The quick answer is that an NFT game is one where unique digital items (NFT’s) can be owned within the game but those same items are also owned by the player out of the game.
NFT games are harnessing the player’s desire to collect, improve, or trade items within a game and that they are willing to use real money to do so.
What makes it an NFT game?
An NFT (Non-fungible token) is simply a unique digital creation that can have its existence and ownership verified by means of a complex computer record. The process of creating an NFT is called ‘minting’ and a record of its creation is then stored on a blockchain.
So what does that actually mean?
Basically, any item in the game that is made into an NFT is given a unique code. That code includes all the information about that unique item. The information includes details of the item relevant to the game (its shape, color, size, etc), the owner, when, where it was created and any other details the game developer may require.
If that item is then sold or changed, the information relating to it is updated but all the original information is also kept, creating a full history for authentication.
Some examples of NFT creations in the game world include:
- A Character Skin / Outfit
- A Prized Weapon
- A Magical Creature etc
These unique NFT items might be found, created, or earned by the character within the game but would also then be owned by that player in real life.
Note: Each NFT is unique. It might be part of a group of items that all look and function exactly the same but each one has a unique code. This is the same as having a ‘limited edition’ artwork.
e.g. You might find, within the game, a ‘standard sword’ that has been made into an NFT. However, your unique standard sword might be number 876 of 100,000 ‘standard swords’. It is not particularly rare but it is still unique.
In-Game assets are NOT new, what is the big deal?
The success of in-game purchases has been proven time and again with games such as Fortnite where players pay real-world money to buy skins (outfits), weapons, or moves for their in-game character. The scarcity of such an item, as controlled by the game’s developers, helped create a thriving economy in reselling these items.
The introduction of NFT’s is a way of having more control over the items. So what are the benefits:
Benefits For the Player
- Proof of ownership and authenticity of items
If a prized digital weapon is meant to be the only one in a game or indeed the world, then the NFT technology allows its owner to prove it. He can simply view the NFT report and it will have all the information about the item, including when it was made, by whom, and any other owners of the item.
- Ability to trade an item within a secure environment
If a player wishes to sell an NFT item they can now prove their ownership and the authenticity of the item. This should make reselling items legitimately, on marketplaces either in the game or indeed third-party websites, more trustworthy.
- Ownership of an NFT within a game but also outside of the game!
Ownership and trading of an NFT item can earn you money in the real world. As the popularity of a game increases then the value of an NFT can also increase.
Benefits For the Developer
- They can earn money each and every time an item is traded
The most obvious benefit to game developers is that NFT’s allow them to make more money! One of the features of an NFT is that the game developer can add a rule to its creation saying that they will take a percentage of any transaction that takes place involving that NFT. This applies every time they are traded.
This means that the game developers can now earn from the thriving reseller market.
- They can create an economy within a game that extends to the real world
The other key interest of game producers is that they are able to develop an economy within a game that can also be traded in the real world.
The game developers launch a new digital currency (a cryptocurrency) that is used to buy and sell the NFT’s within the game but that can also be traded in the real world for other currencies ($, €, £, etc but most commonly cryptocurrency).
e.g Axie Infinity Shards (AXS) are the governance currency that is part of the Axie Infinity Universe of Games
As all of the information for all of the games’ NFT is recorded, any trading (buying/selling) or creation of new NFT’s can now be tracked. It is, therefore, possible to monitor the state of that economy.
Like any economy, it will fluctuate up and down, depending on variables such as how popular the game is, the desire for people to own the NFT’s, possible upgrades, problems with the game, etc etc
As the currency is traded in the real world, investors can also now speculate on the currency even if they never play the game! They can simply buy some currency and hope the game becomes more popular and then sell the currency for a profit!
Having investors, brings in more money to that game community, making the currency more valuable.
NFT’s as part of an in-game Economy
One of the first games with NFT characters was CryptoKitties, which launched in 2017. In CryptoKitties, players collect, breed, and trade digital cats. Each cat is a unique NFT.
The games’ developers set up various rules for the creation of new cats (some of them random!) that determine the characteristics and rarity of the individual cats, which in turn determines their value in a traded market. There are now over 2 million cats, each with unique characteristics that allow players to rank them and value them.
They can then buy, sell, or in this case breed the NFT cats.
Note: Breeding creates a new, unique, NFT cat, at a cost to the player, but may create a rare and therefore desirable and valuable new cat. This has created a community of collectors but also those who simply speculate on breeding new cats in the hope they get a rare one, that can be sold for a profit.
Game NFT’s as part of a Real-World Economy
As an NFT game becomes more popular the uniqueness and rarity of items make them more desirable and valuable. Therefore the total value of all the NFT’s within the game becomes greater, which means the game economy is becoming more valuable.
As the in-game currency is also a tradeable currency, then investors seeing the increase, and wanting to make a profit, will want to invest. This, in turn, makes the economy and associated in-game currency more valuable and will increase the value of the NFT’s.
NFT Games in the Future
As new games are developed they are learning new ways to utilize the potential of NFT in expanding in-game and cross-game economies. This will no doubt add benefit to both players and game developers in the long run, and will once again change the perception of game playing.
Currently, the drive to add NFT’s to existing games is not being taken so well by the existing players. The general feeling that the game owners are simply trying to make more money is not viewed favorably.
However, new games are being created where the NFT principle is built in from the start. These will allow all the benefits for players, both financially and in gameplay, in supporting their chosen gaming universe and for developers to show their gratitude for the loyalty and success of a game.
What do you think about in-game NFT’s?
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