The worlds of cryptocurrency and video games are rapidly colliding. This combination, known as “play-to-earn” and more broadly as part of the “web3” decentralization movement, could lead to a whole new gaming experience with real economies and new incentives for players. In turn, this could fundamentally disrupt the traditional business model of the gaming industry.
The blockchain gaming market has become one of the fastest-growing segments of the gaming industry and shows no signs of slowing down. One example of a successful blockchain game is Axie Infinity, which has millions of players worldwide.
What is an NFT game?
NFT games combine traditional game design with non-traditional game mechanics to give users more control over in-game assets such as skins, characters, weapons, virtual land, and more. This is achieved by running games on the blockchain and linking them to an economy based on digital assets. These digital assets are typically NFTs, so they are distinguishable and protected from unauthorized access. Adopting the NFT token standard also allows developers to preserve the rarity and uniqueness of some of these in-game items. This is why some blockchain gaming assets are considered more valuable than others.
With this system, players can gain ownership of game assets through three main strategies. They can create or breed new characters, purchase digital items on local or third-party markets, or unlock and acquire new items. Whichever method you choose to access these game resources, you have exclusive ownership rights to them.
How players and companies profit from NFTs
For most video games, you usually have to buy a copy to start playing. However, NFT-based games are usually free to download. But to start playing, you must purchase an NFT. For Axie Infinity, these are creatures. For other games, they may be characters, armor, or weapons.
When you play most NFT games, you not only earn experience and badges for each achievement, but also a small amount of cryptocurrency used by the game developers. You can then use these to buy more in-game items or cash them out and convert them into local currency.
Some games also allow you to buy and sell NFTs with other players so that new players can get the items they want without having to fight for them — they simply exchange money for time. Developers usually charge a percentage for each in-game transaction that takes place.
As more and more people become interested in the game and invest their money in NFT games, players who got into the game earlier can sell their NFTs and make money. And for every transaction completed, the game developers also receive income.
Meanwhile, other players prefer to enter the game and convert the cryptocurrency they earn from the game into local currency.
The company essentially makes money when NFTs are sold from one person to another within the game. It is the interest in the game that allows them to continue to make money and expand their gaming world.
Pros and Cons of NFT Games
NFT-based video games, such as Axie Infinity, have become more prevalent as new and established developers launch NFT-based games. These games can provide a fun way to escape reality. NFTs are scarce and unique digital assets that have the potential to appreciate in value.
Advantages of NFT Gaming
Solutions for licensed digital creations: NFTs cannot simply be copied or reproduced indefinitely. Each one has a different value, as each irreplaceable token exists in a decentralized digital registry based on blockchain technology.
The ability to profit from digital assets: Monetization is another potential benefit of NFTs. Converting digital items into digital assets essentially means assigning them monetary value. An early stage of non-fungible tokens is the monetization of digital artworks.
Collectibles, fundraising events, and games: Physical collectibles such as baseball and NBA cards are becoming digital assets, generating digital equivalents and displaying them with non-fungible tokens. The tokenization of these in-game assets can also form the basis for the development of play-to-earn video games.
Investing and trading non-fungible tokens: Converting digital files into non-fungible digital assets can lead to delivery restrictions. What’s more interesting? The fact is that you may never be able to play the game, but you can still make money from NFT items.
For example, the digital collectible “CryptoPunk #3100” was first sold in 2017 for $2,127, and when it was sold to another collector in 2021, the original collector received a return on their investment of over $7.5 million.
Disadvantages of NFT games
The hype surrounding NFTs and concerns about uncertainty: those who have purchased digital assets minted as NFTs believe they have an investment. However, the current rush to buy these assets has led some experts to compare the economic bubble phenomenon to a possible crash in NFT investments. Of course, some non-fungible tokens have proven their value and growth potential, but there is still room for excessive speculation and herd effects in NFT investments.
Environmental issues with blockchain technology: A significant drawback of NFTs is that the underlying blockchain technology that underpins their development has significant environmental implications. Remember that the world still relies on fossil fuel consumption for electricity generation.
