KamaGames CEO: ‘The whole ICO thing will eventually collapse’

2 Apr 2019

Andrey Kuznetsov. Image: KamaGames

A reconnaissance into the world of blockchain-based gaming tokens taught Andrey Kuznetsov that the ICO fad could be just a house of cards.

Last year Dublin-headquartered online gaming platform KamaGames initiated a token sale using the Ethereum blockchain.

And, instead of raising €22m as had been initially targeted and reported by The Irish Times, it came away with some telling conclusions; most critically that blockchain-based transactions are too slow for online gaming and that centralised databases remain the way forward.

‘I estimate that 95pc of tokens are already dead’

KamaGames is one of the biggest European social mobile games operators and is worth an estimated $500m. Last year the company reported a 33pc increase in revenues to $76.4m. The award-winning operator’s flagship title, Pokerist, has been the number one grossing app in 101 countries on the iOS App Store and one of the top five grossing apps in 45 countries on Google Play.

A token effort

KamaGames CEO Andrey Kuznetsov told Siliconrepublic.com that the intention of the token sales actually wasn’t to raise money but to create a new and different form of promotional event to attract a new type of audience or engage with lapsed players.

The company launched KamaGames Tokens as in-game virtual chips that could grow in value. However, the chip sale attracted few new users, and generated little additional revenue and little improvement in player retention.

Kuznetsov explained that the issue was that the speed of transactions and performance was too slow.

KamaGames processes 1.5m transactions per minute. “Centralised databases are much faster for us. Secondly, the cost of transactions would have increased expenses and hence we would have had to charge players more. We are in the social games business where a tiny percentage of players are paying, so it wouldn’t have justified the investment.

“In the end there was no actual benefit either for us or the players. We have the transparency that our players require, we have an RNG [random number generator] licence from the Gambling Commission. And secondly, it is a social game and why would we want to make the game potentially unfair? If it isn’t broke, don’t fix it.”

The RNG factor – which is crucial to mobile social games – was an important one. “Putting RNG on blockchain would create issues because it would become more predictable.”

What Kuznetsov means is that it would unravel the potency of RNG by creating a data trail that could potentially be gamed.

“Another thing we learned from the token sale was that there wasn’t even enough demand out there to make it viable.

“We never really wanted to raise money by these means and it is too risky and it is in fact illegal in some countries where it is a grey area. And, of course, there are a lot of people out there speculating, trying to make a quick buck and not even asking questions.

“The whole ICO thing will eventually collapse. I estimate that 95pc of tokens are already dead.”

Kuznetsov may not be actually too far off the mark. The Wall Street Journal reported in recent days that $118m has been raised via ICOs in Q1 – more than 58 times less than the $6.9bn amount raised in Q1 the previous year.

Kuznetsov concluded that he hasn’t ruled out blockchain altogether. “For now it is an interesting technology. I’ve explained why it wouldn’t work for us within our games engine for technological and legal reasons. But we will wait and see.”

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years