NFTs or so called “non-fungible token” take the world by storm with an incredible sales increase from USD 42 million in 2018 to approx. USD 9 billion in 2021 and it seems we are only at the beginning.
This development was very unexpected, not only for experts, because if you had claimed years ago that you could sell a graphic, a user avatar or, for example, an unknown song for hundreds of thousands to millions of dollars, you would have been declared crazy.
It is becoming increasingly clear that NFTs are not simply the acquisition of strange-seeming digital art like CryptoPunks or CryptoKitties but that a business field is developing here that can take on even more unimagined dimensions.
By the way: Call it crazy for a reason… CryptoPunk #9998, sold for $530 million and is with that the most expensive NFT artwork ever!
NFTs clearly show that blockchain technology can be used not only for smart contracts or digital assets such as Bitcoin, but is starting to slowly push into much wider territories.
NFTs have not only revolutionized industries, but continue to penetrate more industries. Most notably, the gaming industry will be affected, where players can enjoy crypto-gamification and financial rewards.
There is no denying that more and more gamers and especially cryptocurrency investors are increasingly interested in the NFT games industry and see it as a promising long-term investment… for a very valid reason.
Let’s start slowly:
What is a NFT (Non Fungible Token)?
I will cover the NFT topic in detail in another article (What is an NFT) but in a nutshell and without having a NFT deep dive: Bitcoin or a dollar bill are fungible, meaning they can be replaced or exchanged for other identical bills of the same value.
On the other side a non-fungible token is a unique and non-exchangeable piece of data stored in a digital ledger. NFTs can be linked to digital objects such as videos, photos, digital drawings, goods in a game, song files, and many other types of digital files as unique objects.
The public proof of ownership of an NFT is done (stored) by using the blockchain technology.
There are various NFT types or categories such as Art-, Metaverse-, Utility-, Collectibles-, Sports- NFTs and the one we focus on in this article.
Let’s take the above aspects and facts and combine them with an industry that is growing significantly and not only benefits from the NFT development, but could drive it to undreamed-of potentials and revenues. The magic formula is Gaming NFTs!
Global Gaming Industry on the rise
Several economic reports mention that the approximate total value of the gaming industry is now said to exceed $300 billion. To put this in perspective, this value equates to more than the movie and music markets combined.
The gaming industry doesn’t stop there and has grown by half a billion players in the last three years and now has a total of about 2.7 billion players worldwide. But this is far not all, as this market segment is expected to add more than 400 million new players by the end of 2023.
According to several surveys, gamers spend an average of up to 16 hours per week playing games, approx. 8 hours per week watching or participating in gaming streams on Twitch, Youtube etc., and 6 hours per week interacting, reading in gaming communities.
Even investors with rather conservative investment strategies should not ignore these figures. Especially not when we talk about linking games with NFTs.
Why NFTs and Games are the perfect match
How can a NFT be represented within a game? Well, a very good example in a computer game could be that you acquire an upgrade of a weapon, a new outfit or a special rare customization of the character you play in the game.It could be even a property or piece of land you acquire. The possibilities are almost unlimited.
In Korea quite popular for a long time, but still relatively unpopular in Europe the fact that this type of NFT usage, in combination with games, allows players to earn additional income in games.
Even more interesting is the fact that in some games players can create NFTs themselves and provide them to the game world. Let’s think of World of Warcraft. For example, a player could offer a self made magic potion that gives other players superpowers or a rarely crafted sword in the auction house and earn real money. A beloved hobby thus turns into a lucrative source of income.
In the GameFi world there are various models of how you can earn money as a player (play to earn gaming). There are models where you earn tokens just by playing the game, or NFTs can be traded in-game or sold to other players and collectors.
NFTs are created via so called smart contracts created by developers and implemented in games. Smart contracts are self-executing codes stored on a blockchain that are executed automatically when triggered by a player, for example.
The many combinations have led to the emergence of gamification also called GameFi, where players can exchange digital game assets of any kind and/or make use of it for financial rewards.
In a nutshell:
- NFTs allow users to earn, buy, exchange and in some cases even create in-game assets.
- NFTs are registered in a blockchain (i.e. as smart contracts) to secure the public ownership.
- NFT games reward gamers for their made efforts within the game (“play-to-earn” model).
- NFTs can create additional revenue streams by selling or staking.
Models of NFT Gamification
Source of Income
Until now, games have tended to be “play-to-win,” where players buy items or upgrades that don’t provide any economic benefit. Today, the new “play-to-earn” model serves as a source of income for players, who receive financial rewards for in-game achievements. They can either receive NFTs from trade or earn rewards and cryptocurrencies in-game.
Play to Earn Gaming Guilds
Guild members can rent assets like weapons or crafted goods in the game, so to speak, instead of buying them. Especially in, for example, role-playing games, a potentially very welcome way to start to play as a new joiner. Play-to-earn guilds support new players to get started in exchange for a reward. The new player gives a percentage of his earnings to the lender. In return, the player gets what they need to start playing quickly and as successfully as possible.
Interoperability of Game Assets
An unprecedented opportunity to use specific assets in different games. Blockchain-based games are characterized by interoperability. It allows players to use individual game assets in different games, provided this is permitted and supported by the blockchain.
Some NFT games allow players to lock NFTs or cryptocurrencies into smart contracts, which in turn generate rewards over time. For example, those who wager certain tokens are rewarded with NFT Mystery Boxes. Each of these boxes contains an NFT with random rarity, which can then be sold on the secondary market.
Uniqueness and new values
NFTs paired with games, give a unique NFT something that never existed before in terms of values. The NFT can represent something through a player that only came about through the progression of the game, namely experience, earned stats, strength, stamina, progress, and many other characteristics depending on the game.
We are certainly nowhere near the end of all the possibilities and ramifications that will arise here, but I am sure that this new value-added universe coupled with NFTs and the gaming industry will bring unimagined and unprecedented opportunities that we currently dare not even dream of.
What about you? Do you already invest in NFT artworks? Did you sign-up on a NFT marketplace? What is your opinion on digital artworks and your level of engagement?
Disclaimer: This article is not financial advice. We are not responsible for your actions or investment decisions.