Are NFTs a new opportunity for game developers?

The author of this article is Qian Yi

1. What is NFT:

NFT stands for Non-Fungible Token, which translates to non-fungible token in Chinese, characterized by its indivisibility, non-replaceability, and uniqueness.

NFT is not a virtual currency, which can be subdivided into smaller units. Each unit of virtual currency is equivalent to each other (similar to coins of the same denomination), which is what fungibility and replaceability mean. "Non-replaceable" assets are indivisible assets, such as: a painting, a house, a car, or even digital collectibles.

The innovation of NFT lies in its provision of a method to mark the ownership of native digital assets (i.e., assets that exist in the digital world or originate from the digital world), and this ownership can exist outside of centralized services.

NFT provides digital artists with a new revenue model—allowing them to profit from the resale of digital works and earn money from digital art.

For thousands of years, humans have had to rely on certificates of authenticity, experts, and trust to verify the validity and uniqueness of art collectibles such as paintings. Now, with the public ledger of NFT and blockchain, forgery and theft are nearly impossible. Everything is verifiable and public. The traditional business model of collecting and trading has finally opened the door for digital artworks.

Cryptopunks is a collection of art images made up of irregular pixels in a 24x24, 8-bit style, produced during the 2017 NFT craze, launched by the Larva Labs team, with about 10,000 pieces, each with its own randomly generated unique appearance and characteristics.

Since the launch of NFTs, most of the hype surrounding NFTs has come from the digital art world. Many creators see NFTs as a way to communicate directly with collectors, rather than being part of the traditional gallery ecosystem that takes 80-90% of their potential income. Collectors view NFTs as a way to collect proven scarce works (similar to limited edition prints) while directly supporting their favorite artists.

Some developers have already noticed new opportunities for NFTs in music and fashion, as well as in other asset areas like domain names or real estate. Naturally, some developers are wondering: can NFTs be applied to games that have been producing virtual props for years without blockchain?

For game developers and players, in the past, it was difficult to determine ownership and price for virtual digital goods such as game props, equipment, and skins generated during the gaming experience through public markets. Once a game account was stolen, the owner often faced enormous losses that were hard to estimate. With the emergence of NFTs, all these issues become easily solvable.

Since late May, although the NFT project’s popularity, sales volume, and wallet activity have declined due to the downturn in the cryptocurrency market, the NFT market has already made significant strides compared to the overall level in 2020. This indicates that the entire market has begun to reassess the value of NFTs and that user participation is deepening.

2. For game products with a complete economic system, some of the most important functions of NFTs include:

1. True ownership. NFTs are actual assets owned in the player's wallet. Even if the game platform suddenly rolls back the game, it will not take away the digital assets that players have already obtained in the game.

2. Permanence. Once an NFT is minted, it may exist on the blockchain forever.

3. Provable scarcity. Since all records are publicly accessible, software can check the blockchain and confirm how many can exist. For example, if a virtual item is one of a type of item in the game (commonly referred to as "1 of 1" in the NFT space), players can immediately confirm this. If it is a limited edition of 1,000, players can also confirm this immediately.

4. Proven provenance. The history of ownership of the project is recorded on the blockchain. Some items may appreciate simply because of who held them in the past. With NFTs, players will know exactly who has owned a particular game item (tracing back to the creator).

5. Programmability. Using "smart contract" technology, NFTs can facilitate internet transactions between players—even across different games.

6. Decentralization. There is no centralized platform to control the economy and execute smart contracts. The economic system of the game maintains its integrity in a completely trustless manner, adding significant economic value to the game's community ecosystem.

3. Opportunities for game developers with NFTs:

NFTs offer very clear advantages for game developers, but there are also some drawbacks, such as when game developers discover significant bugs in newly launched game versions, it is difficult to quickly fix issues through rollback. The decentralized approach also leads to lower efficiency in data exchange and synchronization for virtual digital goods compared to centralized methods.

Therefore, not all games are suitable for adopting NFTs. Game scenarios that may be more suitable for NFTs include:

1. Preserving player experiences. An opportunity for both existing and new games is that NFTs can record player achievements in a way that is different from the past. Imagine a player exploring an interesting place in the game, winning a match, reaching a certain level, earning in-game rewards, and saving that record through NFTs.

In this way, long after a player has put down that game, that memory may be etched in a virtual artifact, becoming a permanent part of their collection. In story-driven games, such memories are more important than ever.

2. Increasing value perception. Currently, global gamers purchase and create various game equipment, props, and skins, driving a $100B+ gaming transaction industry—even if these virtual goods only exist within a specific game.

But if players truly own the rights to these virtual goods through NFTs, they will value these items more. Imagine how this new sense of ownership will change the way players engage with the game world.

3. New forms of funding. Currently, game development funding mainly comes from equity investors, publisher financing, or crowdfunding (pre-sales).

In the future, selling limited edition virtual goods as NFTs may provide a new way to fund game developers earlier than crowdfunding. Unlike crowdfunding, limited edition virtual goods also offer advantages of trading and liquidity. Players who own assets may become more "invested" in the success of the game, potentially becoming important drivers of the game product.

In fact, one of the biggest operational costs for game developers is user acquisition costs. But now developers can transfer user acquisition costs from operational expenses to (slightly) diluting the assets of game developers by airdropping NFT digital collectibles to users, which may ultimately provide a higher cost-effectiveness for user acquisition.

4. New opportunities in esports and streaming. Since NFTs can prove provenance, one way items gain value includes not only what the item is but also who has owned it.

In the past, outstanding esports stars endorsing the clothing brands they wore during victory could generate advertising revenue for esports teams.

Now, streamers who demonstrate games, report events, or help with releases can obtain limited edition virtual goods as NFTs and then transfer them to fans as a source of sales revenue.

5. Games built specifically for trading. NFTs can add considerable value to collectibles. Focusing on asset value creation rather than selling game software allows game companies to freely build new experiences for players. Unlike trading cards in the real world, players can earn a share of the transaction each time they resell an NFT.

6. Games built for communities. What does it mean for players to own the assets of the world, allowing them to add software as part of a decentralized ecosystem? Decentralization can fundamentally open up new experiences in the game world.

7. Play-to-earn. NFT games may create new ways for players to earn money, allowing players to discover and create scarce virtual props and items, and sell these virtual goods to other players through trading markets. Moreover, these transactions are decentralized, with prices determined by player supply and demand and market changes.

The characteristics of virtual goods trading under different rule systems.

4. Some current NFT games:

1. Axie Infinity: Axie Infinity is a game where players collect and breed various small monsters. In addition to ordinary collection attributes, Axie also adds unique combat attributes, becoming one of the earliest NFT pets that can battle.

In February, the Axie team launched a customized Ethereum sidechain called Ronin to improve verification speed through POA consensus to alleviate the pressure of Ethereum network congestion and player gas fees. Currently, Axie has become a representative of NFT chain games, with sales exceeding $121 million in June, a 351% increase month-over-month.

2. Gods Unchained: The first on-chain esports card game based on Ethereum, similar to Hearthstone, allowing users to freely trade and sell their cards while owning the cards.

3. Zed: The first AR horse racing game on Ethereum Layer 2, forming a one-stop NFT horse racing experience with various gameplay such as breeding horses, racing, and watching races.

Its backer, Atari, has authorized multiple game IPs such as Asteroids, Centipede, Missile Command, and Pong to Zed Run. In the future, as more horse racing enthusiasts join, the gameplay and content boundaries will continue to expand.

4. Skyweaver: Similar to Gods Unchained, it is a digital trading card game with actual trading functionality. Players control the economy and the value of NFT cards based on the number of cards forged in different game modes, the demand for certain cards in the store, and the number of players offering cards for sale in the store.

5. Alien Worlds: A DeFi game based on the WAX public chain, where players can earn Trilium (TLM) through mining, with a chance to mine NFTs each time they mine.

Trilium can be staked on one or more of the six planets in the game, and after signing up to become a candidate for planetary governance, players may have the opportunity to rule that planet. NFT game cards will introduce innovative gameplay over time, including upgrading cards through "shining" and battling in fighting games.

6. Sorare: A fantasy football game based on Ethereum, developed by the startup Sorare. Players can purchase and trade NFT player cards certified by clubs or leagues to build their teams, each with its own scarcity and uniqueness level, with each player card's rating based on their performance in real matches. After assembling a complete lineup, players can participate in fantasy football competitions on the platform and earn card and token rewards.

7. Mega Crypto Polis: A city management game based on Ethereum and TRON, where players can start by acquiring a piece of land on a decentralized city map and build a variety of building types. Each piece of land, along with the buildings being constructed, exists as NFTs and can be transferred or traded in the market.

Every action in the game requires some tax to be levied for regional and federal budgets, which is then distributed to all players based on their share of total influence points generated during the game cycle (24 hours).

8. Somnium Space: An open, social, blockchain-powered virtual reality world where users can purchase land, build or import objects, and easily monetize their experiences. Somnium Space supports complex game economies, including virtual avatars, NFT collectibles, and more.

9. Marble.Cards: An innovative card game where players can carve any webpage into a collectible card represented by an NFT, with each card being unique and publicly auctioned, and the URL can only be carved once and owned by one person.

Original link: https://mp.weixin.qq.com/s/xmeKDmeZll23TAONHpmoDQ