What is the Purpose of a Non-Fungible Token?
The main role of an NFT is to certify the ownership and authenticity of a unique digital asset. These digital tokens are unique cryptographic assets, which are stored on a blockchain and cannot be replicated.
NFTs can be linked to all kinds of assets. They can be attached to physical assets such as property or physical items like shoes, or they can be attached to digital assets like art.
The key driver behind NFTs is blockchain technology. This platform for handling transactions securely and transparently means there is no need for an intermediary and markets can be created around NFTs and the digital assets they are linked to.
There is an industry that NFTs and cryptocurrencies are beginning to show their worth in dramatically, and that is gaming.
The Current Gaming Meta
Most games in today’s world generate the majority of their revenue from microtransactions. Microtransactions are made through players purchasing in-game items with an in-game currency, and this in-game currency is bought with real money.
For example, in 2021, Activision Blizzard - the company in charge of the likes of Call of Duty and Overwatch, generated over $6.4 billion in microtransactions as opposed to $2.3 billion in actual game sales. This indicates that companies are accumulating a lot more through in-game transactions compared to actual game sales.
The microtransaction strategy was welcomed and accelerated by Epic Games - the creators of Fortnite. Released as a free game, Fortnite's only way to generate any sort of revenue was through in-game purchases which are essentially microtransactions. Players could enjoy the game for free, but if they wanted added utilities, such as skins or added experience gain, they needed to spend money.
One of the current issues with the current gaming meta is that players don’t necessarily own the in-game assets that they’ve worked for. The platform owns them and they’re stored on walled-off data systems. This means that current in-game assets earned don’t really offer much out-of-game value.
This is where NFTs and cryptocurrencies could fill gaps and exponentially grow the gaming industry. The reason for this is that the current environment is dominated by gamers and gamers only. By bringing in NFTs and cryptocurrencies, you’re bringing in real market value and therefore you’re bringing in investors.
NFTs as In-Game Items
Within the current gaming ecosystem, in-game items provide an incentive to play the game and obtain these virtual objects. Even though these items may not necessarily have real-money value, they still motivate millions of gamers to play and collect.
Imagine turning these in-game items into non-fungible tokens? Unique virtual assets stored on the blockchain that hold real monetary value and can be bought or sold on a worldwide marketplace. Players can sell the items that they obtained in the game, providing a crazy incentive to play and earn while doing it.
Another key thing to note here is that players will be able to trade these items and currencies without the game publisher getting in the way or acting as a middleman. This will incentivise trading a lot more.
Another huge gap that non-fungible tokens will fill is that they give ownership of the assets to gamers. Players and investors have the choice of either utilising these assets for the benefit of their growth in the game or selling them on real-world marketplaces.
Cryptocurrency as In-Game Currency
Now, I mentioned that current games rely on an in-game currency for generating the majority of their revenue. Let’s now replace that in-game currency with a native cryptocurrency. This cryptocurrency could potentially be earned by achieving objectives within a game, but it can also be obtained by being bought off a cryptocurrency exchange.
The way NFTs and cryptocurrencies link is that in-game items (NFTs) can be bought or sold with the in-game currency (native cryptocurrency). Players or investors can sell in-game items for the native cryptocurrency and trade it on global exchanges for other cryptocurrencies that have real-world value such as Ethereum or USDC.
This movement has the ability to create micro-economies within every game willing to employ a blockchain system. These micro-economies bring in gamers and investors, creating an increase in demand for both in-game items and the native cryptocurrency, resulting in an increase in value for both assets.
Examples of In-Game Economies
One of the best examples of where NFTs and cryptocurrencies could (and will) thrive is in the MMORPG genre of games. MMORPG stands for massively multiplayer online role-playing game and it’s essentially a game where thousands (or millions) of players play together in an online world.
Right now, these types of games are incredibly addictive and popular. An example of one of these games is World of Warcraft. Released in 2004, World of Warcraft remains one of the most played games today.
The game is focused on players creating a character and building this character from the bottom up. Players can explore, engage in quests or have person-versus-person battles (PvP). The in-game currency for World of Warcraft is Gold and players can earn this through quests and engaging in other activities. Players are also able to find items during their adventures. These items can be traded in-game between players and they can also be sold for Gold.
Imagine replacing this in-game economy with an NFT and crypto economy. In-game items become unique NFTs while Gold, the in-game currency, becomes the native cryptocurrency.
Games like this would develop a fully functional, real-value economy that will attract millions of players from around the globe. The combination is simple. World-class game mechanics and the ability to earn from playing the game. This is the future of gaming, but it’s going to take a while before we see the big names entering the blockchain environment.
Another interesting element that blockchain brings to games is the decentralised governance of the game's direction and overall decision-making. Many upcoming blockchain-based games are introducing decentralised autonomous organisations (DAOs) into their strategies. This ultimately means that project leadership and decision-making is spread amongst a whole bunch of stakeholders rather than individual leaders.
This will bring about an interesting aspect to a game's growth, as players will get a vote on how the game is optimised or altered for the future.
Blockchain Gaming Adoption
Blockchain technology and gaming are simply a match made in heaven, and we’ve already seen some companies take huge advantage of this. Axie Infinity was the first game that really installed the play-to-earn (P2E) nature and many have earned a lot from playing the game.
In fact, some have even turned to Axie Infinity as their main source of income. In the Philippines, Covid-19 had a catastrophic impact on employment and the economy, resulting in many utilising the game to stay afloat and potentially earn more than previous work.
Axie Infinity absolutely exploded when it first got released. It seemed like a dream come true that you could earn money from playing a game. The game’s governance token, AXS, has the third-largest market cap within the large list of gaming and metaverse projects.
Although Axie killed it at first, numerous issues are getting exposed within their tokenomics. The term tokenomics refers to the quality, distribution and production of a crypto token.
The game is especially prevalent in poorer countries and many are using the currency earned from playing the game to cover living expenses. This results in the in-game token not being used productively within the game and inflation may start creeping in.
Since Axie Infinity, hundreds of game developers have hopped onto the play-to-earn train with the intention of creating their own in-game economy that anyone can get involved in, whether you’re a gamer or an investor.
The Growth in P2E Gaming
The majority of games in this space are still very much in development and are currently raising funds. The way they’re raising funds is by launching NFT collections as well as their ICOs (initial coin offering).
NFT collections may be the characters or heroes that one needs to access the game, and holders of these NFTs may obtain exclusive benefits for when the game comes out.
An example of this would be Sipher. The game released a collection of NFTs which are essentially heroes that can be played within the game. Buyers and holders of this NFT collection will have early access to the game, as well as gaining whitelist for further collection drops.
Whitelist essentially means you’re guaranteed the opportunity to invest in the next NFT collection drop - these collections can sell out quickly, so being whitelisted is valuable.
Sipher is built on the Ethereum network and it looks like an incredibly satisfying and addictive game. It’s a game where players can explore, socialise and battle to earn $SIPHER - the native cryptocurrency for the game.
When it comes to the ICO (initial coin offering), this is where the gaming company will launch its own cryptocurrency. A public sale will occur where the company offers the token/coin for a price that is pre-set or determined by how the sale goes.
The ICO is a key part of a game’s fundraising strategy and this will roll out well before the game is released. The funds raised from the coin offering will be used for development, marketing and overall growth of the project.
After the ICO, these coins will get listed on both centralised and decentralised exchanges, where they can be traded by investors.
This form of fundraising gives the opportunity to smaller game developers to acquire the necessary capital to build and showcase their dream projects. These developers can now present their ideas to willing investors and have the chance to raise money that they couldn’t before.
Right now, we’re seeing loads of ICOs and NFT drops. Game developers are desperate to get their game launched and raising funds is at the forefront of their strategy. It may be exciting to see these projects getting launched, but the chances are we’ll only see most of these games being playable at the end of 2022 or early 2023.
Play-to-Earn Games to Look Out for in 2022 & 2023
There are hundreds of games currently raising funds and being developed that have employed a play-to-earn system. The majority of these projects will fall short and may struggle to fulfil their goals and objectives, but there are several promising developments that have a world-class team and are ticking all the boxes on their roadmap.
Here are three games that I believe will fly once the game is released:
MonkeyLeague is one of the first promising projects that looks to bring in the success of soccer-based games such as EA Sports’ FIFA. It’s a play-to-earn model that aims to bring in a FIFA Street feel but also intersects with Final Fantasy. The game will be built on Unreal Engine, with the intention of it being playable on both desktop and mobile (sorry console players!).
Players will battle it out in a 4 versus 4 game mode as unique characters (NFTs) where one player can control the whole team, or there can be 4 different players controlling individual players.
In terms of earning, there are 3 different ways one can do so:
- Winning matches as players
- Hosting matches through renting out stadiums (stadiums are NFTs) or;
- Supporting the winning team as a spectator within the match
Monkeys are the characters within the game. Each Monkey is ranked differently based on traits or as MonkeyLeague describes it - DNA. The rarer the Moneys traits, the more potential they’ll have to perform special moves and ultimately have better game statistics.
This may seem unfair, but the motivating part is that even less rare Monkeys can be improved through playing more and winning matches. This basically means that any Monkey has the ability to improve playing statistics over time.
The in-game currency, or native token, is $MBS. This is a utility token that can be used to breed new Monkeys (new characters for more players) or to buy consumable items within the game.
MonkeyLeague also has a governance token, namely $SCORE. The game will be governed by a DAO (decentralised autonomous organisation) meaning that the players will play a major role in the direction of the game.
The team behind MonkeyLeague is incredibly strong in all aspects and they’ve pulled in experts that have more than a decades experience in building and marketing games.
I personally can’t wait for a FIFA-style game with the potential to earn from my efforts - keep an eye on MonkeyLeague.
Dark Frontiers is a space exploration game where players are forced to survive away from the destroyed Earth. Players are able to claim land on different planets, with resources being the key to survival.
The project will feature a player-versus-enemy ecosystem, where players can explore different planets and fight off local inhabitants that will disrupt the farming of resources.
NFTs will come in the form of space suits which are needed for oxygen, in-game items to benefit player development, space rovers for travel, spaceships and land, where resources can be farmed and stored.
The game’s native currency, $DARK, is needed to claim land as well as to forge in-game items that can be used during quests or exploration. Needless to say, but it can also be traded on exchanges for other real-value cryptocurrencies.
The survival genre of games has always been a huge sell and Dark Frontiers has got a significant survival mode feel about it. It also has released several previews of gameplay and the graphics are seriously impressive - check this out for example.
Magic Craft is a massive-multiplayer-online (MMO) role-playing-game with the aim of having a fully immersive crypto economy. Players have the option to free-roam, engage in quests or forms clans and battle other clans, with the incentive of earning $MCRT, the native token.
The game aims to bring in successful elements of games like World of Warcraft, where players can develop and build their heroes in a huge online world. There will also be a more competitive side to Magic Craft. Players can develop teams and plan organised strategies for battling other clans and climbing worldwide leaderboards.
The first NFT collection drop will come in the form of characters, which will have different tiers of ranking. The higher the tier, the greater earning potential of $MCRT for the character. Further NFT collections will come in the form of unique items, which can be used by characters or traded on marketplaces for $MCRT.
When it comes to earning avenues, players are able to earn $MCRT through quests, battles (PvP) and clan wars. Another pretty cool fact about Magic Craft is that it’ll be free-to-play, meaning you won’t have to put in a large investment to have the ability to earn. Players can start earning $MCRT and eventually use this to invest in a character that can earn them more during their battles.
The team behind Magic Craft is extremely transparent. They’re giving constant updates on their progress and are constantly looking for input from their community. Their game model is influenced by some seriously experienced game developers and they’ve brought in advisors that have vast experience within the crypto ecosystem.
Big Game Publishers Entering the Blockchain Environment
One thing I’ve noticed personally is that most of the projects hopping onto the P2E bandwagon are led by new brands and startups. Very few huge game publishers have stated their intent in building games on-chain, and this is where we’ll see the most hype and public adoption.
Established game publishers like Rockstar, Activision or Epic already have a massive following and community. Once they present this idea to their followers, there will be an exponential rise in hype and adoption. Imagine everyone playing Grand Theft Auto, but now, with the potential to earn while playing it.
Ubisoft is one of the first major game publishers to show interest in entering the blockchain space. The French company launched a platform called Quartz. This platform allows for the trading of in-game items as NFTs that are usable in their latest game release, Ghost Recon Breakpoint.
This is just the very beginning of well-establish gaming companies plunging into the world of blockchain gaming. We could easily see all the major game publishers entering the space within the next few years and that’ll change the face of gaming completely.