+44-208-004-7212

A dummies guide to NFTs in gaming: they really will revolutionise the gaming industry, and yes it makes perfect sense.

Date

30/09/2021

Written by

Airnow

You may wonder what on earth cryptos can add to gaming, and why they are causing such a stir in the gaming community. But make no mistake, digital non-fungible tokens (NFTs) are the most exciting thing to happen to gaming in years, and they will transform the industry indefinitely.

Cryptos and gaming are a match made in heaven. In fact, virtual currencies were invented in video games. For years virtual currencies in games such as Runescape and World of Warcraft have had real-world value. People have been more than willing to spend their government issued currencies on an in-game virtual currency in burgeoning game economies. You only have to look at how Runescape is helping many Venezuelans survive in the face of economic crisis to realise just how much real-life value these virtual currencies can have.

The economics of these virtual in-game currencies have the same basic principles as any government issued currency or “fiat currency”: value is driven by human emotion and rarity. Take for example the virtual currency of World of Warcraft, humble gold pieces. To buy things in game you need gold pieces, but gold pieces don’t grow on trees, so you need to go out and get them, which is at times a long and arduous process. Sound familiar? Well, if you don’t want to spend time farming for gold pieces, you can simply buy 100 gold pieces for $10 from someone who has done the hard work for you. Of course, this price will have inflated since 2014, when I used to play World of Warcraft.

How does this relate to mobile gaming?

Gaming is the primary source of entertainment for the younger generations, beating Netflix, Amazon Video and social media by a country mile.

Data shows that two-thirds of 18–25 year-old gamers would rather play video games or watch gaming content than watch TV. Viewing gaming is also enormous, and is slowly eroding the viewing of linear TV among Gez. Two in five (41%) 16–24 year-olds have watched a gaming stream in the last month, with a rate of one in three (35%) recorded among Millennials.

This trend is only increasing, as companies are coming to the conclusion that the primary revenue stream of the future will come from gaming. They are also starting to realise that NFTs may just be the best idea we have to date when it comes to monetizing this time.

The game economy, where users can play to earn items or in-game tokens that others will buy from them, is no different than gamers buying accessories on, say, PUBG Mobile. Game developers make billions from such sales.

It’s more than just a game

Anyone who has spent any time gaming will know that you come to cherish the time you spend on the game, as well as the characters you play as. In other words, you come to value in-game things. But up until now there has been no real way of keeping this memory or assigning real-world value to this virtual world.

At least there was no way of doing this, until NFTs came along. Using blockchain technology, gaming items, characters or accessories are able to be transformed into NFTs that can be traded by the user in open marketplaces such as OpenSea. This means that NFTs will finally enable people to store and assign value to the hours of time they have spent in virtual worlds or video games. For years people have looked at collectibles as both an investment and a kind of emotional memorial. That's why rare and special edition Pokemon cards are now selling for thousands of dollars. With blockchain technology, you can buy an NFT that memorialises a moment in a game you played, or validate the authenticity of a rare item you have collected. Just like with the Pokemon cards in real-life, the NFT can gain value based on the emotion you have for it, or its rarity.

It's a small change at first glance, but this has the potential to revolutionise gaming, and even the world as we know it.

While cryptocurrencies such as Bitcoin are interchangeable (or fungible), NFTs are not. Each NFT is different, and so it introduces the idea of a one-of-a-kind property, something that can be considered valuable because of its rarity. Combine this with the emotional value that people attach to the time they spend collecting a rare item in-game, and the two key components for value - emotion and rarity - come together to create value. Suddenly, NFTs don’t seem so crazy after all.

It is very possible that in the not too distant future, games with huge player bases will be utilising NFTs to enable players to create real-world value, as well as having burgeoning game economies that utilise cryptocurrency in-game to reward players and keep them coming back.

NBA topshot

In reality, this future has already started to arrive. NBA Top Shot (a digital take on collectible basketball cards). Published by Animoca Brands and built by Dapper Labs, NBA Top Shot has surpassed $100 million in sales, five months after going public to a worldwide audience. NBA Top Shot has notched over $700 million in total sales in less than a year, according to CEO Roham Gharegozlou. By comparison, Dapper Labs’ CryptoKitties — where you simply breed and buy and sell kittens - has sold more than $40 million since 2017.

NFTs in gaming: the possibilities are endless

NBA topshot is just the start; there are endless possibilities for how NFTs can be used in the gaming world to allow for the ownership and transferability of digital assets. The adoption of a new free-to-play monetization model has been around for a while, but has grown exponentially through the release of Riot Games’ Fortnite and Epic Games’ League of Legends. Alongside the games being free-to-play, they offer the option for players to buy “skins” - aesthetic items such as outfits or weapon camouflages that help personalise their gaming avatars.

Despite the fact that these additions are purely aesthetic, meaning they have no actual impact on gameplay, players around the world have been buying skins in their millions. A recent report from Forbes suggests that Epic sold close to 3.3 million NFL-branded skins during the event. Converting that figure to fiat currency, this means that Epic Games made around $50 million from a single set of skins.

Skins have essentially become digital art for video games, and NFTs could allow digital artists who may later want to sell such designs to claim ownership of and authenticate their skins.

It's not just skins where NFTs can be utilised either. Take Roblox for example, a mobile game where users can create their own gaming world and map with infinite creative freedom. What if NFTs allowed gamers to sell the map or world they have created to someone else?

Another perennial problem that has existed in video games which could be fixed by NFTs is the transferability of digital assets. Up until now, any time you spend collecting virtual currency or unlocking rare skins in a game is locked into that specific game. That means if that game were to stop existing for whatever reason, all the time you spent will essentially be for nothing.

NFTs could solve this problem. Let’s say for example that you have poured hours into unlocking the much coveted Avengers skin in Fortnite, which holds a real-world value of around $50. What if you could import that exact skin into Roblox? If players knew that this kind of transferability was available, the value for these items would only increase.

Such innovations are causing the dawn of a new era of gaming, from the free-to-play approach, to play-to-earn, which is far more collaborative and fun for the user. It is only a matter of time before blockchain technology becomes ubiquitous in the gaming space.