Bitcoin, newer cryptocurrencies, tokens and other digital assets attract thousands of speculators, professionals and amateurs alike.
The attention is largely focused on the figures: prices, highs and lows and multimillion-dollar deals.
These numbers, however, are superficial.
For anyone in the tech industry, I believe it’s more important to understand the major trends stemming from the distributed ledger technology (DLT). In this article, I aim to summarise some of the opportunities that my team is watching.
1. Virtual Assets In Gaming
Digital collectibles have existed in computer games for decades, including swords, skins, game currencies, and more. In 2018 alone, Newzoo (via CNBC) projected that gamers worldwide would spend $138 billion on games, which represents a huge potential market for in-game items.
Currently, in-game artifacts reside on the game publishers’ servers. The owners of rare items don’t actually own anything. Meanwhile, in-game currencies are prone to inflation; for example, the USD value of World of Worldcraft gold has reportedly fluctuated multiple times.
The tokenization of virtual in-game assets would create a provably limited supply. As a result, users might spend more, possibly even treating their in-game expenditures as investments. If Lego toys have already outperformed stocks and bonds, why couldn’t in-game virtual property emerge as a new alternative investment?
Widely adopted and frequently exchanged virtual in-game assets will likely require a much higher transaction throughput than most existing blockchains can offer. However, game developers can already experiment with tokenizing parts of their in-game economies.
To get around current scalability and usability limitations, you can use on-chain transactions only for in-game transfers of items between players. Other operations could still be done off-chain on your servers. That way the gameplay would remain unchanged for most players. Yet heavy spenders might pay more knowing that their items are freely tradable and that you have a limited supply.
2. Identity Management On The Blockchain
More worrying than publishers’ stronghold on in-game items to me is the fact that companies like Google and Facebook have a lot of control over our online identities. DLT-based digital IDs might become a viable alternative to centralized identity management by large corporations or governments.
In the future, I expect solutions will emerge where users control their own private identifying information (name, address, date of birth, et cetera) and use a distributed ledger to selectively confirm or reveal it. For example, a user might locally save documents to a mobile app that acts as a digital wallet with public-private keys cryptography — similar to what’s used in Bitcoin and Ethereum. Companies and other external parties could then request a confirmation of the user’s ID by creating a transaction with the user’s public key. The user would then sign the transaction with their private key, agreeing to confirm the requested information without revealing it.
The actual implementation of the DLT logic doesn’t really matter because the biggest challenge and opportunity lies in creating a smooth user experience of creating and managing their decentralized identity. The simplicity of using Facebook or Google logins sets a high bar for any alternative solutions. But anyone can experiment with new decentralized technologies.
3. Tokenized Digital Collectibles
Finally, a more exotic application is the idea of digital collectables. You might have heard about CryptoKitties selling for upwards of $100,000, and I believe that’s just the beginning.
Crypto wallets may soon be a common feature on smartphones, thanks to new browsers (for example, Opera) and smartphone manufacturers such as Samsung. As a result, wallets could also hold non-fungible tokens (or NFTs) that could represent any digital collectible.
It might seem silly, but people already hoard GIFs, sticker packages for messenger apps, and even digital “gifts.” Unlike GIFs or any other media assets, NFTs are often scarce and unique. This adds a whole new dimension to the experience of digital collecting and brings it closer to the world of traditional collections such as stamps, coins and a myriad of other items.
For apps with gamified elements, I believe that NFTs could strengthen the appeal of badges and other achievements. These rewards could enable new functionalities, be limited and tradable, create demand from other users and increase engagement.
NFTs could even be used by offline marketers as digital alternatives to traditional giveaway merchandise, such as silicone wristbands, pin badges and medals. It’s hardly possible to wear all charity merch at once, but you could collect NFTs on a single wallet to showcase the causes you support.
There is a lot of uncertainty around the new opportunities we’ve explored in this post. Most of these use cases still depend on advances in user experience, transaction throughput, and general acceptance of the digital asset as something that is used beyond speculation.
To prepare for new opportunities, I believe it’s best to follow a range of use cases that are most relevant to your business and pay attention to the distributed ledger platform that is gaining the most traction. Right now Ethereum looks to be in the lead in terms of developers and applications building on top of it, but new generations of platforms will keep competing and pushing the industry forward.