Drawing this parallel to NFTs, an NFT token that is usable and provides utility to the user will end up having a solid intrinsic value. An art NFT may have unique traits or a unique name that makes it scarce (and hence some sort of buyer value), but it will still remain a collectible as long as the holder is unable to use it. Arguably, the only “value” that is intrinsic to an art NFT would be its (i) story / association, and (ii) collectability / resale value.
Gaming offers an additional aspect of value that art NFTs are unable to do so - (iii) usability / player engagement.
In conventional gaming, in-game items do not out rightly belong to the bearer. Purchases are non-transferable, and can be viewed as a form of “lease” given that the items are locked in the game, with true ownership lying solely at the publishers’ feet as they have the ability to dictate the attributes, usage, supply, and price of an item.
It is the developers and publishers that ultimately own the intellectual property of the game and its content. From a cash-flow perspective, it becomes a zero-sum game significantly skewed in favour of the developers/publishers (vs. the game’s community of users who pay to play/purchase items).
In contrast, NFT gaming offers a paradigm shift, from a zero-sum game to a positive-sum game where all parties benefit; Now, an in-game item can be tokenized to have:
Interoperability between different dApps and game ecosystems so that utility is no longer tied to a single game / single use-case
Immutability which ensures that the item will exist regardless of the state of the game that it originated from, and prevents it from being tampered with or copied
True ownership as the item becomes a digital property of the holder, with a permanent record that is verifiable on the blockchain, as well as the freedom to trade or move the item as they please
Games like Axie Infinity go even further by launching a governance token and community treasury that decentralizes the ownership and management of the game so that any decision-making power and cash-flow accrual will eventually end up with the player community, rather than the game developer.
And why would game developers be interested in using the blockchain for their games? The upside potential is limitless - developers have the ability to design, craft, and run their own “digital” economy that is integrated with the real-world, and potentially charge a fee on all transactions within the game.
(2) The holy grail lies in true ownership
74% of total gaming revenues were generated via in-game transactions alone in 2020, indicating a general willingness for players to spend on in-game items.
n fact, gaming has become one of the fastest growing media sub-segments, with the global games market expected to grow from c.$160bn in 2020 to c.$200bn in 2023E (according to NewZoo, a leading provider of gaming market intelligence).
Third generation (upcoming)
If play-to-earn is the driver for popularity of the current generation of NFT games, the upcoming third generation of games will start bringing in the larger mainstream gaming community as production value increasingly aligns with traditional AAA games (together with the economic incentives that come with play-to-earn).
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