A

Seminar Report
on
“Application of Tokenization in Gaming”

Submitted to the
Savitribai Phule Pune University
In partial fulfillment for the award of the Degree of
Bachelor of Engineering
in
Information Technology
by
Mihir Ranade
(33162)

Under the guidance of

Dr. K. A. Sultanpure

Department Of Information Technology

Pune Institute of Computer Technology College of Engineering
Sr. No 27, Pune-Satara Road, Dhankawadi, Pune - 411 043.

A. Y. 2021-2022

P: F-SMR-UG/08/R0
 CERTIFICATE

This is to certify that the seminar report entitled “Application of Tokenization in Gaming”
being submitted by Mihir Ranade (33162) is a record of bonafide work carried out by him
under the supervision and guidance of Dr. K. A. Sultanpure in partial fulfillment of the
requirement for TE (Information Technology Engineering) – 2019 course of Savitribai Phule
Pune University, Pune in the academic year 2021-22.

Date: 10 / 11 / 2021

Place: Pune

Dr. K. A. Sultanpure Dr. A.M.Bagade

Guide Head of the Department

Dr. R. Sreemathy
Principal

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 ACKNOWLEDGEMENT

I take this opportunity to thank every individual who has helped me in the preparation of this
seminar; particularly my teacher Dr. Kavita Sultanpure, my senior mentors Mr. Arnav
Deshmukh, Ms. Khushi Asawa, Mr. Samarth Badhane for their timely advice in getting the
required information and for offering help in the implementation of the topic; and Dr. Anant
Bagade, HoDIT, Prof. Sachin Shelke, Seminar Coordinator, Dr. Prahlad Kulkarni, Director of
our Institute, Dr. R. Shreemathy, Principal, all the academic and technical staff from my
department for giving me this opportunity. I would also like to appreciate the efforts of my
family and friends who offered their mental and professional support to me as and when I
demanded.

Mihir Ranade

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 ABSTRACT

Blockchain Technology has revolutionized the entire value chain of the world which
previously existed as a trust-based method and has converted it into a trust-less peer-to-peer
system of value transfer which only requires the notion of value in something and nothing
else for a transaction to occur. In this sense, Blockchain has made a new layer on top of the
internet which is the Internet of Value. There is a new system of techniques which come
under the Blockchain umbrella which serves this purpose; Tokens being one of it. These are
designed to be either unique in existence or fungible in nature. While fungible tokens have
enabled new use cases such as Initial Coin Offerings, the potential of NFT as a valuable
component remains unclear. This seminar will focus around efficacy of Tokens, particularly
NFT in Gaming Industry. Furthermore, the seminar will divulge into the specific market
trends regarding Blockchain gaming and how this dynamics are changing and will also take a
case study of few of the world’s most popular Blockchain based games.

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 CONTENTS
Acknowledgement I
Abstract II
List of Tables IV
List of Figures IV

Sr. Chapter Page No

1. Introduction to Text Based Input
1.1 Introduction to Seminar
1.2 Motivation behind Seminar topic
1.3 Objective(s) of the work
1.4 Introduction to Topic
1.5 Organization of the report
2. Literature Survey of Seminar Topic
2.1 Introduction
2.2 Different Approaches of …
2.3 State of Art Algorithms …
2.4
3. Title of third chapter
3.1
3.2
4 Applications of ….
4.1 State of Art applications
4.2 Advantages and Disadvantages
5. Conclusion
6 References
Appendix
Plagiarism Report

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 LIST OF FIGURES

Sr. No. Figure Name Page

No.
1. Cryptokitties Image
2. Decentraland Image

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 CHAPTER 1

INTRODUCTION TO SEMINAR TOPIC

1.1 Introduction to Seminar

Just after the introduction of the first majorly accepted crypto-currency Bitcoin, there has
been increase in the number of applications of the new technology called Blockchain
ranging from Currency to Governance to Banking to Art and to Games. This technology
which revolutionizes the very need to have trust between two parties for a transaction to
occur, has seen many changes in the range of development of applications over the course
of years. With the introduction of Ethereum Blockchain and the feature of smart-contracts
which it offers, opened up a new era of Blockchain application called tokenization. The
smart-contracts allow any user to create and deploy programs on any/all participating
nodes, which can be used to tokenize any asset. These tokens can be fungible or non-
fungible meaning they can be unique or exchangeable. These tokens have unique
applications including that in governance, currency, and in arts and games. Games usually
run on the client-server model meaning they fetch the data from a particular server
including that of the in-game assets and any monetary value transfer, a model which we
generally call Web2.0. With the emergence of Smart Contracts after Ethereum and Layer-
2 chain solutions such as Polygon (Matic), Binance Smart Chain (BSC), which solve
some major issues with the transaction volume and resulting high Gas fees occurring in
Layer-1 chains like Ethereum, it has become viable to use decentralized systems like
Blockchain to be used instead of Client-server model to fetch or store data with lesser Gas
fees. This has led to the emergence of new Web technology called Web3.0, which
essentially is the future of Distributed Networking. The seminar will deep dive into the
specifics of how these Layer-2 solutions work and how to interface the client application
with Blockchain creating new crypto-games and see the trends in the market with some
case studies

1.2 Motivation behind seminar topic

As mentioned in the Introduction above, Web3.0 is going to be the next move for
Distributed Networking meaning that any applications made in Web3.0 would surely be
gaining momentum in the coming years. This also includes Gaming industry which
accounts for second highest internet usage in the world after video-streaming services.
Blockchain will leverage the Game developer’s ability to make in-game assets to be
tokenized and automate transactions which usually required setting up of third-party
services for payments and servers for serving the in-game assets. This seminar will also
help in understanding the current market trends and future scope for Blockchain based
gaming.

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1.3 Aim and Objective(s) of the work

Seminar Aim
The aim of this seminar is to understand the tokenization concept in Blockchain and to
study the application of tokens in Gaming

Seminar objectives
 Understand layer-1 and layer-2 Blockchain and Smart Contracts.
 Understand Web3.0 and the framework used to interface client apps to chains.
 Understand Fungible and Non-fungible tokens and various Interfaces used to
design Smart Contracts for them.
 Understand Case Studies of few famous Blockchain based Games and the recent
market trends for the same.

1.4 Introduction to Seminar Topic

Understanding some of the concepts is imperative while understanding the seminar topic.
These are as follows:

 Blockchain: Blockchain is a distributed, trust-less, peer-to-peer, cash-less,

electronic permissioned or public ledger whose pages are called blocks and those
are logically chained together using complex cryptographic systems.
 NFT: Stands for Non-fungible Tokens are tokens which are unique in existence
and therefore not fungible that is in-exchangeable with another of the same kind.
The other counterpart of this is Fungible Tokens which are not unique and
therefore fungible with another of the same kind.
 Smart-Contract: Smart Contracts are programs which are mandated to run on all
the nodes on the Blockchain and perform the duty of implementing the trust-
mechanism in otherwise trust-less ledger system automatically.
 Tokenization is the process of creating tokens out of a digital piece of
art/code/any item which can be traded on any specific Blockchain.

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 CHAPTER 2

LITERATURE SURVEY OF Seminar Title/Topic

The application of tokens is really a very recent topic with NFT being even more recent than
fungible tokens. While the applications of Fungible Tokens are highly documented, the same is
not true for Non-Fungible Tokens and that too, in the specific sector such as Gaming or Game
Development, we have to rely upon specific whitepapers of particularly famous Blockchain
Games to understand the applications of Tokens in Gaming, which particularly may not be
considered as Research paper for academic purposes but more of a marketing instrument.
Nevertheless, they give quite a good idea about the economy of these games which is crucial to
understand for designing any game over any Blockchain. For the various stages of
implementation, this seminar will refer to the documentation provided by Open Zeppelin
regarding Ethereum Smart Contract for Tokens namely Ethereum Request for Comments (ERC-
20 and ERC-721) and the documentation provided by the Enjin IGO platform for ERC-1155.

From all the papers among the first ones to exemplify use cases of NFT in any industry, I came
across a paper written by Ferdinand Regner, André Schweizer and Nils Urbach titled “Non-
Fungible Tokens as Core Component of a Blockchain-based Event Ticketing Application” from
December 2019’s 40th International Conference for Information Systems, Munich which is
based on use case of NFT in Event Ticketing Systems. This seminar takes inspiration from this
paper.

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 CHAPTER 3

Layer-1 and Layer-2 Blockchain

Layer-1 Blockchain is fairly easy to understand because it is the general structure of the
Blockchain which we see typically in action like Nodes, Network, Consensus mechanism and
Enforcement Systems like Smart Contracts. A typical example of a layer-1 Blockchain would be
Ethereum, Bitcoin, Solana, etc. Most of the time these layer-1 Blockchain networks rely on
transaction fees to keep their networks secure and to incentivize the validator and miner nodes of
the network. In Ethereum and thereafter in almost all the layer-1 Blockchain, they are called Gas
fees which are a token amount in local crypto-currency given to these nodes for participating in
the validation or mining process based on the amount of Gas they burnt in order to keep the
network secure. These Gas fees were not considered a big problem until we experienced huge
load on Ethereum in 2020 because of high transaction volume which then resulted into
skyrocketing Gas price. This makes layer-1 Blockchain a worse alternative to Web2.0 just
because of the transaction cost. This is where layer-2 Blockchain comes into play.

Layer-2 Blockchain is a mechanism laid on top of layer-1 Blockchain which acts as a cached
chain of transaction blocks which is ratified by the validator and miner nodes of layer-1
Blockchain after a specific interval of blocks or specific interval of time. These are also called
side-chains as they run parallel to the main net of layer-1 Blockchain and thus have many
advantages like increased throughput of transaction even after having high transaction
congestion. Examples of layer-2 Blockchain include Polygon’s Matic and Plasma sidechains,
Binance’s Binance Smart Chain (BSC), Polkadot, ChainLink, etc. We can leverage this idea of
layer-2 sidechains to our benefit as video-games or any online games require substantial amount
of data read/write which is executed in the form of reading data from Blockchain through Web3
API or writing data on it through a smart contract from a node using Web3 API. All of the data-
writes are executed as transactions because it needs invoking of a smart contract everytime we
need to make changes to a state of an object in Blockchain.

Smart Contracts and Web3 API

As explained previously, almost all the Blockchain developed after Ethereum have a protocol-
included feature of Enforcement agent which are known as the Smart Contracts. These contracts
are pieces of code written for a specific, measurable, achievable, realistic and time bound tasks
and are mandated to run on all the nodes of the chain. These contracts ensure that the terms
agreed upon by the issuer of the contract and the invoker of the contract are enforced
computationally strictly. Without going into much details about the contracts themselves, a short
description of how contracts work is like this: It is like a kiosk machine which distrubutes
candies. We enter specific coins into the machine, the machine starts running and counts whether
user has paid the required amount of coins and then disburses the candies accordingly. The only
difference in the smart contract and candy machine is that smart contracts run on all the
participating nodes in order to confirm that the invoker has paid the required tokens to get the
data written onto the ledger, whereas candy machine does not have that facilty.

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In order for a contract to run, invoker must invoke the contract with some native cryptocurrency
or a token. And this invoking is done by a node with that specific credentials. In order for the
client application to contact the Blockchain node, we need some framework or API which will
send JSON RPC to and from the node to the client application. These are called Web3 APIs and
the most popular to be used is Web3.js and Web3.py for javascript and python respectively.

Fungible and Non-Fungible Tokens

As we now know what a smart contract is, the one obvious application which comes to the
forefront is the generation of tokens. As explained in the introduction tokens can either be
fungible or non-fungible meaning they can be exchangeable or in-exchangeable with their same
kind. They can be used like a native currency inside a Blockchain like fungible tokens, for
example Polkadot, or can be used for specific purpose for just one application. In order to create
tokens, we need to invoke a specific smart contract made for that very purpose. These smart
contracts are made using following Interfaces and Ethereum Request for Comments (ERCs):

ERC-20: Is the go-to Interface for creating contracts for mining fungible tokens. Most Ethereum
based cryptos use this standard for minting their specific coins as opposed to creating a different
standard altogether. Examples, Binance’s BNB, ChainLinks’ LINK, etc. This standard is perfect
for creating fungible tokens like in-game currency, gems, ammunition, etc.

ERC-721: Is the go-to Interface standard for creating contracts for mining non-fungible tokens
only. It has some features like high compliance, unique ID, multiple product management, admin
tools, subscriptions and newsletters for immediate upgradation, embedded Web3 checkout button
with metamask support, easy transfers, ERC721 token wallet apps for web, android, and ios,
roles-based permission, high-end security system, etc. However, this standard only allows for the
minting of non-fungible token just like ERC-20 was for fungible tokens. This standard is used to
make contract for transfer of NFT made out of Art, pieces of code, games, etc.

ERC-1155: Unlike other two standards, this standard was proposed by Enjin platform just to
make minting tokens for both fungible and non-fungible purpose easy and less redundant. Using
this standard, we can mine both fungible and non-fungible tokens form the same contract, which
the earlier standards did not allow to do. This standard was proposed specifically keeping
Blockchain games in mind.

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 CHAPTER IV

Case Studies

1. Cryptokitties: It is the first blockchain game on Ethereum chain developed by Canadian

studio Dapper Labs that allows players to purchase, collect, breed and sell virtual cats. It became
so successful it resulted in the historic congestion of Ethereum chain in 2020. It uses ERC-721
tokens to mine specific NFTs for each cat and the characteristics for each kitten are randomly
selected using a library which the studio made for that purpose.

2. Decentraland: Decentraland is a decentralized virtual reality game platform powered by the

Ethereum blockchain. Within the Decentraland platform, users can create, experience, and
monetize their content and applications. The finite, traversable, 3D virtual space within
Decentraland is called LAND, a non-fungible digital asset maintained in an Ethereum smart
contract. Land is divided into parcels that are identified by cartesian coordinates (x,y). These
parcels are permanently owned by members of the community and are purchased using MANA,
Decentraland’s cryptocurrency token. This gives users full control over the environments and
applications that they create, which can range from anything like static 3D scenes to more
interactive applications or games. Some parcels are further organized into themed communities,
or Districts. By organizing parcels into Districts, the community can create shared spaces with
common interests and uses. You can find a list of the original District Proposals on GitHub. The
content that makes up Decentraland is stored and distributed via a decentralized network while
ownership and transactions are validated on the Ethereum blockchain.

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 CHAPTER V

CONCLUSION

In this seminar we studied what is a layer-1 and layer-2 Blockchain looks like, what are smart
contracts, what is Web3 API, various ERC-x standards for creating tokens, the applications of
NFT and FT in different games, and the current market trends in the gaming industry for
Blockchain.

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 REFERENCES

List all the material used from various sources for making this seminar.

[1] Nakamoto, Satoshi. (2009). Bitcoin: A Peer-to-Peer Electronic Cash System Cryptography,
retrieved from https://bitcoin.org/en/bitcoin-paper

[2] Buterin, V. (2014). “A next-generation smart contract and decentralized application

platform.” Retrieved from http://buyxpr.com/build/pdfs/EthereumWhitePaper.pdf

[3] Wood, G. (2014). “Ethereum: a secure decentralised generalised transaction ledger.”

Ethereum Project Yellow Paper, 1–32.

[4] Voshmgir, S. (2018). “Fungible Tokens vs. Non-Fungible Tokens.” Retrieved from
https://blockchainhub.net/blog/blog/nfts-fungible-tokens-vs-non-fungible-tokens/

[5] Szabo, N. (1994). “Smart Contracts.” Retrieved from https://bit.ly/2rLG2Nr

[6] Tepper, F. (2017). “People have spent over $1M buying virtual cats on the Ethereum
blockchain.” Retrieved from https://t.co/Ea718is6M5

[7] OpenSea. (2019). “OpenSea.” Retrieved from https://opensea.io/

[8] OpenZeppelin. (2019). “OpenZeppelin.” Retrieved from https://openzeppelin.org/

[9] F. Regner, A Shweizer and N. Urbach; “NFTs in Practice – Non-Fungible Tokens as Core
Component of a Blockchain-based Event Ticketing Application”: Retrived from
https://www.researchgate.net/publication/336057493_NFTs_in_Practice_-_Non-
Fungible_Tokens_as_Core_Component_of_a_Blockchain-based_Event_Ticketing_Application

[10] DappRadar (2021). BGA Blockchain Game Report – Q1 2021 retrieved from
https://dappradar.com/blog/bga-blockchain-game-report-q1-2021

[11] Dowling, M. M., 2021. Fertile land: pricing non-fungible tokens. Finance Res. Lett.
Forthcoming, retrieved https://doi.org/10.1016/j.frl.2021.102096

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 PLAGIARISM REPORT

Overall Similarity: 14% (by https://paperpass.net)

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