Title: NFT Rental in Web3 Gaming

Written by: Double Protocol, Winkrypto

Compiled by: Frank, Foresight News

Main Points:

• Most users in the Web3 gaming space come from a few top games;

• Among the top 100 games, 7% support NFT rentals, and 18% plan to adopt this model;

• The main reason gamers use rentals is to reduce costs and increase their chances of winning in NFT games by using or combining NFTs;

• Barriers for game developers to adopt their own rental markets include technical challenges, lack of priority, or counterintuitive approaches;

The mission of Web3 gaming is to enable gamers to truly own and sell in-game assets without barriers, but it goes beyond that. As digital assets increasingly resemble real-world assets, gamers will be able to engage in various other categories of financial transactions, starting with rentals.

In this article, we will explore the following questions:

• How many games have adopted, want to adopt, or plan to adopt NFT rental features?

• What are the reasons behind renting these game assets?

• What are the barriers for game developers to adopt their own rental markets?

User Concentration on a Few Top Games

The data source we chose is the ranking of games with the highest average daily active users over 30 days, published by metadata.io on June 12, 2022. Before looking at the rental data for these games, we should first understand the attributes of these games.

From the data in the above chart, it is clear that in terms of users, GameFi projects are dominated by a few winners, with the top three games accounting for more than half of the total users. By examining the difference between the median and average, we can see that most users come from a small number of top games.

Distribution of Blockchain Networks

In terms of ecosystem performance, it seems that no player dominates, but WAX, BNB Chain, Polygon, and ETH appear to be the leading GameFi blockchain networks.

25% of Games Have Adopted or Will Adopt NFT Rentals

We then investigated whether the games in the corresponding data have NFT rental features, and if not, whether they plan to implement this feature, as recorded in their roadmaps, white papers, etc.

Thus, they can be categorized into three types:

• Have their own NFT rental market/function: 7%

• Have not implemented NFT rentals but have publicly expressed interest or commitment to do so in the future: 18%

• Have not implemented NFT rentals and have not publicly expressed interest or made commitments: 75%

Although rental games seem to be few, we also examined the share of players in each of these categories relative to the number of existing games, and the share of rental games in the player base is also disproportionate (20.4%).

One possible explanation is that rentals may make it easier for new players to acquire in-game NFT assets, which they would otherwise be unwilling to purchase directly to play the game.

Another possible explanation is that once the player base of a game reaches a certain level, game developers may be more motivated or capable of establishing an NFT rental market.

The main reason gamers use rentals is to reduce costs and increase their chances of winning in NFT games by using or combining NFTs.

Reasons for NFT Rentals: Reducing Costs or Increasing Winning Chances

1. Splinterlands

Overview

Splinterlands is an online collectible card game that uses blockchain technology, where each card can be traded as an NFT. Players can earn income in the game through tournaments, ranked matches, and quests, and the card NFTs can be purchased and rented through third-party online markets.

Advantages of Renting in the Game Compared to Buying/Trading

• Daily Quests: Gamers need to play different factions (water, fire, earth, etc.), but they do not need to own enough cards to play each faction; instead, they can choose to rent cards to complete quests;

• Brawl Rentals --- brawl (guild battles): This may impose certain limitations on their battles; to participate in these events, players need to use niche cards that they are less willing to purchase;

• Experimentation: Players have the opportunity to try out new builds and combinations with cards they do not own before committing to a purchase.

2. DeFi Kingdoms

Overview

DeFi Kingdoms (DFK) is a browser-based pixel art game built on the Harmony network, combining DeFi functionalities with gaming elements. Its DEX uses the Uniswap V2 protocol, allowing users to swap tokens and provide liquidity to earn fees.

Advantages of Renting in the Game Compared to Buying/Trading

• Summoning: Summoning a hero requires two heroes; gamers can own them but can also rent heroes to summon new ones;

• Reducing the cost of summoning new heroes: The cost of summoning is tied to generations, so if gamers have higher-generation heroes, they can rent a lower-generation hero using one of their own heroes, thus lowering the summoning cost. In many cases, even if gamers pay a certain amount of JEWEL to the owner of the rented hero, renting a lower-generation hero is more economical than using a higher-generation hero, such as a 5th generation hero;

• Maximizing the chances of obtaining excellent heroes: Gamers can rent high-level heroes to use alongside their own heroes, increasing their chances of obtaining higher-quality heroes.

3. MOBOX: NFT Farmer

Overview

MOBOX: NFT Farmer launched on BNB Chain in early April 2021, describing itself as a unique infrastructure built on the DeFi ecosystem, combining it with gaming through NFTs. The GameFi infrastructure uses liquidity pools, liquidity mining, and NFTs to find the best yield strategies for users and generates unique NFTs that can be used across multiple games, allowing MOBOX users to play games for free and earn money in the process.

Additionally, MOBOX is a gaming DApp where players can stake LP tokens or stablecoins to earn rewards in the form of the liquidity mining token KEY. KEY can be used to unlock NFTs, which serve as game characters or collateral assets within the MOBOX platform.

NFTs play a crucial role in the MOBOX ecosystem, as users need MoMo NFTs to become active within the MOBOX ecosystem.

Advantages of Renting in the Game Compared to Buying/Trading

• Players can earn coins by putting MOMO into the MOMO vault; ordinary quality MOMO has a lower yield, while rare quality MOMO typically collects coins at a rate of over 100 coins/minute. If coins are in short supply, renting MOMO is considered the fastest and most reliable method;

• Gamers can participate in raiding features, similar to Clash of Clans. Rented MOMO typically has relatively high stats, making it a good choice for new players who want to win raids consistently.

4. Thetan Arena

Overview

Thetan Arena was launched in December 2021 by Wolffun, a leading gaming company in Vietnam, and has received investments from venture capital firms such as Animoca Brands, supported by gaming guild YGG.

It is one of the largest MOBA (multiplayer online battle arena) games on BNB Chain, combining free-to-play and play-to-earn models, with two types of tokens—Thetan Coin (THC) and The Gem (THG)—which players earn by participating in battles or completing other tasks.

Advantages of Renting in the Game Compared to Buying/Trading

• Earn gTHC through daily battle loot;

• Earn Power Points to upgrade gamers' NFTs;

• Opportunity to participate in upcoming special events.

5. Aavegotchi

Overview

Aavegotchi is a DeFi-supported crypto collectible game developed by Singapore's Pixelcraft Studio, allowing gamers to stake NFT avatars with tokens of interest and interact with the Aavegotchi metaverse, representing a unique combination of DeFi and NFTs.

Aavegotchis are pixelated ghosts living on the Ethereum network, supported by the ERC-721 standard, with their value determined by rarity, which is calculated through various factors such as base traits, the amount of staked collateral/aToken, and equipped wearables.

To upgrade Aavegotchis, gamers can participate in various activities, including mini-games, governance, and parties. Aavegotchis can also increase their rarity by equipping wearables and upgrading.

Advantages of Renting in the Game Compared to Buying/Trading

• Players can collect tokens in the game to mint a golden altar; players without ghost NFTs can rent them from the rental market to enter the game;

• Purchasing an Aavegotchi typically costs around 400 GHST, while renting it costs very little, less than 1 GHST (see Aavegotchi rental data).

6. DracooMaster

Overview

Dracoo Master is a strategic Roguelike deck-building game on BNB Chain, where the arrangement of Dracoo cards allows gamers to achieve limitless possibilities in the Sacred Peak real-time multiplayer online battle. In Dracoo Master, there are functional tokens BAS and governance token DRA, which gamers can use to breed Dracoos and craft summoner equipment.

Dracoo Master players can also collect DRA tokens through adventures and battles in the game, while players can collect and evolve different types of Dracoos, earning DRA tokens through combat. Dracoo NFTs can be traded on NFT markets.

Advantages of Renting in the Game Compared to Buying/Trading

• For non-blockchain players, they can rent Dracoo NFTs using fiat currency when making in-app purchases to play the game;

• Renting NFTs with fiat currency not only lowers the barrier to playing blockchain games but also provides a more economical option for users in certain regions who cannot afford to buy NFTs.

7. Pegaxy

Overview

Pegaxy is a P2E PVP-style horse racing game where players compete with 14 other racers for the top 3 positions, with each race having random elemental variables, including wind, water, fire, speed, etc.

Using strategic upgrades, food, and skills, players must finish in the top 3 to earn the platform's utility token VIS (Vigorus). In the game, players can breed, merge, rent, sell, and race their Pega to earn VIS tokens, enabling teams to build large guilds and scholarship programs, even providing solo players with opportunities to earn in-game tokens through daily races.

Advantages of Renting in the Game Compared to Buying/Trading

Pegaxy has three types of rentals: fixed rental, profit-sharing, and direct rental.

• In the fixed rental scenario, once the renter accepts the agreement and the Pega is in the custody wallet, the owner will receive a fixed amount of PGX from the custody account but will not be able to redeem their Pega within the fixed time to ensure the renter can redeem the Pega during the fixed rental period;

• The profit-sharing model incentivizes hard work while reducing the workload for managers/owners. Scholars/renters can access NFTs at a lower cost than fixed rental options but must share a portion of the profits with the manager/owner;

• The direct rental system is specifically designed for guilds, allowing managers to create rental contracts and send them directly to scholars for acceptance.

Pegaxy achieves large-scale rental programs and guild development through its in-game economic model, creating extensive opportunities for those who want free access to the game.

What Are the Barriers for Game Developers to Adopt Their Own Rental Markets?

While the advantages of allowing gamers to rent NFTs to play games instead of purchasing them are clear, our observations indicate that games with this feature are still in the minority.

Here are several possible explanations for why more games have not launched their own rental markets:

Technical Barriers

NFTs based on ERC-721 and ERC-1155 token standards typically cannot be used out of the box and can only be transferred. While they can be rented out without collateral, doing so can be tricky and time-consuming to develop.

For this reason, we have released new token standards ERC-4907 and ERC-5006, which are extensions of ERC-721 and ERC-1155, simplifying the process.

Lack of Priority

Almost all games using NFTs are relatively new projects, with new features being launched every month. With NFT rental features, there are millions of different tasks to complete: new gameplay, server maintenance, bug fixes, etc.

For some games, developers must address other priorities before implementing something like a rental market, especially when the benefits are not yet fully understood.

Counterintuitive

The role of NFTs and cryptocurrencies in games is to "enable true ownership of game assets," and of course, for rentals, there is no exchange of ownership. Therefore, for mainstream gamers and game developers, while NFT and blockchain-based ownership may represent a leap, NFT-based rentals represent another cognitive leap built upon this, which may affect its adoption.

Conclusion

Games that adopt rentals typically have higher user engagement and occupy a disproportionate share of active users. Because for new users who are not yet willing to invest significant funds before purchasing digital assets for games, rentals make NFTs more accessible and affordable.

Experienced users can choose to rent specific cards or game components for events, which may also be because NFT rentals allow players to try out certain gameplay combinations and builds before committing to a purchase.

Regardless, we expect the adoption of NFT rentals to grow steadily alongside NFT-based games themselves.