… are not necessary. NFTs are the latest trend in the crypto community and people are quick to associate them with industries outside of their initial use case which I think is an interesting area to look at, especially regarding Gaming.
With Ubisoft offering its employees NFTs, the adoption of the technology by one of the biggest studios is hard to ignore, but my thesis is that the push for NFTs today is that it’s a misguided and misused solution to a problem that doesn’t really exist yet.
What are NFTs?
I’m not the first and won’t be the last to attempt to explain this, but effectively, NFTs are “Non-Fungible Tokens” i.e., they are a representation of something (token) that can neither be exchanged or replaced (non-fungible). Recently, we’ve seen NFTs as concepts like Bored Ape Yacht Club images where artists (or something/someone imitating artists) creates images, tokenizes them i.e. attaches this image to a unique token of a crypto asset (e.g., Ethereum), and sells them on a platform like opensea.io.
The extension of this idea is that anything can be tokenized as a unique item that is irreplaceable and, with the powers of “the blockchain” can be universally acknowledged and live on indefinitely.
This is a huge oversimplification – for more detail, check out this video by Folding Ideas’s Dan Olson.
NFTs’ gaming applications
Below I lay out the top 3 most common use cases I have seen around NFTs prioritized by how often they appear in the news/in the common lexicon of NFT usage, but also by their proximity to what is “traditional” gaming.
The most often cited concept I’ve seen in terms of introducing NFTs to gaming is the idea that we can utilize assets across games and begin to create a gaming economy that spans genres, games, studios, etc. because it’s all built with the same blockchain. The idea being NFTs, given they are non-fungible and unique, means they cannot be exchanged without being recorded on the blockchain and there is a limited supply of them (decreasing supply from unlimited to limited means on a supply and demand curve, the price increases because the item is no longer a commodity, but a unique item only available to a select group of people who can manage to get them before others).
The second most pervasive concept is the introduction of Play to Earn for gamers. In this scenario, the more games won, actions completed, events performed, etc. generates a crypto token for players that has an exchangeable value to fiat currency. Hypothetical example: playing a game of Hearthstone and defeating the opponent generates Hearthstone coins that can be exchanged to USD for $1:1,000 coins. People would potentially buy these coins for things like in-game assets, ability to buy certain items that make it easier to be better at the game, skins, etc.
The third most popular concept is the idea of a 3D virtual world where people can hang out and interact with each other and can therefore utilize NFTs to own forms of digital property like land on a virtual earth, avatars and their respective articles of clothing, etc. People would buy these NFTs using fiat currency (they would have to first buy the crypto to then make the NFT purchase) and potentially sell them to others for the crypto that is applicable in this scenario.
Problems with NFTs in gaming
My biggest problem with NFTs in gaming, and the fundamental reason for writing this post, is that I don’t believe any of the above concepts need NFTs to function well and continue to enhance the players’ experience.
Generally, the concept of a ledger can solve most of the above problem cases. When creating skins that would apply across games or platforms, for example, a middleman or a marketplace (I wrote about this in another post) could host a ledger with common security practices to prevent issues with duplication or “hacking” that could also create the skins across gaming. The biggest problem I see with this idea is that none of these games that might utilize this idea, Call of Duty, Fortnite, Overwatch, etc. are built the same – there would need to be someone in the middle to create the assets that are exchanged across games. A Call of Duty armor pack wouldn’t fit well in Fortnite’s more playful art style and vice versa. The introduction of another platform or in-house developers that create skins that mimic, but don’t perfectly mirror the skins between platforms also negates the idea of non-fungible. The ledger, in an accounting sense, could tell the systems the players are on, who owns what. In short, what’s needed to support this is a simple exchange, not a series of games built on a blockchain that are fundamentally different games. There’s also no reason not to keep this information as transparent as it might be on a blockchain – displaying a record of transactions is not difficult and it could lead to the idea that transactions are able to happen in the open without needing to be “decentralized” or “trustless”.
Similar to the above, the 3D virtual world example does not need the same set of requirements that NFTs entail. Again, ledgers make this possible across platforms and you need a system by which to translate one world’s assets to another.
Unique to both of the above concepts is “Play to Earn.” As a concept, this is exciting to me (who doesn’t want to play video games to make money), but again is fundamentally undermined by the requirement that this is supported by crypto assets. The idea that people could earn their entire income via Play to Earn is interesting until you realize that the video game community is polygamous in their gaming. The vast majority of players do not pick up a game and stick with it for years and years. Eventually, the population playing this Play to Earn game dissipates and you’re left with people gathering Hearthstone coins or gems or anything else that don’t have a value because there’s no one else playing. The population you’re competing with decreases/reasons you’d have to continue to play the game (events to complete or challenges to overcome) decrease over time (example here) and, eventually, the supply of coins continues to exist, but the value of those coins is ostensibly non-existent because no one else wants the coins.
The solution of NFTs is a solution to a problem that doesn’t yet exist. Until we get one major mega-conglomerate of gaming that creates all games that are all on the same system and run the same assets i.e., the death of the video game industry as we know it, I don’t think NFTs make sense and exist only to be a cash grab by early adopters and corporations.
Amaan Lakhani 