Metavers

FTX’s New Gaming Platform to Fuel Metaverse Growth

Crypto exchange FTX’s launch of a crypto gaming platform is seen as a make-or-break strategy to lift revenues while giving a fresh boost to an already burgeoning metaverse or virtual reality (VR) industry, analysts say. An FTX spokesman says the unit is already “live” and working to forge partnerships with gaming developers to provide crypto-as-a-service, enabling them to add play-to-earn features to their products through non-fungible tokens (NFTs) .

“They are working to partner with developers so if, say, Activision wants to add crypto gaming, they can help them do that,” says the spokesman, adding that FTX may provide updates about such partnerships during the upcoming Game Developers’ Conference in San Francisco starting March 21.

Meanwhile, the division’s newly appointed chief, Steve Sadin, said, “Our primary focus is providing Web3 [decentralized web] support for gaming companies. Whether you are a one-person indie or a global developer/publisher with tens of thousands of employees, we want to enable you to safely and easily build and operate fully compliant crypto games that will be enjoyed for decades.”

Sadin added FTX will strive to choose quality developers and franchises amid criticism that many NFT games are of poor quality or rife with scams, bringing investors losses.

“We’re not here to support any pump-and-dump projects,” he told Decrypt.com. “There needs to be a great design, a passion for making [and] operating games, and a demonstrated commitment to doing what it takes to make a game successful for the long term, or we’re just not going to be interested.”

Worth around $30 billion in January (before the latest crypto meltdown), FTX is seen as a trendsetter in the crypto space where it operates as a fast-growing, decentralized exchange for a wide range of tokens, NFTs and derivatives. Its foray into gaming comes as blockchain technology is set to bolster the space by 12% annually to $125.6 billion on a CAGR basis, according to Technavio consultancy. FTX says it is targeting the world’s 2 billion-plus crypto gamers “who have played with and collected digital items and can now own them.”

Future gains will also be driven by traditional players’ scramble to join crypto and metaverse gaming as more people, notably millennials, gravitate toward blockchain-enabled platforms.

Microsoft (MSFT) and Epic Games recently announced such incursions, with the former moving its Xbox franchise into the blockchain and the latter investing $1 billion to muscle into the metaverse. For its part, FTX also recently announced a $100 million investment to help the Solana decentralized application [DApps] blockchain expands its gaming offerings.

“It’s a calculated move,” says Ed Moya, senior analyst at Oanda. “There is a growing expectation that Solana will continue to gain traction as one of the dominant blockchain protocols behind the next round of crypto growth.” He adds art and collectible NFTs are losing momentum, shining a light on gaming tokens as the next hot trading asset, which Moya says could have a longer term appeal.

“There is potential for gaming to be done massively on the cryptoverse, which is why you are seeing investments,” he adds. “Gaming companies are losing a lot of their power so the pressure is on to be part of this blockchain integration.”

Innovation/metaverse boost

Jane Edmondson, CEO of ETF indexing firm EQM, expects FTX to bring much innovation to the space. “A lot of people are excited about it as gaming is where growth is right now,” she says. “A lot more gaming companies will probably get involved” taking the space to the next level.

Metaverse NFTs is one area where FTX will innovate, she notes. The space continues to gain traction with an unnamed Canadian firm now working on a Netflix series that will feature a metaverse game with 3D NFT characters, though it’s unclear if it will team with FTX. “The game’s characters will be in the series. They are converting video games into film and vice versa,” Edmondson said.

Integration/security challenges

Blockchain expert and Rutgers Business School professor Merav Ozair says FTX’s crypto-as-a service offering “is fascinating,” helping expand blockchain’s use cases, boosting the token-trading industry and bringing more liquidity and engagement to the space, such as many digital currencies have collapsed amid geopolitical tensions brought by the Russia-Ukraine war.

But there are challenges. “There is going to be increased competition and we need more interoperability so people can move and take tokens from one game to another,” Ozair said. “If you look at the metaverse [protocols]you can’t shift your assets across networks that operate in silos.”

Security is also a problem as some protocols have fallen vulnerable to hackers and insider rigging.

“They have to work on security solutions and hopefully we will see new ideas and innovation,” Ozair adds. “These organizations [such as the new metaverse platforms] It should also move toward decentralization to better encapsulate blockchain technology features of immutability, transferability, transparency and security.”

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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