NFTs are no longer a niche technology. Over the past several years, millions of users have accessed NFT technology through Web3-native mediums, social media platforms such as Reddit, and company-specific applications such as the Starbucks app. And some of the largest names in gaming—including Square Enix and Ubisoft—are experimenting with NFT technology to better understand how it can be used within video games.
What Are NFTs?
Non-fungible tokens (NFTs) are unique, 1-of-1 tokens created by smart contracts and powered by blockchains. Unlike their fungible counterparts, NFTs always have a unique identifier that distinguishes them from any other token on a blockchain. No two NFTs are ever the same.
This quality of uniqueness, alongside the sovereign digital ownership that blockchains offer, has led to a wide range of use cases across art, gaming, and finance—and the design space is only expanding.
What Are NFT Games?
NFT games are video games that use NFTs as a core part of their game. In the context of games, NFTs are simply a blockchain token with a unique barcode that can be distributed by games and owned by players. Thus, the design space for using NFTs within games is effectively limitless—they can be used to represent characters, items (both full and crafting), weapons, skins, and literally any other in-game asset that requires the property of non-fungibility.
The Benefits of NFT Games
There are a variety of benefits that NFT games offer over their non-NFT counterparts.
Sovereign Ownership
In traditional games, players don’t truly own their in-game items, currencies, or achievements. Because these digital assets exist on a centralized server controlled by game publishers/developers/companies, they can be taken away at any moment and cannot be used outside of the game.
With NFTs, players have sovereign ownership over their digital assets in the same way that one can own physical items. They are theirs to own, build upon, and trade in whichever way they see fit. And this kind of real ownership creates a new level of player immersion and engagement, as evidenced by the tendency for humans to collect physical items like rare coins, stamps, cards, and other memorabilia. Before NFTs, creating a digital collectible was impossible because the longevity of any item was ephemeral and uncertain. At any point, the server that owned the digital item could shut down and the collectible would no longer exist.
For as long as the blockchain is running, the NFT will exist. This adds a new dimension to the gaming experience and deepens the connection that players have with their digital items and the systems that maintain them.
Interoperability
All NFT games that are built on the same blockchain are connected due to their shared underlying infrastructure, enabling various forms of permissionless interoperability between them. For example, because NFTs can exist outside of the game from which they were earned, an NFT in one game can be used in a different game (or games) and serve a different purpose within that game.
Some Web3 projects have created NFT primitives in an attempt to kickstart shared development that takes full advantage of NFT interoperability. This is accomplished by creating a collection of NFTs first, distributing them, and then relying on NFT owners and enthusiasts to build on top of the NFTs by creating a variety of games, experiences, and more elements that utilize the NFTs.
In an increasingly digital world, blockchains act as shared digital environments that are maintained by many and controlled by no single party. With blockchain technology, users can buy NFTs, play different games, and take out loans from DeFi protocols against their NFT, all on a single, overarching platform. This connected ecosystem offers an inherent consistency that empowers users to traverse blockchain-based experiences in a harmonious and cohesive manner—the foundation for any emerging metaverse.
Monetization
All NFTs are connected to a larger, built-in economy consisting of all the other applications built on top of a blockchain. Players who buy or earn in-game NFTs have immediate access to open blockchain marketplaces where they can freely buy, sell, or trade their NFTs. This unlocks the possibility for players to earn real money by playing games, though whether a player will turn a profit is far from a guarantee.
For NFT game developers, this open economy also unlocks new paths to monetization. For example, developers can earn royalties each time the NFTs they created are traded on a marketplace—an economic model that no longer requires game developers to optimize for continuous and repeated in-game purchases to the detriment of the player experience.
NFTs also generally have a monetary premium over their traditional in-game item counterparts. They are more expensive to produce, which leads to an increased cost, and they also have the intrinsic benefits of permissionless operability, sovereign ownership, and access to open marketplaces that many traditional games don’t (or can’t) offer.
Conclusion
As an emerging vertical, NFT games have yet to realize their full potential, and it’s difficult to predict what NFT gaming will look like in the future as game developers experiment with different gameplay and monetization models. But there are limitless possibilities—for both players and developers alike—to build better, more engaging games on a foundation of sovereign ownership, permissionless interoperability, and experimental monetization.