If you’ve been paying attention to gaming news, you’ve probably heard a lot about NFTs. You’ll hear this term thrown around a fair bit, alongside words like “metaverse” and phrases like “play-to-earn”. If you’re anything like us, you greeted these new concepts with confusion. What is an NFT? Why does it sound like they’re essentially ephemeral possessions? Are they going to be the future of gaming? We’re here to demystify the concept a little. Here’s our basic primer about what NFTs are and how they relate to the gaming space.
NFT stands for “non-fungible token”
First, let’s define the word “fungible”. If I have a £5 note, that note is “fungible”. This is because if I lose it, I can replace it with another £5 note, and that second note will have the exact same value. If something is “non-fungible”, however, it means that if you lose that thing, it can’t be replaced by something of equal value. You can think of non-fungible items as those that are truly unique; first editions of books, for example, or original paintings.
An NFT is a token you can’t replace
Going by this definition of “fungible”, then, an NFT is a uniquely-assigned token that is yours to keep. Usually, NFTs are assigned to things like artwork or music. You can, for example, own an NFT of a piece of art, or a song. You can also own an NFT that corresponds to a specific part of a piece of art, or even a single note in a song. These tokens are “non-fungible” because they are unique; you can’t replicate the tokens, and only you are entitled to possess the one you have (unless you sell it, of course).
NFTs are not the underlying artwork
Whatever you’re buying an NFT of, it doesn’t give you the rights to the artwork. For example, if you buy an NFT of a song, you don’t have the rights to that song. You won’t earn royalties when it’s played, and you won’t be able to sue anyone who uses it without your permission. It might be helpful to think of a first edition book. If you own a first edition of Richard Osman’s The Thursday Murder Club, for example, you can’t claim authorship over the book, but you can claim ownership over your specific edition of that book.
NFTs are an attempt to bring scarcity to the digital world
One “problem” with digital artwork (at least, it’s a problem to some people) is that it’s impossible for scarcity to exist when the artwork is infinitely replicable. A JPG file can be endlessly saved and reproduced at no additional cost (unless it’s an image with specific rights conditions, of course). NFTs are an attempt to redress this balance and to bring exclusivity and scarcity to the digital art world. They are a way for collectors and enthusiasts to claim they own something truly unique, and to pay for the privilege of owning that thing.
The blockchain verifies NFT ownership
Much like cryptocurrency, NFT ownership is verified by the blockchain. In essence, this means that each transaction is checked against a decentralised ledger that contains records of all of these transactions. The blockchain is publicly available to view, so anyone can see who purchased an NFT and who is currently entitled to ownership of it. There’s no central authority for the blockchain, either; it’s effectively verified by all of its users and by the fact that it exists. Each transaction is logged and tracked, so NFT ownership is hard to fake (although that hasn’t stopped people from trying).
NFT gaming is almost here
So, with that out of the way, how do NFTs relate to gaming? Well, you might be hearing the “pay-to-earn” concept bandied around a fair bit. In essence, “pay-to-earn” games reward players with NFTs, unique collectibles they can trade with one another. Different degrees of rarity are assigned to NFTs, thus making some more valuable than others. It remains to be seen whether this will be a successful concept; Diablo III’s real-world marketplace attempted to do something similar, only to end in catastrophic failure, so gamers may not respond well to this kind of monetisation.
Gaming companies can also sell art and music as NFTs
As well as NFTs in gaming, there are also artworks and pieces of music that can be sold as NFTs. Square Enix is already in the process of looking into the NFT world, as are companies like Zynga, Konami, and other gaming giants. They’re selling unique art assets and collectibles that might be of interest to NFT enthusiasts. Expect to see this kind of thing increase in frequency as more and more gaming companies understand the potential value of NFTs and how they can be used to rake in profit, even as gamers aren’t enamoured with them.
NFTs are controversial in the gaming space
There are a lot of controversies surrounding the world of NFTs. Upcoming open-world post-apocalyptic shooter S.T.A.L.K.E.R. 2 had to backtrack on introducing NFTs to its game world because of an overwhelmingly negative reaction. Square Enix has talked about how “play-to-earn” players could make a game more exciting for those who only wish to have fun, but there are concerns that play-to-earn mechanics could supplant traditional gaming enjoyment to create something that feels more akin to work. There’s also a rampant environmental cost to NFTs, with huge amounts of energy required to maintain the kind of technology needed to verify NFT transactions.
We hope our brief primer on the world of gaming NFTs has been helpful! Although this topic is highly controversial, it doesn’t look like it’s going away anytime soon; developers and publishers alike are realising the huge commercial potential of the NFT world. Expect to see this conversation expand to encapsulate more and more areas of the gaming industry as time goes on.