WHAT ARE NFTS IN GAMES?

Regardless of whether it's used in gaming or elsewhere, the acronym NFT refers to a “Non-Fungible Token” for a digital item. It sounds a bit complicated in name, but the idea is actually fairly simple. An NFT is a certificate of ownership of a digital good that’s supposed to be made in a limited quantity. They can be attached to digital pictures or memes, video clips, or even something as abstract as the original source code for the World Wide Web. If something is “fungible” then it is a mutually interchangeable commodity — like a dollar bill.

No matter what form it takes, when you have an NFT for a specific digital item, you own the certified token for it on a digital ledger or blockchain. Simply put, you get a specialized link that proves your connection to that digital asset. Just like someone can own a highly valuable car in the real world, NFTs offer an opportunity to claim a small slice of the digital landscape.

It’s like owning the deed to something that exists purely on the internet.

HOW NFTS MIGHT WORK IN VIDEO GAMES

Especially when it comes to gaming, large corporations see NFTs as an avenue to make a continuous revenue stream out of digital content. For example, if a rare Fortnite skin were offered as an NFT, a player could be the first to unlock the skin in-game and then take ownership of it. Once they do, the token for that skin can then be resold to the highest bidder, potentially for a lot of money. Regardless of how much the skin sells for, its original makers at Epic Games would still take a cut of that payout, and it can be resold by the new owner to additional owners in perpetuity with Epic hypothetically taking a cut every single time.

Aside from attaching NFTs to any game that sells cosmetic skins, it’s equally easy to see how NFT principles might be applied to card-collecting games like the Ultimate Team modes featured across EA Sports titles. Essentially every card in the mode could be its own NFT, and then you could sell ownership of any card in your deck to other players, with Electronic Arts taking a cut of auctioned sales.

So, in addition to getting paid for a gamer purchasing the pack from which rare cards originally came, EA could theoretically open up an entirely new revenue stream based entirely on resales of those rare cards for as long as NFTs are viable. While there has long been a “black market” of sorts for folks selling Ultimate Team accounts that feature rare cards for real money, NFTs serve as the publisher’s opportunity to take their own slice of that profitable pie.

None of the above-listed examples exist yet, but those with a passing interest in the games industry can likely see where this train goes. Big game publishers love the idea of NFTs because they unlock the possibility of making lots of money on items that are scarce. We’ve already seen recent trends like time-limited cosmetics become the norm, but what if publishers could get away with only selling so many of a certain skin or card? The demand for those items would skyrocket, creating an active marketplace.

NFTs are poised to be the next evolution of in-game microtransactions. We’ve seen this concept progress from loot boxes to battle passes, and, now that the latter trend has become a bit stale, bean counters see NFTs as the next best way to siphon money from FOMO-suffering fans.

Could a game publisher technically make its own auction house without necessarily relying on the blockchain to do it? Absolutely. But NFTs are a special beast because they combine ongoing cash flow with investors’ recent interest in blockchain initiatives. If corporations can please investors and make money at the same time, they’ll be okay with taking the NFT route to do it.

By Vineet Singh Chandel, CEO and Founder, Spido7