In my younger years, and perhaps this admission of mine will reveal my age, I was the proud owner of a venerable Tandy Color Computer 3 with 128KB of RAM. These humble specs did provide countless hours of entertainment (these were simpler times). However, what I saw on-screen really paled in comparison to what I witnessed at my best friend’s place, who was lucky enough to own a Nintendo Entertainment System and a Sega Master System.
Eventually, my family’s Sony Trinitron was graced by the presence of a Turbografx-16 (the North American version of NEC’s flagship console, the PC-Engine), an underdog which was marketed as a direct competitor to the Super Nintendo and the Sega Mega Drive.
After high-school, my interest for video games never really faded – however I was never able to be as involved as I was during my younger years – especially during those demanding university semesters.
In 2018, during Crypto Winter, my interest for Gaming and Blockchain led me to do a little bit of research and to my surprise, I discovered a vibrant market for games that implemented Blockchain technology to create new game dynamics.
Blockchain games have come a very long way – today, we are seeing the rapid emergence of NFTs in the blockchain gaming industry, and far from being just another fad, the use of NFTs in the context of Gaming will have cascading effects and change everything we thought we knew about games.
Follow me as I go down the NFT gaming rabbit hole.
In-Game Assets as NFTs
An NFT is a cryptographic token that lives and dies on a Blockchain Network, where the ownership and transaction history associated with an NFT is stored. An NFT is designed according to certain standards (a standard is a set of specific rules that tokens have to adhere to). There are quite a few standards for crafting NFTs and the most popular ones are ERC721 (the Gold standard for NFTs) and ERC1155 (a multi-token standard which can be used to craft NFTs but also an assortment of other digital assets).
NFTs, thanks to Metadata that contains critical descriptive information, cannot be replicated: they are non-fungible.
Gaming and NFTs are a match made in heaven. Why didn’t we think of this before? Swords, potions, shields, all of the items associated with Dungeon Crawlers or more classical Role-Playing Games such as Final Fantasy – represented as NFTs. Owning race cars from the latest racing game as NFTs and trading them among friends. Just thinking about the possibilities should be enough to make your head spin.
If in-game items can be represented as NFTs, then they are not bound to a particular gaming world. And this perhaps is the most far-reaching consequence of the introduction of NFTs in gaming.
In-game items as NFTs can now be transferred peer to peer and perhaps, given Blockchain’s Interoperability (the capacity of vastly different systems and blockchain networks to speak to each other and understand each other) and Composability (the possibility, built on a foundation of Interoperability, to adopt a modular approach and compose new systems, products, services and experiences with platforms and applications as building blocks) be used in other games.
The idea of transferring in-game assets raises specific legal issues. However, taking a page from the Real Estate NFT playbook, couldn’t developers quell disputes well in advance by stating that the ownership of the NFT grants ownership of the associated Intellectual Property?
In-game items as NFTs are a brilliant idea and one that will appeal to anyone who has spent a significant amount of time and money on a game, only to see their efforts and in-game assets wiped out of existence due to technical failures from the developer, for example.
When a game account is deleted, when servers malfunction, or when a developer goes out of business, all of the time and effort spent building characters, collecting items and building relationships is vaporized. All that effort is gone. NFTs change this: all game items as NFTs can be immediately transferred to an external wallet for safekeeping. Even characters can be transferred out and used in other games.
This is a revolution for gamers – in-game items and characters are no longer bound to gaming worlds and exist on their own timeline.
NFTs will unlock a tremendous amount of value in the gaming world, which is already, thanks to Covid-19 among other known catalysts, experiencing explosive growth. The global gaming market was valued at 162.32 billion US dollars in 2020 and is expected to reach a value of 295.63 billion US dollars by 2026, registering a compound annual growth rate of 10.5% over the period of 2021-2026. Analysts will need to add to these jaw-dropping numbers the value created by Decentralized Finance protocols slowly creeping in the Gaming World via NFTs.
Certain platforms, such as Mobox (in a sign of things to come), allow users to Stake in-game items turned NFTs. In-Game items are now making appearances on NFT Marketplaces such as OpenSea and WAX (the WorldWide Asset Exchange). And really, what is stopping Decentralized Platforms from allowing in-game items, via bold governance proposals, as collateral on their platforms?
2.7 Billion gamers will finally be able to own in-game items, experience a true sense of ownership and, most importantly, generate streams of revenue for themselves. Traditionally, gaming generated revenue in a single direction: towards the developer. Most globally recognized video game developers – such as Electronic Arts, Activision, Ubisoft – tend to employ a monetary maximization model, where they focus primarily on making as much money as possible with each title release. In this regard, it bears mentioning that over the course of the past 5 years, the issue of microtransactions seems to have plagued the entire gaming market, such that players are now required to shell out a small fee to unlock very small features present in a host of popular gaming titles.
The emergence of NFTs in gaming is a game-changer: not only will it force large industry players to rethink the way they make money – this also means that value creation will not be the sole domain of developers and publishers any longer.
In this brave new world of Gaming, Governance by users becomes a distinct possibility. Users who own a sizable share of in-game currency or a large amount of precious in-game assets will be able to impact core rules of the game through governance.
The funding of NFT powered Gaming is a great indicator of the shifting interest towards this new hybrid. One example is Bit-Country, which raised over 4 million US dollars in one day, for its digital, community-driven metaverse. Another example is Forte, a decentralized gaming ecosystem, which raised 185 million US dollars at a 1 Billion US dollar valuation for its blockchain game platform.
In-game assets as NFTs can be transferred peer to peer and sent to external wallets for safekeeping. In-game assets will soon be accepted as collateral on Decentralized Finance Platforms. Users who own a sizable share of in-game currency or rare items will be able to submit governance proposals that will impact a game’s rules and design, something that was inconceivable with traditional gaming. NFT powered gaming is upon us.