Nonfungible Tokens, or NFTs, provide a way to verify that a digital asset is uniquely owned and has specific properties, thus potentially giving the asset value through scarcity. This is a powerful idea for gaming because in many games users collect virtual assets like weapons, clothing, and land. The properties that make up these assets are recorded into the NFT token’s metadata.
Instead of storing assets in NFTs on a blockchain, games like Fortnite store assets in a centralized database owned by the company. Consequently, while there are third-party marketplaces for Fortnite goods where people spend US dollars for items, Fortnite goods are hardly investable. Fortnite’s parent company could mint an unlimited supply of these assets, change the properties of them, or seize the asset altogether. Any Fortnite good holds very limited real-world dollar value due to unlimited supply.
Decentraland is a similar virtual world game, where the assets collected are stored as NFTs on top of the Ethereum blockchain. Decentraland is not nearly as popular as Fortnite but the assets in the game have a constrained supply and are verifiably unique. Resulting in land near popular destinations in the game selling for an average price of $900 per parcel. For contrast, the most expensive good sold for Fornite on a third-party site is $33, again, due to uncapped supply. This despite Decentraland’s roughly 12 thousand active users to Fortnite’s 350 million suggests NFTs can drive an astonishing amount of value to assets. Decentraland land speculators invest in land purchases, knowing new land cannot be created without going through a democratic process with other Decentraland landowners. The constrained supply of land combined with growth in new users will keep the value of the land high.
Although the idea of NFT-based virtual assets is powerful, the actual gameplay in Decentraland is not yet compelling to me. Admittedly I am mostly a non-gamer so maybe not the best judge of this. I’ve seen this before with another original idea in gaming that once initially caught my attention but did not hold it over time: Pokemon Go. Niantic used Nintendo’s Pokemon IP to overlay augmented reality Pokemon onto the real world through a user’s smartphone camera. Like many, I found this experience exciting at first but found myself playing less as the novelty wore off. I wonder if I would still be playing regularly if the Pokemon I collected through the game were uniquely and verifiably held by me, and thus the work I put into leveling them up resulted in an investable asset.
The Pokemon IP as NFTs seems like a neat vehicle for mainstream blockchain gaming adoption as Pokemon could then be verifiably rare, battled, and traded. A trainer investing time to level up their pokemon would know they could sell this Pokemon assuming the game stayed popular. Battle records and trades could all transparently happen on a blockchain. Third parties could build new experiences on top of these NFTs, increasing the value of the assets. Users would care less about the present-day game gimmick of AR graphics if they saw their time and assets as investable. The “real world” element of AR gaming through a cell phone would be accessible to the non-gamer.
Legacy IP like Nintendo’s Pokemon will be slow to move their assets to a blockchain, but the shift is happening. Dapper Labs, a USV portfolio company, has partnered with the NBA to put NBA trading cards on a blockchain. Users can own a scarce supply of rare NBA highlights through these cards.
I’m excited for new virtual worlds built with NFT backed assets to lead the NFT space. While there are many projects using NFTs for desktop and virtual reality – I believe an augmented reality mobile-first experience would be an awesome mainstream use case. If you’re building around this idea please reach out to me at [email protected].