How NFTs Will Change Gaming
What’s an NFT?
Even after reading through countless articles and watching lengthy videos, grasping the concept of an NFT remains difficult. Let’s start with the name. NFT stands for “Non-Fungible Token.”
fungible (adj.) — being something (such as money or a commodity) of such a nature that one part or quantity may be replaced by another equal part or quantity in paying a debt or settling an account
So, based on the above definition, we can see that NFTs are the inverse of how we currently perceive currency and monetary value. The easiest way to think of it is to compare an NFT to a US dollar.
A US dollar is equal to another US dollar, meaning that, if you walked up to a stranger and traded a dollar with each other, you would both walk away with the same value in dollars. Although the serial number or the issuance date may be different, the dollars are interchangeable — they hold the same value, regardless of who is in possession of them. Moreover, once you hand off that dollar to the stranger, there is no verification of the transaction, and it is no longer associated with you personally.
On the other hand, an NFT is designed to create what is called “digital scarcity,” by stamping each NFT with a code or digital footprint that is entirely unique via cryptography. When someone creates an NFT, the blockchain recognizes that this is the original copy, and all transactions thereafter can be traced back to its genesis. Unlike the dollar example, two people swapping different NFTs does not result in each walking away with the same value as before.
As we know from simple economic theory, price is generally a factor of supply and demand, and, when supply is extremely limited and the asset is considered “valuable,” the demand will follow. It is akin to the “one-of-a-kind” mindset that many collectors and connoisseurs have when seeking new treasures.
The Obsession with Uniqueness
Humans have an obsession with being the sole owners of things. Baseball cards, vintage cars, record players, and even paintings like the one above, which sold in 2019 for $110 million. Now, there may be some who would question why anyone in the world might spend so much on a single painting, other than having enough money to do so. The answer? Scarcity.
The painting above represents 1 of 4 paintings in the “Haystacks” series, which was completed between 1890 and 1891 by Monet. It is often that we see tremendously wealthy people spend tens of millions on pieces like this. Although they may be able to invest that money elsewhere for a return in the short-term, they know that art appreciates in value greatly, and what is currently valued at $110 million today could easily become $220 million a decade from now.
A more-palatable example might be baseball cards. Although I have never been a collector myself, I have witnessed the excitement of finding an especially rare and valuable card. People who share this interest know the values of these cards, and use their knowledge to acquire and grow their collections to impressive valuations. This Micky Mantle card sold for $5.2 million this year — not bad for some paper and ink.
The point is this — people want things that are uniquely theirs, and they’re willing to pay for it. NFTs are the digital baseball cards, art pieces, and intellectual property rights of the future.
The Rise of Gaming
Now that we have established how NFTs capture their valuations, we can start to think about the implications of these digitally scarce items becoming mainstream. In recent years, the Gaming Industry has soared, and that growth is projected to continue to the tune of a 30% increase in market capitalization in the next 3 years. This has also seen a trend that promises to continue, as games follow the free-to-play, or “freemium,” business model. This means that you can play the games for free, with the option to purchase items that will help you progress in-game.
If the product is free, then you are the product.
In fact, this is how these games are able to generate revenues. If you’ve ever played mobile games on your phone, you may have seen the option to buy more gold, or get instant experience. Additionally, you might see full-page advertisements that you have to watch before continuing in the game. As the saying goes, “if the product is free, then you are the product.”
Analysts estimate that the Gaming Industry will continue to see mass adoption of this “freemium” model, with more than 99% of applications becoming “F2P,” or free-to-play, by 2024.
A New Era
Gaming in the new era has become a monolith. From teenaged gamers on Twitch making millions to eSports teams packing stadiums, it seems that everyone wants a piece of the action. This has led to a tremendous amount of investment into branding.
Companies are always looking for innovative ways to market their products. Often, this comes down to associating someone, or something, well-known with the product. A recent example is the Travis Scott meal at McDonald’s, to which some attribute the 4.6% increase in sales in the same quarter. Was the meal something vastly different than McDonald’s traditional offerings? No. People were simply excited to see one of their favorite artists partnering with one of their favorite fast-food chains, and wanted the experience of getting one of a limited number of “Travis Scott” meals. What’s more, the sudden uptick in sales for this meal resulted in scarcity — consumers were unable to find the meal at their local establishments, driving demand even higher.
In a world chock-full of everything Limited Edition, NFTs may be the perfect way for the Gaming Industry, and the broader Advertising Industry, to capitalize on this basic human desire.
The End Game
As it becomes increasingly difficult to grab people’s attention, marketers must find new ways to get consumers excited about what they are selling. This is precisely why NFTs could revolutionize the way in which advertisements function in the Gaming Industry.
Imagine this. You’re sitting at home, enjoying one of your favorite games. An ad pops up, blocking your view of the game. Annoyed at the sudden disturbance, you see that the ad lasts for 30 seconds. So, you get up from the couch to grab some water, knowing that the ad will be finished when you come back.
Now, advertisers can up the ante. Imagine the same scenario, but now, if you watch the entire advertisement, you receive an NFT that helps you to advance in the game. However, you must interact with the ad in order to receive the reward. Almost instantly, you have piqued the interest of your target audience at virtually no additional cost.
The beauty of NFTs does not end there. Pretend that, as a company in the Gaming space, you want to run a promotion for your game. For the first 100 people to reach 10 hours of game time, each player will receive a unique token related to the game, i.e. a customization for a character, or a new graphic. Once you have sent the players these NFTs, they will be the owners of original digital art or otherwise, which cannot be replicated, nor destroyed. The players now possess Limited Edition features in your game.
Once players are in possession of these NFTs, they can choose to either keep them, or list them on a marketplace to sell to another gamer. This is where revenue can be generated by the gaming companies. These companies can then take a percentage of the sale price of the item, just as an art auctioneer might. Moreover, the excitement over these Limited Edition NFTs is sure to create excitement around the game, and drive more eyes to the content that you are marketing.
A final distinction to be noted about NFTs is that they are not dependent on whether the player is still active in the game. The NFT essentially becomes the property of the player, who can then use it however he/she sees fit. This is slightly different than in the past, when players would sell in-game assets to other gamers on third-party exchanges, like eBay. In fact, selling “gold” from the popular online game Runescape has become a means of survival for people in Venezuela, who receive real cash in exchange for in-game money.
The Final Take
The Gaming Industry is just one of the examples of how NFTs can change the way in which we live. Proponents of blockchain technology speculate that NFTs could be used in place of notaries, effective in tracking ownership of property, and even become the new standard for trading digital art. The concept of blockchain is rooted in the intention to remove the veritable “middle man” in transactions, and the ability to transact with each other is just the foundation for a promising, more-equitable future for everyone.
