The meteoric rise of NFTs

NFT was Collins Dictionary’s word of 2021. Unsure about what an NFT is? Hopefully this helps! NFT (non-fungible token) means that it’s unique and can’t be replaced with something else. The buzz around NFTs gathered pace throughout the year and, by the end, you would have thought that everyone had sold their physical collections and replaced them with digital versions. Yes that is hyperbole, but the sheer volume of money surrounding NFTs made them high profile news.

Beeple became “among the top three most valuable living artists” as his digital collage sold at Christie’s for a cool $69 million. Viral videos from Charlie Bit My Finger to Side Eyeing Chloe got the NFT treatment. Some of the most famous moments in tech were sold; Sir Tim Berners Lee’s source code to the web and Jack Dorsey’s first ever tweet. Celebs were quick to get in on the action; Snoop Dogg has a highly valuable collection, Tom Brady founded a sports NFT platform and Jay-Z sold a newly created album cover for his iconic 1996 debut album “Reasonable Doubt”. We ended the year with The Merge selling for $92 million. Just read that again. $92 million for a single piece of NFT artwork!

NFTs and gaming

All this makes great headlines and I’ve been involved in countless debates about how and why NFTs are so valuable or whether we’re amid a bubble, about to crash. As someone who took their first step into NFTs in early 2021 via NBA Top Shot, you can guess which side of the argument I sit.

But the most interesting conversations I had were about NFTs in gaming. I love an outlandish statement, but they have the potential to revolutionise and disrupt the industry by transferring power from major developers/publishers and putting it back in the hands of gamers.

“Play to earn” gaming

If there was one game that got media attention more than any, it was Axie Infinity. During the pandemic, particularly in the Philippines, gamers were turning to the game to earn a living. It also gave prominence to the gaming term of the year, “play-to-earn”. If you’re interested in how and why Axie Infinity became such a phenomenon, check out this awesome 20-minute documentary. (And if you need convincing that Axie Infinity is a big thing, check out these stats; 1.7 million items traded at a total volume of nearly $300 million in the last 30-days. It’s big!)

On the flip side, Ubisoft announced an NFT platform, Quartz, to considerable backlash. Gamers saw this as another way to exploit them, given they would have no impact on gameplay. Square Enix have hinted that NFTs are a trend they would pursue, again to negative feedback, and it’s easy to see why. Games such as Axie Infinity, Splinterlands or Alien Worlds are ones where NFTs are integral to the game; they are the core mechanic. Games which bolt NFTs on as another form of monetisation are bound to be viewed sceptically by gamers. Despite this, the top publishers are sure to dip their toes into NFTs in the near future with EA calling it “the future of our industry”.

Digital asset ownership

Beyond “play-to-earn”, what other role could NFTs have in gaming? The obvious example is giving gamers ownership of digital assets purchased within a game. It’s a departure from the nearest comparison of loot boxes which contain cosmetic ‘skins’ that change the appearance of a character or weapon. Ultimately these are owned by the games’ developer and where or how you can trade/sell these assets is often constricted to their marketplace, leaving gamers open to riskier third parties if wanting to convert to real money. The nature of NFTs means there is proof of ownership stored via blockchain. There’s no need for third parties to get involved and thus they are fundamentally more secure for all parties.

But the main benefits are about ownership and value; not to say that security isn’t important! ‘Skins’ as they currently operate are inherently worth nothing to the owner as the developer could duplicate, move or delete them at will – they are fungible. They are also only usable or of value in that games’ ecosystem. An NFT version would put gamers fully in charge of that item and they could potentially move it across gaming ecosystems. It turns gamers in-game spending into investing.

Providing gamers with ownership of digital items is the most obvious use case for NFTs. Will we see an explosion of this in 2022? Probably not. Some developers make huge sums of money through sales of in-game assets and have mature marketplaces that blockchain could bypass. It’s a matter of money; a switch to NFTs would eat into profits.

2022 predictions

So how will gaming NFTs evolve in 2022? “Play-to-earn” gaming will continue to make big news and new releases will arrive, pushing the boundaries of what genres and mechanics can be adapted to this model. But it’s only a fraction of gamers that will play this way, even if this increases incrementally. Some of these games require significant financial investment to get started. There’s the issue of how much time it takes to see a return on this investment and the fact that crypto is a barrier for many. Quite simply, it’s not for everyone.

My prediction for 2022 is that it will the year of experimentation. We’ll see smaller and more agile studios come out with games with new use cases, whilst larger studios will test the waters with announcements and see what reaction they get. The gaming community is extremely vocal and, as we’ve already seen, will not hold back in their opinions!

What is clear is that gamers need to be shown the gameplay benefits of NFTs. The possibilities of what could be converted into an NFT are endless. Taking digital ownership of your character in an RPG or your fleet within space exploration, having the ability to trade or sell your digital card collection, or even being able to sell your most precious badges or trophies earnt through gaming. These are just some of the innovations we may see in 2022.

Some say this is all a solution to a problem that doesn’t exist and gaming NFTs will never be mass market. That may be true, but as we tiptoe towards the Metaverse, a lot of future tech trends are out of our control. The fact that gaming NFTs is such a bit debate right now proves this.

Conclusion

Will 2022 be the year of NFTs in gaming? It’s unlikely that they will be move from their current niche position; we’re many years off NFTs becoming an integral part of gaming. But they sure have their place. I for one am stoked at what innovations we’ll see across 2022 and how the gaming world reacts. Gamers are always seeking new experiences and the “play-to-earn” model has opened a whole new business model. Whatever your stance on whether they add to the gaming experience or not, gaming NFTs will continue to be part of the discussion in 2022.