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Gaming Skin Trading: A $50 billion industry ripe for blockchain disruption

Dec 14, 2017

What you just saw was a “skin,” a customization to the way a particular virtual weapon in the video game Counter-Strike: Global Offensive can look like. This particular version, the Souvenir AWP | Dragon Lore, warranted a mind-boggling $35,000 price tag. Just like a tangible collector’s item, the rarity of the skin itself gives it a high ‘float value’ and an even higher price tag. But how did we get here?

A walk down memory lane

Skins have been a part of the gaming community for a long time. But it was not really an economy until they could be traded. Starting in 2011 when Steam® announced the Steam Trading beta for Team Fortress 2 (then the game with one of the highest player bases on the platform), people gained the ability to trade skins with each other. Before this, skins were only available through a random drop in the game. If you were lucky, you got something rare; if you weren’t, tough luck! With the ability to trade, a barter system was now available. Then, thanks to the opening of the Steam market in 2012, all these skins eventually became associated with a fiat monetary value, making fiat based trading a reality.

The skins themselves serve a very simple purpose — they make your weapon or character look cool and unique. You can create and curate a collection of skins, which gives you something to flaunt to other players, while serving as a status symbol to the collective whole. Consider it a virtual equivalent to people who collect baseball cards or shoes. The more extensive the collection, the prouder the collector. Just as a card collector would be ecstatic over a 1954 Ted Williams, these virtual connoisseurs may desire a particular version of a rare Dragon Lore with a certain ‘float value.’ Skin collectors usually pride themselves with a wide array of rare and limited edition skins that they have. Skins range from a few cents to extravagantly high priced, like the one we saw earlier. A benefit to skin trading is that it’s unencumbered by physical limitations. You can collect these skins while sitting in the comfort of your home and clicking away — and people are doing this in a massive way. Skin trading has become an integral part of massive gameplayer communities like CS:GODOTA 2H1Z1PLAYERUNKNOWN’S BATTLEGROUNDS and Team Fortress 2. With massive options available, skins allow players to customize their character in numerous ways. Players regularly invest money via credit cards, eWallets, coupon codes or Bitcoin to buy these items. With a player base of millions of users, you have a massive untapped market of open trading. However, once invested into the Steam market, money can only be used to purchase items in the Steam Marketplace. So, although you may sell something for a hefty sum on the Steam market, your profits would never translate into ‘real’ money.

This is where centralized marketplaces such as OPSkins come in. With peer-to-peer trading, there is the ever-present risk of being scammed. If you trade with someone you don’t know, how do you know that they will keep their end of the bargain? Centralized marketplaces like OPSkins minimize these risks by being a neutral trustworthy third-party in the transaction.

The Secondary sales

Skins collection happens via random drops or by purchasing keys that open crates filled with items. Theses cases can be bought from the in-game store, and may contain a number of distinct skins in various states of wear. Depending on the game, added features like StatTrak™, keep count of the kills the user amasses over the weapon’s lifetime. Elements like the product’s rarity, limited availability and market trends, factor into the product’s value in the secondary market. The secondary market is where the action happens, by giving millions of sellers the opportunity to sell the skin. When the product is listed on any of the markets — be it OPSkins, Steam Market, or any other escrow sites for that matter, it is not just available from the game developer, so it’s reach is exponentially bigger. Think of it in terms of the resale market for cars, or real estate. While new property is always under construction, the main appeal of the market comes from the asset’s resale value, and the volume of the resale market outweighs the primary one several times over. However, the secondary market, which involves users on both sides of the transaction, can have problems like accessibility, availability and the ability to trust the trader. Even so, this specific secondary market itself is estimated to be valued at $50 billion. Because buying virtual items using antiquated fiat payment systems comes with a number of limitations and problems, there is a dire need for a unified approach that does not soley rely on centralized consignment marketplaces or fiat currencies, but rather provides the global pool of buyers and sellers with real time information on every item available for sale across the world.

Enter the most disruptive technology development in the past decade — the blockchain.

The blockchain disruption

A Blockchain based platform will allow the virtual item industry to do away with traditional centralized consignment marketplaces. The entire transaction history of all global trades will be available on a publicly distributed ledger. Using cryptocurrency tokens, video gamers can buy and sell virtual items in a fast, secure and transparent fashion that has never before been possible.

Enter Worldwide Asset eXchange (WAX) — a blockchain based smart contract platform introduced by the most experienced digital item marketplace operators on the planet — the team behind OPSkins. Powered by the Ethereum blockchain, WAX brings vast improvements to the digital item trading industry, helping the virtual item trading economy expand greatly beyond its existing $50 billion in annual turnover of today.

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