ALL IN! GAMES S.A. NFTs have been taking the internet by storm recently and seem to be popping up in yet another industry everyday. But what even are NFTs? What impact can they have on the gaming industry? If you don't have time to go through several articles on the topic, check out our overview for a brief introduction to NFTs and what they mean for the video game world.
What are NFTs?NFT is short for non-fungible token. 'Non-fungible' means that each individual NFT is unique and 'token' is just another word to say 'item' or 'asset'. So an NFT is a unique digital 'item' that comes with an ownership and authenticity record stored on blockchain technology. The use of 'token' in the name can be confusing at first because it might make you think that NFT's are a type of cryptocurrency, especially since the two are often discussed together. While NFTs and cryptocurrencies exist in the same world, they are by no means the same thing. It's easiest to think of NFT's as digital items and of cryptocurrencies as the digital currencies we use to buy NFTs.
An NFT can be any manner of digital item such as graphic assets like memes or original artwork, in-game items such as skins, virtual pets, virtual land, and much more. However, NFT's can also serve as a digital record of a physical asset such as real estate or a painting, only retaining the 'blockchain record of ownership and authenticity' part of the NFT definition. It's this use of blockchain technology that makes NFTs so special and much talked about across all industries.
But what is blockchain technology and what's so great about it?A blockchain is a type of digital database used to store information. What makes it so noteworthy is the level of security offered. Firstly, data entered into a blockchain is encrypted. Secondly, blockchains tend to be stored on a decentralized network of computers. This means that there's no one person or group in control of the database, all users have an equal level of control.
Most importantly, data in a blockchain is more difficult to tamper with because of the structure in which it's stored. Information that is entered into a blockchain builds up to form a 'block of data'. When the block is 'full' it becomes permanently sealed and future data will go into a new block attached to the previous one (this is where the chain part comes from). The next block will store some data from the block that came before it making it even more difficult to alter the data.
By storing data in these sealed blocks, together on a chain, you not only have a secure place to store your data, but the chronological order of data entry can't be tampered with either as each block is timestamped. So what makes blockchain technology so great is that it guarantees the security of a record of data and removes the need for a trusted third party or 'middleman' in a transaction. That's why it's been used to record cryptocurrency transactions and now, with NFTs, ownership of items.
Despite all it's benefits in terms of increased security, blockchain technology also has disadvantages such as high energy consumption and high costs for each transaction. These issues are planned to be addressed with changes to the technology, such as the release of Ethereum 2.0, the blockchain used in NFT transactions, but even then there are still other issues. For further reading on the possibilities and issues of the blockchain we recommend this research paper.
While the concept of NFTs is said to have started in 2012 with Colored Coins, small denominations of Bitcoin that were used to represent a variety of assets, the first true NFT to be created was Quantum, a digital gif art piece made by Kevin McCoy and Anil Dash in 2014. Finally, with the launch of Ethereum in 2015, the first blockchain to incorporate 'smart contracts', packets of code that could keep record of ownership and authenticity, NFT's started to become easier to create, store, and trade and Ethereum essentially became the cryptocurrency to use for NFTs.
The first time that NFTs earned a mention in mainstream media was in 2017 with the blockchain-based game, CryptoKitties, in which players would raise, trade, and collect virtual cats (NFTs). The game's success opened the world's eyes to the potential of NFT's and was followed by a veritable explosion of NFT innovation. Although a lot was going on behind-the-scenes, NFTs didn't pop back up into the mainstream until January 2021; but this time they went really mainstream, to the point that everyone's still talking about them a year later and it doesn't seem like the hype will die down anytime soon.
What brought NFT's to the public's attention this time seems to be a combination of factors. Medium explains that part of it is due to the pandemic-driven increased interest in all manner of crypto-related investments. At the same time, one of the most successful NFT ventures to date, NBA Top Shot, was released at the tail end of 2020 and has only been growing in popularity. If you add on top of that the mind-blowingly large amounts of money that NFT art pieces have been sold for ($69 million for Beeple's The First 5000 Days), it's no surprise that NFTs continue to dominate headlines even now.
NFTs haven't taken the world stage without controversy though. Already there have been numerous cases of art theft, whereby works are stolen and sold as NFTs. And of course, one can't neglect to take into account the long-lasting consequences for the climate as a result of the high electricity usage needed to process NFT transactions and mine for the cryptocurrency used to buy them. Moreover, NFTs are said to have contributed to Nvidia's graphics card shortage; in addition to manufacturing problems caused by the coronavirus pandemic, the cards have been being bought out by crypto-currency investors to use in their mining rigs.
NFTs and video gamesNFTs and video games have a relationship that started long before 2021. As mentioned earlier, one of the first times NFTs went mainstream was actually because of the game CryptoKitties in 2017. It was only a matter of time before NFTs would start to spread in the gaming world after the success of the game. When you add to that the rise of the metaverse in 2021, a concept that is closely tied to both NFTs and gaming, it's no surprise that 2022 dawned on a horizon ripe with new possibilities for NFTs in video games.
In-game NFT ItemsThe first thing that usually comes to mind when someone thinks of NFTs in video games is in-game items. NFTs are most simply put 'digital items' after all. Incorporating NFTs into games as in-game items is basically attaching a special receipt to your skin or weapon that grants and tracks ownership. But what's the point of this? For the most part, attaching NFTs to in-game items creates the opportunity for resellability and therefore investment and entrepreneurship. A blackmarket in in-game items has always existed in one form or another around games such as Runescape and World of Warcraft, but with NFTs, the possibilities for legitimate trading based on the blockchain become available.
Another way to see the value in NFT game items is an NFTs record of ownership. Granting an item an NFT tag makes it unique and tracks its journey through time, distinguishing it from other items of the same type. Imagine for example the increased value of an in-game item that was owned by a popular streamer or was used by the winner of an esports championship. This type of added historical value to in-game items would have been impossible without NFTs.
In-game NFT items aren't necessarily the new holy grail though. While some might say that NFTs grant players 'real ownership' of an item, if a game were ever to shut down its servers, your NFT would become a bit meaningless. You'd basically have ownership of an item that is no longer usable or accessable. Some have said that due to the decentralized nature of NFTs, in-game NFTs could potentially be used across game worlds, which would solve that problem, but the reality is that the implementation of universal in-game items would require the collaboration of so many different stakeholders that it will probably never become a widespread thing. Another downside to NFTs in games is the high price tag that usually accompanies them. Due to just the cost of performing a transaction on the blockchain, NFTs are inaccessible to a large part of the gaming community.
NFT-Based Games Axie Infinity is one of the most popular play-to-earn games on the market. Source: Twitter.The types of NFT-centric games on the market so far can be categorized into Play-to-Collect and Play-to-Earn games. The main aim of Play-to-Collect games is to gather collectibles which are in themselves NFTs, e.g. cats in CryptoKitties or a type of video trading card in NBA Top Shot. In Play-to-Earn titles, in-game currency is generally earned through gameplay which can then be used in game or traded in an open market for cryptocurrency. An example would be Axie Infinity, which Newzoo calls "an evolution of CryptoKitties" because the developers added on to the idea of breeding, trading, and collecting virtual pets by offering players the chance to earn more currency by using their pets to win battles against other player's pets. So in this case, not only are pet NFTs assets that can be sold and bought, but they can generate income as well.
The MetaverseOne does not simply talk about NFT's and gaming without touching on the metaverse. Just like 'NFT' and 'blockchain', 'metaverse' is a word that may need some explanation. A 'metaverse' is a network of 3D virtual worlds that use augmented reality, virtual reality, and blockchain technologies in which you exist as an avatar version of yourself. Some people call it the Web 3.0 because in a way, it is similar to the internet in that it's a decentralized network, but by being an actual world you can enter and 'walk around in', it's definitely an evolution from opening a browser window.
If the metaverse is a digital world, then NFTs are the digital items that will fill it with meaning and gaming is a large part of what we'll do there. Some would argue that a metaverse already exists-in games! Minecraft is the perfect example of a 'type of metaverse' that has existed for a long time. In terms of a full-fledged metaverse, although Meta would like people to think that they are the first, there are a few games that existed before the formerly-known Facebook changed its name and that are the closest thing we have to the future of the real thing.
The Sandbox plans to open their metaverse to 'LAND owners' who have built 'high quality experiences' in Q1 2022. Source: press pack.The Sandbox andDecentraland are both games that offer a 3D virtual world in which players can buy virtual plots of land (NFTs) which they can then sell, rent, or ultimately use to build their own games upon. The Sandbox has set up a thriving marketplace for, not only land NFTs, but also for just about any digital item (NFT) you could want in a virtual world and has consistently been one of the top sources of NFT transactions globally. Investors are definitely taking the metaverse seriously-gaming companies and even celebrities make up a large portion of virtual land sales. Only time will reveal what they'll create in the metaverse and the gaming world that will begin to take shape within it.
With new headlines coming out about NFTs in gaming everyday and opinions divided, it's definitely a hot topic. Here's a summary of major video game companies in the news and their stands on NFTs:
- Valve announced a ban on blockchain-based games as well as those featuring NFTs in October 2021. In response an open letter followed, criticizing the company's decision.
- The Epic Games Store declared the opposite-the platform stated that they welcome NFT games as long as they comply with financial laws and provide an explanation as to how blockchain technologies are being used in them.
- In December 2021, Ubisoft announced a beta test for its new platform for acquiring NFTs, Ubisoft Quartz. In addition, the company implemented NFTs in the PC version of Ghost Recon Breakpoint for cosmetic in-game items.
- GSC Game World joined the NFT trend with plans to auction off the rights to become an NPC in Stalker 2: Heart of Chernobyl. The idea was criticized and subsequently canceled just a few days later.
- Peter Molyneux, known for games like Fable and Godus (and Curiosity - what's inside the cube), revealed that his new game Legacy, announced back in 2017, will allow players to buy Land NFTs-digital plots of land. The game hasn't been released yet, but Land NFTs can already be purchased.
- Other gaming companies turning to NFTs when developing their business strategies are SEGA and Square Enix.
In spite of the controversy surrounding them, it doesn't look like NFTs are going anywhere any time soon. On the contrary, it seems like they're only just starting to hit their stride now, and we're sure to see NFTs incorporated into future games and even aspects of real life. Whether they'll become a permanent and successful feature in gaming remains to be seen. Might as well sit back, play a game, and wait to see where NFTs will take the gaming world.
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All In! Games SA published this content on 21 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 January 2022 10:11:10 UTC.
