The gaming world has begun to explore the opportunities that incorporating NFTs into video and bitcoin online casino games offers to the industry.
NFTs are non-fungible tokens. An NFT represents ownership interests in digital assets. NFTs are created on blockchain (by “minting”) and each is unique, as distinct from fungible assets such as a fiat currency, Bitcoin or any other cryptocurrency. NFTs are typically composed of two components: the off-chain digital work/real-world asset to which that NFT identifies or attaches and the on-chain token.
The metadata of the NFT links these two components and generally includes a pointer to the digital work's location. Digital works are typically licensed while the NFT purchaser takes on ownership the on-chain token.
Any digital item can be "tokenized" as an NFT. These items include tweets, memes, .jpegs, .gifs, video and audio files, pieces of digital art, etc. NFTs give people the opportunity to invest in something of value with no need to physically own or store the items.
Much of NFT development is liked to the “Web3” -- a new, decentralized version of the internet that uses cryptocurrencies, blockchains and NFTs to provide ownership to users. Supporters see these transactions as putting power in the hands of individuals as opposed to corporations.
NFTs can be bought and sold (and resold) on secondary market platforms such as Rarible and OpenSea. Once you buy a NFT you can set it as your profile picture, post it online and announce your ownership. There’s a blockchain entry to affirm all NFT acquisitions so if you want to sell it in the future, you can do so, and keep the profit.
Each NFT comes with a software code called “smart contracts". These “rules” are recorded on the blockchain. They verify ownership, confirm permitted uses and set out the parameters for transferability and secondary sales. The smart contracts are also used to link an NFT to other assets including digital files, art, music or other assets.
That means there are options to own an asset that’s associated with or linked to an NFT as well as options to fully own the NFT.
If you buy an NFT that’s linked to an asset, it’s not the same as purchasing the IP (intellectual property) rights of that underlying asset. IP rights are part of the NFT purchase only in cases in which they are expressly transferred as part of the NFT purchase with the inclusion of a license agreement.
Such IP rights are governed by traditional IP laws which transfer from the NFT creator to the purchaser in a smart contract.
This protects the NFT creators and their financial interest to and in their intellectual property, in the same way that an author retains IP rights on his book or a songwriter has IP rights on her composition. The NFT creator has the right to dictate which rights are passed on, all the while retaining the ability to profit from their creations.
NFTs and the Gaming Industry
NFTs are changing the gaming industry in a number of ways.
- NFTs can be used as an investment. Purchasers of NFTs believe that the value of the NFTs will increase so they feel that buying now is a good investment strategy for the future. The gaming industry is responding to the increase in demand by producing more and more NFTs.
- The proliferation of NFTs is changing the strategy of micropayments in which all players have the opportunity to achieve the best items in any game. Obtaining those items may involve luck and money but the chance that they have to get what they want is good. NFTs change this because if a player gets ahold of a unique and powerful item, s/he will probably want to keep it. That gives that player a huge advantage over the other gamers in the game.
- NFTs run on blockchain technology. That means that they don’t need to be bought and sold through a centralized location. So game makers need to take into account the new reality that users will be able to buy and sell game items from outside the game. That means that companies miss out on transaction fees as items move through the marketplace without their involvement. Most video games currently forbid users to trade outside the official app but because of the involvement of blockchain, it’s impossible to enforce this ban with NFTs.
- Loot boxes could be radically transformed with NFTs. Loot boxes are boxes that the player purchases during the game. The items that are contained in the loot box are randomized so the purchaser has no way of knowing whether his/her purchase will result in the acquisition of items that will be useful in the game. The user doesn’t buy the item directly but pays for a box that gives random items. To date, NFTs have not been involved with loot boxes but that could change, bringing unique tokens that would allow the players who obtain those NFTs to have an advantage.