NFTs in Gaming: From Pay-to-Play to Pay-to-Win

HodlX Guest Post

Remind me, what are NFTs again?

Non-fungible tokens (NFTs), also known as “nifties” in some corners, are a special type of digital asset. While NFTs can either be unique or come in limited editions, they all have digital scarcity as a core component. In comparison, Bitcoin (BTC), with 21 million coins to be mined, is a fungible token and 1 BTC has the same value as another 1 BTC. In other words, unlike BTC and typical tokens in the crypto industry, the exact NFT you own matters, as each of them is unique or provably scarce.

NFTs have opened up a trove of intellectual property to monetization. For example, marketplace Terra Virtua has launched NFTs that are presented in 3D, with animations and audio for movie franchises such as The Godfather. While the film industry’s attention to NFTs may be increased due to the death of ticket sales in light of the ongoing pandemic, gaming is more promising.

NFTs already exist in games

In comparison, the monetization of NFTs from the gaming industry has been strong from the start and seems the likeliest reservoir of future growth. Take, for example, Enjin, a blockchain company that offers a virtual NFT marketplace. Enjin offers in-game items paired with Coincheck to support the trading of in-game Minecraft cryptocurrency tokens. Being a separate token, each token corresponds to a separate item. Other games such as The Six Dragons and 9lives Arena are also on Enjin’s marketplace for NFTs. However, these NFT games are still works in progress, judging from the status currently in alpha, which means they are yet to be fully developed. While the games do sell NFTs in the form of unique equipment, they can profit only if the gaming customer base is willing to spend on them.

For NFTs to be accepted by the broader gaming community, major developers with large budgets would need to sign up to develop NFTs for AAA games. To date, the most successful stories of NFTs have occurred in non-conventional games, such as Sandbox or Minecraft, where users spend time building objects and worlds, which creates ample opportunities for monetization.

Despite the current lack of interest from AAA developers, one benefit of NFTs is their interoperability between game platforms. For example, a much anticipated but currently in development blockchain game project, Age of Rust, has always been closely linked to Neon District, another anticipated game, and also supports BitCrystals’ Book of Orbs wallet.

Adopting NFTs could be revolutionary but would require tradeoffs

Interoperability could eventually be the key that allows NFTs to become fixtures of mainstream gaming. Many of the most popular online games, such as EVE, World of Warcraft, and League of Legends, allow users to hold objects that have real value in the game. However, these items will always remain on the company’s servers. If the company suddenly shuts the server, the objects disappear and the real currency invested is totally lost.

In comparison, NFTs will continue to exist on the blockchain. This could be a main advantage if the company has a popular but dated game it would like to upgrade. The creation of balanced intergame objects is much easier and fairer if done on a public blockchain. While there are advantages of major AAA games using NFTs, doing so would likely require the redefining of the relationship with their publishers.

Many of the most popular MMORPGs started on a pay-to-play model as the publishers demanded a steady stream of licensing fees and royalties. However, eventually many indie developers pioneered the pay-to-win model, which proved effective in monetizing the sales of special items and characters. While the base game was free, lowering the entry barrier, the players who wanted to win could buy the tools of their trade.

NFTs could be the next evolution of the pay-to-win business model. Using NFTs, the owners of a gaming franchise could use the tokens across all of the intellectual property line and retain customer loyalty. While interest in NFTs has been lukewarm due to the reluctance of AAA publishers, they already have massive marketplaces to sell a vast variety of virtual merchandise. Therefore, with the surge on blockchain game popularity, it is only a matter of time before major players either collaborate or create their own version of a marketplace along the lines of Enjin, Terra Virtua or other existing NFT marketplaces.

Crypto exchanges have been watching the development of NFTs with interest, admiring both the strides being made in the gaming sector and the meshing of DeFi and collectible tech –and the creativity resulting from the collaboration between artists and developers.

It’s incredible to see so much innovation and growth among the NFT sector, with several projects pushing the boundaries of what can be done with this technology. Therefore, giving our users a voice on choosing their favorite tokens will help to place crypto exchanges at the forefront of the crypto space with the hottest new NFTs available.

Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

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Featured Image: Shutterstock/Akira Kaelyn