A four-part review of Ultra, a Next-Generation Blockchain powered PC Game Distribution Platform.
Welcome to part four of my four-part series on the Ultra platform. In part one I covered Ultra’s team, as well as their partnerships with Ubisoft, AMD, and the as yet unnamed Chinese “Operator”. In part two I covered Ultra’s approach to governance and block producers, their solutions to Steam’s various pain points, the network effects of the Ultra platform, and the new launch window and how it affects Ultra’s chances of success. In Part three i covered Ultra’s referral systems as well as the UOS token.
You can read part one here, part two here, and part three here.
And if you haven’t already, you should immediately check out the video demos of the platform below!
So without further ado, here’s reason 11 and 12 detailing why Ultra is set to disrupt the gaming sector.
Many blockchain and cryptocurrency experts believe blockchain tech will see its first mainstream adoption in the gaming sector, and it’s easy to see why. Gamers are often among the first to adopt new technology — they are a young and tech savvy demographic. In addition to that, gamers are well accustomed to in-game economies powered by digital currencies, as well as the ownership and trading of digital items. Blockchain is a perfect fit for gaming economies and can improve and expand them in powerful ways.
The most talked about application of blockchain in gaming is in the ownership of trading of digital assets. The trading of digital items in video games is already a $50 billion dollar industry. While this is already a massive and growing industry, it’s growth is significantly hampered by a few factors including: lack of true ownership, fraud, lack of transparency, and unaligned economic interests between players and developers. Blockchain can solve all of these problems.
At the core of blockchain’s value proposition to digital item trading is the NFT, or non-fungible token, which is essentially a unique, indivisible token that can represent ownership of something e.g. a digital item in a game. The Ultra platform will make extensive use of NFTs including a marketplace where gamers can buy, sell, gift, or trade digital items. There are many good articles on how the NFT will revolutionise the trading of digital items, so I won’t go in to great detail on the topic here. Instead I’ll focus on the application of NFTs that power its core offering — games.
Briefly though, here are some of the ways that NFTs and blockchain will improve digital item trading.
How does blockchain improve digital item trading
Provides true ownership — Blockchain is the first technology to allow true ownership of digital assets. Having true ownership over their digital assets would allow players to derive real-world value of our virtual possessions, and permit them to sell and trade those items freely.
Proof of scarcity — Blockchain allows game developers to create rare virtual items and prove their scarcity. Users will be able to trust that a given item is rare, and see exactly how many have been, and even could be, issued.
Prevents fraud — For every 1 digital item purchased legitimately, 7.5 are lost to fraud. Blockchain can all but eliminate fraud by giving the purchaser absolute certainty over the legitimacy of an item, and removing counter party risk that is prevalent on black markets.
Increase the value of digital items — Giving players the ability to trade, share, gift, and sell their items for real money cements their economic and social value.
Secure storage — As the value of rare digital items increases, so too does the importance of keeping those items safe and secure from cyber criminals. Blockchain wallets provide tremendous security and are virtually unhackable.
Aligned interests — Secondary markets can be set up to allow developers to take a cut on every digital item sale, aligning the economic interests of devs and users.
Provenance — Transparency around ownership history could result in some items worth incredible sums of money. Imagine a famous E-sports player wins a top competition, then autographs and auctions the weapon that got him the winning kill. We already know that in the physical world, an item like that would be incredibly valuable, for the first time we are able to replicate that in the digital world.
Multiverse Items — Blockchain also creates some amazing new possibilities for digital items, like so-called “multi-verse” items. For the first time, you can conceivably have digital items that are usable across multiple games within a series, or even across franchises. This has been a focus of Enjin, another blockchain based cryptocurrency project focusing on NFTs.
These are just some of the ways blockchain can enhance digital item trading, since the possibilities are only really limited by the imagination of developers. Ultra’s aim is to create a new standard for NFTs that can fully unleash the creativity of game developers.
While we’re on the topic of digital item NFTs, Nicolas dropped a hint in Telegram that we may see existing big games adopt NFTs on Ultra. If what they introduce is compelling and makes the Ultra version of the game an improved experience, it could be a significant driver for user on-boarding. That, of course, is not limited to existing games, but all games released on Ultra.
Let’s now look at Ultra’s game NFTs and how this flexible feature creates a win-win-win situation and will represent a significant improvement to the status quo and be a major point of difference over its competitor, Steam.
On Ultra, every game, game subscription, and DLC is an NFT. This means that every time a player purchases a game, they receive a token in their wallet that represents their ownership of the game. These NFTs are fully programmable within Ultra’s ‘Token Factory’, meaning everything related to the price and revenue share structure, resell-ability and tradeability conditions, and availability and supply, is all fully customisable. For developers publishing their games on Ultra, the customising of the NFT can become the core of the marketing strategy of their games and enable various new revenue streams.
Tradeability and Resellability
As the distribution of video games continues to move away from physical copies towards digital downloads, there has been a lot of debate around ownership of digital games. If a gamer purchases a game on Steam, they don’t actually own it, they own a license to play the game. That means they have no ability or right to gift, trade, or sell the game, like they would if they have purchased a physical copy. In fact, it is against Steam’s Terms of Service to attempt to sell games, or the accounts they are associated with.
Ultra will be one of the first distribution platforms to allow the re-selling of digital games. When setting the parameters for their game NFTs, developers can opt-in and allow re-selling of their games, as well as the conditions upon which re-selling can take place. Developers can set a minimum re-sell price, they can allow re-sales only after a certain amount have time has passed since launch, to avoid cannibilisation of launch sales, and they can set an amount of commission they get for each additional sale. This benefits all parties — The developer gets another revenue stream by taking a cut on all secondary market sales, the seller gets to recoup some of the money they spent on the game, and the buyer gets access to content they may not have been able to afford at the game’s full price. Win-win-win.
It also has another effect that is overlooked when it comes to the enabling of secondary markets, and that is, people are more likely to buy things if they know they can sell it later. Imagine how many fewer cars would be purchased if the re-selling of cars was made illegal. Games are obviously a lot cheaper than cars, but the principle still applies in that not permitting resell-ability can negatively affect demand.
The debate around ownership of digital games is even taking place in the courts, with a French court recently ruling that Steam must allow its users to re-sell their digital games. Valve is appealing the decision, but it seems inevitable that as new distribution solutions emerge that restore users ownership rights over digital purchases, Steam and other platform’s policies will become increasingly untenable.
Valve will appeal French courts ruling that Steam cannot ban resale of 'dematerialised' games…
Update: Valve's Doug Lombardi responded to our request for comment with the following statement:"We disagree with…
On Ultra, developers can even permit the selling/trading of game progression, character accounts etc and take a percentage cut of every sale. This creates another win-win-win outcome. It’s another revenue stream for developer’s, but here instead of getting just a percentage cut of the price of a game, they’re getting a cut of whatever value the game plus game characters, item inventory etc is determined to be, which could be hundreds or even thousands of dollars. It’s a win for the sellers because they’re seeing a monetary return for the many hours spent in the game, and it’s a win for buyers because they can make the purchase without any fear of being scammed, which is an ever present risk when buying on a black market.
Price and Revenue Share
As mentioned in Part 2, Steam has a major discoverability problem, due to the massive volume of games releasing on the platform every year, and Steam’s storefront algorithms that favour large publishers that account for the vast majority of their income. Steam also lacks a way for developers to effectively market their games. The result is that in an ocean of games, smaller developers have an extremely difficult time catching the eye of gamers, not to mention influencers, streamers, and other content creators. Meanwhile, gamers have a hard time finding interesting content outside of the already massively popular titles.
On Ultra, developers will be able to customise their game NFTs to enable commission from sales referrals. They can set who the potential beneficiaries are, what percentage share they receive, and the duration of the deal, among other things. This could fundamentally change the go to market strategy for developers. No longer will they need to go through an agency to set up these deals with individual streamers. Instead the referral system organically incentivises others to promote content on their behalf, effectively crowdsourcing the marketing and promotion of their games.
It’s of course not just the developers that are the winners in this equation, this will open up a major new source of revenue for many thousands of websites, streamers, and bloggers. Because it’s smart contract based, everything is fully transparent and the commission is paid out instantly at the point of sale without the need for an intermediary to facilitate the deal (and take a cut).
Gamers benefit from this arrangement as well. With so many new games releasing every year, it’s can be difficult and time consuming to find the quality titles in the morass of content. Meanwhile there is no great incentive for influencers etc to go digging either. Ultra’s referral system provides that incentive for influencers to do the leg work and find the “hidden gems” on the Ultra platform, meaning gamers don’t have to.
I covered Ultra’s referral system in greater detail in Part 3.
Availability and Supply:
The main reason for the transition from physical distribution of video games to digital distribution is cost. The cost per unit of distributing a digital game is insignificant compared to a physical boxed copy. There’s also no constraint on supply, since digital goods can be duplicated at no cost and downloaded infinitely.
Blockchain‘s greatest innovation is that for the first time in history, we can impose scarcity on digital goods. On the Ultra platform, developers will be able to impose supply limits on their content e.g. for limited editions or even super rare collectors editions. All of this would of course be provably scarce since every game is an NFT on Ultra’s blockchain.
Developers could even take this a step further and make the standard version of the game limited in supply, essentially meaning they could sell-out of the game altogether. Why would they do that? If the game became super popular, the value of the game on the secondary market could potentially skyrocket. Since Ultra’s NFT gives devs full control over the conditions of the secondary market trading, they could potentially capture a lot of the value from the trading of the game. The publicity around this rare and highly sought after game could drive interest even higher.
This kind of monetisation strategy is just theoretical of course, but it’s a glimpse of the possibilities with Ultra’s NFTs. It will be fascinating to see how developers experiment with this technology and what sort of new monetisation and marketing strategies emerge. David Hanson (co-CEO) gave a creative example of how a developer could monetise a game using a fixed supply and clever use of secondary market conditions.
All in all, according to David Hanson (co-CEO), there are something like 50 different parameters that a developer can change to customise their game NFTs, giving them a tremendous amount of flexibility over their marketing and monetisation strategy. All of this is done in an “attractive and convenient user interface” requiring zero coding on the side of the developer.
David and Nicolas (co-CEOs) have often referred to Ultra’s “Secret sauce” as the key to Ultra’s success. What is the Secret sauce? We don’t know, because it’s secret. What do we know? According to David, it’s UX related, and it’s social network related. It’s a new technology that is apparently so disruptive that it has executives from prestigious companies taking significant pay cuts to join Ultra:
As well as influential developers in the cryptocurrency space, such as Rami and Nathan James, the developers of Scatter, the popular wallet that secures billions of dollars worth of EOS tokens. Rami, since joining Ultra, has had a few things to say about the secret sauce.
According to David, it was also instrumental in securing partnerships with giants Ubisoft and AMD:
I’d love to be able to say more about the secret sauce, but the fact is, not enough information has been made available for any meaningful speculation. Since I’m not in a position of authority to talk about the secret sauce, and in the interest of not creating any unwarranted hype or speculation, I’ll let people make up their own mind 😇. And so — here’s some of what’s been shared so far on Ultra’s closely guarded new technology, the “Secret Sauce”.
I am aware of the conflict of including this in the list, since we don’t actually know what it is. However, given the obvious significance of the secret sauce as conveyed by the David and the team, it had to be included. After all, if the hype is to be believed, it could be the reason Ultra disrupts the gaming sector.
On the topic of “hype”, while i fully endorse a healthy dose of skepticism in the cryptocurrency space, with significant partnerships with giants Ubisoft and AMD already announced, Ultra is already delivering on the early hype. When it comes to the secret sauce — dismiss it as hype at your peril.
If you’ve been in the cryptocurrency space for any length of time, you will have heard the countless promises of blockchain and the industries it plans to disrupt. Back in 2017 there was a resounding narrative that mass-adoption was just around the corner. Here we are in 2020 and we still have not seen a mass-market adoption of any blockchain tech or application. I believe the Ultra platform is poised to be the first blockchain application to achieve mass adoption.
Firstly, it’s targeting gamers, a demographic that is uniquely suited and capable of being early adopters of blockchain. Gamers are accustomed to digital currencies and the ownership and trading of digital assets.
Secondly, they have massive partnerships with hugely influential players in the gaming space, as well as an unannounced partnership with a PC gaming giant in China (75 million users).
Thirdly, the industry it’s targeting is enormous and its main competitor, Steam, has significant and well documented issues that the Ultra platform solves. Given the size of the industry — Ultra would only need to capture a small percentage of Steam’s users to be considered hugely successful.
Fourthly, Ultra’s application of blockchain not only improves on competitor offerings, it provides powerful and unique solutions for developers, gamers, and third parties, made possible only through blockchain technology.
Lastly, the Ultra team’s pragmatic and business focused approach doesn’t ask developers (or gamers) to jump through hoops or force any changes to their existing business models — a big reason why they’ve managed to sign up over 150 developers to publish games on the platform, including many of the biggest in the world. For gamers, the Ultra team is building a platform that is slick and user-friendly, with blockchain as the invisible player in the background.
It’s these reasons and more why I believe Ultra is set to disrupt the gaming sector and become a major player in the years to come.
That’s it for Part 4, the final part of my review of the Ultra platform. I hope you enjoyed it!
To keep up to date on the progress of the Ultra platform as it approaches its launch date later this year, I strongly suggest you join the Ultra telegram group!
Or check out some of Ultra’s other resources:
Thanks for reading!!
Investment Disclosure: I own some UOS tokens.