Digital currencies, blockchain technology and eSports

As eSports take place in a digital environment, it is no surprise that game developers and platform owners embrace the use of digital currencies. Such currencies take many forms, including decentralised currencies which use encryption techniques, such as Bitcoin, and centralised currencies used and accepted among members of a specific virtual community, but all are, essentially, a digital representation of value. eSports is the competitive playing of virtual games for rewards. A whole host of in-game virtual currencies exist, for example Linden Dollars (used in Second Life) and WoW Gold (used in World of WarCraft). Virtual currencies are often earned during game play and can be used to reward players for their gaming performance. Sometimes virtual currencies and skins can also be purchased with, and cashed out into, real money.

Amazon announced in October 2016 that it will be introducing a new virtual currency called Stream+ into its game streaming platform Twitch. It is reported that Stream+ coins will be awarded when players watch different streams and can be spent on in-game items and for ‘polls and wagering’. Detail of how ‘wagering’ will work in practice has not yet been released, but it will be interesting to see how Amazon navigates the regulatory framework. The onus is on operators to manage the risks of cheating, match fixing and inciting young people into gambling. However, this presents particular challenges for an industry which operates globally and in the digital environment, where players’ real identities and match fixing can be hidden behind the internet or a screen.

There have been various instances where the integrity of eSports has been called into question, for example, allegations of eSports tournament organisers failing to pay out cash prizes. Could blockchain technology, which underpins cryptocurrencies such as Bitcoin, be used to create a more secure environment for eSports gamers? Blockchain is a shared digital ledger, distributed across a network of computers which can be used to record and verify data. A decentralised eSports gaming platform based in the Ethereum blockchain is being developed by FirstBlood. Once the FirstBlood network verifies the match result, prize money is automatically distributed to the winning individual or team using smart contracts. According to the FirstBlood whitepaper, one of the features of the decentralised automated platform will be a user reputation system which allows users to identify players who have a history of abusing other players or hacking. As the popularity and commercial value of eSports continues to increase, so too will the call to ensure the integrity of the industry. Blockchain technologies have the potential to materially deliver against this goal.