Love them or hate them, everyone is talking about NFTs.
NFTs, or Non-Fungible Tokens, are unique certificates of authenticity that can be linked to an image, song, video or even an event ticket. Really any asset, digital or physical, can be represented by an NFT.
Why on earth might something like this be useful? you might be wondering.
I’m so glad you asked.
While the potential applications of NFTs are wide and varied, there is one industry that is primed to utilize this new technology:
Gaming.
Gaming?
Wait, really? Come on Amy, grow up. Games are for kids.
Let me remind you that the global gaming market generated roughly $180 billion in 2021 and is expected to amount to $268 billion by 2025 [source].
Games are everywhere, on every device, appealing to people of all ages – over 2 billion of them, in fact. Games capture the world’s attention and attention is king.
So yes, I’m bullish about gaming. And I’m really bullish about gaming + NFTs.
In this post, I’ll discuss just one of the many superpowers that NFTs unlock: digital ownership.
When you buy an NFT, it becomes yours. You own it. And, you can sell it or transfer it, if you so choose.
Applying this to games, we’ll look at what it means to own a game asset and see how ownership has the potential to transform the gaming landscape.
Finally, we’ll wrap things up with a few questions to ground ourselves in the reality of this still nascent space.
Ready? Let’s do this.
Digital Ownership
As a long-time gamer, I am no stranger to the idea of digital assets. You play a game, you collect items and currency, dedicate time and effort to levelling up your character and even buy and sell stuff on an in-game marketplace.
But I will be the first to admit that I never really thought about digital ownership. The question of whether my World of Warcraft characters belonged to me just didn’t cross my mind.
That is, until I discovered NFTs.
NFTs provide a way for gamers to own their digital assets in the same way that you own physical collectibles like your Dungeons and Dragons dice set or your binder of Pokemon cards.
Let’s come at this from the angle of a World of Warcraft player.
You may think that your level 54 warlock belongs to you. You’ve spent months levelling, questing and raiding. You’ve invested real money to purchase cosmetic items, even a name change. Of course you own your character!
In reality, your warlock lives on a server that’s controlled by the game developer. If you get yourself (unjustly) banned for gold farming – poof! – say goodbye to your character. Likewise, if the game devs close the game and shut off the servers, your character is gone forever.
Now let’s see what is unlocked when we introduce NFTs to the equation.
With a level 54 NFT warlock, the time and effort you put into levelling up your character are reflected in a digital asset that you own. If the game servers shut down, no problem, your NFT character lives on in your blockchain wallet.
Like your Pokemon Cards, your NFT warlock is yours to do what you want with. You can send it to a friend, sell it on a marketplace, lock it up in a vault for safekeeping.
You could even use your NFTs in other games, either within the same series or between different universes. If a new game decides to build an ecosystem that supports your mighty warlock, well then great, off you go. Behold, the power of interoperability.
In this way, NFTs become the base level asset for digital experiences. An indie developer looking to bootstrap user adoption of their upcoming game can leverage the community of an already popular game by integrating its NFTs.
This creates a symbiotic relationship:
Holders of the NFTs will be excited to access the new game and enjoy a new way to utilize their assets.
The new game benefits by adding an established community to its user base.
If the new game turns out to be a hit, everyone wins! Value is shared with the holders of the NFTs who can choose to sell – or not!
NFT Marketplaces
Just as there are in-game auction houses that facilitate transfers of in-game items, NFT marketplaces enable gamers to trade the NFTs that they own.
This is exciting on many levels.
Collectors can buy rare assets and, thanks to the immutability of transactions on the blockchain, be assured as to their authenticity.
Creators can sell their own user generated content – for example: custom items, skins or maps – to other players who then use them in game.
And your everyday player can sell assets that she acquires and receive a return for her efforts.
The exciting part about these marketplaces is that they enable the majority of the value to stay in the hands of the individual, with typically only a small portion of each sale going back to the marketplace and game developer.
Simply put, NFT marketplaces cut out the extractive middleman (game devs or game platforms) and enable a new category of e-commerce.
Digital Flex
If you’ve ever played a game, chances are you’ve experienced a desire to show off your hard-earned achievements. Traditional games have fulfilled this desire with leaderboards, special player ranks, unique gear sets and other rewards.
Player-owned NFTs on a public, transparent blockchain enable an entirely new level of digital flex.
Instead of your achievements being siloed in each game that you play, NFTs across your entire gaming repertoire can be showcased in a unified virtual profile. This means that your career as a gamer can be appreciated by anyone, not just people who happen to play the same games as you.
Let’s take this one step further.
Imagine a game sends you a trophy NFT, indicating that you are among the top 10,000 players. This NFT becomes a social signal that represents your skill and passion as a gamer..
Seeing your trophy:
Another game developer might send you an NFT that unlocks early access to an upcoming game. A game conference might send you an NFT that gives you free admission to the event. A brick-and-mortar retailer could send you an NFT that comes with a discount on gaming rigs.
This is just one of the many ways that player-owned NFTs can provide value back to the holder.
The Sticky Parts
The NFT gaming space is teeming with new ideas and experiments. But, with great innovation comes great challenges. I think it is critical that we acknowledge that there are technical hurdles we have not figured out yet and questions we have not answered.
In that spirit, I’d like to address a few of the big questions that may cause gamers to dismiss NFTs.
How do we prevent NFT games from becoming pay-to-win?
Many gamers fear that game assets traded on the open marketplace will undermine the fun and sense of achievement they get from playing a game. And rightly so. If you can simply purchase a gear set without putting in months of grinding, questing and raiding, then progression stops being about skilled gameplay and defaults to who has the deepest pockets.
Possible solutions include:
NFTs could be used only for cosmetic items – think skins or non-combat pets.
Or, earned NFTs could have distinct visual appearances compared to those that are purchased.
A third possibility is to use so-called soulbound NFTs, which live on-chain but cannot be transferred, to represent items or achievements that are earned via skilled gameplay. Like soulbound items in World of Warcraft, these special NFTs cannot be bought and sold on the marketplace; if you want them, you have to collect them yourself.
Only through many iterations will we figure out the optimal way to integrate NFTs in games without compromising on fun and difficulty.
How do we incentivize early adopters to play the game rather than speculate on the NFTs?
Many NFT games sell NFTs to fund the development of the game. While some buyers are excited to playtest, provide feedback and contribute to the ecosystem, others are solely interested in the future value of the NFTs.
Games can’t be fun or engaging if the majority of asset owners sit on the sidelines waiting for prices to go up. Likewise, games can’t be inclusive if speculators drive up asset prices and the barrier to entry becomes exorbitantly high.
One idea I heard recently, which applies to NFT land assets, is to impose a digital land tax. Under this policy, land owners would incur a holding fee that incentivizes them to do something productive with their land to offset the fee [source].
Pretty wild, right?
Figuring out a way to encourage NFT owners to play the game and add value to the ecosystem, rather than just holding assets, will be paramount to ensuring the long-term success of NFT games.
How do we live up to the promise of interoperable NFTs?
One of the most hyped features of NFTs is their ability to be utilized across game worlds.
But awesome as it sounds to take your NFT weapon from Diablo II to Diablo III or from World of Warcraft into Super Smash Brothers, we aren’t there yet – not even close.
In order to get there, we’ll need to address significant technical hurdles arising from translating unique assets between unique game environments.
How does an NFT look and feel across different games? What does it mean for the lore and story? And most importantly, who decides how much damage Thunderfury, Blessed Blade of the Windseeker does in Super Smash Brothers?!
Standardization of game assets across the industry is just one step in the right direction. We’ll also need automation to make the manual, laborious conversion of digital assets into a faster, more efficient process.
Will interoperability become a reality? Only time will tell.
We’re Just Getting Started
Just as the gaming industry was transformed with the advent of mobile phones, it will be transformed again thanks to blockchain tech.
NFTs will fundamentally change the power dynamic by empowering gamers with ownership of their in-game assets. Global communities of gamers will be able to connect and transact via NFT marketplaces, allowing more of the value to be retained by the individual and making the space more equitable overall. NFTs will also provide new ways for gamers to be rewarded for their time and effort, to flex their achievements and to form even stronger attachments with the games they play.
NFT games are the next frontier. But, we certainly don’t have it all figured out yet and that’s why this is such an exciting place to be.
At Tribally, one of our central goals is to attract new communities and demographics to NFT gaming. To do so, we will need to overcome one of the main blockers to adoption: education. I hope that by framing NFTs from the point of view of a gamer, for gamers, I can help to bridge the gap into this new technology and get people excited about the next generation of games.
Thanks so much for reading!
Amy Peniston
Co-founder @ Tribally
twitter.com/amypeniston
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