NFT Gaming: Introduction to Virtual Economies

Virtual economies in games have existed for years, such as marketplaces, currencies, and in-game assets such as skins and weapons in games like Fortnite and World of Warcraft, but currently, these are tied to each game that they are played in.

The markets in these games are largely unregulated with no real-world value except for the value placed in them by the players. The interoperability and security of having these and more held on a blockchain are immense. 

The traditional gaming industry is a behemoth with many sources estimating around 3 billion players during 2021. Multiplayer online gaming has exploded over the years as the technology developed. Competitive gaming at a professional level, otherwise known as esports, is an extremely lucrative industry.

A Rewarding System Reserved for the Elite

Although there is money to be made for both players and games studios, the current system of monetization is mainly based on sponsorships and funding from advertisers. And mostly for the professional esports players, not for the average player who hasn’t got a huge YouTube or twitch following.

At best, earning anything is down to luck, possibly winning tournaments that you pay to enter… Some skills are obviously needed for certain gambling games, but gambling comes with its own hazards! 

Virtual assets, skins, and in-game purchases are all commonplace within online multiplayer and other gaming ecosystems but generating real cash revenue for your time and skills spent in-game is another matter. There is no doubt that economies have already been established around games and their assets, players trade their hard-earned virtual items peer-to-peer with other players for cash but there are downsides to this. 

For example, the majority of game studios prohibit the resale and exchange of digital assets. Other players can also associate it with cheating and buying your way in as opposed to earning it fairly. There is also the lack of interoperability between the assets and any other platforms as well as the trust issue of buying directly from a stranger.

In-Game Digital Assets

Potentially one of the most exciting use cases for NFTs is in-game digital assets. One of the issues with blockchain and crypto has always been finding a path to mass adoption. NFT in-game assets seem set to be the most likely catalyst for this long-awaited moment.

NFT in-game assets have a layer of security built-in and in addition, can be openly traded directly for crypto or traditional Fiat ($, £, €, etc.), on regulated and decentralized marketplaces. Also, digital ownership enables players to earn real-world cash for their skills and the time they spent playing the games.

Using NFT in Video Games

In 2014, the first ‘crypto games’ began to appear with experiences mixing blockchain technology and well-known gameplay. Indeed, before 2018 and the appearance of the NFT standard on Ethereum, it was possible to participate in experiments such as:

• Buying trading card game NFTs
• Playing rewarding adventure games in Bitcoin
• Using servers to mine cryptocurrencies to reward players.

Of the three projects that were chosen to work on the ERC-721, one of them was a mix of game and collectibles: CryptoKitties. The goal of the game is extremely simple: breeding two Kitties to have a third one that could have a rare trait. Each Kitties is a unique NFT that has between 5 and 10 strokes.

Beyond the speculative aspect, the interest here is the action of breeding that takes place on-chain. The information regarding the action cannot, therefore, be challenged. This has clogged the Ethereum blockchain because of the high number of complex transactions but has also given green light to developers wishing to do blockchain gaming.

In addition to crypto gaming that rewarded players in crypto, it was now possible to have games whose shares could be recorded directly on the blockchain.

A Turning Point for the Gaming Industry

Blockchain gaming has been heralded as the future of the gaming industry but as with every transitional shift in an already established sector, the intersection between blockchain and gaming has taken a few years to develop and is still in its infancy.

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