NFT and Video Games: The Future or Fading Trend?

Introduction

Anyone interested in blockchain has probably heard of terms like Web3 Gaming, Play & Earn, Play to Earn, and others.
The core concept behind these terms is the same: integrating blockchain technology into the world of video games, transforming all in-game assets (maps, characters, tools) into NFTs, which are non-fungible tokens that exist within the game‘s reference blockchain.

This is a recent trend with the potential to completely transform the gaming industry, and many companies are entering this space, with increasing investments in this direction. A notable case is Ubisoft, one of the main investors in the Dogami project, a Tamagotchi-style game that will be released on the Tezos blockchain. In this game, players take care of a dog, which is, in fact, an NFT.

The uniqueness of these games lies in the fact that almost all assets are “tokenized,” as mentioned earlier. This can be a barrier for many players not familiar with the technology. To address this, many companies have considered introducing a “free” version of the game, where the average player can still enjoy it but with limited functionalities, such as character customization, which, not being a tokenized asset, cannot be personalized.

Currently, it is estimated that about 50% of activity on various blockchains is related to gaming.

Why Should Someone Play a Web3 Game?

Let’s take an example of a game where the goal is to create your own basketball team. The user is the coach and needs to buy players to win. Often, in traditional games, in-game currency is not enough to achieve goals, such as buying the highest-scoring player or creating a team with specific requirements. In such cases, users resort to microtransactions to purchase in-game currency with real money.

Once the money is spent, it is “lost” within the game system, with no possibility for the player to get it back because what is purchased remains confined within the game.

Now, imagine the same scenario in a web3 game, where the user purchases NFTs, which are the players, using fiat currency (such as Euros, Dollars, etc.), cryptocurrency, or, in some cases, the project’s own token. When the user gets tired of playing, they can resell their players, sometimes even making a profit.

In summary, a web2 game allows you to buy items, characters, or credits, just like a web3 game, but the difference lies in where these purchases are actually located: 

in a web2 game, they remain only within the game, while in a web3 game, being on the blockchain as NFTs, they not only belong to the user but also are not confined to a single video game.

Many blockchains are trying to keep up with this trend, with Polygon, based on Ethereum but capable of handling many more transactions per second and having very low fees, being one of the leaders in this space.

It has invested in 19 projects and boasts nearly 8 billion USD in NFT trading volume, with over 700 million USD solely related to gaming.

Why Are They Called Play & Earn Games?

As the name suggests, web3 games offer the opportunity to earn through various mechanisms:

1. Earning by playing: Users receive tokens based on their gaming activity, such as daily logins, completing missions, or winning matches. These tokens can then be sold on various DEXs (Decentralized Exchanges: PancakeSwap, SushiSwap, Uniswap…) or in some cases on CEXs (Centralized Exchanges: Binance, Bybit, Bitget…).
   
   
2. Earning through airdrops: To incentivize users to hold NFTs instead of selling them, many games airdrop, meaning they give away tokens or NFTs from secondary collections, covering the network fees (Gas Fees).
   
   
3. Earning through speculation: The opportunity to profit from these games is not limited to players but also extends to speculators who seek to buy assets and resell them at a higher price. 
   
   

This is a rare case but worth considering to understand the direction in which things are heading.

Challenges of Web3 Gaming

Despite the promising prospects offered by Web3 Gaming, it is essential to highlight the issues related to this system.

The first problem is game sustainability. Many of these games have a governance token with a very high supply and are typically inflationary. A striking example is Thetan Arena, which saw a significant drop in its token value, from an all-time high of around $19 to approximately $0.06, with a supply of 420 million tokens. This is due, in part, to the current market conditions and poorly thought-out tokenomics.

The second problem, perhaps the most critical, is related to the blockchain itself. Since it is a public network where anyone can release their token or NFT collection, scams are prevalent. Fake collections are increasingly being created with the aim of deceiving less vigilant users into believing they are genuine. In the “best-case” scenario, users end up with counterfeit products, while in the worst case, they may interact with malicious websites and smart contracts that can empty their wallets.

Nevertheless, I am confident that as this technology becomes more integrated into our lives, even less experienced users will learn to protect themselves from scams in this sector.

Conclusion

While there are currently only a few web3 games on the market as most are in development, I believe that when they are released, we will witness a phenomenon of mass adoption of blockchain in the gaming industry. This is due to the ability to resell in-game assets once players get tired of the game and the enticing prospect of earning while playing, especially for competitive gamers.