January 06, 2018
Fund your game with cryptocurrency!
So you have your own indie game studio, and desperately need a way to fund your studio.
Let me guess:
- Maybe you tried finding investors, no one shown interest or maybe did not even want to talk about games.
- Maybe you tried publishers, but they also not shown any interest or wanted you to change your game and take a large chunk of the profits.
- Maybe you tried crowdfunding, but it either failed completely or you live in a country where crowdfunding is not supported.
- Maybe you tried doing freelancing work for other companies, but it's either difficult to find clients or it also failed in a spectacular way.
So, let's see a more unknown way, cryptocurrencies!
What is a cryptocurrency?
You probably already heard about Bitcoin, and that is one type of cryptocurrency, the first one and the most popular. Many people that barely know what Bitcoin is usually associate it with scams, pyramid schemes and fantasy money, but if you're a guy with technical background and started diving into it, you'll be astonished.
Cryptocurrencies were invented as a way to revolutionize the way that money works, taking into account what modern technology can offer.
To put it simply, most cryptocurrencies are based on two main features:
- Blockchain, a database distributed in computers all over the world, used as a ledger for transactions
- Public/private keys, a pair of cryptographic keys used to sign transactions (and is used instead of user account/password)
The blockchain basically solved a huge problem in digital currencies (like the kind of coins you usually find in mobile games), the double-spending problem. If you had a mobile game where you sold tokens and players could basically create tokens out of the air using hacks, well, you were a victim of the double-spending problem.
The way that the blockchain solves this is that by having the same copy of the transactions over thousands of computers, and making sure all copies are synced, no hacker can go and spend coins that were already spent (unless they for some magically reason can control more than half of the blockchain network, which currently would be an impossible task).
But I said that cryptocurrency was created to improve how money works, but how exactly?
To understand that, you need to know the meaning of "fiat".
What is "fiat"?
Currencies like the dollar used to be backed by gold, meaning no new dollars could be created without having the gold to back it.
However in 1971, United States president Nixon decided to abolish this backing, in what was called the Nixon Shock
After this measure, the United States could now print any amount of dollars they wanted.
The consequence of this is that the more dollars in circulation in the world, the less they are worth, in other words, inflation.
Fiat money is a currency without intrinsic value established as money by government regulation.
This basically includes most major currencies, like dollar, euro, yen, pound, etc.
In other hand, cryptocurrencies come with a limited supply, meaning that there is a fixed value of each cryptocurrency and more cannot be created.
This causes an opposite effect, deflaction, meaning the prices of the cryptocurrency tend to go up when compared to fiat currencies.
How do I make money with cryptocurrency?
The objective is simple, you will need to invest a small amount of money, make profit from it and there you go, you can now fund your game.
There are a couple ways to do this, the most common being:
- You buy a certain amount of a cryptocurrency and wait some time until it value goes up. The cryptocurrrency tech gets adopted by new persons and sites, more and more people use it, and since they are limited in supply, the price goes up. Eg: Steam used to support Bitcoin as payment until some weeks ago.
- You buy a certain amount of a cryptocurrency, but then sell is as soon as you get a profit, and buy it again when the price goes down, and keep repeating this over and over again.
Classical trading, buy low, sell high. This one requires a larger time investment from you, but can generate larger profits.
Now, the important part, you can't just buy any cryptocurrency or buy them at any time and expect to make money, I repeat, this is very important.
The trick is that you need to investigate as many cryptocurrencies as you can, to find which one can be a good investment. At this point, this is very similar to investing in early Microsoft or early Facebook.
The best site you can use is CoinMarketCap
. In here you can find a ranking of all cryptocurrencies, along with their current prices, supply, links to websites and other stuff.
The important things for look in a cryptocurrency are:
- What is the premise behind it?
- Who is the team behind it? Are they experienced guys?
- Do they have partnerships with big companies? Microsoft? Amazon? Alibaba?
- Do they already have a working product?
- Current price, supply and total market cap (I'll explain this one later).
After you create a list of potential investments, now comes the next part, waiting for the time to buy. Like I said before, you can't just buy them at a random time, otherwise you'll end up like this guy:
Due to being a new market, cryptocurrencies are extreme volatile assets, meaning their price can rise up or fall down in a single day by huge percents (sometimes more than 20%).
But also due to this, if you're smart you can actually make high profit from it.
A typical cryptocurrency chart would look like this.
There are lots of "waves", when the price goes up, then down, then up, then down, then up, then down, you get the point.
Note that this is an high risk asset, meaning that while you can make tons of profits you can also lose money. But if you follow those golden rules, you'll find yourself in a confortable position most of the time.
- Only invest the money you can afford to lose. Meaning if you're willing to throw 100$ into a fire, then use those 100$ to invest in cryptocurrency.
- Only buy when the price goes down. Never chase a coin that has grown already 20% in a single day.
- Only sell when the price goes up. Never sell at a loss, unless you're already quite experienced with trading and know what you're doing.
Ok, so I guess at this point you're thinking "how can I start?".
How to buy and sell cryptocurrency
Cryptocurrencies can be bought in "exchanges". An exchange is a site that facilitates trading of currencies between users, meaning you'll be buying from other users and selling also to other users.
Buying is a scary process for newcomers, since most exchanges require you to be "verified", which entails sending a scan of your ID documents along with photos of yourself.
I would say that you can trust big exchanges like the ones I'm going to list next, however I understand this step is not really confortable at all, but it is required if you want to enter this world.
After you are verified, you can send dollars or euros to the exchange sites and buy the cryptocurrencies with it. This step will also be scary to newcomers since in many cases you will have to send the money and wait a couple days until the money arrives in the exchange, can take up to a week.
So if after those explanations you're still brave to try, here are some of the exchanges I can recommend for newcomers.
- Coinbase. Certainly the most newbie friendly site. Accepts USD and EUR.
Protip: They have a "brother" site called GDAX, and it is cheaper to buy cryptocurrencies from GDAX than from Coinbase. The trick is to send the money to Coinbase and then transfer it to GDAX and buy the cryptocurrencies there (it is instant if you're verified on both).
- Kraken. Regarded as the most secure crypto-exchange, but lately their site is being too slow, overloaded with too many users. Accepts USD, EUR and GBP.
- Bitstamp. Another alternative, this one accepts USD EUR and GBP.
Those newbie sites usually only support Bitcoin, Ethereum, Litecoin and not much more, and once you get past the newbie stage, you'll want access to more different cryptocurrencies.
So here's a list of more advanced exchanges, those have a huge selection of coins but don't work with fiat money at all, meaning you can only buy cryptocurrencies by paying with BTC or ETH.
- Kucoin. My current favorite, they are quickly to add new cryptocurrencies and they do lots of giveaways.
- Binance. Another great exchange with a huge selection.
- Bittrex. This one is older but also great.
There are also some useful tools to help you track your investments:
- Cryptopanic. The best place to get news about different cryptocurrencies.
- CoinMarketCap. To check the rankings and prices.
- Blockfolio. An app to keep track of your investment portfolio.
How to distinguish good from bad cryptos
First, you need to know that cryptocurrencies are distributed into three main groups: coins, platforms and tokens.
- Coins are cryptocurrencies that are mostly used for payments. Like Bitcoin and Litecoin.
- Platforms are cryptocurrencies that support smart contracts, which is something like a custom program that you can put in a blockchain.
If you come from a game development background, smart contracts are the crypto world equivalent of shaders in gamedev. Examples include Ethereum and Neo.
- Tokens are a type of currency usually tied to some service or company, and running on top of a smart contract in a cryptocurrency platform. Examples include OmiseGo and Golem.
Knowing the difference lets you compare different coins. This means that there is no point of comparing Bitcoin directly with Ethereum, but comparing it with Litecoin is a more fair comparison.
When finding new coins to invest, if every checkmark is ticked and they seems a good investment, you can look at their current marketcap, which basically current price multiplied by total supply.
By comparing their market cap with another similar but more popular cryptocurrency, you can have a good estimate of potentially the new coin can grow in the next weeks or months.
Here are some of my recommendations for beginning of 2017:
- Ethereum is a very solid bet, since is currently the most advanced smart contract platform. Around 99% of the tokens in top 200 run on top of Ethereum. But as I said before, wait until the price falls down a bit to buy it.
- NEO, the current main competitor to Ethereum. This one already has some tokens running on top of it and it is currently undervalued. By the way, I'm part of the developers working on it.
- ICX (korean) and NEM (japanese) are also two alternatives to Ethereum that have a lot of potential and are also undervalued. However their tech is behind ETH and NEO.
- If you prefer currencies, Litecoin is the original competitor to Bitcoin, and I would recommend it against Bitcoin, due to much faster and cheaper transactions (it is possible that Steam and Amazon adopt it this year).
- About tokens, I won't recommend anything in special, there are too many of them, and I invest in a couple of them, be free to due your own research.
Going further, to expert level
Ok, so let's say at some point you invested and started getting some profit, but you want more, after all, you have a game studio to run, and you need thousands of dollars for that.
Once you're confortable enough, there are some advanced ways to invest.
- ICO. Meaning "Initial coin offering". When a new cryptocurrency is created, the company behind them launches an ICO to sell a percentage of the coins to early investors.
This is somehow similar to an IPO, if you're familiar with that concept. By doing lots of research in idea, team and other details, a good call here can net you a return of 5x to 20x of the original investment. But if doing holding / trading of cryptocurrency is already considered an high risk investment, this one blows it through the roof, be aware, while most ICOs are sincere, there are also a couple scams going around.
- Obscure exchange adventures. If you're not confortable enough to invest in ICOs, you might at least try this, which basically consists of registering in very small obscure exchanges that no one knows, like a cryptocurrency hipster. Grab some relatively unknown coins (with proper research, as always!) and then wait for the coin to be released in a larger exchange like Binance.
Some exchange names to research are Liqui.io and Etherdelta, but really, beware, you'll be playing with fire at this point.
Having your cryptocurrencies in exchange is fine is you're doing lots of trading, but if you just want to buy some cryptocurrency and hold them for a year or so, the best thing you can do is after you buy, withdraw them to your own cryptowallet. This means that even if something bad happened with the exchange (it happened before
), your coins are safe.
It is even possible to buy custom ledger hardware, like the Ledger Nano S
and the Trezor wallet
. Those will let you to safely store your coins and tokens offline.
Finally, don't forget to follow the golden rules I said before. Invest only what you can afford to lose and don't be impulsive.
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