Esports has been the fastest-growing sport on the planet in recent years by players and viewership, and blockchain and cryptocurrencies could be the catalyst that drives this hot new industry fully into the mainstream, a new report from Macquarie Research predicts.

While it’s debatable whether or not consider competitive videogaming should be considered a “sport” along the lines of football or basketball, what’s undeniable is the surge of interest this activity has experienced, driven primarily by younger people who grew up in front of PlayStations and Xboxes.

Macquarie, a Wall Street research firm, expects the global esports market to grow from $892 million in 2016 to $5 billion by 2020 and total viewership to jump from 365 million to nearly 500 million over that same period. Esports tournaments, in which fans pack arenas to watch Counter-Strike: Global Offensive and League of Legends battle royales, have also exploded in popularity.

While the industry is still nascent and grappling with natural growing pains, the gradual adoption of blockchain and cryptocurrencies, the report reckons, will likely provide a pivotal boost by enabling more secure betting and exchanges of digital goods, as well as the ability to offer cryptocurrency incentives to gamers and fans alike to participate.

“While we are still early in the cycle, we believe that blockchain integration could strengthen the broader esports communities and further enhance the professionalization of the industry as it continues to evolve,” wrote Jiang Zhang, a Macquarie analyst and lead author of the report.

Digital Goods Marketplaces

Zhang sees blockchain playing a key role across several verticals in the sizzling industry, the most apparent being the facilitation of markets for digital goods that increase the overall player experience.

In this regard, videogaming ecosystems have a natural leg up as potential early adopters of the technology because many of them, such as World of Warcraft, established digital currencies and thriving markets for exchanging digital goods long before the concept of a cryptocurrency had even been conceived.

In this regard, the ability to conduct secure, friction-less payments on a blockchain has multiple value propositions, Zhang wrote:

“In our view, having a cryptocurrency that is built on the back of blockchain can provide a universal method of payment for both the developers and the gamers, and can address the higher fees associated with third-party payment platforms.”

He added that consistency in the payment network, custody of digital assets and overall platform security are other problems confronting the industry that blockchain can help rectify.

Further, Zhang predicted that major video game publishers with large portfolios of intellectual property will eventually develop their own cryptocurrencies to help build trust and loyalty across their respective digital marketplaces and reward fans for participation across their platforms. This could prove especially pivotal if blockchain-based distributed markets were created that allow for virtual assets to be traded across different game ecosystems.

Esports Betting: The Secret Sauce

Another ripe area for blockchain is betting – which is the real secret sauce for driving engagement among e-Sports fans who are renowned for their enthusiasm. The global e-Sports betting market is estimated to reach $750 million to $1 billion in revenue and $15 billion to $20 billion in total handle by 2020.

Howver, these activities are currently widespread but lack transparency, are often conducted in an unorganized manner and face significant regulatory risks across the multiplicity of jurisdictions in which they occur. As with other forms of online betting, blockchain solutions could help shore up concerns over transparency and match integrity.

As I’ve reported previously, platforms such as Unikrn have sprung out of the gate to offer regulated betting on esports matches in Europe.

Compensation is also an area that has been fraught with disputes and infighting in the industry’s early years. In addition to the actual gamers, esports “teams” also consist of managers, coaches and others who stake claim to a portion of the winnings earned, and there have been several notable examples where one party claimed their slice of the payout wasn’t fair.

Automating payout distribution rules through the use of smart contracts could help ensure that stakeholders are compensated in a fair and timely manner, thereby preemptively solving many such disputes before they even occur.

Zhang concluded:

“[W]e believe that embedding blockchain technology could provide greater transparency as the smart contracts are on an open ledger where identities are concealed and the terms are well understood by all parties involved.”

Aaron Stanley is Strategic Communications Lead at Sweetbridge, an Arizona company that is building blockchain-based economic tech for supply chains and commerce.