Esports has developed much faster in South Korea than in any other country to become a massive revenue earner for their economy. The video games sector raked in US$2,389m this year and is expected to result in a market volume of US$2,829m by 2022, with an annual growth rate (CAGR 2018-2022) of 4.3%.
The country is a pioneer of sorts in establishing this culture, and this is best understood by the dominance of PC bangs in youth culture. The gaming industry is now merging with the other phenomenon which has found a large consumer demand in the country –blockchain and cryptocurrency. To understand the potential of these two sectors coming together, one needs to know the background of both in the Korean way of life.
Gaming in South Korea
From the end of the 1990s to early 2000s, young Koreans wanted to build their own culture, leading the proliferation of PC bangs. PC bangs are LAN gaming centers in South Korea, where multiplayer computer games are participated in by patrons for an hourly fee, typically ranging between 500 to 1500 KRW.
PC bangs have provided a destination solely dedicated to gaming and developing gaming skills. With the sudden increase in internet developments in Korea, about 20,000 PC bangs were set up across the country. A place where PC games are enjoyed and learned to play strategically. Top pro-gamers like Yo Hwan-lim – South Korea’s StarCraft legend – could potentially earn more than $400,000 a year from league matches and sponsorships alone.
The lure of money and fame fuels the desire to take up gaming professionally, even though the lifespan of a pro-gaming career is significantly short. Aspiring pro-gamers practice for 14 hours a day in these gaming centers, and even enroll in the world’s first esports education academy established there.
It is estimated that the expenditure on video games comes to approximately $100 per resident, which is three times the amount spent by Americans. Not surprisingly, Nexon and NCSOFT, two of the largest game development companies in South Korea recorded a combined net income of more than $370 million in 2012. 4.5 million out of a worldwide total of 11 million copies of StarCraft was sold in South Korea.
Blockchain for Video Games
South Korea established itself as one of the biggest markets for blockchain and cryptocurrency (Ether and Bitcoin) when the adoption of the technology soared in 2017. The demand for those still remains and has been extended to altcoins, and the gaming industry is positioning itself to reap its benefit. Gaming companies are adopting blockchain to raise revenue using game characters. The gaming industry of South Korea has regulations against using fiat money to trade game items. Blockchain technology has resolved the issue of not being able to earn a profit with this method by presenting cryptocurrency as a replacement for fiat currency.
Blockchain has also enhanced reliability and transparency to cyber competitions which are regarded as national sports in South Korea. These large-scale gaming events see the participation of ten professional gaming leagues, and the stats generated during the games is rapid and voluminous. The stakes are high as the money won at the end of the tournament is colossal, which has created a dire need of an error-free storage system for the instantaneous generation of scores.
The decentralized distributed ledger can be used to collect the numbers in an immutable data cache. Every data in a blockchain network is encrypted with a unique hash code and stored in interconnected nodes making it mathematically quite impossible to hack. Neither does this digital archive have a storage limit, therefore eliminating any chance of a system crash.
Gaming Companies Adopting Blockchain
Gaming leaders are roping in the expert services of software development companies from South Korea such as The Loop, as well as abroad such as California based HashCash Consultants. Studios of the likes of Nexon, Smilegate, Netmarble, and NHN Entertainment have pinned hopes on blockchain to create novel business models to stay ahead of the competition in one of the world’s fiercest gaming markets.Nexon ranks second in the list of big companies investing in cryptocurrencies in South Korea with a $14.6 billion market cap. It is preceded by telecom company SKT, according to Korea Exchange.
Chairman of Netmarble Games’ board of directors, Bang Jun-hyuk, announced its plans to implement blockchain to widen the company’s business scope. This led to speculations about the company, which is also the publisher of hit titles Lineage 2 and Seven Knights, to launch its own native asset.
The 1.325 trillion won market cap gaming company, NHN Entertainment Corporation, launched OKCoin Korea in January by funding OKCoin, once China’s biggest cryptocurrency exchange. OKCoin Korea is now big enough to compete with South Korea’s largest exchange, Upbit, which is invested in by mobile giant Kakao Corp.
Smilegate is another big earner in the Korean gaming industry and reportedly stated US$324 million in operating profit in 2016. The company reached this number riding on the success of its hit online first-person shooter game, CrossFire. Smilegate has collaborated with blockchain startup The Loop toissue a native assetintended for use on its Stove platform, which stores content on games and users’ posts.
The Road Ahead for Gaming and Blockchain in South Korea
While the gaming culture has caught on with rapidity in South Korea, blockchain and cryptocurrency have seen a slow rise in this South Asian market. However, a conflation of both has given wings to another level of consumerism. Pro-gaming which was once seen as an impractical profession because of a lack of financial stability in the field has been replaced by better options of earning money with the help of blockchain enabled cryptocurrency exchange, for one. Technology such as DLT has increased trust and reliability in the fairness of national and international level tournaments, and gaming centers such as bangs itself have opened up an all-new market for businesses. With its expanding hand in increasing the country’s GDP, blockchain has entered the Korean market for the stay.