NFT | Tokenisation

Adding NFTs to Games by Tokenising In-Game Digital Assets

April 14, 2022

Gaming is Big (yes, with a capital B) business. According to Statista, the industry was worth a staggering $138.4bn in 2021.

People love gaming, you see, and gaming they do, in their millions, every day. As of March 2022, Xbox Live boasts 100m monthly active users. (In 2016, the service had about 40m active users.)

These figures only highlight the rising popularity of gaming as a means of mainstream entertainment. Of course, these days we can game on pretty much any platform. From the ubiquitous mobile phone, tablets, laptops, gaming consoles, even our TVs. In other words, gaming is immediate, accessible, and relatively affordable.

But despite the immediacy and the inescapable truth that gaming is only going to increase in value over the coming years, the fact remains that the gaming industry is structured in such a way that gaming revenue benefits the retailer that sells the game, the publisher that commercialized that IP, and the studio that created it. In short, the revenue flow only goes one way. The gamer gets no financial reward for playing a game that might have cost millions of dollars to create. (Call of Duty: Modern Warfare 2 currently ranks first in the list of most expensive video games ever created. COD: MW2 had an estimated budget of $250m.)

But over the past twelve months or so, that unidirectional revenue flow has begun to change course. Thanks to blockchain technology -and more specifically, non-fungible tokens (NFTs), gamers can get a slice of the gaming money pie.

Let’s explore how.

NFTs: value for the players, at last

In the traditional model, a studio creates a game, a publisher distributes it to retailers, which sell it to consumers (i.e., the gamers) This distribution used to be in the form of physical CDs (and 3 1/2-inch disks before that, if you’re old enough to remember those.) Some games used multiple disks. Nowadays, most games are distributed via a digital service, like Xbox Live or Steam. It’s certainly more convenient than in the old days. (1994’s Beneath a Steel Sky, published by Virgin Interactive Entertainment, came on 15 floppy disks!) Every stakeholder (the retailer, the shipping company, the publisher, and the studio, take a share of the game’s profits, as it should be. But what about the gamer? Someone might spend a sizeable chunk of time and effort playing the game, getting to know its intricacies, its maps, and learning the gameplay. Shouldn’t this effort be rewarded too?

The current economic model of game production and retail creates value for stakeholders, but little to no value whatsoever for the gamer. Blockchain addresses that shortcoming through the use of NFTs.

How this value is created

Video games, particularly massively multiplayer online role-playing game (MMORPG) ones, feature considerable in-game economic systems that often translate into big-time real-world profits. The economic system of sci-fi epic EVE Online for example is worth $55m in real, hard cash. And some of the in-game assets can sell for respectable amounts. A Gold Magnate frigate, one of the game’s rarest ship types, sold for $33,000 in 2020. But even that ship, pricey as it was, pales in comparison to the $6m plus (that is, six million American dollars) that someone paid for the virtual planet Calypso in the game Entropia.

All these assets are in-game. Essentially, you cannot use them outside of the game environment. They are valuable, certainly, but this value is limited by the scope of the game world. Tokenizing game assets using blockchain technology enables a paradigm shift in how these assets are handled, their value, scope, and relevance.

The tokenization of in-game assets opens up a whole new world of possibilities. You could purchase an in-game item, say a new ‘skin’ for your favorite character. Right now, this new skin would make the character really cool in the game, and nothing much else. But imagine that you acquire this skin in tokenized asset form, an NFT, in other words. Suddenly, that skin becomes transferable elsewhere (to a different game environment, or any other ecosystem that supports digital assets -digital art exhibitions, for instance.) Blockchain-based games and assets have a great power: the power to expand the game’s economy by orders of magnitude. This might lead to the development of brand new game categories, creating a substantial amount of value for the players, at last.

Gaming NFTs: properties

Blockchain technology is disruptive for many reasons. It provides a radical new way to manage trust in network environments, and it’s decentralized, of course, which removes many of the issues lingering in legacy systems. When it comes to gaming NFTs, the use of blockchain technology heralds the arrival of a brand new asset class of in-game items, with three striking features: ownership, scarcity, and interoperability.

Ownership

As we saw earlier, in-game items in ‘traditional’ gaming environments are only useful and usable within the confines of that same environment. A skin purchased in Epic Games battle royale-style Fortnite cannot be used outside of Fortnite, for example. In this concept, ‘ownership’ (of that skin) is only an illusion. You might have paid for it, but it effectively remains the property of the game’s developers, as you cannot use it elsewhere.

Tokenized assets turn that concept in its head by enabling the player to truly own an asset. Gamers who purchase that skin (or any other in-game item, for that matter) can save it, sell it to other players if they so choose, use it in a different blockchain-supported game, or turn it into digital art.

Scarcity

Rarity equals value. (A Revenant Carrier, one of EVE Online‘s most powerful and sought-after ships, can set you back around $8,000 in real money, while a 1999 First Edition Shadowless Holographic Charizard Pokemon can fetch almost $370,000.) It is this rarity that makes these things such prized collectors’ items. But of course, these items have to be authentic to hold onto their value. This is where blockchain technology comes in. The inherent immutability of blockchain data means that gaming NFTs can be provably authentic, so players intending to splurge the cash can do so with peace of mind by determining the provenance of a given item. Subsequent collectors can do the same, thanks to the distributed ledger’s data traceability.

Interoperability

Up to the current era, games play in centralized servers, using siloed, proprietary platforms that do not communicate with one another. (The concept of cross-platform gaming, which enables Xbox Live players to face off against players on PC or Playstation Network is relatively new, and remains limited to just a few games.) Generally speaking, centralization is king in modern gaming.

Blockchain technology disrupts that concept through the tokenization of in-game assets. Blockchain-based games can interact with one another, so items acquired in one game can be used in any other game on the same blockchain, or even in another, if both technologies are integrated.

Conclusion

NFTs are little digital wonders to some, short-lived fads to others. The truth probably lies somewhere in the middle. We have discussed NFTs in this space before, including a two-parter series (part one and part two) about some of NFTs’ more interesting use cases. These two articles would be a great starting point on your NFT knowledge journey.

When it comes to tokenized gaming, the possibilities become truly fascinating. NFTs are versatile, powerful, and unbound from centralization. Many companies, including Zaisan, are expanding into NFT territory to support gaming and other types of projects involving NFTs.

Gaming NFTs represent the freedom to unleash a constellation of creativity, opening up a brand new universe of gaming, and heralding a new dawn of video game player power.

Key takeaways

  • In-game tokenization enables the creation of tradable assets, and therefore, value for the players
  • Blockchain technology, when applied to gaming, facilitates the introduction of a new asset class of in-game items with the following features: ownership, scarcity, and interoperability.
  • Zaisan specializes in gaming NFT management to help gamers create and manage value out of their in-game tokenized assets

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