Some of the more popular developments in late 2017 focused on scarcity and non-fungibility on the Ethereum blockchain, with ‘tokenization’ being one of the key buzzwords. One of the leading blockchain-based ‘games’, CryptoKitties, managed to clog up the entire Ethereum network for days on end.

CryptoKitties proved that blockchain-based digital collectibles will be one of the most significant use cases in the space. But why is it that digital, in-game items — such as skins, loot crates, and other collectables — hold real-world value, and what is their future in a tokenized world?

How are they Relevant?

While it has tremendous utility as a peer-to-peer electronic cash system, some of Bitcoin’s valuation can be traced to simple scarcity — much like how scarcity leads party hats in RuneScape or rare skins in CS:GO to serve as both in-game and real world currencies with prices over 10,000$. But with Bitcoin, it’s the security of the underlying blockchain protocol and the social consensus around it which makes this scarcity guaranteed. Similarly, having an asset digitally held on a network like Ethereum provides the trustless guarantee that an item that you own is yours alone. Currently, in-game items rarely have these guarantees.

We saw CryptoKitties taking off because of the popularity of card collectibles combined with scarcity (which was limited here by a sufficable issuance rate). CryptoKitties was just the first live example of this happening to a non-ERC-20 token, one which had the additional qualities of being usable in a sort of “game” environment where players could interact with their cats.

The Current State of This Industry

Across the industry, virtual goods are getting increasingly popular and giving game studios a new means to extract value. The highly popular title ‘Fortnite’ has, for example, recently set a new record in revenue by netting nearly 2.5 billion dollars in a single year. While the game itself is entirely free-2-play, its revenue was sourced from players spending money on in-game items like skins, collectibles and cosmetics. Many competitive free-2-play games also follow this model. By and large these items do not provide spendthrift players any inherent advantage for their games, and they are only for cosmetic purposes.

In 2017, the size of this market reached around 50 billion dollars according to WAX, a leading digital items trading platform. There are serious investors and traders in these marketplaces actively making a living on these digital assets.

The one problem in the industry is that these items are game-bound. Once a game dies, a player’s items die with it. This is a fundamental market flaw that blockchain can tackle — specifically, through smart contracts.

Opening This Market Up to the Blockchain

Opening up the market and bringing these collectibles to the blockchain would make them game-agnostic, thus significantly raising their value. A user can achieve true ownership, as no central developer company can interfere with the market to ‘reprint’ these items. This was actually one of the main reasons why Vitalik Buterin started Ethereum: a single company changed the value of an item that his in-game character possessed, thus changing its strength, which he’d put years of work into.

At CLC Group, we believe this market will only continue to expand, which is why we’ve worked to connect it with the smart contract ecosystem through the Chainlink decentralized oracle network.

In that regard, we are excited to share with you our latest partner, SteamAPIs.com, which will be listed on our Honeycomb marketplace at launch.

SteamAPIs is the leading API provider for accessing the Steam Community Market, which features over 360,000 digital items, skins, and collectibles, and which has transacted over 3.2 billion dollars during its lifetime. On the Community Market roughly 30,000 items are updated daily, and there are over 3 million individual users investing, trading, and gambling with these digital assets.

Together with SteamAPIs, CLC Group is the first to open up this global, digital market to smart contract developers, making it possible to trade, invest and tokenize these assets through smart contracts.

The Future of the Industry

Take a random CS:GO gambling website for example. Right now, there are dozens of markets with millions of dollars in volume where users gamble to win specific items in a lottery format. There exists a risk in skins being stolen or lost with websites shutting down, and users never know how the lottery algorithms are set up since it’s closed code.

With Chainlink and CLC Group, you can now connect a smart contract to a random number generator, offered by Chainlink, and the SteamAPI. The smart contract could then select a winner within a pool of participants, and by true randomness directly change the ownership of a Steam Marketplace item. Right now the centralized gambling websites handle these transfers, and they pose a risk to users through shutdowns and lottery tampering. These shutdowns happen regularly. In fact, the community even manages a list of known scam websites on github. The promise of smart contracts on Ethereum cutting out the middlemen is perfect fit and immediately applicable.

This is actually a use case which Cornell professor Ari Juels described in the Town Crier whitepaper. The whitepaper specifically cites a use case with Steam, and explains how a Town Crier authenticated data feed could be used as a trustless oracle for an exchange to take place within a secure enclave, whereby user credentials can be securely added to such an enclave in order to enable an exchange of games or items. Ari elaborates on how Town Crier would work with Chainlink here.

When the Town Crier whitepaper was published, the Steam API was not open to the public. We have now included an adapter for Steam APIs as part of our offering on Honeycomb, bundled together with a per-call pricing, which allows smart contracts to connect with these APIs through Chainlink.

In its current state, a smart contract would be able to use the API to query a list of a users items, the items price, the amount of the item model existing on the market, the lowest price it was sold and the highest price it was bought. The Chainlink node can get proof of the transaction happening with checking the buyers profile list of skins and see if the item ID is in that. In case the transfer didn’t happen, an pre-decided collateral (in cryptocurrency) would go back to the buyer.

At CLC Group, we’re proud to take the first steps to enable the tokenization of all in-game items and collectables. This tokenization will grant owners additional securities and enable new markets, which will in turn unlock the full potential of tokenized game assets. We’re thrilled to be a part of this burgeoning industry, and look forward to watching it grow in the coming years.

CLC Group is presenting an opportunity to own a share in the company to the general public. Check out our website for more info about the STO.