In gaming, there is a new trend: blockchain and especially NFT (Non-Fungible Token). There are now several companies betting on NFTs, known as “Unicorns”: they have a market value of over one billion US dollars. Even major established publishers are flirting with NFTs. What is behind this?
What are NFTs actually? NFT is short for “Non-Fungible Token.” It is a protected digital object based on “blockchain” technology. Cryptocurrencies like Ethereum or Bitcoin are also based on the blockchain.
An NFT is like a limited digital collectible. It can be photos, videos, audio files, or any other type of digital data.
Essentially, you can think of an NFT as a piece of art that is “originally” signed by the artist:
- Without a signature, a file is essentially worthless because it can be duplicated infinitely
- With the signature, it becomes an “authentic” work that possesses the value attributed to it by others.
Just as a famous painting can be auctioned off, NFTs are also offered on auction sites: An NFT may be the image of a Pixel Ape, the clips of a Twitch streamer like Indiefoxx (thumbnail), or a video showing how a basketball star dunks spectacularly.
Like other collectibles, NFTs are also treated by some as an “investment”: they buy a piece of art assuming it will increase in value, allowing them to resell it later for more money—similar to stocks that can rise or fall in value.
Investor pays almost 70 million $ for digital artwork as NFT
What is the most expensive NFT that has ever been sold? In 2021, the artwork “Everdays: The First 5000 Days” was auctioned at Christie’s. It reached a value of 69.3 million US dollars, and the artwork was paid for in Ether (via twitter).
A programmer and crypto investor from Singapore purchased the artwork, which represents a collage of 5000 digital images by artist Mike “Beeple” Winkelmann.
NFT is the new trend in gaming – It involves huge amounts
What does this have to do with gaming? “NFT” and “blockchain” are seen in 2021 as the next big development in gaming. There are several new companies in the US developing games based on blockchain technology.
As the business site Venturebeat reports, there are already 4 gaming companies that have achieved “unicorn” status. This term refers to a young company that is already valued at over one billion US dollars. The companies are Animoca Brands, Mythical Games, Dapper Labs, and Sky Mavis.
Only two years ago, the company “Forte” was founded. They aim to be a platform that allows other studios to develop blockchain games and provides them with the necessary technology. In a funding round, Forte was valued at 725 million US dollars.
That a young company can achieve such a high valuation in such a short time shows how immense amounts of money are currently being funneled into this business model and area of interest.
Owning items—rather than just renting them
Why is this model believed to be so lucrative? Essentially, it comes down to the fact that players can now create permanent value within a game through blockchain and NFT, and the players truly own:
- Normally, a player can only invest money into a game by purchasing it, paying a subscription fee, or acquiring items in a cash shop. However, the items do not belong to the player: A particularly strong item in Diablo 2 Resurrected remains owned by Blizzard. Players are merely “renting” the items.
- With NFT, however, it is supposed to be possible to actually own a digital item and potentially sell it to another player.
“Play” to earn – Games to Earn and the Leisure Economy
The site Venturebeat speaks of a “Leisure Economy”: You can earn money with the game by creating or acquiring items that you sell to others.
Blockchain and NFT are seen as the “next step” in gaming. Gaming is also regarded as a lucrative market in the entertainment scene, even by investors outside the industry, because it is growing rapidly. Currently, the market value of gaming companies is further enhanced by technological trends and buzzwords like “metaverse.”
A company like Roblox was once valued more at the stock market than an established corporation like Activision Blizzard.
This is why investors are pouring a lot of money into the field of “NFT”—even established gaming studios are increasingly being offered the opportunity to become active in the “NFT” realm:
- The CEO of EA, Andrew Wilson, described NFT and “play-to-earn” games as the “future of the industry” (via PCGamer)
- The head of Ubisoft, Yves Guillemot, believes that blockchain and “play to earn” will help the industry grow (via vice).
At the same time, one can see how “the players” are being addressed: On YouTube, some videos are already showcasing current “NFT games.” The videos are not about whether these games are good or bad—it’s mainly about how to earn money in these games.
The companies are also actively promoting NFTs through advertising deals, reaching out to popular Twitch streamers and offering them significant sums of money.
There is a lot of rejection against NFTs, especially for environmental reasons
What is the criticism of NFT? The criticism of NFTs is the same as that of blockchain technology:
It is generally criticized that a lot of real energy is expended to create virtual objects—this means that the technology directly impacts the environment.
An article from Wired reported in 2019, for example, that a Dutch artist who created and sold six NFTs consumed more electricity in the few moments of auction than his studio did in two years (via wired).
This shocked the environmentally-conscious artist:
NFTs are also criticized because they have already been used for some “art scams” where investors were ultimately cheated out of their money.
The site Kotaku quotes among others, executives from gaming studios saying that NFT companies have no idea and no connection to gaming. It is a bubble backed by a lot of money that lives off buzzwords like “NFT” or “metaverse,” which very few investors truly understand.
The gaming studios that invest in NFTs quickly realize, “Oh God, I have no idea how to develop a game” and then contact experienced studios (via Kotaku).
Among players, there is a strong aversion to NFT elements in many places. The common counterargument is that one is supposed to “pay a lot of money for a few pixels.” Players do not see why a digital item should suddenly cost several hundred or thousands of euros—they are used to the “normal prices” in cash shops.
There are also some horror stories from NFT investments that lost massive value within a short period.
As is often the case with speculations, opinions vary widely:
- Some believe NFTs are the “new thing,” talking about exponential growth and huge increases in value. They believe that potential difficulties with high electricity consumption will be resolved when the industry switches entirely to “green energy.”
- Others believe NFTs are a bubble that could burst at any time. And in light of the environmental damage NFTs are currently causing, they hope it will.
Currently, NFTs are like a red flag for some players:
Dead by Daylight sells controversial NFT killers—players find it “incredibly suspicious”
