South Korea hosts live-stream competitive crypto trading event — is gamification the future of investing?

The gamification of investing took a hyper-leap at the latest Korea Blockchain Week held in Seoul from September 21 to 27.

One of the side events, Perp-DEX DAY, was a live e-sport style spectacle where competitors traded perpetual futures — a type of cryptocurrency derivative.

It’s a new prospect for gaming and entertainment, but despite the pronouncements of financial revolution by some online and social media commentators, it’s unlikely to reshape finance — or be a wise investing strategy for most people.

A DEX is a decentralized exchange (DEX), which is a peer-to-peer marketplace that allows crypto traders to transact directly with each other in tokens for various cryptocurrencies, but not in fiat currency (aka national currency).

A perp-DEX is a DEX for trading perpetual futures on-chain, which means the trades are managed and settled on a blockchain using smart contracts — computer programs that automatically perform actions such as crediting a trader’s account after a trade.

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Highly entertaining for the audience, highly risky for the traders

Organized by ReboundX with UmbrellaX DAO, the invite-only Perp-DEX DAY was held at the SJ Kunsthalle arts and cultural center in Seoul’s Gangnam District and was open to 400 live spectators.

In addition to the interactive exchange-specific trading competition, it featured copious physical and on-chain swag offerings, exchange mission booths, interactive demos, exchange pitch sessions and a DJ-led afterparty.

While ostensibly an entertaining gaming event, this was also a demonstration of six different perp-DEXs.

Seated in front of massive screens, each trader was part of a carefully chosen team. With real capital at stake, they competed in front of the live audience for the highest spot on the leaderboard by growing their portfolio the most in the allotted time. LED displays showed their real-time profit and loss, while commentators narrated the action.

This type of trading may appeal to a certain subset of tech-savvy traders. But just as most weekend poker players don’t move to the professional leagues, the capital at stake and the risks involved in a timed trading competition will render it unsuitable even for otherwise talented traders.

And, since this type of trading is heavily dependent on luck, it’s akin to gambling and comes with the same potential for loss, abuse and addiction.

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The pros and cons of gamified investing

This is an extreme embodiment of the move toward gamifying personal finance and investing, as fintechs and other financial institutions increasingly use game elements in their apps to attract, engage and retain users.

They may also use social techniques such as leaderboards, leader trade copying and social stock promotion to encourage more trading.

These gamified apps can be beneficial, offering a convenient and often inexpensive way for people to begin investing. They can also encourage people to save more through automatic contributions to their investment accounts.

But, like many gamified apps, they can become addictive for some people, potentially encouraging them to trade more than if they were using more traditional investing methods and possibly take more risk than they would otherwise.

It’s also possible that the use of gamified apps could reduce the due diligence that normally goes into assessing security purchases or sales. These are all actions that can cause individuals to lose money.

For instance, a study published this year in the Journal of Behavioral and Experimental Finance found that ‘nudges’ can “significantly amplify risk-taking,” although a higher level of financial literacy helped to reduce this effect. (1)

Another study found that individuals who saw stocks promoted in a social feed or those who had the option to copy trades from a top trader would trade more in promoted stocks. (2) This may mean they’re trading in stocks they haven’t researched and which may not suit their risk tolerance.

If you need to brush up on your financial literacy to protect yourself from the impacts of gamification, the U.S. Office of the Comptroller of the Currency provides a Financial Literacy Resource Directory, while the U.S. Securities and Exchange Commission offers investor education. (3)

If you’re just getting started, you may also want to consider working with an advisor who can help you set goals and understand your risk tolerance. If you choose to go it alone, keep in mind that multiple studies show that most day traders lose money and the majority of investors will be better off in the long run with a buy-and-hold strategy. (4)

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Journal of Behavioral and Experimental Finance (1); Ontario Securities Commission (2); U.S. Securities and Exchange Commission (3); Current Market Valuation (4)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.