NFTs are beyond the peak of inflated expectations and troughs of disillusionment, climbing up the slope of enlightenment in digital art and digital collectibles. NFTs enable player needs of ownership, collection, fandom, and investment, making them a compelling fit to be applied as a technology to gaming.
NFTs Outside Gaming
Put Aside the Hype
Since the 2017 peak of inflated expectations, the world has been on the lookout for actual, interesting blockchain applications beyond cryptocurrency store of wealth, investment, and payments. Plenty of time and effort was put into development, but when would it turn into users and cash? Late 2020/early 2021, it turns out. Today, that reality is playing out with non-fungible tokens (NFTs) in the digital collectibles and digital art worlds.
For technoskeptics, NFTs are just the latest in Doge/SPAC/Money printer excess, a bubble bound to collapse. There are certainly bubbly components to the market, and the technology is also closer to the 2001 tech bubble than the 2021 technology domination of the stock market. But, beneath the bubbly excesses are also a very serious set of bleeding edge technologists, afew of whom might become like Brian Armstrong (now worth ~$20 billion and in the Buffett/Gates tier of donating all of that money for the good of the world) in 2013.
Up the Slope of Enlightenment
Take the world of digital art. Non-fungible tokens are solving real problems in the art world. Anyone can put up a faked Picasso on their wall, or profit from art owned by a dictator. With digital art on the blockchain, it gets to take advantage of blockchain features: the public ledger is there for everyone to see and trace. No fakes. Furthermore, if you do not want to trade with a known Al Qaeda, or other money-laundering wallet, that information is also available for you to verify on the blockchain. Thousands of pieces of art from Jews murdered or dislocated during the holocaust sit in our museums. With NFTs, these pieces can easily be identified, and returned to their heirs ethically.
If those two levels of value were not enough for buyers of art, NFTs also offer a revolutionary method of payment for artists — allowing them to profit off the resale of their work and make money off digital art at all. People before would just download the jpg and you had to work in tech art on 3d in proprietary software to get paid — an office job, hardly the artist life. Could we see a new age of artists now that they can make a living? The potential to grow the overall market is tremendous. This level of added functionality helps explain Beeple’s $69 million auction at Christie’s. NFTs are entering the 40,000-year-old art market and offering disruptive innovation.
Then shift to the world of digital collectibles. For thousands of years now, humanity has had to rely on certificates of authenticity, experts, and trust to verify the validity and uniqueness of collectibles. In Phillip K Dick’s classic The Man in the High Castle, Childan’s Americana antique shop sells counterfeit antiques. Thanks to NFTs, and the blockchain’s public ledger, counterfeits are no longer a problem. Everything is verifiable and out there in the open. This consumer advantage is like the one seen in digital art.
NFTs also play the critical role of enabling digital collectibles in the first place. Before NFTs, digital collectibles were not a market because everything was so easily copied. With a public ledger, the space has finally opened up for digital collectibles to exist. This problem solving helps explain NBA Top Shot’s over $230 million in transactions (Roham Gharegozlou looks set to be one of the future Brian Armstrong’s I teased, with Dapper Labs raising at a $7.5 billion valuation). A Top Shot Moment is a 3-D looping basketball clip — a unique item impossible in the physical world.
This digital market can move faster than physical markets. It was actually the first place a LaMelo Ball (the youngest of the Ball brothers, now a star in the NBA) collectible was even available. Through these ways, NFTs are disrupting the massive collectibles market (here I have defined trading cards as a subset of collectibles, though I have heard others describe them as distinct and NFT enabling a trading benefit as well).
To tie it all together: in the digital art and digital collectibles worlds, NFTs have found applications for buyers and sellers that are bringing the technology up the slope of enlightenment.
NFTs In Gaming
The question of the day is, “will gaming emerge as another application for NFTs along the slope of enlightenment?”
What they are and can do?
NFT is simply a file format for transferring data and information on a blockchain network. It could be anything from an NBA moment to a video game mechanic. That is what makes it so interesting: with code, you can add value to the game. Many NFTs on the Ethereum blockchain implement a smart contract on top. That is how an artist, for example, can receive a portion of the sales of her art as it is traded after her initial sale. The terms are coded into the smart contract.
There are many forms of NFTs and one of the most common is the ERC-721, created for CryptoPunks. Overall, these technologies add several key values: they can help provide a decentralized marketplace, without relying a game publisher to maintain a server; they can be a modular marketplace solution that is plugged into games; they can be used to trade assets; they can be used to store value and be traded in/out of fiat based on supply and demand.
What they are not and cannot do?
NFTs are not cryptocurrencies. Many games with NFTs have a cryptocurrency element, but they are separate concepts. NFTs are unique, embedded in the blockchain, but not currencies or tokens. If anything, they are an alternative to cryptocurrencies when it comes to investment and store of wealth, representing an alternative digital asset class in and of themselves.
There are also limitations to the technology; though, with our technoutopian hats on we can see how future NFTs solve some of these issues. One of the largest limitations, for instance, is that NFTs on the Ethereum blockchain have been subject to the chain’s congestion and seen fees in the range of $70+. Dapper Labs dealt with that in NBA Top Shop by using the Flow blockchain.
Another limitation is counterfeiting in other forms — e.g., reissuing a digital asset with minor changes as their own. At the moment, this is solved by using a trusted creator or closed ecosystem. Another limitation might be the self-custody nature of these assets. There is no FDIC insurance. Lose your wallet, and you are out of luck. Using a trusted platform may be the solution to this problem as well, but has the disadvantage of not being decentralized. A final limitation is that blockchains tend to be energy intensive. While these issues are real, I see them more as opportunities for businesses to solve them than barriers to success (a la Coinbase solving secure fiat/crypto conversion).
Now, to the juicy stuff — what are the player needs that NFTs can deliver for gamers on? Perhaps the primary mode of value from an NFT comes from the sense of ownership and possession. That is why its earliest successful applications have come in art and collectibles. As Finish Line says about Top Shot, “it’s about the glory, the bragging rights and the exclusivity.” Gamers have also been trained to feel a sense of ownership and satisfaction; while Free Fire is free, millions of gamers are willing to pay up to own cosmetics. So, we can see NFTs solving the need of unique ownership over rare cosmetics, for example, in gaming.
NFTs also serve a player need towards the end of a gamers’ lifecycle. When gamers quit a game, the investment is gone. It does not mean anything. But if gamers could either: 1) sell what they bought when they quit, spending becomes investing, or 2) transfer the cosmetics to the next game they are playing, then they become game-less game pieces.
In addition, they serve as collectors’ items — the digital collectibles use case brought to gaming. One could imagine players passing down NFTs across generations. At this point, the NFT can serve psychological story needs for the gamer as well. Like a wedding ring is imbued with extra value to its owner, an NFT cosmetic from one’s grandfather when he played Roblox could have even higher intrinsic value.
NFTs can also serve a role in fandom. Users who want to express a great connection to Jack Dorsey’s first tweet, for instance, can buy that. Fans who watched a particular dunk highlight from LeBron James can buy that. Similarly, in gaming, players might be able to buy the gun wrap a Call of Duty: Warzone competitive player used to win the biggest prize.
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