NFTs in Gaming

Mar 7, 2022 2 min read
NFTs in Gaming
This article is part of a curated learning journey on NFT Basics.

Given that NFTs are an ideal device with which to represent the ownership of scarce digital assets, they also have an important role to play in the future of gaming, virtual reality (VR) and the concept of ‘The Metaverse’.

Items owned by players in video games and online worlds are nothing new: think custom skins on games such as Fortnite, rare weapons and armour in MMORPGs like World of Warcraft, or clothes and furniture in the virtual world Second Life. However, these items have always existed within the ‘walled garden’ of a particular game. Their continued utility and even existence depends on the developer’s willingness to maintain the digital environment where the items reside.

Furthermore, these items have traditionally only been accessible via channels which rely on placing trust in others: an official in-game store, special currencies specific to the game, or even negotiations between individual players via online forums. Tokenising an item, outside the confines of any one game or virtual world, allows for the trustless ownership of portable digital assets, which could be used in any environment in which the item is supported.

As NFTs in gaming become more widespread, developers will be able to work on composability between titles, genres and even platforms. This will allow for gamers to maintain a seamless virtual identity, for example, by displaying their ‘Bored Ape’ PFP from social media as their gamer profile, or even taking their avatar’s clothing and equipment from one game’s world into another. This is one aspect of many visions of how a ‘metaverse’ could develop in future.

The advent of NFTs has also propelled an emergent model of gaming. Following on from early free-to-play games, and later pay-to-win mechanics based on microtransactions, a new play-to-earn (p2e) model has emerged. In p2e games, players use NFTs with different statistics or abilities, earning cryptocurrency based on performance or as prizes. Popular NFT games with cryptocurrency rewards include Axie Infinity, in which players breed and battle teams of creatures known as Axies (each represented by an NFT), and Sorare, a fantasy football game with officially licensed player cards.

As it can be very expensive to acquire a competitive team in these games, a system of sponsorship has developed. These ‘scholarships’ are an arrangement between a ‘manager’, who owns NFTs, perhaps as an investment, and a ‘scholar’. The manager loans the use of their NFTs to the scholar, who uses them to play a p2e game and they split the proceeds. In this way, the scholar is paid for their time-consuming ‘work’ of playing the game, and the manager receives a passive return on their investment. These types of relationships are particularly popular in low-income countries where playing a p2e game can occasionally be more lucrative than working at the minimum-wage.

As these games are still in their infancy, and many are far more focussed on tokenomics than game mechanics, they tend not to be particularly entertaining long-term. The gameplay is generally repetitive and other key aspects of enjoyable games such as storylines or graphics are somewhat of an afterthought. Their enormous popularity, especially from scholars using them to supplement income, has diluted the rewards system leaving even the financial incentive to play gradually lessening with time.

NFT-based p2e games still have a long way to go before gamers can get paid to genuinely ‘do what they love’, but as the focus moves away from grinding out token rewards, and towards a more enjoyable experience, a balance will be struck between gaming for fun and winning financial rewards.

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