The Impact of NFTs in the Video Games Industry
The Impact of NFTs in the Video Games Industry
As the line between the physical and virtual worlds becomes increasingly blurred, non-fungible tokens (NFTs) provide easy access to digital collectibles in the virtual world. NFTs are currently transforming the video gaming industry. Many digital collectibles used to problematic to own because they were not “one-of-a-kind,” implying that they were easily reproduced and copied. With the introduction of NFTs, video game players can now be assured of owning unique digital collectibles. This also means that their creator cannot withdraw or revoke the digital collectibles. There is considerable value in NFTs that guarantee ownership of digital collectibles simply by virtue of playing video games. To focus on this growing phenomena BigONE would like to discuss the effects of NFTs in the video gaming industry and how to maximize their potential, from individual gamers toindustry players.
The value of NFTs
The value of NFTs lies in the fact that they can be used for various purposes, including digital collectibles from a game. They can be used as an avatar, to display one’s status or fandom, or to take advantage of any special abilities that NFT items unlock in a game. The market value of gaming NFTs is not static either, and can continue to rise over time, seen most dramatically with the recent launch of the Loot when 2,400 people managed to grab a NFT collection of computer-generated text images that represent the treasures of a videogame that hasn’t been invented yet, according to a report in Decrypt: “Those 2,400, who minted their Loot NFTs for free a week ago before the entire collection was claimed within a couple of hours, can resell their NFTs for a minimum of 8 ETH (and far more if their sheets contain rare items), and claim about $50,000 of Loot ERC-20 tokens. Everyone else, however, had to watch with envy while the lucky few became immensely rich, networked in exclusive online clubs and got ready to play the RPG videogame that Loot’s community is feverishly creating for them.”
For a more established video game brand such as Activision’s Call of Duty, a “special gun” provided as an NFT can have its properties upgraded, as well as from a trading value perspective become a rare digital collectible. An exclusive item like this can help create a one-of-a-kind gaming experience for players while improving gameplay quality. BigONE believes that over time, it will become the industry norm for video games to support cross-game NFT usage — so you can take your costume from one game to another. We believe that for the value of NFTs in video games to realise their full potential, the existence of NFTs should not be dependent on a single game, but exist in a ‘metaverse’ with interoperability built in. Interviewed recently in The New York Times, Tim Sweeney, the chief executive of Epic the designers of Fortnite, defining the NFT-driven metaverse said,“In the metaverse, you and your friends and your appearance and cosmetics can go from place to place and have different experiences while remaining connected to each other socially.” Could it be possible one day to have a tunnel from Roblox to Fortnite and other games, connecting them all in some sort of futuristic world? Mr. Sweeney said yes.
The play-as-you-earn model (GameFi)
One of the advantages of NFTs in video games is that they enable the transition of video games from purely recreational activities to profitable activities. NFTs in video games allow players to monetize their time and earn real rewards simply by completing gaming challenges and tasks. Many players have made NFTs and other digital collectibles that they can sell for real money by playing Axie Infinity, Decentraland, etc. The system is shifting away from video games that provide enough value to keep players engaged for an extended period,and towards a system in which players receive unique NFTs for completing game objectives, allowing them to choose to trade these NFTs for money on an NFT marketplace. The NFTs are embedded in a smart contract and are automatically awarded to players when they complete in-game objectives.
In Axie Infinity, for example, players earn Small Love Potions (SLP). Players require these tokens to breed new Axies, but they can also sell them to other players on the open market.AXS acts as the default currency of the Axie Infinity ecosystem that players use to buy and sell Axies and pay trading fees. AXS also operates as a governance token, allowing Axie Infinity players to vote on proposed upgrades. The economic prospects have so far boosted AXS demand among traders. Data intelligence firm IntoTheBlock noted that the number of Axie Infinity token holders grew by 400% since November 2020 — from zero to 16.73K addresses.
GameFi is a hybrid of gaming, NFTs, and decentralized financial instruments such as yield farming, lending, staking, and much more. A “play-to-earn” game should be free to play, but that is not currently the case. Despite this the GameFi ecosystem has started to grow and mature thanks to a plethora of unique play-to-earn models that have seen revenue generation incorporated into gameplays. Also impressive is the amount of finance being devoted to developing the infrastructure required to take GameFi to the next level. Taking an ambitious view, with consequences for trading opportunities for the future, and not just in the short term, this arguably means global adoption that rivals traditional gaming economies. Certainly, as NFTs becomes more commonplace,GameFi will play an important part, helping users to access a market to trade NFT gaming assets across their favourite platforms, in turn helping grow future inter-connected play-to-earn ecosystems.
The role of intellectual property and licensing
These changes in the video gaming industry means that game developers must understand whether the design of a character based on an NFT is copyrighted. According to case law from the European Union’s Court of Justice, a character in a game can be protected by copyright if the outward appearance is different from a similar character. We believe gaming companies and developers should implement a notice-and-takedown system for the unauthorized use of third-party NFTs on their platforms. People should understand that the sale of an NFT does not include the complete transfer of the ‘copyright’ to the buyer, but rather the right to use derived from the copyright, which remains with the creator. There’s also an argument, that to drive scarcity and make cross-gaming NFTs valuable, that game creators should restrictusing NFTs. On the other hand, there’s a case to use NFTs for more common in-play gaming items to simply allow for portability between gaming.
The future of NFTs and gaming
BigONE believes GameFi is here to stay as the popularity of NFTs in online gaming grows. Part of this change is connected to the global growth of the gamers. A recent report from Accenture found that the gaming industry has increased by half a billion players in the past three years, totalling 2.7 billion people globally. It also predicted more than 400 million new gamers are expected by the end of 2023: “The profiles of these new joiners are also changing: 60% are women, 30% are under 25 years old and one-third identify as non-white. Whereas respondents who identified as longtime gamers are 61% male, 79% over 25 years old and 76% identifying as white.”
The “play-to-earn” system, which allows players to earn money for playing, is responsible for transforming online games from a recreational activity to an e-sport, even a means of making a living. While we acknowledge the potential of the GameFi model, we believe that the barrier to entry should be reduced to recognise the influx of new gamers from around the world. At its simplest people should be able to play games for free while also earning money, moving from one game to another taking their NFT in-game identity with them.
