NFTs in Gaming - Where Passion Meets Business

The gaming industry has risen exponentially over the past few decades. From playing Pac-Man on a 4-feet tall arcade in late-1900s to enjoying 8-bit superhits such as Mario on smaller consoles and immersing in DVD-based action games, for instance, League of Legends, gaming has flourished over time. The Internet revolution accelerated the industry’s growth from a few billion to hundreds of billions of dollars at present. NFT is the new sensation in the gaming business. Supported by crypto capabilities, NFTs are set to boost growth of the gaming industry.  

The Internet helped the world of gaming evolve into having its own ecosystems. Numerous developers have created unique gaming universes where people can play, purchase items, network, and almost live a virtual life.

Non-fungible token (NFT) was unheard of until 2020. However, NFT use-cases have expanded since 2021, especially in the gaming business. Every day, new NFT marketplaces and blockchain apps emerge. Such networks are hugely successful among potential customers, with hardly any indication of slowdown in growth. Many online games have introduced their unique NFTs, which are helping them advance in the cryptocurrency rankings. Traders have begun investing in these tokens on realizing potential for profit.

NFTs are digital certificates that prove ownership of items in the online realm and are registered on blockchains. An early use-case was artists selling their unique copy of digital art in the form of NFTs to users in exchange for cryptocurrency. NFT use-cases are now gradually increasing in other areas.

NFT Applications

Source: Aranca Research

I. NFT in Gamification

• NFTs have potential to revolutionize the video game industry. “Collecting” has been a popular hobby among people globally. For instance, the iconic board game Monopoly has been played for ages, seconding the human nature of accumulation. Similarly, NFTs can act as collectables, with the added advantage of monetization.
• Blockchain technology as a distributed ledger system cultivates a degree of trust for digital goods. NFTs will provide easy access for players’ unique digital goods in virtual worlds. Simulated in-game items can be transferred to an individual on an immutable blockchain as “non-replaceable” NFTs, which cannot be deleted, changed, or withdrawn by their creators. The gaming market recognizes the value of each NFT, which players can potentially gain by simply enjoying video games.
• NFT in gaming works in a simple way. Rewards used in the virtual games are programed as NFTs, which will hold value among players and collectors, and can also be sold. These will not just be digital files with codes, but can also be integrated with other NFTs, which will increase their worth gradually. This synergy of gaming nuances such as rules of play, scoring mechanism, and competition with application of decentralized finance led to the emergence of GameFi, where users can earn by playing.
• Although various games are currently operational on other blockchain networks, the NFT-based gaming industry was founded on Ethereum. Several games operate across various blockchain networks. In-game items are owned by players in the NFT-based gaming industry; these can be sold on secondary marketplaces. Furthermore, users of NFT-based gaming platforms can rent items to other gamers. As a result, investors seeking high returns may be drawn to the tokens exchanged on these networks. In fact, considerable trading activity was reported for the Axie Infinity NFTs, due to which their value increased in cryptocurrency markets.
• The popularity of the NFT-based gaming industry is especially influenced by the potential profits from such games. On exchanges, users can convert their NFTs into fiat money. In developing countries, gamers can use NFTs as an additional source of income.

II. A View into the Future

Assume Super Mario Bros., an inexorable Nintendo spinoff from the pre-web age, is a GameFi. In this hypothetical game, you get to be Mario for as long as you like, as you own its NFT. You need not be good at playing the game or even play it all day long. As you own the Mario NFT, which is registered in the blockchain ledger, it is impossible to duplicate – you have full ownership of the NFT. Thus, your Mario NFT will always be better and faster than the others in the Mushroom Kingdom. Consequently, the go-kart you drive will always be superior to that of Luigi, Princess Peach, or Toad, as you possess the Mario NFT. Hence, you play to earn the kingdom’s digital money (e.g., Supercoins) with the aim to set the Mushroom Princess free from Bowser and the tribe of turtles.

As per this game’s economics, people may have to pay heavily for the Mario NFT than for others, for instance, Luigi NFT or Peach NFT. In return, you also earn more as Mario is the sharpest player in the Mushroom Kingdom. When you move out of the game and back to your daily life, you still own the Mario NFT. When you resume playing, the Mario NFT is still there, waiting to earn you more Supercoins.

You can sell your Mario NFT in the market to other users if you wish. The Mario NFT would now be worth more than what you bought for if the character performs fantastically during the course of the game. This will likely attract more people to try Super Mario and earn. Supercoins may now hold some monetary value as it will become the talk of the town, probably by the hype created by social media.

GameFi developers are trying to build similar scenarios via blockchain technology. In particular, designers are tokenizing game assets. Gamers can collect and store these tokens in virtual wallets, and trade or sell these in any manner. The more time gamers spend playing a game, the more the chances are of the asset becoming valuable.

III. How is NFT Gamification Changing the Industry?

• Additional Source of Income via Play-to-Earn (P2E) Games: Online gaming typically follows the play-to-win model. Through this, players purchase objects and products that aid them in the games. However, gamers do not earn money. The new P2E concept serves as an alternative means of income for gamers who receive compensation for levelling up within a game.
• The rise of P2E Guilds: P2E guilds emerged due to the popularity of decentralized games, further reducing the entry barriers to NFT-based games. Guild owners can lend players the required in-game assets for "rent". This way, the lender receives a portion of the gamers’ revenue. With more new players, guilds make more money, and new users can also start earning. YGG is one instance of a P2E guild.
• Interoperability of Game Assets: Interoperability is one of the best features in NFT-based games. It is the ability to use individual game assets in multiple games, if permitted. Interoperability allows NFT-based games to exist on the same or interoperable blockchains, where game assets are exchangeable on marketplaces.

Source: Aranca Research

• NFT Staking: This feature enables players to store NFTs or cryptocurrencies in smart contracts, which require a significant initial investment and provide rewards in return. For instance, users that stake MBOX tokens are rewarded with MOMO NFT Mystery Boxes. Each mystery box includes a random NFT of a certain uniqueness that can be sold on the secondary market.

IV. Popular NFT Games

Many NFT-based games soon gained popularity among players as a result of the growing popularity of NFTs. Top NFT games in the market, according to online players and trade volume, are listed below.

V. Why is NFT Ideal for Gaming?

NFTs bring invariability, proven scarcity, and interoperability to gamers, powered by the blockchain. These benefits ensure that the experience of gameplay is unprejudiced and decentralized.

Source: Aranca Research

• NFTs provide owners the authority on the information about the asset in a transparent manner without risking the privacy of the player.
• NFT game development helps players access their game assets anywhere and anytime outside the game.
• On the blockchain, it is easy to verify the authenticity of an NFT. This increases the confidence in trade transactions.
• NFTs allow gamers ownership of their in-game assets instead of game developers. Players can sell these to other gamers or transfer them in other games that accept such NFTs. Furthermore, NFT ownership will not be affected by issues such as delisting of the game in any country. 

VI. Conclusion

Although the use of NFTs in the gaming industry has advantages, there are also considerable challenges, such as hacking and fraud, which must be addressed. Above all, NFTs should be made more enticing and understandable to ordinary consumers who may not be tech savvy. NFTs have intrinsic value. Thus, some NFTs may be primarily considered as speculative assets. This is likely to encourage players to buy in-game items with the aim of selling them for a profit rather than utilizing the resources within the gaming environment, as intended.

The opportunity for financial gains in the gaming sector will encourage more businesses that are not blockchain-focused to experiment with NFTs. Such companies may partner with other blockchain initiatives that have the necessary technological know-how to develop NFTs. Furthermore, the widespread popularity of gaming decentralized apps (DApps) will contribute further to stimulating improvements in the NFT infrastructure and driving the creation of novel solutions that facilitate mainstream usage.