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The Reason Games Will Be The First Real NFT Use Case & The Current Resistance
By Elliot Koss, Founder @ Future Mints
Technical Level: 🛠️
This week we’re wrapping up our mini-dive into NFTs and Gaming. We started by covering the Four Core Components of Games and then explored Five Ways NFTs Can Make Games Better. Today, we’re going to discuss why games will be the first real use case for NFTs and then dig into why there is so much resistance to NFTs by gamers (hint: a bunch of it has to do with misinformation). Ok, let’s get moving.
Why Games Are The First Real NFT Utility Use Case
In 2021, the hype over NFTs blew up quickly. I’ll admit that I got caught up in the excitement, though I was always more interested in what NFTs would allow us to do instead of simply focusing on the financial gains that we were seeing. The rise of communities was amazing, and it’s special to still see many of these communities remain active during this cold crypto winter.
The NFT craze started with Art. And Beeple’s eye-popping sale drew insane attention. But for those who were in the space, it was the community aspect that was where the true value was identified in those ‘early’ days (which were late since if you only joined in 2021 then you missed out on Bored Apes and Crypto Punks and many other true OG communities).
However, community only gets you so far. There are some truly exclusive communities around the world that people spend thousands of dollars on membership each year. Certain private clubs, country clubs, and more. But this is still an extension of exclusivity that won’t reach a mass audience, similar to the fact that the vast majority of the world has no idea what the Soho House is. Communities, which we’ll write about soon, are a critical part of NFTs and a true value add. But they are not the first real use case that will reach the masses due to the exclusivity of these communities.
The first real NFT use case that reaches the masses will be Games, because Games have some clearly advantageous reasons to adopt blockchain technology. There are two main reasons for this.
As we outlined last week, Game Ownership will give players a way to buy and sell access to games in a way that game makers will be able to monetize each transaction. Today, game makers do not earn any money from secondary sales (aka person to person transactions that happen with digital codes). With NFTs being used as Game Ownership, game makers can (eventually) write into the smart contract that some percent of each sale of the NFT goes to the game maker. This is a revenue generator that some game maker will test, and as long as the economics work out, other game makers will adopt as well. So this is only a matter of time, which will partly require the infrastructure for NFTs to be more widely used (though that’s a general blocker that applies to all potential use cases)
Ownership of In-Game Items (also outlined last week) creates another new revenue stream for game makers. Individual users could acquire in-game items and then have a way to sell them. Again, the smart contract could include some revenue royalty to the game maker, which would represent a new revenue stream. It would also create a new interactive element for players plus a new incentive to play longer and spend more in-game since each in-game item, especially the randomly earned ones, now have this potential element that is akin to baseball cards where some incredibly raw item has a lot of market value, so players will spend more to have the opportunity to earn it.
Notice how both use cases represent new revenue generation opportunities for game makers while providing players with economic incentives to buy the game or spend more in-game. This is no accident.
Adoption of NFTs and blockchain technology is NOT going to happen without an economic benefit. No new technology is every adopted simply for technology’s sake. There needs to be some benefit. In this case, NFTs make it easy to transfer ownership of a game or an in-game item in an open market. And NFTs do this in a way where both game makers and players can economically benefit. That’s it.
The Current Resistance Gamers Have Against NFTs
With all that said, during the 2021 NFT craze, many game companies started dabbling in blockchain technology and openly talked about using NFTs to enhance gameplay, similar to how we’ve described it. However, the general opinion of game makers (though not of everyone), is expressed by Activision Blizzard, which is one of the biggest game makers in the world, when they state that they are not planning to incorporate NFTs into their products and Sega’s CEO sums it well when he says that players have concerns that it won’t benefit gameplay and would instead be a moneygrab.
The problem is that players watched the 2021 NFT craze and ‘play to earn’ games like Axie Infinity, which had a $600M hack that say basically all its money drained (we wrote about this in early July), and they were simply offended by the sole focus on financial gain. It was something that I disliked about the NFT community as well since there was little focus on underlying value - which was the area I spent a lot of time focusing Future Mints to aim to cover. This ‘get rich quick’ attitude wasn’t held everyone in the NFT, but it was certainly the prevailing sentiment that the public perceived as basically everyone in the NFT was forced to defend their belief in the space in what felt like every conversation with those not in the space.
It’s no wonder that this pushback against NFTs has taken hold in the gamer community.
Not only is there resistance to the purely money driven concerns with NFTs, but also the environmental concerns that NFTs would ‘boil the ocean’ if taken mainstream have made a lot of negative on NFTs.
The issue with these concerns is that they are misplaced. First, let’s dispel the environmental concerns.
As we highlighted with our earliest explanation of Ethereum, there’s already been an upgrade to the blockchain that reduced energy consumption by ~99.95%, and the next week we explained how the upcoming ‘Sharding’ upgrade will increase transactions from ~30 per second to 100K per second. Taken together, these technology upgrades mean that there will basically be no environmental impact for NFTs (which are currently predominantly used on Ethereum).
When it comes to the purely money driven motivations for NFTs, the two main rationales we noted above are not driven by profit-seeking but instead by introducing technology to do something that players already do or want to do today. NFTs simply make these actions easier, faster, and more reliable.
This is exactly what new technology is supposed to do - solve a problem better, faster, and more efficiently. And if the new technology can do this at a profit that someone is willing to pay for, then this new technology will be adopted at scale.
That’s what NFTs offer.
And despite the resistance today, which I believe is based less on misinformation instead of a complete understanding of where the technology sits today and where it’s going, we should see a change in opinion as enterprising game makers begin to incorporate NFTs into their experience, likely without using the term NFT, similar to how Starbucks Odyssey shies away from using the word NFT.
At some time, ‘NFT’ may be reclaimed as a positive term. That is not where it stands today, and the resistance we’re seeing is now more instinct than anything else. And I expect that to change over time.
Wrapping Up
And that concludes the NFT and Gaming mini series. Next week, I’ll write NFTs and the country club membership to dig into the exclusive community memberships. This is currently the most used value for NFTs, and it’s truly unique. However, its reach and value are unlikely to break through to the masses for a while partly because the way subscriptions work today is already a strong technology that NFTs do little to improve (though there are some new benefits). I’ll dig into this in more detail. Until then, have an amazing week!