NFTs are rewriting our digital experience by reframing asset ownership in an ever-changing digital landscape. In 2021, the NFT craze caught people by surprise as it continually made headlines. Beeple’s artwork sold at the prestigious auction house Christie’s for over $69 million, while NFT marketplaces became a sought-after model. From NBA to the likes of Kings of Leon and Snoop Dogg, NFTs dominated the blockchain space.
Digital assets in the gaming world are not a novelty, as the industry has switched to a freemium business model. Games such as Fortnite and CS:GO generate revenue from in-store purchases, which create in-game digital economies. However, virtual economies in a divided digital ecosystem are game-dependent and don’t provide a safety net for users’ investment. Therefore, in the first quarter of 2021, the total value of NFT projects increased by 1,750%, fueled by user demand and awareness among retail investors.
NFTs have changed the current rhetoric of the gaming industry as they have fundamentally altered the economic ecosystem. The global gaming market is expected to reach $256.97 billion by 2025 without accounting for NFT use. Gamers are the fastest adopters of digital collectibles, even before NFTs became a viable possibility.
Gamers add value to in-game assets. However, in the currency model, they lack ownership and security, both of which still reside with the game developers. To that end, gaming NFTs are a safety net that protects users’ investments. The CEO of Machine Zone, Gabe Leydon, has emphasized that gamers are spending money on gaming collectibles which could be insignificant once they quit the game. Therefore, offering NFTs as a secure way of owning in-game items will further increase NFT adoption.
Known gaming personalities, such as Pewdiepie, have already voiced their opinions on the value of NFTs. Scarcity and the implied value users give to a digital asset are how NFTs can become the new norm in the gaming industry. When CryptoKitties pioneered the first NFT and clogged the Ethereum blockchain, this also emphasized how blockchain can be a catalyst for a momentum shift in the gaming industry. As developers improve scalability and interoperability between blockchains, NFTs’ place in the global gaming market is being reinforced time and time again.
The promise of virtual economies becomes appealing to large-scale investors as well as developers. Enjin, an NFT platform developer, raised $1.89 million to develop an NFT solution on the Polkadot blockchain to improve scalability. Additionally, virtual reality games, where NFTs play a significant role in proving ownership of a virtual asset, have seen investments from Silicon Valley VC, which purchased LAND in a decentralized virtual ecosystem developed by The Sandbox.
As gamers come to understand the economic value of NFTs in terms of protecting their investments, NFTs are becoming less of a bubble and more of a requirement. As Yat Siu, the chairman of Animoca Brands, highlighted, NFTs are still in early development, but their intrinsic value is hard to overlook. Still, the proof of the utility of gaming NFTs will create more demand for uniquely-owned digital assets and mandate game developers and publishers to use NFTs as a standard in gaming.
According to Gabe Leydon, NFTs will become the first blockchain byproduct that will not be dependent on the price of Bitcoin. He argues that the value of NFTs and usability will affect all digital software, including games. Furthermore, proof of ownership will increase digital asset trading, which is currently done on third-party websites, which don’t guarantee the safety of your assets. Places such as World Asset Exchange (WAX) have created a marketplace for gaming NFTs to be transacted.
Unique items in the gaming world are used to show prestige and uniqueness and create a hierarchy of value between users. Acknowledging NFTs as contributing to one’s digital identity creates a shift from the rental economy, currently used by gamers, to an ownership economy. Such developments in the gaming ecosystem will create a new untapped revenue stream for developers and gamers.
The NFT craze will never be over for the gaming community as NFTs will shift power from developers to gamers. While such a change is worrisome for developers, it creates opportunities to move their games into a growing virtual metaverse that can encompass all characters and games. Although they might not be tasked with game development, publishers can still generate revenue from selling their IP rights to be used in a different digital environment.