FEATURE a government can engage in“ quantitative easing”( a fancy name for printing cash) simply by saying,“ Let it be done.” Suddenly a hundred billion dollars materialises to buy some national debt. Game-makers now find themselves in a similar position, generating skins in the same way governments print cash.
Cryptocurrency happened because enough people with enough skills wanted‘ money for the internet’ that was free from government interference. The same thing is now happening within skins trading.
Freeing the market You may have heard of initial coin offerings( ICOs), where businesses offer tokens for sale. When people buy them, they are funding the business in the expectation that it will be a success. A crypto token is a‘ thing’ with a value, a representation of a contract. The token is created and the company writes up the basic rules for it: the token amount, its value and any special conditions.
For example, a casino business creates an ICO with tokens at $ 1 each to raise funds for the project. Players buy these tokens and use them in this casino. The casino is successful and, because of the finite supply of tokens, their value rises. It now costs $ 10 to buy a token to play in the casino and the person who bought the token initially for $ 1 is now $ 9 richer if they sell it in a marketplace.
A couple of the biggest igaming ICO’ s have been with Funfair. io, which had a peak market cap of $ 791m, now a $ 125m market cap, and Betterbetting, which had a peak market cap of $ 12m and now has a market capitalisation of around $ 3.3m.
But one ICO that enables gambling on a massive scale was bigger than any of these types of offerings.
After OPskins launched the WAX platform and token its ICO had a peak market cap of $ 1.345bn, and is currently hovering around a market cap of $ 124m. OPskins is the largest of the skins-trading platforms and it didn’ t enjoy the centralised nature of the skins ecosystem, where the likes of Valve could make a decision on trading with the potential to kill that ecosystem.
OPskins decided to launch WAX, a decentralised platform that enables anybody to run a fully functioning virtual market place without any investment in infrastructure, payment processing or security. This marketplace is designed to transact anything of value, but most notably
skins and loot boxes. It aims to facilitate the 400 million gamers globally who have skins or virtual goods of some kind. Its development of WAX ExpressTrade makes it easy for anyone or any site to trade virtual items. As a result, hundreds of trading sites have emerged already.
The genius of this exchange is that players won’ t be trading‘ money’; they’ ll be trading skins and items such as adapted guns and loot boxes. These items will have various market values because they will have degrees of rarity and interest – say, a red skin on a desirable gun in CS: GO or a loot box that will probably give out a bigger prize.
The gambling link The result is that skins trading is moving from being centralised to becoming decentralised. And here is where gambling comes in.
Let’ s say I have a skins gambling site. A player comes onto my site with an inventory of items with a particular market value, which they exchange for credits and play casino games. The player loses and forfeits their item. Because there is an ecosystem of item exchanges, I can take that item and exchange it for money. Or a player buys virtual items, gambles them and I get my revenue through their purchase of these virtual items.
Skins roulette games typically have a house edge of around 15 %; for comparison, single-zero roulette has a house edge of 2.7 %. It’ s a strange thing but skins gamblers love skins roulette. If I’ m in the US, I can sell loot boxes, which I might design so the marketplace value of the average loot box is 15 % less than market value. Therefore I make a 15 % margin. In my terms and conditions I might say that a player can’ t redeem the loot box contents or the roulette winnings for cash. But I can’ t stop someone exchanging their items.
By now you might be thinking,“ This is interesting; it’ s weird, huge and in the realm of gambling …” That’ s more or less how I feel.
However, there are wider issues to consider too and one of the nastiest is around underage gambling.
Parent Zone, an organisation that promotes sensible online activity for under 18s, recently polled an undisclosed number of children aged between 13 and 18. About 27 % of respondents said they had heard of skins betting and 29 % saying it was a serious problem for underage individuals. In headlines, this translated as“ 400,000
UK minors to be hooked on gambling through in-play video games items”.
There is a lack of detail here but the point is that unregulated pseudo-anonymous skins gambling will be very popular with under-18s – and assuming skins gambling takes off, governments are going to come down on skins gambling operators in a huge way unless they have proper player welfare and protection in place.
How big can crypto get? In 2016, Narus Advisors and Eilers & Krejcik Gaming predicted that by 2020 the skins-gambling and esports market would be about $ 19.7bn a year. Then Valve attempted to kill off skins gambling and market valuations crashed. But because of moves by the likes of OPskins, with their WAX tokens and Expresstrade marketplace, Juniper research forecasts that skins gambling will reach a $ 50bn spend by 2022. Its growth will be rooted in ambiguous legislation, gambling without feeling like it’ s gambling and the evergrowing gamer culture. This is the weird world of crypto gambling.
Traditional igaming businesses using cryptocurrency will grow in line with its proliferation. I think skins gambling is going to be vast but with lots of serious issues with underage gambling. For you as an affiliate, offering crypto-casinos on your websites is just another revenue stream that will carry on growing.
With skins gambling, I’ m not quite sure how that’ s going to play out. I think it’ s worth keeping track of how this develops as skins gambling sites emerge and become profitable. If you can, start researching and see what affiliate deals are in place.
ABOUT THE WRITER: Nick Garner has been around igaming since 2006, having previously worked as a marketing manager at Betfair( Betfair PaddyPower), then senior marketing manager at Unibet( Kindred). In 2012 he set up a successful igaming digital-marketing agency, which he subsequently sold to launch his crypto casino Oshi. io. He has also been a successful sports-betting affiliate.
CREDIT WHERE IT’ S DUE:“ I wrote this article with the help of the founder of ninjaskins. com,” says Garner.“ The successful skins-gambling operator is positioned to grow exponentially now that skins trading has become too centralised on the blockchain.” Garner is currently interested in conversations with skins gambling investors. nick. garner @ oshi. io
iGB Affiliate Issue 70 AUG / SEP 2018 29