How does NFT gaming work, and what makes it attractive for crypto investors?

The defining characteristic of non-fungible tokens (NFTs) is that when you purchase the rights to a digital asset, only you (as the holder) have the right to use it. When we talk about NFT gaming, it means that when you purchase an NFT, you acquire the rights of a unique digital asset that is meant to be used within a game – and even in different digital ecosystems and metaverses.

When a person feels connected with a particular NFT, they will pay a higher price for its ownership. The value comes from the perspective of the user; when they purchase or earn an NFT, it allows them to be the only person in the game (or a member of an exclusive group) that has that particular skin, design, or attribute. A mighty $1 billion was invested in blockchain games in January 2022 alone, according to DappRadar.

So, the non-fungibility and utilities make NFTs an exciting investment for gamers – and game producers benefit from novel monetization opportunities.

Is NFT gaming opening the doors to widespread token adoption?

Token adoption was shunned by the mass public as there were very few use cases for it. For example, many users still struggle to see the real benefits of owning digital art. But gaming is a sector where the purchase of tokens and in-game credit has been going on for decades now.

This means that when NFT gaming was introduced, the adoption felt very natural for those gamers that were already willing to spend money on in-game credit – with the slight difference that the purchases are now recorded on the blockchain. Now that gamers can extract additional value from digital ownership, it’s likely that they will inspire new use cases and utilities to be used far beyond entertainment in the future.

What are the barriers for the NFT gaming space to truly take off?

Creating the NFTs themselves is not the primary challenge; it’s the development of platforms where NFTs can be used natively that is the real barrier. Without a doubt, building 3D models for the metaverse is a lot easier than building the metaverse itself. The cost of creating these platforms is astronomical – and can be equal to building a whole new gaming engine.

One good example is Grand Theft Auto (GTA): The game’s art director, Aaron Garbut, revealed that the game cost roughly $265 million to develop and market. The need for such budgets is slowing down mainstream NFT gaming proliferation.

What needs to happen for the giant gaming studios to get on board?

As of right now – even though crypto adoption is certainly booming – the vast majority of people are still using fiat money for their transactions and have not entered crypto. Giant gaming studios are well aware that by shifting to an entirely new business model, they could run the risk of losing existing clients that have not yet connected with the crypto phenomenon. Doing so would impact their revenue, hurting their share prices and investor relationships.

What would need to happen is a wider adoption of crypto – to reach at least 20% adoption within the gaming audience – before it’s worth the risk for these companies to get fully on board. Nevertheless, many big gaming companies have already started testing and working on NFT gaming. But having said that, it’s a lot easier for small gaming studios to enter the space due to the agility of their operations. There are already many smaller companies springing up with new projects in the blockchain space, but the question of whether they have enough funds to create entire ecosystems remains.

How can token-based companies tap into the trend and get their tokens off the ground?

Many token-based companies have started introducing NFTs into their projects, but it’s not necessary for them to launch collections related to gaming per se. For now, most collections out there are associated with a form of membership with special perks – so the key utility comes in the shape of a closely-knit community of project advocates that ultimately helps companies get their tokens off the ground.

Collaboration with gaming studios and metaverses can be the next step, allowing users, for example, to show off their NFTs in a digital gallery or use the token as an access pass to a virtual meetup for that specific project’s community.

What are some of the developments you're expecting to see in the space in 2022?

In the future, we will see more promising projects and gaming companies with innovative ideas that leverage blockchain grow in valuation rapidly. What used to take six to eight years to hit a billion-dollar valuation could now be done within a year or two.

I also strongly believe that Augmented and Virtual Reality (AR & VR) will also be developing fast alongside the blockchain sector in the upcoming months. Overall, there’s no doubt that 2022 will be critical for driving mass adoption.

BIO:
Jeremy Foo, Founder and CEO at TripCandy