NFTs or non-fungible tokens are supposed to give you ownership of a unique digital item which incorporates blockchain technology (most notably on the Ethereum blockchain) to validate your ownership. This article will specifically talk specifically about NFTs in gaming rather than NFTs in general. While cryptocurrency like bitcoin is fungible (meaning there’s no price difference between coins of the same cryptocurrency) every NFT will have a different value, very similar to the price of works of art. If you trade your NFT for another one it should be completely different to any others. The value for NFTs should be independent of each other and can’t be partially sold too which further differentiates them from regular cryptocurrency.
Why NFTs Are Only Entering Gaming Now
NFT’s in gaming have been hinted at for a while and there are currently games in development which were designed with NFTs in mind. It reminds me of some indie games experimenting with adding cryptocurrency to their games a few years back. With Governments waking up to the real links to gambling problems, loot boxes are becoming more of a public relations and regulatory liability than a stable stream of revenue. Especially with regards to children and the research showing loot boxes activating the same areas of the brain to gambling. In my opinion I think NFT’s in gaming are gaining traction from publishers to become the new ‘growth driver’ for shareholder dividends.
Why NFTs Don’t Work for Gamers
For a prominent example of NFTs in gaming we will be focusing on is the laughably bad ‘Quartz’ Ubisoft forced into Ghost Recon Breakpoint. Every NFT is identical except for a unique serial number… let that just sink in. That’s how worthless these things are, you can see they realized this by how quickly they unlisted their widely ridiculed and down voted announcement video. Unless these really are unique (and not palate swaps or slight adjustments) they have little value, especially if you’re expected to play 600 hours to earn one. The fact Ubisoft experimented with NFTs in gaming using a game that commercially failed shows a lack of confidence and that they were expecting it to be received poorly.
Public perception is that NFTs don’t pay out enough, especially considering the time/electric cost. Using Ghost Recon Breakpoints 600 hours of playtime as an example you would have to work 40 hour weeks for 15 weeks to earn it! If you look at UK minimum wage even after tax and travel expenses the NFTs would have to sell for over £6000 for you to earn more. This is before even taking electricity/rent costs or Ubisoft’s cut on every NFT transaction into account. The only people who will make consistent money is Ubisoft and their shareholders in this model. NFTs in gaming will not work if players are feeling like they’re being scammed for shareholder dividends.
Why NFTs Don’t Work for Investors
Games by the nature have time limited support, multiplayer games especially as keeping servers updated and online costs money. This means NFTs in gaming have an expiry date which is down to the whims of the publisher. After the publisher announces the game closing (usually with little warning) all the related NFTs will plummet in value even before the fire sales begin. This makes them an incredibly risky investment and means every NFT game will be it’s own bubble, waiting to pop as soon as the publisher announces end of life.
Crypto like collectables and fine art can be sold in many, open markets across the world, NFTs in gaming can’t. If they want to trade a game-related NFT they have to sell it through the publisher’s authorized market(s). This will include a relatively large cut which is much higher compared to normal cryptocurrency exchanges. None of this is attractive to any decent/professional investor and seems more likely a honey trap for amateur investors. It just seems like even to the high risk investors gambling on NFTs in gaming is far too risky.
Why the NFT Business Model Doesn’t Work
Markets like crypto and NFTs require constant and consistent trading to function and grow normally. This means if too many people are producing NFTs and the demand doesn’t increase prices will plummet. So far companies offering NFTs in gaming haven’t really discussed how they plan to deal with NFT creation because they can’t without causing damage. If they limit NFTs to a handful a month they will retain/gain value but run the risk of losing players that didn’t get one. If they over-produce NFTs the value in general will trend downwards as more and more people earn theirs and again players will leave.
Perceived value is also an issue, an asset that is restricted in any way is always less valuable than an unrestricted asset. Only being allowed to be traded on limited, publisher approved market isn’t going to generate the stupid profits none-gaming NFTs have. If there’s no chance of generating massive profits people will invest elsewhere where the market is more open and easier to understand. NFTs are fundamentally volatile and risky assets, ones intrinsically linked to games are far worse. Publishers have done nothing but make vague buzzword-laden promises regarding NFTs in gaming and people generally don’t trust their hollow words.
The barriers to making NFTs in gaming an attractive proposition are pretty high. Investors aren’t really being catered to and neither are the players. Smaller, expensive markets and the limited lifespans of games only encourages reckless/fast trading. For all intents and purposes it seems to only benefit the publisher who’s taking a cut from every transaction. The only reassurances publishers are giving are buzz-word laden vague promises and it’s just not believable considering their consistent anti-consumer practices. This has been reflected in the trading of Quartz NFTs which have only had 15 trades as of the 21st of December, as spotted by Liz Edwards (Apex Legends senior character artist). Here is a link to the search I used for the screenshot bellow, when you’ve got NFTs up for under €100 on the first page of results it says it all really!
Head of Microsoft Gaming Phil Spencer summed it up best when he said “What I’d say today on NFT, all up, is I think there’s a lot of speculation and experimentation that’s happening, and that some of the creative that I see today feels more exploitive than about entertainment.” in a VGC interview. We really agree with his perspective and considering the pro-consumer moves Microsoft have made recently with innovations like Game Pass it’s no shock. We hope other influential people will join Phil and the general gaming community in rejecting this exploitative practice before it takes root.
If you enjoyed this article please leave a comment below. To read more of my articles visit my author page. Or simply visit https://globalgeek.net to get a whole range of gaming and tech news, reviews, articles and videos.