In the first quarter of 2021, trading volumes of NFTs—or non-fungible tokens—increased more than 25x. While much of the attention has centered around NFTs within the art sector, they are also gaining significant ground in the world of gaming.
NFTs and gaming could be considered a perfect combination. Understanding what gives NFTs value can be a challenge, especially for people who are not accustomed to digital assets—they aren’t tangible, physical objects that you put on your wall. Meanwhile, the concept of digital collectibles isn’t new to those in the gaming space: gamers already understand utility and scarcity. And, data even shows that gamers are much more likely to trade cryptocurrencies than non-gamers.
Why Blockchain + Gaming
Beyond a shared understanding of scarcity and digital assets, there are many reasons why the intersection of blockchain and gaming makes sense. For one, the gaming industry has been a frequent target for hackers. Not only are centralized systems more vulnerable to hacks, but player accounts can also be at risk, given that they often contain digital currency, valuable in-game items, and personal financial information. Vulnerabilities can also come from inside: in 2018, a moderator for the online game RuneScape was accused of using his privileges to steal around 100 billion coins from a player’s account, tens of thousands of dollars worth of real-world value.
While the potential benefits of blockchain in gaming are numerous, the biggest value proposition still comes back to true digital ownership for players—and this is where NFTs come in.
Why True Digital Ownership is an Issue
The conversation around digital ownership in gaming has been going on for years. In 2016, EA inadvertently blocked all of Myanmar from accessing their game platform, Origin, allegedly because of sanctions the US had against the country. After the situation escalated via Reddit gaming communities, EA restored access—but it was a stark reminder of how a company can cut off accounts at any time, leaving players with little to no recourse.
Selling in-game assets or trading accounts has also gotten many players banned in the past. But even if all the rules are followed, players are still at the mercy of these digital gatekeepers. Similar to the situation with Myanmar, gamers worldwide could be caught in the crosshairs of political relations or international sanctions. Last year, Blizzard issued an apology following a wave of account bans that they admitted was done in error. Security breaches or hacks can also impact players—in a centralized system, users never truly have control of their assets.
NFTs are changing this. Now, the owner has digital and irrefutable on-chain proof that they are the owner of the asset. Authenticity and rarity can be verified, and digital assets can be transferred easily and securely from one owner to another.
Not only does this give players true ownership over their assets, but it also unlocks the ability for players to freely trade in secondary markets.
Blockchain Gaming Growth
With the meteoric rise of NFTs and what they mean for digital assets, there has been a surge in gaming growth within the Ethereum ecosystem.
Axie Infinity is an NFT gaming dapp and one of Ethereum’s most popular games. In what might be compared to Pokemon, Axie Infinity creates a digital pet community where players collect, breed, battle, and trade token-based creatures known as Axies. They’ve gained a lot of attention due to their “play to earn” model, where users can earn tokens that translate into meaningful income for some players. Axie’s Head of Growth, Jeffrey Zirlin, has stated that, “it’s much more than a game—it’s a budding nation with a jobs market and a complex economy.”
Another Ethereum-based platform is Sandbox, a decentralized, community-driven gaming ecosystem. Using free software—VoxEdit and Game Maker—players can create NFTs and games that can then be monetized. The project has secured partnerships with companies like Atari, CryptoKitties, and more, and has continued to experience impressive growth. Their latest iteration, Sandbox Evolution, has over 1.2 million monthly active users.
Sorare is a fantasy football game where players trade player cards, scout their favorite players, collect them, manage a team, and compete to earn prizes each week. They stand out from other fantasy football games because the player cards are officially licensed, digital collectibles. The more rare a card is, the higher its value. The Sorare team explains that they chose to build their player cards on Ethereum so their users could leverage the benefits that NFTs offer: digital ownership, scarcity, and provenance.
Skyweaver is an Ethereum-based digital trading card game by Horizon Games, where players can battle using cards they’ve bought, earned, or traded. In Skyweaver, a player’s cards are stored in their wallet on the blockchain. Sequence (previously Arcadeum) is a friendly smart contract wallet that lets players verifiably trade, sell, or transfer their assets. If the player chooses, cards can even be transferred to any Ethereum-based wallet.
Leveling Up with Scaling Solutions
So what is holding back growth? On Ethereum, transaction costs and scalability have continued to be an issue. In the past, NFT game developers faced a lot of friction because of high gas fees to mint, trade, or transfer assets.
While some games have opted for other blockchains completely, scaling solutions are unlocking a lot of potential within the Ethereum ecosystem and setting the stage for unprecedented growth.
Axie Infinity recently announced their move to Ronin, an Ethereum-linked sidechain made specifically for the game, stating that “building on Ethereum Mainnet is a bit like training inside the hyperbolic time chamber from Dragonball Z.” This move is anticipated to help scale the game to millions of users.
Immutable X is a platform for games with NFTs, built on top of Starkware’s Layer 2 scaling technology. With Immutable X, games can stay on Ethereum without sacrificing scalability or liquidity—the platform can handle 9,000 transactions per second with zero gas fees. Along with a marketplace where users can buy and sell assets, this could serve as a model for other blockchain games to follow.
One game that chose to launch on Immutable X is Illuvium, a AAA open-world RPG adventure game. By launching on Immutable X, Illuvium’s players will experience zero gas fees and rapid transactions while still maintaining complete control of their assets.
Polygon, previously named Matic, has also experienced a surge in popularity. Described as a “suite of scaling solutions,” Polygon’s ultra-low fee environment and fast confirmation times have drawn major names to the platform including Aavegotchi, Atari, Decentraland, OpenSea, and ZED Run.
In February, Polygon partnered with Chainlink to introduce verifiable randomness to the Polygon ecosystem, an important move in attracting more gaming protocols that rely on random number generation.
Another scaling solution is Enjin, an interoperable bridging network that will operate under a PoA consensus mechanism.
Microsoft recently announced that they have been working with Enjin to bring cross-platform, custom NFTs to Minecraft. Acquiring NFTs in the game lets players unlock new “quests” inside the MyMetaverse Minecraft server.
The intersection between blockchain and gaming could add value for both sectors. Blockchain solves key issues in the gaming space, and the gaming community may play an increasingly larger role in driving crypto adoption.
Scaling solutions could unleash massive growth this year for blockchain games. Already, we’re seeing more games where users can leverage NFTs to transfer, sell, and trade in-game items on their own terms.
As the world becomes more tokenized, we could see collaboration between unlikely parties—for example, fashion or education initiatives intersecting with the gaming world. One trend we expect to see more of is robust, in-game economies being created, especially as play-to-earn models become more common. In February, Yield Guild Games announced they had purchased 88 plots of land in Axie Infinity, citing their belief that “the future of work will be increasingly virtual, and jobs will be found inside games that have open economies.”
With the global gaming market forecast to hit $295 billion by 2026, there’s an incredible amount of potential. As the Ethereum scaling landscape continues to evolve, we expect to see continued growth.
While it’s still early, we can clearly see that this duo is powerful: NFTs are solving long-standing problems around digital ownership, and scaling solutions are opening the floodgates to a period of rapid expansion in blockchain gaming.