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Are NFT-based video games doing more harm than good?

The collision and confusion around  cryptocurrencies, NFTs, and video games is as 2021 as a conversation gets. But with more and more NFT-based games being developed, is it even clear who’s benefitting?

So you’ve heard Bitcoin, Dogecoin, and NFT thrown around a lot lately and like me, you’re a little puzzled. I know I’ve seen Valve’s decision to ban NFT games on Steam, and Epic Games’ decision to possibly accept them in future. There’s memes about Dogecoin and the story of  how Grimes managed to snag $6 million by selling her music using NFTs. But what is an NFT? And what does any of this have to do with the gaming industry?

Although Happy’s already covered NFTs before and the genuinely good potential it holds for musicians and artists, the gaming angle’s a little different. After some intensive Googling and investigative reading, I can safely say I understand what the fuss is all about now.

ethereum logo
Image: Ethereum

The NFT rundown

NFT stands for non-fungible token. What they do is assign a unique and non-interchangeable certificate to a digital asset and through blockchain technology, prove legitimate ownership. Blockchain technology lets us trace the origins of a file, all the way back to its original creator and thus, allows us to confirm ownership.

In other words, if you had an NFT of a Van Gogh painting, it’d be like owning the original. Since Gogh is long dead, you won’t make any royalties when people copy the painting, but unlike the copies, you’ve got the real deal.
In this case, it’s pretty much a flex.

Moving back to the digital world, yes that NFT image you bought cost $500 and pretty much anyone can download or copy it. But you own the original and thanks to NFTs and blockchain technology, you can prove it too. For fine art collectors, that sort of thing matters.

NFTs can be more than just images too. They can be pretty much anything that’s digital, be it art, music, and now, video games. They can also be bought or sold in whatever currency the seller prefers, but the majority of the market accepts the Ethereum cryptocurrency.

For artists and musicians, NFTs have a nifty feature where you can enable it to pay you a percentage every time that NFT is sold again. Meaning if your work starts gaining value, you still benefit.

So why does this matter for video games?

NFTs have gotten a lot of bad press when it comes to their usage in video games specifically. I’m here to tell you that it’s not all bad, but it’s not all good either. Games with an NFT focus are usually advertised as a way to make money while you’re gaming, which sounds like a dream. But reality is a little different, at least currently.

Usually, you purchase a copy of a game in order to play it, but NFT-based games are, generally speaking, free. That’s because they focus on making you purchase their NFT assets (which could be weapons, armour, or cosmetic skins) instead, which means the game keeps running and you start contributing to the community economy.

Other ways to earn money could be a small amount of cryptocurrency being awarded to players in addition to things like achievements or experience. You can either invest in NFTs with that developer’s cryptocurrency of choice, or cash it out and turn it into your local currency.

Or there are some games that let you buy and sell NFTs between players, with the small stipulation that the developers take a cut of each transaction.

Where you’ve grinded for 20 hours getting a specific NFT skin, you can sell it to a newer player who’s trading time for money – and the devs benefit too. Which obviously helps keep the game running. Sounds like a win-win-win situation. Right?

Sort of. The community economy is an important part of making any kind of money when participating in NFT based games. Supply and demand, my friends. If a game’s popularity spikes, so does the value of its NFT assets. Whereas if the pendulum swings in the opposite direction, you lose your investment. If the game gets abandoned entirely, you can kiss your investments goodbye.

Obviously this is far worse for people who have turned a game like this into their actual income. Rather than a hobby and fun way to find entertainment, gaming is suddenly work for those individuals. For those who’ve invested a lot of money into NFT assets, the stakes they have in these games gets a lot higher. There’s no reward without risk, after all.

To use a quick example: if World of Warcraft contained NFTs, some folks might have made a crazy amount of money over the years thanks to its overwhelming popularity. But in light of Activision-Blizzard’s recent lawsuit, the playerbase has tanked. Which means in this hypothetical situation, so would the value of those NFTs. That mount you worked so hard for? Yeah, it’s gone from $2,000 to $20. Bummer.

Most NFT-based games don’t have huge companies behind them like Activision-Blizzard though. So far, there’s not many (if any) that combine the entertainment factor of popular games with the possibility of buying and selling NFTs.

If this did happen, there’s every possibility that it could work really well. The community economy would be booming thanks to the game’s popularity, and it’d become great incentive for developers to not only maintain servers, but add more content.

The verdict

It’s tough to say whether the future of NFTs in games will be purely good or purely bad. There’s definitely ways for developers to benefit off of their playerbases. But, they could always cut and run once they’ve made enough money for themselves and leave their players with useless investments.

There’s also the risk of the spiky popularity associated with games themselves, meaning spiky value in your online goods.

But if NFTs can be used correctly in the industry, it just might prove to be one of the more interesting and perhaps fun ways to make some money. I’m not sure I’d make it my day job, but a little extra on the side just for gaming sounds pretty nice. At the very least, try to remember the golden rule: “don’t invest what you can’t afford to lose”.