Do NFTs Have a Future in Gaming?
Gaming NFTs bridge two worlds that are heavily into digital asset collection, so it’s no surprise that NFT gaming is growing rapidly. Sales of NFTs, or non-fungible tokens, hit $37 billion as of the first week of May, compared with $40 billion for all of 2021. If sales sustain their median weekly total since January, total NFT sales could double to $90 billion by the end of 2022. [source]
NFTs and GameFi (Gaming Finance) came together as the next big thing in blockchain gaming, allowing players to earn incentives in an exciting play-to-earn ecosystem of in-game tokenomics and gaming NFTs. The decentralization of GameFi brings about advantages that traditional games do not. Making in-game items unique by utilizing NFTs will make them appreciate in value, and hence the rise of many play-to-earn model games.
In traditional gaming, in-game purchases and assets are non-transferable. Players who spend dollars and hours find their hard-earn assets locked into one game, only for it to be of no value when they move on to another game or if it gets nerfed by the creators. Gaming NFTs give assets value outside of the gaming ecosystem, and transfer ownership to the players. The ownership status of an NFT is tracked on the blockchain, and can be bought and sold as collectibles on third-party exchanges. Many hope that the gaming NFT marketplace will help decentralize the industry and create a player-owned ecosystem.
The authenticity of gaming NFTs can be proven via the immutable records of the blockchain. Authenticity is important to gaming assets, as rarity and scarcity of an asset are crucial to its value. With blockchain technology, gaming assets cannot be tampered with or duplicated upon issuance. With some virtual items going up to tens of thousands or even millions, players want a peace of mind that their purchases are not fake.
With traditional games, each game operates on a different platform, created by different companies. Gaming NFTs are transferable and tradeable to other players and buyers, as they are interconnected with the underlying blockchain they are built on. Those on different blockchains are represented by their token value, and can be sold on exchanges.
A study by market research firm Interpret showed that out of 1,500 console and PC gamers, 56% of them are interested in earning NFTs through gaming. NFTs could play a major role in game retention, as over 45% indicated that being able to earn NFTs through gaming would increase their current engagement levels with games. Additionally, over 53% indicated that earning NFTs is the primary driver, compared to being able to sell/trade NFTs, and the idea of building an NFT collection. [source]
However, that doesn’t mean that everyone is on board. In contrast, many gamers have voiced their displeasure about NFTs. AAA game companies like Ubisoft have faced significant negative backlash about their NFTs. Ukrainian company GSC Game World also reversed its plans to launch NFTs after intense backlash.
Gamers are concerned that publishers will use NFTs as a cash grab, rather than as a move to improve gameplay and game asset ownership. As games become hyper-monetized, the concept of ‘pay-to-win’, where you must buy items, abilities, or characters in order to be good at the game, have gotten lots of negative backlash from players. Understandably so, as it can take away the true experience of gaming.
So what are players looking for and how can companies launch NFTs and usher them into a Web3 gaming world that gamers will love?
This evolution in gaming has focused more on game monetization than mechanics. Therefore, it’s no surprise that not all are hopping on board the NFT train yet. Many play-to-earn models solely rely on farming or collecting assets, and do not involve strategic gameplay. Gamers are looking for more motivation beyond simply building a collection of monsters.
High cost of transactions and gas fees on blockchain makes every move very costly for interactive gameplay. Games lack scalability due to low throughput of about 13-15 transactions a second, and true gameplay just does not work with that.
With seed phrases, wallet set up, extensions and buying crypto, currently, the process to becoming an NFT owner is more work than they’re fun in the eyes of a gamer.
Many want more liquidity for in-game items like weapons or skins beyond selling them, as NFTs already allow them to do so. They want the ability to use weapons between games. For example, if a company shut down their game, they could still use their NFT-based character, gun, or items in the sequel. However, that would be a logistical nightmare for game developers.
Smart contracts in some NFTs are being used to store metadata like character stats that can be updated, or let users execute various commands. Some game developers are attempting this, but updating, patching and fixing bugs in an NFT is extremely expensive and difficult to do so.
NFTs could represent a shift in game design ideology. Some developers are beginning to see the potential for NFTs to shift how we think about game design. Perhaps it would spur game developers to adopt a new standard and build items that can be usable across games.
Currently, companies like Immutable X aim to meld both the advantages of game asset ownership that NFTs can bring together with fun gameplay. Immutable X offers up to 9,000 TPS and no transaction fees. With their special APIs, developers can build games in hours, allowing them to take game creativity to the next level. Their NFT marketplace also features a connection to other marketplaces to boost liquidity and visibility for NFTs. It is a model that gaming companies and developers can look toward as the future of Web3 gaming.
Even if you have a brilliant gaming and NFT ecosystem, none of it will thrive without players. Without players, there is no liquidity for your game transactions. Without liquidity, no players would want to get on board. And part of getting players to join is to reduce the complexities of the Web3 process – with just a touch of Magic.
Magic Auth is a developer SDK that integrates with your application to enable passwordless Web3 onboarding (no seed phrases) and authentication using magic links such as email, social logins. Magic enables fully-customizable, secure passwordless login for Web3 onboarding that you can plug-and-play on top of your existing platform. Integrate Magic Auth to get your existing and new gamers entering the NFT scape in no time.