Why NFTs and Video Games Make Sense
What are NFTs?
There are many explanations of NFTs so I’ll just focus on the definitions that are most user-friendly and relevant in the case of video games.
Non-fungible tokens — “They are goods which share common attributes but have their uniqueness: each good has a unique set of values for each trait which is shared with the whole type.” Like Pokemon cards.
NFTs are tokenised versions of assets that can be traded on a blockchain — the digital ledger technology behind cryptocurrencies like Bitcoin and Ethereum. Whereas one bitcoin is directly interchangeable with another, meaning they are fungible, NFTs are the opposite because the underlying assets are unique in some way and can’t be exchanged like for like.
NFTs are managed with smart contracts. A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Like a vending machine (Thank you Rapid API for the analogue).
Consider Smart contracts like typical contracts but they are programmatically generated and completely digital. Smart contracts are stored on a blockchain (a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system).
NFTs are minted through smart contracts that assign ownership and manage the transferability of the NFT’s. When someone creates or mints an NFT, they execute code stored in smart contracts that conform to different standards, such as ERC-721. This information is added to the blockchain where the NFT is being managed.
The NFT is the token not the image file/ item itself. A piece of art from the artist’s official wallet minted through its unique, bespoke contract is more important than the image file. Anyone can copy a jpeg and mint a new token for it, but if it didn’t come from the original artist’s wallet, it’s worthless. In the digital Web 2.0 world, blue ticks on Twitter only matter because Twitter are the ones who assign them. In real life, an artist sits down at a table with 100 prints, and they are essentially a worthless stack of paper until they have the artist’s signature. Like a Picasso painting.
People are going crazy for NFTs for many reasons but at their core, they are a reliable way to prove ownership online. Checking the authenticity of these assets as well as making sure their owner is indeed the real owner of the asset is much easier than tokenising IDs, certificates, software licenses and terms of contracts.
Yes, there are many other ways to do the same thing without the environmental damage so why isn’t it like any other fad? I liked Shaan’s explanation of NFTs — I’m paraphrasing but:
It is a belief system like every other collector’s item, fashion branded goods or art collection from Mona Lisa to our fiat currencies. The more people who believe in it’s value, the more credibility it gains and subsequently it’s value. And when the Bitcoin shares crashed 80% and the majority of Bitcoin holders never bothered to liquidate, the coin dropped (pun intended). If there are this many loyal followers who can withstand this level of volatility then it’s a currency worth investing in. And that sentiment extends onto Ethereum and NFTs.
What is the benefit of NFTs in video games?
The technology underpinning NFTs has many benefits to what we have right now.
One example is Gods Unchained which uses the ERC-721 standard which hold many benefits compared to regular card games (such as Hearthstone):
- immutability of the cards after the release (no more surprise nerfs)
- full transparency of the rarity of each type of cards
- traceability of the previous owners of a given card
Now take your typical online shooter where weapons get nerfed every week and there’s a huge reliance on the community to piece together the stats of loot, equipment and weapons’ effectiveness in gameplay. NFTs technology could make all of this air tight whilst removing the opaque practices of developers iterating on their game. From a players perspective, NFTs in games could be used to prevent cheating on in-game inventory and money.
These NFTs can have history and metadata attributed to them as you play the game. This is an opportunity to authenticate our personal experiences in games and our contribution to in-game history whilst giving them real world utility. Our alternate lives where we grinded years towards status/rewards that were deeply meaningful to us but didn’t translate to real-world value/ownership could be a paradigm of the past of Web 2.0.
I think back to the days where I played Runescape and Tibia and the lack of evidence of my experience roaming the world, interactions with friends, strangers alike and overall contribution to the MMORPG experience. All those hours will probably be erased forever or centralised within the corporate structures of companies who hold all the data. They will then leverage complete profit in their entirety when these worlds would’ve been empty shells without the participation of other players. Shouldn’t players who give so much be rewarded also?
NFTs have the potential to give players immutable leverage in game worlds they are playing in.
Pay-to-own is better than pay-to-rent microtransactions
I see it as a transformation of play to earn as play to own, something suggested by one of our community members because it really cements the idea around what it is, loyalty towards players — Age of Rust developer Chris LoVerme
NFTs are a better alternative to microtransactions if implemented properly. How this is implemented will require a lot of thought but if we accept the madness of microtransactions and paying for cosmetic skins then there should be room to tolerate more perceived value for the end-consumer. A minted cosmetic skin with a transparent scarcity model is more valuable to a player than cosmetic skin coming out of an opaque ‘surprise mechanic’.
The Ready Player One analogue from Bloomberg illustrates nicely that you own all your digital assets and they are recognisable in that digital world. Who would you rather trust, Ubisoft’s implementation of NFTs on a blockchain outside of their control or digital assets they’ll happily rent you until their next bi-annual release?
This is why it makes sense for companies like Ubisoft to get involved because they already have microtransactions that simply let you rent content with no long term value. Now they can offer a better value proposition within the worlds they have built. The value is from who recognises it and if you are the world builder and you recognise NFTs then the NFTs value are tied directly to that IP.
In-game contributors being paid for adding to the lore.
Imagine the Assassin’s Creed Odyssey Story Creator Mode feature where you create quests for other players which can now be sold/experienced in exchange for blockchain currency and now you’re rewarded for your efforts. Another example is from an anime called Log Horizon where players are stuck in the game world and in return are given powers over that world itself. Like Shiroe creating new magic spells through a contract. The bargaining power is now in the hands of the players, shaping what the world can be. The more I think about it, the more likely I can see PC modders finally getting their pay-day through NFTs in video games.
NFTs in established IPs
So will these NFTs ever be worth anything and who determines their value? NFTs in games will be tied directly to the universes/worlds they come from. NFTs within worlds like Harry Potter and Star Wars will continue to increase as new books, movies, games are released and the world builders (aka IP owners) can also assign additional perks to first-comers and OG veteran fans. The community (fans of the IP) will recognise the rewarding of their long term loyalty and want to invest further in that IP.
Even though some would argue this defeats the purpose of NFTs if they are not built into the game from the ground up, I can see it’s appeal for established IPs. It is my belief the game NFTs must hold value on their own (like Pokemon Trading Cards). So the game must be fun and the IP must have cultural value outside the game while tokens reward participating. This is why I’m leaning more on video game developers adding NFTs after the IP is already established.
Pay to Progress mechanics
Pay-to-Earn or Pay-to-Win already have many connotations attached to them as traditional gamers rally against these practices. A term not used often but puts a positive spin and introduces particular mechanics possible exclusively with blockchain video games mechanics is Pay-to-Progress. Instead of buying Game Boosters from Ubisoft, you can pay fellow players to grind for you. I can’t think of a fairer way for gamers to pay into a video game than rewarding other players for helping them progress.
Imagine giving a co-op buddy a NFT tip for helping you defeat a Dark Souls boss? Another way to apply this concept is when a player discovers a new skill, they are rewarded with the maximum power of that spell. At least if it is a pay-to-win mechanic other players within the same ecosystem can benefit rather than lining the pockets of the developers further.
Interoperation is a massive advantage for cross-game value currently not possible in video games. Gary Vee’s interview with Mark Zuckerberg mentioned the trading of assets from Minecraft to Fortnite. This idea of extending the longevity of your in-game experiences by transcending the original game is a worthy pursuit for gamers who put in so many hours into their favourite games.
Open standards like ERC-1155, ERC-721, and EIP-2981 on Ethereum, and the next generation of coming interoperable blockchains, are the foundations for a metaverse. — Enjin CTO Witek Radomski
This falls into the domain of company Enjin’s main objective which is creating a marketplace to trade value across games. There has already been interest by video game publishers who would rather leave the developing/maintaining of a marketplace to an external company. This is a more fair, trust-friendly outcome that avoids the problem of centralising by Web 2.0 companies with shareholders not incentivised to provide value that can exist outside of their reach.
Loot systems and NFTs
On OpenSea, NFTs can be programmed so that each transaction includes royalties, allowing creators to be rewarded fairly for their work online. Now apply this to loot systems in MMORPGs, where the first player to loot a scarce item will continue to reap the rewards for the foreseeable future even if they stopped playing. The key part is that the marketplace determines the value of the loot, not the game developers.
Adding NFTs post-launch or Building games with NFTs?
The key to mass adoption is making compelling games that use NFTs in a way that facilitates new and fascinating types of gameplay and worlds. Developers need to use blockchain and NFT tech to elevate the medium — Fight for the Future Activist Joe Thornton.
Pros and Cons of NFT approaches in Video Games
The immutability and fixed scarcity of NFTs in video games can be guaranteed in a transparent way if the game is built from the ground up on the blockchain. Once you treat NFTs as an add-on, then the centralised authority in-charge of the game dilutes the many benefits of using NFTs in video games. There are pros and cons for each approach.
Adding NFTs to games that already exists means:
- (Con) Centralised game developer can abandon NFTs at any point which would significantly devalue them
- (Pro) Developers still incentivised to build a complete finished product since post-launch wealth will still be decentralised
Building NFTs into the core structure of the game from the beginning:
- (Pro) Gamers are rewarded for their time spent playing
- (Pro) Profit is skewed and driven more towards gamers than corporations ho own them
- (Con) Accusations of Pay-to-Win/ Ponzi scheme
- (Con) Players primary objective is to make money which impacts playstyle and community interactions
- (Con) Wrong incentives could drive developers to build a less appealing world from a gameplay perspective
- (Pro) Potential for NFTs to hold value outside of the game they originated from
- (Pro) Near impossible to cheat/game the system
As you can see, there are a lot of cons to building a NFT game from scratch. I will not pretend that NFT games will ever be superior to games built the traditional way because the incentives are just a lot more aligned when you prioritise gameplay first. Which puts me at odds with the quote below:
Although this wouldn’t be the case for every genre of video game NFTs, I can’t get on board with game developers not thinking gameplay first. This runs the risk of driving the wrong incentives and also drops the barrier to entry.
It’s easier to create items with no context, hoping the community does the heavy lifting. And this should be reflected in how the wealth from the video game is distributed. Something the NFT Loot Project gets right but is currently struggling to deliver appealing outcomes so far. This means ensuring contributors can earn more than the developers who simply created items. This should sound completely reasonable if you believe in the decentralised vision of Web 3.0 but will Web 2.0 corporations like EA and Ubisoft be happy to go along with this philosophy?
Can’t you do all this without blockchain?
This is a main obstacle for NFTs in video games. We can do everything mentioned in this article already without blockchain. It is up to the developers and the industry at large to prove that blockchain authentication is more trustworthy, reliable than what we already have. Even if developers decide to execute on these concepts without blockchain and decide to handle the authentication without NFTs, it is a win for the industry by introducing gameplay mechanics that are more rewarding for players long term.
Video games and NFTs are a recipe for in-game and outer-game longevity of experiences and digital assets immutably linked to the blockchain. This can be ensured by following key principles of Web 3.0 including — decentralisation of wealth creation, transparency and community driven development. There will be money grabs along the way but the rabbit’s out the bag so we can only find ways to embrace it in a way where gameplay remains first.
NFTs offer opportunities for reward systems that benefit gamers who contribute to the development of the video game backed by a trustless technology that is more reliable through it’s immutability.