NFTs are primed to make an incredible breakthrough in the world of gaming. No clue what an NFT is? Don’t worry, I’ll explain.
NFTs are a craze in the current cryptocurrency landscape. People like Beeple, Grimes, and Mark Cuban are jumping in and are already cashing in millions on this digital gold rush. NFTs aren’t exactly new, even if they are generating a ton of buzz. If this is the first time you are hearing the term, don’t worry — I’ll fill you in.
In 2015, I wrote an article for Bitcoinist about colored coins, one of the first practical applications of the so-called Bitcoin-2.0 and layering in additional functionality to the cryptocurrency’s blockchain. This was four months before the genesis block of Ethereum was mined, and before the time of some of the impressive capabilities that come with cryptocurrencies like Ethereum. NFTs piggyback on what colored coins created in 2013 — but like any iteration of technology, they bring about lots of cool new functionality that wasn’t possible back then.
Now, I anticipate some of the technical capabilities of cryptocurrency are bound to break through to the world of gaming — at least on an exploratory basis as new features and business models change and disrupt the already innovative and rapidly expanding gaming industry.
NFTs may fail in gaming — at least at first.
The idea may seem a little complex in the technical workings, and this article won’t go into a deep dive into the mechanics of the blockchain. This is a gaming publication after all — so we’ll keep things simple and get to the good stuff.
Flashback to 2013–2015
Back in 2015 when the world was crazy about Overwatch’s upcoming launch, I was just learning about colored coins and what they could do. The idea of colored coin functionality at the time was to ‘mark’ or alter certain digital tokens to issue or transfer additional digital assets on the Bitcoin blockchain.
Before this initiative, marking or storing other assets on the Bitcoin blockchain was impossible and one bitcoin was one bitcoin. The net sum was the same and the tokens were indistinguishable. The idea behind colored coins is what is driving the current craze with Non-Fungible Tokens or NFTs. Ethereum makes the expanded functionality of what was proposed in 2013 by Colored Coins a much more impressive and imminent reality for many digital industries — including gaming.
Maybe you’ve heard the idea mentioned in a conversation at digital company happy hour on Microsoft Teams, Slack, or Zoom, maybe this is your first time hearing the term. NFTs are non-fungible tokens. They are unique and cannot be replaced by something else. If a digital item — such as art — is minted on the Ethereum blockchain, it is unique and gives the owner of the NFT digital and irrefutable proof through the blockchain that they are the sole owner of the original token. See Nyan Dogecoin, for example, bought at auction for almost $70K USD in Ethereum.
So why do people care? NFTs provide a way to create scarcity and uniqueness to digital art. A new vessel of distribution and ownership for an already experimental medium.
I have included a copy of the ‘original’ art file NFT which you are seeing above, but since I do not own the NFT itself, I do not own the artwork. Think of it like purchasing a print of a Rembrandt. You can look at the same piece of art, but you don’t own the original piece. There is a distinction.
It is important to note that the possibility of NFTs is not exclusive to Ethereum. Other cryptocurrencies with supporting blockchain can and have implemented the technology which involves ‘minting’ a digital token to create and attach the original file to the NFT.
Okay, so how can NFTs apply to the gaming industry?
Here is where things get interesting. Think of our example above of individuals being able to claim ownership of original digital items. What if players had that same kind of ownership to in-game items of extreme rarity or difficulty to obtain. For this system to have merit, players need to have full control of their NFTs, otherwise, they have no value.
Players could own NFTs that immortalize and commemorate their most impressive accomplishments and items in games.
Unique or extremely limited stamped items could be held and owned by players. Think of something extremely limited tied to in-game events and challenges. Game devs, feel free to copy any of these ideas. I would love to see some of these implemented in your games:
- An item is given as a reward to the group who is the first to clear the new raid.
- 1,000 players who participate in an event gain a special reward — no more copies of the item will ever be introduced within the game.
- ‘Title cards” or masterwork/curated items from extremely rare world drops.
- Weapon, item, or character skins of increased rarity, cost, or importance.
- NFTs tied to long-living live-service games that extend or enhance the lifecycle and value to both publishers and players.
- Commemorative play of the game highlight reels from eSports teams could be auctioned to players to let them own a piece of franchise history.
- Unique, signed eSports in-game items could be distributed to players and fans.
- Digitized subscription tokens of ongoing value.
- Convert a large sum of in-game currency to a redeemable NFT that allows for real-world transfer.
- Convert a large sum of in-game commodity items into a digital token.
Giving the owners of the NFT as much agency as possible and the ability to sell and realize real-world value from their holdings is essential to making this kind of system work.
Entire in-game economies driven by NFTs
AAA developers may want to hire a well-renowned economist who understands digital scarcity to help build their NFT systems.
Entire player-driven economies could be created and facilitated with cryptocurrency technology — specifically NFTs. Developers and publishers will certainly need to understand the legal and technical requirements of implementing NFTs into their games, but the possibilities are expansive.
Before developers go all-in, they need to understand the limitations. Gas fees are the fees paid to miners contributing to the proof-of-work algorithm backing the Ethereum blockchain and verifying transactions. They are expensive enough right now to the point where creating an NFT for EVERY in-game item would be impossible and in theory, infinitely expensive. For developers to implement NFTs successfully, the functionality would have to be more targeted unless they planned on creating their own cryptocurrency to support the tech.
Looking to the past to look to the future.
Largely regarded as a disaster, the real-money auction house that shipped with Diablo 3 ended up being a total failure. But it illustrates one of the very first real-world examples of a player-driven economy with real-world financial impact. Diablo 3 was the first video game I played that carried a tax implication on my financial bottom line, and that was cool.
I was most of the way through high school when Diablo 3 released — and I made over $200 of cold, hard cash selling items in Blizzard’s real-money auction house. I even had a dedicated character geared with magic-find to up my chances of finding items worth selling.
So why did the auction house fail? First, the appeal of the Action RPG genre is the grind. You complete harder and harder content to find marginally better gear to help you do even harder content, faster. The mechanics and content loops between decide the fun and sense of achievement you get as a player by progressing through the game. As it turned out, the best way to get the best gear you needed was to buy it for cash. Blizzard earned a cut of the action on each sale on the auction house of course, but players were still making real money.
But what happens to the appeal of the game when there is no chase item left for your build? How can casual players compete in ranked or ladder play when other players can simply buy the best equipment and they can’t?
These issues were compounded by the fact that Diablo 3 gear used to drop with every stat in the game — even stats that had NO impact on certain character classes. Intelligence dropping on your Barbarian-specific axe? You’re out of luck, pal. Go kill more monsters and hope you don’t roll another shitty battleaxe.
Diablo 3’s real-world auction house was a massive failure — and Blizzard ended up pulling the plug and turning the game around for the better. But this innovative and absolutely WILD system of Diablo 3 paved the way to iterate and improve on the formula in some ways.
World of Warcraft’s WoW Token is a perfect example of Blizzard learning from its failure. Players can purchase WoW tokens to sell to other players in the game for the current market price in gold (WoW’s in-game currency). My biggest gripe with this system is that players who generate enough gold to reliably obtain the tokens have no way of turning them into real cash, only game-time or Battle.net account balances for other digital purchases with Activision Blizzard.
In my time in World of Warcraft: Legion, I was making enough gold through crafting and gaming auction house commodities to buy three WoW tokens every hour — but I had no way of cashing them for anything other than Battle.Net account balance and I could only buy so many Overwatch Loot Boxes… If players once again gain the ability to get a cut of the action paid out via PayPal, this system will be cooking with gas. It’s a step in the right direction, but NFTs take things so much further in giving their owners TRUE control over their assets.
Eve Online has run a much tighter real-world money economy for years. I find new articles on my discover feeds about massively expensive battles between giant player-run alliances all the time. Like this absolutely massive battle involving ships worth more than $1 million dollars of real-world value. From my research, the real-world money economy of Eve Online is typically well-regarded amongst its community of players. NFTs would take things a step further in building out some impressive capabilities for the economy all while giving players even more control of their valuable assets.
NFTs: coming to a game near you
So Where do we go from here? Who knows. But the past has shown us that even the titans of the gaming industry aren’t afraid to take chances and break the rules of how everything is done. NFTs may be their next toy to bring to the sandbox.
It will remain to be seen how NFTs can break into gaming and eSports — but if the current world trend is any indication, we may be seeing it sooner rather than later. What do you think about the capabilities of NFTs in gaming? Let me know in the comments below!