26 Oct

Gamifying NFTs: Will a Ban Spell the End for this New Crypto Craze?

NFT art

The pandemic took a toll on many industries, but it marked a mini golden age for low-cap and “alt-crypto”.

From sketchy (and occasionally outright scam) “shitcoins”, to “charity” crypto, and celebrity-endorsed tokens, 2020 and 2021 marked a period of change, innovation, and remarkable volatility. Thousands of new coins like SafeMoon entered the market, reached market caps in the hundreds of millions, and crashed to a fraction of that peak in the space of a few months. Other market entrants didn’t even last that long.

The rise of the NFT

However, in all this creative chaos, the rise of the Non-Fungible Token (NFT) stands apart. NFTs are tradable tokens stored on the Ethereum blockchain which can be linked to digital assets. NFTs can be used as proof-of-ownership for a song, or a particular trading card, but most of the recent excitement has centered around the sale of digital art. Forbes notes that there was over $2.5 billion worth of NFT sales in the first half of 2021 alone. On 11 March the online artist Beeple sold the online rights to a single piece of work for $69 million.

Even internet celebrities of the early 2000s were getting on the action: 2021 saw a “meme goldrush” as thousands of classic stills, clips, and gifs came up for auction.

But that’s all old news.

Gamification

The most recent NFT craze isn’t digital paintings or memes – it’s games. Games incorporating NFTs have skyrocketed in value over the last few months. Generally built around a play-to-earn (P2E) model, where the developers give out semi-random rewards in return for playtime, the gamification of the blockchain is gathering steam.

The most popular of these ventures have been Alien Worlds, which saw nearly a million players in the last month. Alien Worlds rewards players with its linked cryptocurrency “Trillium”, which can be exchanged with other players in the game for special items or trading cards (the NFTs), or for other forms of cryptocurrency, like Bitcoin or Ethereum. That means if you get rich in-game, you can convert that into real value offline.

Other games follow a similar model. Gods Unchained is a traditional trading card game, except all of the cards are NFTs and they can be traded for a linked cryptocurrency. Axie Infinity allows players to collect and breed unique NFT-backed creatures (think Pokémon-lite) which they can trade with other players in-game. And players do. One in-game token (AXS) was worth over $120 in mid-October.

Games NFT's

Image via subspace

What’s in it for the developers?

The appeal for players is clear: the promise of a return rewards daily play and the link to real-world value raises the stakes for in-game risks. For the developers, the incentives are murkier. First off, most developers impose a transaction fee on every in-game trade. This means that high activity on the platform translates directly into high profits for the development team. Secondly and more troublingly, is the incentive for investment on the platform. While few NFT/blockchain games demand up-front investment from players, most allow you to convert other currencies into the game-linked token. Because many of these games reward big spenders, there is a clear “spend money to make money” incentive. Clearly, not everyone betting big wins big, but as long as there is money moving into the game, the developers’ stake will continue to have high exchange value with other crypto tokens.

Letting off steam

It was these concerns that led the leading PC gaming store, Steam, to ban all blockchain games from its platform. Major developers like, Epic (the company behind fortnight), have followed suit. This is a major curb on the accessibility of this new gamified marketplace. It also suggests that as the popularity of this industry grows, it is going to face increasing pushback from corporations and perhaps from governments too.

However, like so much in the “blockchain-verse”, these platforms may prove hard to regulate. Alien Worlds, for example, is just a browser game with a linked wallet. It doesn’t need a platform like Steam to distribute it and it will be hard to craft legislation to regulate it without pulling in other thorny questions surrounding low-cap crypto.

Even as regulators struggle to get the grips with this world, that market is changing. Fast.

Crypto
Gaming
NFTs