When a new blockchain gaming project is launched, more capital is required to develop the project further. This capital is raised by organizing an Initial Game Offering or IGO, which takes place on specialized platforms and allows would-be users to “invest” in the title and receive a small stake in return.
The process not only benefits the game developers; it’s also an investment opportunity. With the rise of GameFi, IGO is gaining popularity among crypto investors. So, what really is an initial game offering and how does it work?
Defining Initial Game Offering
In an initial game offering (IGO), a blockchain gaming project sells the tokens used within the video game during the development stage of the project. The IGO benefits the game developers by allowing them to raise considerable capital in earlier stages. Buyers, meanwhile, gain access to the NFTs they’ll need to participate in the project.
To understand IGOs, you need some background knowledge of GameFi (a combination of the words “game” and “finance”). The gamification of finance has become a central component of the crypto world. GameFi refers to blockchain gaming projects in which participants receive tokens for actions they take within the video game. The tokens specific to the video game act like chips in a game of poker, and you can’t participate without them. That’s why IGOs have become such an important phenomenon.
IGOs are similar to initial coin offerings (ICOs), which have existed for years and are familiar to most crypto investors. In an ICO, a project launches itself by selling tokens on the crypto marketplace. This is the approach that Ethereum took when it launched in 2014. IGOs take that same concept and apply it to the world of GameFi.
How Does an IGO Work?
An IGO is used to raise capital for blockchain games. It is similar to an initial coin offering (ICO), with the major difference being that an IGO focuses on games while an ICO is carried out for cryptocurrencies. These two processes help investors gain a foothold in a blockchain game as soon as it’s released.
As a result of supporting games at their developmental stages, IGO participants get early access to in-game assets like mystery boxes, weapons, characters, etc. These assets are Non-Fungible Tokens (NFTs) that are usually needed to access the game.
You can invest in a game at the lowest possible price by investing at the start. However, investing at an early stage also carries some risks as there is no guarantee that the project will be successful or even complete its actual full-public launch.
Advantages of an IGO
Many advantages come with initial game offerings that are thriving among mobile game developers. Initial game offering offers a chance for the game developers to raise money without having to rely on venture capitalists and publishers. Some of the key benefits that come with IGOs include:
- Quick funding — if one has a great pitch and many social media followers, an IGO may offer a channel to get quick funding within a short time. This strategy is beneficial since it does not have any of the strings that are attached to venture capitalists.
- There is no need to give up the company’s equity — publishers want to own a segment of the company in exchange for their investments. Hence, the developers forfeit some ownership of their business but an IGO does not push developers to these extremes.
- Total control of your game — An initial game offering lets you retain total ownership of the firm’s equity. That means that you are the only person who makes all development decisions.
- Funding future games — IGO enables you to look for money for many projects simultaneously since it is easy to raise funds in increments when still building up a loyal audience. An IGO may also set the pace for better use of Initial Public Offering concepts, where firms list themselves on different public stock exchanges under the IPO process via ICO prospectus.
Disadvantages of an IGO
On the other hand, the main disadvantage with an initial game offering is that it is an all-or-nothing scheme. If you start the funding process, you are compelled to return all invested funds to every investor before you try once more in case that round fails to go through.
Thus, you may go through a whole round and not get any money. The other shortcoming with this method is that it might be quite challenging to finish a successful initial game offering just because of the number of people you need to inform and the time the process takes.
IGOs might be risky since nobody knows whether they will succeed. The initial game issuers have to invest time, money, and effort before they manage to raise all the funds that they need to launch their IGO. Furthermore, IGOs cost more than IPOs. But, IGOs have become quite popular just because IPOs are forbidden in some parts of the world like China.
IGO Cannot Guarantee Returns
As an investor, the main reason for buying an IGO is to be a part of the project from the developmental stage. Although the process involves many risks, initial investors may profit from the project if it is successful. On the other hand, if things go south than expected, it is likely that you will end up losing your money.
The blockchain gaming industry is relatively new and fast-growing, and enough opportunities are expected for the gamers and game developers to make money. Buying an initial game offering looks like a great way to access a project early on and earn a significant return; however, it is crucial to analyze the blockchain gaming project before buying an IGO. Also, one must look out for the risks associated with it.
