Crypto-games based on Ethereum fall under the category "Gambling".
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This week, the university published an article stating that a new study examined the nine most highly rated Ethereum dapp (decentralized applications) games listed on State of the DApps, a non-profit dapps directory, and found that they meet the definitions of gambling. The research paper, which will be presented at the CHI Play conference in Barcelona on October 24, explains that crypto-games are video games with a fully or partially distributed registry architecture that runs on a crypto-currency network, giving players a demonstration of ownership of virtual assets. The games studied include about 16,000 accounts of players, says the article, adding that this is still a niche phenomenon with respect to the gaming sector in general. The researchers chose Ethereum because it is "the oldest cryptocurrency that supports everywhere and the most consolidated based on market capitalization".
These games, researchers discovered, allow players to exchange virtual goods with cryptocurrency, which can then be exchanged for fiat money, so they are "a real money gaming instance", comparable to jackpots and gacha games that concern regulators. "As in many online games, crypto-games allow players to exchange or auction such gaming items for game currency. Unlike most free-to-play games, in-game crypto-games, in-game currency is often exchangeable and can be used to pay for other goods and services outside of gameplay and can therefore be replaced with real currency," says the study.
Focusing only on sampled games and not on crypto-games in general, the researchers found that these games "link investments in crypto-currency for gaming objects and actions to case-based mechanics". The difference from many other games is that these nine games require players to pay for items and perform actions before case-based events, which makes them "similar to betting mechanics".
Oliver Scholten, a PhD student in Computer Science, said: "Unlike games with prize pools, all the crypto-games in the studio allowed direct or indirect exchange of in-game items for real money, making them more easily suited to gambling criteria. This does not mean that technology should not be used to develop games, says Scholten, but that "designers need to think carefully about how their decisions can affect players' spending.
"While the underlying technologies are new, the field of cryptocurrency is evolving rapidly and it is possible that the types of issues raised by research may become more widespread in the coming years," the article says. The study adds that crypto-games are growing in popularity and have attracted significant financial investment from gamers. The development of a set of specific design criteria, based on the five-point criteria presented in the paper, the researchers say, could help crypto-game developers not to unintentionally create gambling platforms when they want to make non-gambling games.
Meanwhile, coincidentally, we reported last August that a leading Shariah consulting firm specializing in Islamic financial solutions, Amanie Advisors, in collaboration with the Ethereum Foundation, examined the Ethereum platform and its native Ether currency to see if it violated any prohibition and if it could be admitted to the Islamic community. They found that Ether is Shariah compliant, but only as long as it is not used for profit and any kind of gambling is certainly prohibited.