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NFTs and Gaming, Part 2: Five Ways NFTs Can Make Games Better
By Elliot Koss, Founder @ Future Mints
Technical Level: 🛠️
Last week, I wrote about the Four Core Game Components.
Today, I’m going to expand upon the core components: Goals, Rules, Challenge, Interactivity.
Imagine that you buy a game and receive 3 NFTs for that game. Each NFT serves its own purpose, and today, we’ll talk about how these different NFTs can be used to make games better.
#1. Game Ownership NFT
The first NFT out of the 3 imaginative NFTs that you get with the game represents ownership of the game itself, meaning that whoever has that NFT can play the game.
It’s sort of like logging into Netflix. You used to be able to share your password and now Netflix has cracked down. So if Netflix decides that you may be sharing your password, you either are (and likely can’t watch) or you are the account owner and you can take actions to bypass whatever block that’s been put on your viewing pleasure. An NFT could be used for Netflix and games to prove that the person who possesses that NFT has authorization to access that content or play that game.
This NFT allows us to decouple the game’s code from the ability to play the game. You could possess the game but not be able to play it. That may not seem like it has value, but this is one critical benefit of NFTs that doesn’t easily exist today - the ability to sell your access to something.
If you paid $50 for a physical game disc or cartridge, when you’re done with it, you may be able to go to Gamestop or Facebook Marketplace to sell the used game (plus eBay or Amazon). In those situations, you usually won’t get all of your money back, but you may get some of it. The game maker receives nothing from this secondary transaction, and you get whatever price Gamestop or random people on Facebook are willing to pay. In other words, there’s little transparency around the pricing. And Gamestop is going to pay you less money than you may be able to get otherwise, because they’re basically acting as a market maker and accepting some risk that there is no one who will buy the game from them. After all, Gamestop only makes money on the difference (aka delta) between what they buy the game and the price they sell it.
However, if your access to play the game is now an NFT, then first-off, the game is unlikely to be a disc or a cartridge but instead a digital download (which is what XBox, Playstation, Nintendo, and computer-based games are moving towards anyway). So you likely already have some sort of a digital game code that you could sell, which means you could go to Gameflip (a marketplace to sell game codes) to sell it.
The challenge with this approach is that your digital game code is like the change that’s been lost in your couch cushions (at least back when cash was used instead of credit cards) - you may have it, but you don’t know it. Without having your digital codes in a ‘wallet’ that shows you the current price, you have no idea the resell value of your digital assets. In other words, perhaps you have 100 video games that you’ve spent $50 each to acquire. That’s $5K which you may never see again. However, one day you decide to sell one of those games, and you learn that it’s worth $25. Amazing. You just got $25. But how much is your library of video games worth on the secondary market? You’d have to look up the list of each game you own.
While there are a variety of ways to make this process easier, NFTs are the most complete solution, because you can acquire the NFTs from any place that you choose (peer to peer transfers, retailers, or secondary marketplaces) and they’d all sit in a wallet or five. To see the value of those NFTs, you just connect your wallet to a tool like Floor and you’d instantly know the current value of your games’ resale value. Now that $5K video game library that you bought over the past few years has a clear value. Perhaps it’s $2,500, and you now have an easy way to buy or sell your games in a fully transparent way.
On top of this, there could be rules written into the NFTs smart contract that send some compensation to the game makers for each transaction. This gives the game makers the funding to continue building games, and it’s an extra incentive that could pay long-term dividends to game makers.
#2. Official Game Card NFT - Publicly Tracking Your Results (Goals)
The second NFT in your initial three would be an Official Game Card. This is an NFT that, when you choose to use it in a game, will record your results.
Think of this like an official chess tournament. First, you don’t have to enter. You can always go to the park or cafe to play games with strangers where no one is keeping track of the wins or losses. But when you feel ready, you can go to a tournament where your wins and losses will be recorded. Your Official Game Card will keep track of the games that you ask it to track.
Much like the chess tournament, you’d use your Official Game Card to get access to increasingly competitive games. If you’re a Grandmaster chess player, you don’t go play someone who’s substantially lower ranked than you. You want to play someone at your level.
So your Game Card could grant you access to games that are at your level, plus it would be a way to more or less rank all players in a game.
An NFT tracking your wins and losses presents a few obvious challenges.
First, can a single player have more than one of these Official Game Cards? This is a mixed bag. The integrity of the game would dictate that a single player should have only one Official Game Card. However, perhaps someone wants to gain access to a certain level of a game without having to start at the beginning.
If we think about the chess tournament, you likely have to play under your personal identity, meaning that you can’t play as an alias. As a result, there’s no real way for you to simply start your scoring over. If you could have more than one Official Game Card for a game, you’d essentially be able to start over whenever you feel like your record doesn’t reflect your skill. Perhaps you started as a novice but became a grandmaster. Wouldn’t you want a clean Official Game Card? Or perhaps you’d want to sell your grandmaster scorecard.
In the NFT space, there’s this concept of a soul-bound NFT. Basically, it’s an NFT that’s tied to a user’s identity and cannot be traded or sold. Think of an NFT for credentials like a college degree. Once you earn your college degree, it’s yours. You can’t sell it to someone else. It’s now a part of your identity.
If the Official Game Card was soul-bound, you would have a permanent record of your wins and losses. Granted, with the blockchain, there are a myriad of ways to ‘start over’, so if you chose to use a burner wallet for your Official Game Card or perhaps you generate a new wallet for each new game you purchase, there’d be a way to bypass the soul-bound intent.
As this space evolves, I expect the holes in this concept to be addressed.
Another use case, which is similar to win and loss tracking is recording the level you’ve achieved. If you’re playing a Role Playing Game (RPG) or a building-type game (a la Clash of Clans), you will want to play at the last level you were at. Today’s games usually keep track of this for you. Most of the time, this is done at a system level, so if I wanted to buy a new iPhone, then I could upgrade from my iPhone 11 to an iPhone 14 and still keep my Clash of Clans progress since I use Apple to login to my Clash of Clans game. But if I wanted to move from iPhone 11 to an Android phone, I would probably have to consciously figure out how to do this (assuming it’s already been solved). This would require forethought on my part, but what if I forgot to upgrade a game before I did my phone migration. I’d potentially lose my progress.
I’ve casually played Clash of Clans off and on for the past 10 years. I’ve passed a ton of levels. There may be some resale value in the game after all the time I put into it, but I have no way to extract that value. I basically play it for 3 months as my sole game during random down time, and then I ignore it for 2 years. I haven’t played it since around September 2021, but I can imagine someone would pay at least $10 for my level (it would probably cost $100+ if someone wanted to start from the beginning and pay for all the upgrades). Since I barely play the game anymore, I’d sell my progress to someone for $10.
This progress-based NFT would also present a new revenue generation mechanism for game makers since they could sell (or give away for free) blank progress-based NFTs that allows a player to start tracking their progress on a new NFT OR the game maker could sell access cards / NFTs to specific levels where players could then start tracking their progress. Imagine being able to pay to get past a particularly hard boss? It may devalue the gameplay for some people, but since it’s separate from your soul-bound tracking, would people care?
There’s a LOT to think about here.
One more concept that I’ll just touch on briefly is the ability to use your soul-bound Official Game Card to earn access or status in another game. Perhaps you want to play against other top players in Counter Strike, because you’re a top notch Fortnite player. The gameplay is similar, so the skills should be translatable to some degree.
There could be a way for you to use your Official Game Card to grant you access to similar games where your skill level is considered relevant.
#3. Official Goals & Rules NFT (Rules)
Game design today requires that the goals and rules be hard-coded into the game. While this helps ensure that gameplay is consistent, we’re increasingly moving to a technology standard that includes more flexibility.
Gamers have long been creative in coming up with new goals and rules. For instance, when Goldeneye came out, new goals and rules were quickly invented by gamers including ‘longest surviving player’ (goal) and ‘slaps only’ (rule). But you had to keep track of these goals and rules on your own. The game itself didn’t have the structure to keep track of this. It also didn’t have the flexibility to allow players to create their own goals and rules.
As new games were created, the gameplay began to adopt what gamers had already been doing unofficially. This is generally the evolution of ideas. Someone creates something new (the game creator). Then someone thinks of an improvement to the game (sometimes a game player, sometimes the creator). Finally, the game creator (or possibly a new owner of that intellectual property) is the only person who can make changes to the game.
With blockchain, and NFTs in particular, the world of gaming could take a major leap forward.
The third NFT that you’d receive would be the Official Goals & Rules, and while there’d be no real value in buying or selling these basic NFTs, there would be value in being able to configure a separate NFT with your own custom Goals and Rules. Perhaps the Official Goals & Rules aren’t an NFT, but instead they’re built into the game. And this third NFT is a configurable NFT itself.
Game makers could include with the game AND sell, for a small fee, a configurable NFT that allows someone to come up with their own Goals and Rules that the game would honor. The intent is to give gamers the ability to come up with their own Goals and Rules.
Then, gamers could sell these configurable Goals and Rules. Since there would likely be some skill required to configure these custom Goals and Rules, there would be a real value. Plus, for consistency's sake, everyone would need to play with the same Goals and Rules, so you’d have to buy these NFTs to enter specific tournaments.
This could become a new revenue stream and market that also benefits game makers since they could receive a royalty from each transaction.
#4. Accumulation And Exchange Of In-Game Currencies (Challenges + Interactivity)
This is more of a use case where blockchain makes games better and not necessarily NFTs, but I’m lumping it in anyway.
In most digital games, there is some sort of in-game currency that is required for interactivity or to bypass challenges. The first action of most games is that you have to earn in-game currency. There are often restrictions on the speed at which you can earn currency, whether there’s a limit on the amount of time you can play, the size of the in-game wallet you can use to hold the currency, or the amount of currency you earn for completing certain challenges. Then, there’s the interactivity of spending your currency to acquire elements in the game that will enhance the experience, whether it’s unlocking something that makes it finally possible to complete a given challenge, upgrading your weapons or defense or customizing your character’s wardrobe.
The point is that in-game currencies serve a real purpose for the gameplay experience, and while players often have a way to buy a currency, they are limited in the ways that they can use that currency outside of the game.
Why would a player want to use a currency outside of a game?
Well, if a game maker is going to charge $1 for 100 coins, that means each coin has an in-game value of $0.01. If I’ve accumulated 1,000,000 coins, then I’ve accumulated $10K in value. While it’s unlikely that I’d receive $0.01 for each coin, there may be someone willing to spend $0.005 per coin (half off), which means I could, in theory, generate $5K from my coins.
This concept of being able to monetize my in-game currency isn’t new, but today’s games don’t make it easy. Part of the rationale is that game economics today make it so that gamemakers don’t want you to sell your coins. For each coin that you sell, that’s one coin that the game maker can’t sell directly. So it would disrupt their current revenue stream.
Of course, each time something changes, the economy adapts, so if players were able to monetize their in-game currencies, game makers would adapt to find ways to generate that lost revenue. For instance, a ‘tax’ for bringing currency into a game that was purchased outside of a game could be a new revenue stream. Plus, economic theories indicate that prices would find an equilibrium between supply and demand, and the game makers would still control the supply.
Another use case is transferring your currency from one game to another. For this to be possible, both games’ currency needs to be relatable, which is where the above example of determining the value of a currency becomes useful. If all game currencies have a USD or ETH value, then you can relate each game currency - the same way that all fiat / government currencies can be related to each other. But if there is no common exchange value between game currencies, then you would have no way to transfer currencies from one game to another.
If there is a way to relate two game currencies, then I could transfer all those coins I’ve accumulated from Clash of Clans to whatever new game I wind up playing, which could also help me fast-track my progress.
#5. Ownership Of In-Game Items (Interactivity)
It’s been written about a bunch, but the mythology around the creation of Ethereum is that Vitalik came up with the idea of smart contracts and Ethereum after his beloved character was removed from the World of Warcraft and he had no power to stop it.
NFTs are a powerful solution. The idea is that the in-game items can be earned as NFTs. Since you would own the NFT instead of the game maker (meaning it couldn’t be taken away), you would have control over it.
There’s still a way for game makers to block a given NFT from being playable, because game makers would need to make sure that their game’s logic allows for in-game NFTs to be playable.
However, the ability to prevent an in-game item from being playable at a given moment is different from completely destroying that in-game item.
And what’s even cooler is that an in-game item, represented as an NFT, could be made playable in a completely separate game.
If you watched or read Ready Player One, then you’ll probably remember all of the pop culture references. Imagine being able to take Ryu (from Street Fighter) and being able to play as him in Fortnite. Sure, it may seem out of place, but your character in a game is a representation of you, and if you have an affinity for Ryu, that’s totally cool.
NFTs are what can make this possible. And this can be extended in many ways. The principle is that in-game items would be based on NFTs, and games could allow in-game NFTs from other games to be playable. You could bring a character from one game to another. Or a favorite weapon. This concept is central to the expanded Metaverse concept that many in the VR and AR space are so excited about.
Wrapping Up
As you’ve probably realized by now, there’s a ton of use cases for how NFTs and blockchain can make games better.
There are a few topics I didn’t touch on though, such as why games are the first real NFT utility use case and the current resistance that gamers have against NFT.
Next week, I’m going to wrap up this 3-part section by covering each of those cases. Until then, have a great week!