The emergence of gaming non-fungible tokens (NFTs) has turned the industry on its head in the past few years. Back in the early 2000s, gaming was merely seen as a form of entertainment — a fun pass time activity. From there, it has come a long way and transformed into a means of earning financial rewards for players. Twenty years later, we are in the era of GameFi.
The Evolution of GameFi
Microtransaction has always been a core part of modern games since its first major adoption in 2006 by Elder Scrolls IV. Whether it’s a multiplayer battle royale game or single-player adventures, microtransaction has helped players to enhance their experience by purchasing useful items and in-game currency.
However, the microtransaction of the 2000s lacked a sense of ownership. While you’re using hard-earned currencies to buy in-game products, these purchases don’t give you any sense of uniqueness. Let’s say you’ve purchased a new character, but thousands of other players also purchase the same one. If we mind originality, there is no real value.
Gaming NFTs are rapidly changing this. The uniqueness and non-interchangeability of NFTs mean that gamers can own an actual piece of the game, and this ownership can’t be replicated by any other player.
The gaming NFT market is projected to grow by 32.56% year-on-year until 2027. And it grows not only due to new Web3 games. Mainstream games are also adopting the concept to enhance the payer experience and provide a real sense of value for in-game assets.
The Types and Benefits of Game NFTs
Generally, there are two NFT models used to create the in-game value.
The first model is ‘play-to-earn.’ A game rewards its users with fungible or non-fungible tokens based on how long and how well they play. These tokens can later be traded for other assets.
Another model is ‘in-game NFTs.’ These buyable tokens represent in-game elements such as characters, reward boxes, armor, skills, skins, accessories, and so on.
As mentioned earlier, the real benefit of NFTs in gaming is the sense of ownership. Purchasing an in-game character means it will now be represented by a unique token, providing ownership that anyone else cannot replicate. The rights to this character belong only to you unless you sell them to another player for a profit. This model can be actually used for any in-game assets: characters, skills, special abilities, currencies, or even digital lands or properties.
In-game NFTs not only create a value-driven sense of ownership but also develop monetization opportunities for players. This way, the benefits of microtransactions are experienced by both the developers and the players. This way, in addition to enjoying the experience, they actively invest and financially benefit from the game.
How Do Mainstream Developers Use NFTs
Major game development studios are increasingly acknowledging the benefits of non-fungible tokens. This has accelerated the adoption of in-game NFTs across several major games in the past two years.
The concept was first incorporated into mainstream gaming by Ubisoft. In 2021, the game publishing giants released in-game NFTs for one of its highest-selling AAA titles, Ghost Recon Breakpoint. While this particular game received a mixed reaction from the wider community, Ubisoft has continued to push the adoption of non-fungible tokens further as a part of its Web3 strategy. Earlier this year, the studio released ‘Rabbids NFT avatars’ for The Sandbox, an Ethereum blockchain-based metaverse game.
Other major publishing studios are following in similar footsteps. For example, Azra Games, founded by former EA game developers, has recently raised $10 million in funding for the upcoming NFT-themed adventure game “Legions & Legends.”
The leading production house, Universal Studios, has also started researching ways to leverage non-fungible tokens in mainstream games.
And global retail giant Amazon goes as far as planning to launch a digital assets enterprise.
To sum up, NFTs and blockchain are set to receive widespread adoption across the gaming industry in 2023 and beyond. However, certain challenges might hinder its progress.
The Risks of NFTs in Gaming and Their Potential Solution
There’s no hiding from the fact that the NFT sector is filled with scams, frauds, and malicious threats. Scams and frauds have caused the industry over $100 million in the past year alone.
This is because non-fungible tokens are decentralized assets, making them difficult to track and secure. So, naturally, they become a breeding ground for threat actors and scammers.
Also, the value of non-fungible tokens can be highly volatile, and their prices can fluctuate rapidly. This makes it difficult for players to determine the value of their investments correctly and may lead to unexpected financial losses. Such concerns are often hindering the broader adoption of NFTis gaming. Tim Sweeney, the CEO of Epic Games, has recently ruled out any potential Fortnite NFTs, saying, “the field is tangled up with an intractable mix of scams.”
Blockchain gaming and non-fungible tokens are still in their primary stages. There’s a lot of due diligence to be done to make this sector less susceptible to malicious threats. Going forward, game developers should collaborate with NFT marketplaces and crypto exchanges before introducing digital collectibles within their gaming environments. This will drive more credibility into the sector and help to keep fraudulent practices at bay.
Written by Ilman Shazhaev, Founder and CEO of Farcana