just want the benefits.”

GameOn offers this approach to sports gaming, providing players tokens through gameplay, participation in challenges, or by simply holding certain NFTs. These can be used for in-game purchases, staking for rewards, or redeemed for real-world goods and services.

With partnerships in major sports leagues like LALIGA and the Professional Fighters League (PFL), the platform focuses on match-based games and live in-game actions to provide an enjoyable and rewarding experience for users.

Blockchain’s future in sports gaming

As blockchain technology matures and becomes simpler to use, we can expect its adoption in sports gaming to accelerate. More platforms and industries will embrace the use of NFTs, smart contracts, and decentralized systems to enhance user experiences and create new revenue models.

The integration of blockchain technology into the gaming and sports industries will play a big role in shaping how users benefit from participating in the gaming ecosystems.

TNGlobal INSIDER publishes contributions relevant to entrepreneurship and innovation. You may submit your own original or published contributions subject to editorial discretion.

Image credit: Unsplash

RWAs for social change: Digitizing assets and services