Crypto: What are gaming coins and how do they work?

Yahoo Finance's Brad Smith joins the Live show to discuss gaming coins and how they work.

Video transcript

BRIAN CHEUNG: Cryptocurrency and gaming culture have gone hand in hand for years. And with the surge in new coins, game developers are carving out their space in a rapidly tokenizing reality. Yahoo Finance's Brad Smith joins us now to explain how these growing altcoins use a so-called play-to-earn model. So Brad, give us a sense of why all of this is getting so popular. BRAD SMITH: Yeah, Brian, so historically, there has been a strong overlap in the crypto community and the gaming community Venn diagram, if you will. Gaming coins, they take digital currency a step further by being both purchased and earned by in-game play. Now, similar to some of the other more well-known cryptocurrencies, like Bitcoin and Ethereum, gaming coins can carry a higher value based on the supply and circulation, as well as the number of games where a token can be redeemed. Now the largest gaming coins by market cap, currently Decentraland, you've got Sandbox, APEcoin, and Axie Infinity among those top five, four out of those top five that I just mentioned a moment ago, according to CoinMarketCap. Now, most often, gaming coins are tokens. They can be used for player attributes or skins or in-game NFT drops or other exclusive events as well. So we've already passed the checkpoint of concerts being held in games. Think Travis Scott, Ariana Grande, and J. Balvin and Fortnite. Plus, you've also got Lil Nas X taking "Old Town Road" virtual as well. 21 Pilots, they played Roblox. Now these examples serve as test cases or early proofs of concept for a future where more concerts could be held in a game Metaverse with the price of admission being a gaming coin. Another example of play-to-earn, in December, Ubisoft, they had launched limited edition nonfungible tokens, NFTs, via Ghost Recon, though the quality of the limited edition drop was heavily scrutinized for a lack of quality and extreme gameplay prerequisites. In theory, those NFTs would then be able to be resold for other game coins or cryptocurrency. And so both the concerts here and the exclusive drops, they provide this glimpse of the growth potential that gaming coins can experience, touting a form of earned, owned, and transacted currency for an already highly engaged audience. AKIKO FUJITA: So, Brad, where does all this money sit? BRAD SMITH: So the founding companies here for gaming NFTs have benefited from institutional money investing into their projects. You think about during December 2021, or during the whole year of 2021, rather, blockchain and NFT gaming companies, they received a sum of $3.6 billion in investments over the course of the year, according to Axios Gaming. Now, as I mentioned off the top, the Sand token being one of the largest gaming coins by market cap, it's issued by Animoca Brands, a company that's actually founded by Yat Siu, who has played the role of game owner, acquirer, investor in blockchain gaming at large, as well as an issuer of nine fungible tokens, Animoca Brands has been. So the company has also been valued at $5 billion as well. Every gaming NFT company is vying for a larger piece of the growing industry sales, but they also have to compete with tech industry behemoths such as Microsoft, who have announced plans to bring blockchain technology to Xbox users. So in 2021, $4.8 billion in sales was made by gaming-related NFTs. That's according to data from DappRadar, which equates to about 20% of the total NFT sales that took place last year. So this is a good glimpse of where some of those sales and where the money will reside, going forward from here, in the NFT gaming landscape. BRIAN CHEUNG: Right, and importantly, Brad, are you in any of these games? Do you have one of those dancing "Fortnite" avatars. I could see that. BRAD SMITH: I wish I could have-- I wish. I wish I could have made some money off of all of those times that I played Tiger Woods PGA TOUR growing up or NBA Live or Madden, even though I had to give up the sticks on multiple occasions. But you think about the growth prospect for gaming coins. It really stems from the growth of gameplay and ability to fend off hacks along the way. Data from the 2022 Digital Media Trends survey from Deloitte, that revealed a marked shift in which younger consumers are moving their streaming screen time towards gaming. The popularity of gaming, another global trend there. Most respondents in the UK, Germany, Brazil, Japan, they play video games regularly. In all of these countries, younger generations are also more likely to be gamers, with Gen Z and millennial gamers spending an average of 11 hours per week playing. About half of all US gamers say that playing video games has taken time away from other entertainment activities. So all this said, a rising tide of virtual assets, peer-to-peer transactions that's expected to lead a greater level of utilization and storage of gaming coins in the future. BRIAN CHEUNG: All right, Brad, we'll see if you and I can pool together our VC for NBA MyPlayer and maybe get a 2K scrimmage going. Brad Smith, thanks so much for the breakdown.