Blockchain technology is now heavily used in the gaming industry. New games and popular old projects are being launched on decentralized networks. Applications with NFT objects are taking a special niche in this segment.
What are blockchain games?
In the first quarter of 2021, more than 50% of global internet traffic was generated from mobile devices. The reason behind this statistic is that applications for smartphones, including various games, successfully replacing software solutions for PCs.
It is easier for users to play or perform any task by taking a smartphone out of their pocket than to go to the place where the computer is located and run the necessary software from there.
A noticeable rise in the popularity of decentralized projects began in 2017 with the release of the online game CryptoKitties. It runs on the Ethereum blockchain. Its essence boiled down to the breeding of collectible crypto cats. In 2018, thousands of users were actively creating their characters in this game.
The most expensive digital cat in CryptoKitties was sold for $ 170 thousand. The total volume of transactions within the game amounted to more than $ 620 thousand with about 500 thousand crypto kittens sold.
Since the t launch of CryptoKitties, the number of blockchain games has skyrocketed. All of them differed in terms of difficulty and popularity. Gamers also actively began to test the new format of gaming activity and many of them really liked it a lot. At some point, the Ethereum network became so clogged up that there was a possibility of crushing it.
In 2021, NFT games went on to create a new level of demand. Previously, the “Play to Earn” format was popular in the gaming segment. Gamers could make money by achieving higher levels in individual games.
After the introduction of NFT, a new type of game was born - collectible. It got the name "Pay to Earn" - an investment with subsequent ability to earn. Now gamers have the opportunity to create objects in games, own and sell them for any amount.
According to statista.com, one of the most popular business platforms, in 2021, the total capitalization of the NFT games market exceeded $ 22 billion. At the end of 2020, this figure was at about $ 338 million.
Key Features of NFT games
NFT should is a non-fungible token. It is used to describe a unique digital asset owned by an individual user.
Almost any asset can be entered into the blockchain using NFT. Both tangible and those that exist only in a virtual environment. Both works of art and characters of a blockchain game can have a form of non-fungible tokens.
Now gamers can own the items and characters that are inside NFT games. And such objects will always be unique - you won't be able to recreate them. The total uniqueness makes the characters or items of blockchain games valuable. For example, if a user created a crypto kitten and an NFT token corresponds to it, then no one will have the same digital cat.
As a result, NFT technology has opened up a new full-fledged opportunity of earning money for gamers. Games using a non-fungible token have 4 key features:
- The developers will not be able to make changes to the characteristics of the game. All game conditions and mechanics are strictly governed by a smart contract. NFT objects cannot be confiscated from players as payment for a recently introduced penalty or for any other reason.
- Gamers have the ability to exchange characters outside of the game. An object created in virtual space is tokenized using NFT technology and becomes independent. The player will be able to sell crafted and tokenized items even without launching the gaming application. This is because their description is recorded in the blockchain and is available without a game interface.
- Items and characters retain their uniqueness forever. They cannot be recreated, since objects are recorded in the blockchain using a non-fungible token.
- The use of crafted/acquired items and characters is available in other games. Tokenized objects will exist as long as the blockchain in which the data is recorded is up and running. Regardless of the stability of the gaming application, even if the game ceases to exist, NFT objects can be transferred to another application. This makes tokenized virtual assets versatile and reliable.
When transferring characters or objects, the user has to obtain the consent of the developers of the other game to install a third-party object. The main reasons for approval are an enrichment of the game world and free marketing by introducing popular characters.
Now gamers have 3 strategies for making money using NFT in blockchain games:
- Creating a new character;
- purchasing digital items in-game or outside of the game;
- discovering or earning new objects in games.
Regardless of the method of obtaining the character/item, the gamer will have exclusive ownership of these items.
NFT in blockchain games provides a full-fledged decentralized gaming market. Gamers can now trade a variety of assets, items, and characters. At the same time, the developers will receive a part of the profit from such transactions. It makes NFT games useful to everyone.
For developers, NFT technology allows users to instantly create tradable in-game items through protocols that support decentralized exchange. Now, to provide the function for in-game purchases, there is no need for a centralized platform that users will come to. There is no need to create a market.
The clear advantages of decentralized games are complemented by another advantage - the absence of the need to buy expensive equipment. All processes are blockchain-based, so there is no need for high-priced video cards and processors.
Simple inexpensive equipment and the ability to make money from creating unique NFT objects will lead to rapid and stable growth of the blockchain community of gamers.
DeFi and NFT
The combination of NFT and various services in the decentralized finance (DeFi) segment significantly expands the possibilities of blockchain gaming.
Aavegotchi is a great example. This game combines DeFi and NFT technologies. This approach allows players to use every playable character they own as collateral on the Aave lending platform. There is a possibility of upgrading by winning battles. The more popular the character, the larger the amount of deposit it provides.
The competent implementation of the decentralized market in the DeFi segment leads to the following improvements:
- The creation of new pools of liquidity. A variety of resources within the decentralized finance segment will allow players to directly trade currencies and characters of different games with each other.
- The opportunity of earning passive income. When providing digital assets owned by a blockchain gamer to liquidity pools in exchange for a reward.
- Creating of the gaming multiverse. Developers will be able to combine different games into one large virtual world. This will enable gamers to transfer NFT objects from one blockchain game to another.
- Decentralized game management. Key processes will be controlled by the community of gamers, not individual developers. One example is the Decentraland marketplace.
- Expanding monetization opportunities for developers. Game publishers will be able to earn on the price increase in the exchange rate of currencies used within the game world. They will also have the opportunity to receive a percentage from each transaction with in-game assets.
To fully implement the capabilities of NFT games, the problem of fast scalability of the decentralized market needs to be solved. When millions of gamers start using the application, it is important to maintain a high speed of all transactions. But not all blockchains can provide this level of network operability. An example is the CryptoKitties game, which overloaded and nearly paralyzed the Ethereum network in 2017.
Currently, the fastest and most profitable blockchains for NFT games are Wax, Tron, and EOS.
Popular NFT standards
Non-fungible tokens are created on different blockchains, but in most cases, users choose Ethereum. The most popular implementation of NFT tokens on the Ethereum network is ERC721, which extends the capabilities of the base ERC20 standard.
There are other versions that are often used:
- ERC998. Provides the ability to tokenize a set of a whole group of non-fungible assets. You can collaborate with such objects as with an entire crypto-entity.
- ERC1155. Provides ideal storage for a large list of items. It can be used to combine all ERC-721 tokens owned by an individual user into one contract.
- ERC875. Allows users to send multiple collectibles in one transaction.
For professional gamers, the ERC1155 standard is especially useful.
There can be thousands of items or characters in blockchain games. If ERC-721 is used, then in order to record each of them on the blockchain, the user will have to create a separate contract. When ERC1155 is selected, one contract is sufficient to combine all NFTs to be used together.
For example, various weapons, armor, and other items of an individual playable character will be described in one ERC1155. Each token bundled by such a contract retains its characteristics.
There is another popular NFT standard - Blockchain Bean Asset (BBA). Its main role is to provide the decentralized storage of content. Gamers using this standard will be able to retain the copyright for the game content they create.
Examples of the use of NFT in blockchain games
After CryptoKitties had its star moment, there are many more projects that secured considerable income for the gamers.
Decentraland and likes
It is one of the most famous virtual worlds for digital ownership.
Before the public release of the game in 2020, the developers were able to sell 45,000 virtual plots of land to users. Information regarding ownership was recorded in the blockchain using an ERC-72 format LAND token. That was used to confirm the right of ownership. The plots are now being sold on the marketplace built into the game. Their initial cost is $4, 000-$5,000.
In 2021, a major deal took place: investment company Republic Realm acquired a block of 259 parcels in the digital world of Decentraland. The cost of this deal involving virtual land was $913,000.
Plots in Decentraland are purchased for different reasons:
- Erecting virtual buildings;
- Opening digital casinos;
- Rental of the virtual land;
- Erecting shopping centers offering NFT-based merchandise;
- Advertisement platforms, etc.
The governance in the game is decentralized: decisions are made by voting of the owners of the MANA token and LAND land plots. The token itself is an asset that can be used outside of the game. MANA is accepted as collateral for a loan on the MakerDAO DeFi platform.
There are other blockchain games in which tokenized land is available:
- SANDBox. Using token SAND.
- Somnium Space. Using token CUBE.
In Axie Infinity, the virtual world of Lunatia was launched. Its entire territory is divided into 90 601 plots. Each piece of virtual land has a separate NFT. The most affordable plots in Lunatia have a price tag of $ 12,000. With regard to large transactions, in 2021 a plot of land worth $ 1.5 million was purchased.
Without NFT in blockchain games, there would be no uniqueness of objects and such serious sums of money.
This game runs on the WAX blockchain and allows users to buy digital real estate. Unlike many land-based blockchain projects, Alien Worlds does not require players to make an initial investment to acquire properties.
Beginners can immediately mine Trillium tokens (TLM) since at the start they receive the entire set of tools. The mined assets can be withdrawn from the game and sold on crypto platforms. TLM is also used to acquire virtual land.
You can find sites on different planets of the Alien Worlds metaverse. If a user bought land and other gamers begin to mine tokens on it, the owner receives a commission from them. The metaverse is visited by more than 400,000 users per day.
This game was mentioned in major publications, even in Forbes. Axie Infinity became popular in June 2021. It was launched by Sky Mavis studio in 2018. Now Axie Infinity has over 1 million users daily.
In the game marketplace, you can buy and sell NFTs. It has already recorded volume exceeding the $ 1 billion mark within one month. Net revenue of the Sky Mavis studio for the period from 2018 to July 1, 2021, was $ 21 + million. But after the sharp jump in popularity of Axie Infinity, the numbers have changed a lot. In July and August 2021 alone, developers received $ 485 million from operations with NFT objects on the game's own marketplace.
Axie Infinity attracted the attention of millions of gamers with unique characters - Axie. Each Axi is a non-fungible token. These playable characters differ in their combat characteristics. They can multiply, grow and then participate in battles. Axi cannot be obtained for free - beginners have to buy their first units.
A regular character costs $ 200. If you want a hero with improved performance, you will have to pay from $ 600 to $ 700. To collect an Axi team capable of getting the first victories, you will need to come up with at least $ 2000. In battles, gamers receive SLP tokens that can be sold on Binance.
It looks like the game industry using NFT objects positioned for rapid growth. New inexpensive and fast blockchains are already being developed, and high equipment prices are encouraging users to actively switch to blockchain games.