The Big Microsoft Blockchain Announcement Everyone Missed

Chris Stead
Games Indie Games
Games Indie Games PC Gaming Xbox

Gamers are wary of cryptocurrency: for the most part, anyway. We’ve been burned before when it comes to new ways of handling the gaming economy. Remember the microtransactions reveal and promises we could buy DLC for as little as one cent, only to get horse armour for US$2.50. Or those free-to-play games that wall you into an in-app purchase moments after starting. And the less said about loot boxes the better.

As a result, the idea that we may one day be using a cryptocurrency to pay for our virtual games and downloadable content is often greeted with scepticism at best, aggression at worst. We’ve seen it time and time again in the comments. “Just another money grab,” the mob suggests, (sans expletives).

This is a problem. It’s a problem because the technology that drives cryptocurrency – the blockchain – reaches well beyond the finance industry. And when we say “blockchain” most gamers think “cryptocurrency” and let their eyes glaze over. It’s created a resistance to all the good the blockchain can deliver to our gaming future.

Perhaps this is why, with very little fanfare and in the shadows of its hugely successful E3 conference, Microsoft was very low key in announcing its work on blockchain. You probably didn’t catch it all. But don’t let your eyes glaze over when you read the following and stay with us, as the implications are huge and positive.

Microsoft has announced that its royalty payments for game developers on Xbox are now handled by the blockchain. It also revealed that it is working on converting digital rights ownership to the blockchain as well, with Ubisoft partnering on initial trials.

Microsoft Azure is hosting the royalties blockchain.
Microsoft Azure is hosting the royalties blockchain.

Xbox Royalty Payments Now Handled by the Blockchain

For those still unsure about the blockchain and what it does, a quick recap. The blockchain is effectively a digital ledger used for storing transactions in a manner that cannot be altered, only appended. It’s used in the cryptocurrency space because it’s transparent, can be decentralised (so stored on multiple computers at once, rather than on one central server) and the process of recording and confirming a transaction is cheap, fast and secure.

Prior to this recent announcement, Microsoft’s royalty payments were handled manually on a spreadsheet. Think about that for a second. Think about the sheer amount of payments made in the Xbox Marketplace over any given day – even minute – and the process of tallying that up correctly and paying out the developers their cut of the proceeds.

It took 45-days. That’s a heck of a long time to know if your game is actually making you any money or not. It’s also labour intensive, costing a lot to manage. By moving this process to the blockchain, hosted on Microsoft’s Azure cloud, it all happens in real-time.

As a result, a developer can effectively ping the blockchain at any time, query the amount of royalties a title has made, and get a near real-time answer. Imagine the impact that must have! Let’s say you’re a small indie, and you’re wondering whether you should or shouldn’t begin DLC or a sequel. Or invest in some advertisements. Or even just be sure you can afford next month’s rent!

This is a great thing.

Alongside the announcement, Rohit Amberker, finance director, royalties and content operations, said, “after adopting the blockchain solution, even with only one-third efforts, we’re able to run the same royalty operations while providing a faster, more reliable service.”

Speed might not be something that many people associate with blockchain technology, due to the bloated processing periods and transaction fees involved with Bitcoin’s explosion in value. But this is another example of conflating Bitcoin with the technology in general. Hindsight is 20/20, but the new system seems like so much of an improvement, you wonder why it wasn’t done before. In the words of Tim Stuart, chief financial officer of Xbox:

“We are developing an ecosystem within the gaming industry that connects developers and publishers to game performance. Providing near real-time access to data greatly improves the process’ effectiveness and insights that lead to a more enriching experience for the partners.”

The Division 2 contractors paid via blockchain
The Division 2 contractors will be paid via the blockchain.

Microsoft and Ubisoft Experiment with Blockchain Digital Rights Ownership

Royalty payments are not the only blockchain conversion Microsoft announced in June. Linked to that is a secondary system that looks at digital rights ownership. In order to trial this concept, Microsoft has partnered with none other than Ubisoft.

The concept being trialled is one in which the various stakeholders who are owed a percentage of any royalties are recorded in the blockchain, and smart contracts are set up so any revenue is divided accurately, instantly, and in an automated fashion.

For example, think of all the contractors getting a slice of the pie in a game like The Division 2: from the musicians, to the writers, to the Tom Clancy estate. By establishing how and where each dollar is split through the blockchain, the correct digital rights owners can see what they’re owed and receive it through means far faster and cheaper than a spreadsheet.

For many followers of the rapidly growing gaming-blockchain space, it’s digital rights ownership that is the most exciting. At it currently stands, you don’t own the games or DLC you buy, or the in-game items, characters, and creations you build.

You merely license the right to use them. You can’t – in the majority of cases – sell them, gift them, shift them to other consoles or games, or otherwise control them. Blockchain technology makes that possible, in a secure, cheap, and fast way.

While this current trial is not along these lines, a successful experiment here can take us further along the journey to that reality. According to Loic Amans, senior vice president of finance and strategic planning at Ubisoft:

“We are always looking at how to leverage emerging technologies in all facets of our business. The opportunity to collaborate with Microsoft on blockchain use cases in the domain of digital contracts and royalties is truly exciting.”

A fan's concept art for the next Xbox design.
A fan's concept art for the next Xbox design.

What does blockchain technology mean for the future of Xbox?

On first glance, you may be wondering what these two announcements have to do with you, the gamer. Make no mistake, this could be the most important announcement of the year.

There are obvious surface benefits here for gamers. If developers can get their funds, or an understanding of their revenue, faster and more accurately, they can action their next work more efficiently. This could mean bigger, better budgeted DLC arriving faster, and sequels greenlit earlier on. Or simply less developers going under, or being acquired, due to incorrect revenue forecasts.

There’s also a reduction in costs for Microsoft, which could be paid back to gamers in some way. Perhaps Live subscription costs will go down (or not go up, at least). Or DLC becomes cheaper as Microsoft lessens its cut on purchases.

But look deeper and the real gold can be found. Microsoft is clearly now on a pathway to greater blockchain use. With the Xbox up against it this generation and needing to find a key differentiator in the next generation of consoles, blockchain technology could be Microsoft’s trump card.

Not only could it be a console where the players themselves truly own their games, their in-game creations, and their DLC in an open and transparent secondary market. But we could be enjoying a faster, more secure, and cheaper transaction economy. One where there are less overheads and fees driving up prices, and one where the developers and players in that ecosystem are paid near instantly for selling or trading products.

If you’re looking for further proof of this future, look to the comments of the general manger of finance operations at Microsoft, Grace Lao. Look at use of the term “gaming ecosystem” when commenting alongside the announcement.

“Smart contract technology is far more flexible and scalable than any prior solution for managing business agreements. We look forward to deploying his solution across our gaming ecosystem and exploring additional blockchain applications for other finance processes at Microsoft.”

The XboxCoin is coming, and that’s a good thing!

Chris Stead
A veteran journalist with 22 years of experience writing about video games for the world's biggest publications. The true journey began as a kid of the eighties, feasting on Mario, Star Wars, Goonies, Alex Kidd, California Games and more. The bones may ache a little more, but the passion remains!
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