NFTs and Gaming: A Match Made in Heaven?

In late 2017, a blockchain-powered cat-centric collectibles game named Cryptokitties almost brought the entire Ethereum network to a standstill due to its sudden and surprising success. Cryptokitties was one of the earliest examples of Non-Fungible Tokens (NFTs) used in the context of a collectible game, and in the four years that have followed, several other products have sprung up that go even farther. From virtual worlds, card games, MMORPGs, there’s almost no genre that isn’t being explored for the integration of decentralized assets.

Player-owned economies

There are many reasons why the marriage of NFTs and video games is a match made in heaven. For one, In almost all previous models of online game communities, items that could be purchased were limited to use in that game via a single account. If a gamer’s account got stolen, disabled, or even if the user just became bored and moved on to another game, all the money they spent would disappear; it’s a reality many gamers have come to accept. This model has continued because there was no viable alternative — that was until NFTs came along and changed everything.

By making in-game items NFTs, players literally own and control what they buy, earn, or craft. It’s more than just being able to prove your character's new accessory is rare; it also means these items can be bought and sold on secondary markets, moved between multiple games, and allows players to retain the value that they put into these items in the first place. 

The only real problem right now is that getting this technology integrated into video games has been slow. We’re over halfway through 2021, and although there have been, as mentioned, many different games launched, so far, there just isn’t a true “killer app'' that proves the use case to the masses. Although it’s looking like this may be about to change as well.

The world is ready for NFT games

The recent surge in overall awareness and popularity of NFTs is also fueling a general demand for them. We’ve already seen high-profile artists, celebrities, business leaders, and more cashing in on the phenomenon. What’s more, due to the global effects of the coronavirus pandemic, the amount of new people and demographics turning to video games is on the rise. In other words, a growing base of users are showing an affinity to both virtual gaming and decentralized assets. 

Moreover, blockchain technologies are more diverse and scalable than they were just a few years ago, meaning that, even despite a hike in demand, there’s less of a risk of something like Cryptokitties crippling the Ethereum network. 

Put this all together, and you have the perfect catalyst for the mainstream adoption of NFT gaming. And we’re already seeing it take off. Specific projects are popping up all over the place from several different companies. If you like Pokemon breeding and battling, games like Axie Infinity have made a splash recently, allowing hundreds of thousands of players to earn above minimum wage. If you like card games, titles like God’s Unchained use NFTs to create scarce, digital versions of collectible cards, which can be earned and traded on an open marketplace. If you’d rather explore a virtual world, then something like Decentraland or Sandbox may be more your pace. In these fully 3D environments, worlds and minigames can be built, NFT art can be displayed, and avatars can be fitted with a variety of accessories, all made tangible through blockchain. 

If role-playing is more your pace, then my own game, the upcoming mobile RPG Guild of Guardians, lets you enter an epic fantasy world where you can battle monsters, craft unique items and build powerful guilds with other players. Here again, the underlying tech means you are part of a ‘play-and-earn’ economy where players all earn and trade in-game assets in an open economy. 

Problems and solutions

It would be disingenuous to laud the benefits of NFT games without also addressing the downsides. After all, some legitimate concerns still need to be addressed before the sector reaches critical mass. 

First and foremost, with these new avenues of incentivization, it’s integral that NFT games find an equilibrium between engaging gameplay and money-making. In other words, it is not sustainable to have a game where every player has the goal of extracting as much value as possible while contributing as little as possible. A NFT game should stand up on its own merit, appealing to gamers through well-designed gameplay and savvy mechanics. Play and earn— the ability to combine entertaining gameplay with unique play-and-earn incentives and NFT ownership models—is what will allow a NFT game to truly break into the mainstream.

Another crucial factor is tackling environmental concerns around NFT minting. It would be untrue to say that the issue is down to NFTs alone. Rather, it’s the energy-hungry proof-of-work consensus mechanism behind blockchain powerhouse Ethereum that’s to blame. While the blockchain is pivoting to a more efficient Proof-of-Stake, some are already attacking the issue at the root. Immutable X, for example, is a carbon-neutral L2 protocol enabling zero gas fees and instant transactions — a literal game-changer for NFT games.

Finally, NFTs are still a foreign concept to most gamers and right now the user experience of getting cryptocurrencies, creating a wallet and transacting with NFTs is scary for most people. This is an industry wide problem, and luckily the massive media attention that NFTs have received in the past 6 months have rapidly accelerated the pace at which mainstream users are able to onboard onto NFT games.

By this point, you are likely starting to see the bigger picture. The emergence of NFTs represents a powerful new tool that can be used to make video game titles more personal, versatile, and potentially lucrative for the average gamer.

It’s far too early to imagine all the different ways this may change things in the gaming industry, but it isn’t hard to see the potential here. When Cryptokitties launched, the crypto world was excited at what type of new gaming models could be created, but it was admittedly a tad too early. Now in 2021, things have evolved and created the perfect stage for NFT games to finally make a splash in the industry and minds of gamers. The genie is already out of the bottle; now, developers just need to show the world what they can do with it.

About The Author

Derek Lau is Game Director for Guild of Guardians, a ‘play-and-earn’ mobile RPG where players turn their gaming passion into NFTs. The game is published by Immutable and developed by Stepico Games. He has a unique blend of experience in gaming, product and start-ups, with long and sustained exposure to the NFTs since 2017.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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