traverselegal - October 6, 2022 - Blockchain
Blockchain gaming is not necessarily new to the industry but has seen a recent spike in popularity. One of the first widely recognized blockchain games was released in November 2017 for personal computers. This pioneering game (CryptoKitties) had a simple concept that allowed players to make money, in cryptocurrency. Making money doing something you love to do can be ideal. However, profiting with blockchain gaming does not come without risks. You can mitigate those risks by understanding more about the blockchain process and how it works in the gaming world.
Blockchain gaming is also referred to as NFT gaming or crypto gaming. These types of games have a play-to-earn model, where players can earn cryptocurrency. Cryptocurrency, a digital currency, can be used to buy and sell things. Some of the most popular types of cryptocurrency are Bitcoin, Ethereum and XRP.
Blockchain can be described as “a system in which a record of transactions made in bitcoin or another cryptocurrency are maintained across several computers that are linked in a peer-to-peer network”. It is an unchangeable ledger that facilitates transaction recording and tracks assets in a business network. Blockchain technology allows users to confirm transactions without a need for a central clearing authority. We see this transparent ledger system used in a variety of industries including cryptocurrency, health care and food safety. Anything that requires recording transactions or data points can benefit from using blockchain technology.
Buying, selling and trading of items and NFTs in video games between users all take place on the blockchain. Other transactions that occur on the blockchain within video games include: gaming tournaments, live streaming (viewers pay to watch your content and creating guides to sell in game). There are currently several hundred “blockchain games” available on the market. This number is expected to grow significantly with the rising popularity of NFTs and the Metaverse.
This powerful technology has forever changed the gaming industry. Video games have without a doubt evolved over the years since they were first developed. They have improved and grown in ways that could not have been anticipated. Some technology advancements are more obvious than others. Players (causal and pro) can tell when a game looks better. Better graphics and more color choices that create sharper and more realistic images are surface upgrades that anyone can appreciate. There has also been a fairly progressive expansion in social involvement. Developers and game creators across all platforms (PC, Xbox, Playstation, Nintendo etc) have dedicated features and game modes to bring people together (co-op, pvp, teams). Playing video games is not an individualized activity anymore.
Blockchain was the next natural progression of social activities in the gaming industry. Now, developers and gamers can build resource rich games with goods that can be bought, sold and traded between players. On occasion these players may profit from these transactions. Players can earn rewards in game for their dedication. Blockchain technology paved the way for NFTs, allowing developers to create unique one of a kind items for their players to enjoy and potentially sell or trade.
You can make money playing blockchain games. It is legal to profit from a “play to earn” game. There are legal considerations you should be aware of if you decide to try your hand at crypto gaming. Income from buying, selling or trading in game assets is liable for taxes. Cryptocurrency is considered a form of property by the IRS, it’s subject to income and capital gains tax. Every state is different and may also have their own unique laws for cryptocurrency profit made from transactions within video games.
Protect yourself and mitigate potential risk by consulting with a Blockchain Lawyer who specializes in cryptocurrency.