How does NFT transcend the two underlying logics of digital collectibles and games?

We see that NFT technology brings new opportunities to the digital collectibles and game industry, but when I talked about NFT with hundreds of game developers and cryptocurrency enthusiasts, I found that there are many misunderstandings between these two groups .

The discourse systems used by these two groups are different-cryptocurrency enthusiasts often talk about revolutionary technology and social changes, while game developers usually just want to create fun.

This article attempts to bridge this gap.

What is NFT?

NFT is a digital collectible on the blockchain, which means that transactions can be carried out without central authorization.

We use the term NFT (non-homogeneous token) to distinguish it from Bitcoin or ETH equivalent cryptocurrencies (also known as FT), which can be divided indefinitely and are equal in value to each other.

And “non-homogeneous” assets are inseparable, such as a painting, a house, a car-or digital collectibles.

Compared with the collectibles in the traditional game economy system, NFT has different characteristics, the most important ones are:

· Ownership
centralized institutions (such as game operators) can control or even take away virtual assets at will, while NFTs are assets that are actually owned by players’ wallets.
· Permanence
Once NFT is minted, it may always exist on the blockchain.
· Scarcity can be proved
Since all records are publicly accessible, it is possible to confirm the existing number of NFTs without having to verify anyone.
· The provenance can prove that
you can know exactly who once held the NFT, all the way back to the creator of the NFT.
· Programmability
Using a technology called “smart contracts”, NFT can take a different approach and trade between players and even other games and the world.
· The decentralized
economy maintains its integrity in a completely trustless manner so that the community can bring great value to the decentralized ecosystem.

So far, most of the heat related to NFT comes from the field of digital collections.

Creators see NFT as a way to interact directly with collectors (rather than through traditional galleries and markets that account for 80-90% of their potential revenue).

Collectors see NFT as a way to collect works that have proven scarce (similar to limited-edition prints), while also supporting their favorite artists more directly.

Some people have also noticed the potential opportunities of NFT in the fields of music and fashion, as well as the application prospects of other assets such as domain names or real estate.

However, in the past few years since the birth of NFT, it is rare to see the creation of virtual goods in games based on NFT, so can NFT be applied to games?

Objections from game developers

The characteristics of NFT can bring a completely different game experience, but it is also helpful to refer to the objections from game developers.

“Players can already collect virtual items in our game.” 

——Of course they can, but this is always carried out in a centralized architecture. And there are many opportunities, functions, narratives and even emotions that are almost impossible to achieve in a centralized architecture.

“Blockchain technology is a bad backend for our system.” 

——Indeed, if blockchain technology is used to replace the current game’s virtual assets, currency and other data storage, then it is indeed a very inefficient backend. But they ignore that the transformative gameplay brought by NFT technology is the point.

“Opening my game economic system to P2P will destroy my economic structure and play fun.”  

-This statement may be correct in most cases. Game designers are also monopoly suppliers, central bankers, currency exchanges, auction houses, and trade regulators, so they need to strictly control the supply, demand and exchange of games.

But these discussions often overlook one point: certain features can be added to existing games, and new types of games that can be built from games using decentralized strategies.

If NFT is added to chess, it may be a new game.

“This will never work in existing games.” 

——If you consider bringing the characteristic of decentralization into existing games, then this statement is correct, but now there are some opportunities that any game can seize.

“I cannot allow players to bring items outside of my game into my game.” 

The creators of traditional games have complete control over what goes in and out of the game, and there is no need to do so when using NFT or blockchain technology.

“I can’t rebalance the game if needed.”

——This statement is inaccurate. Just as Wizards of the Coast eventually banned Black Lotus in daily games, game designers can establish rules to dictate how players use items.

The main function of NFT is ownership, not rules.

“Blockchain technology is very slow, expensive and inefficient, and consumes a lot of energy.”

——As a generalization, this statement may be somewhat correct, but it is wrong for the blockchain that most games will use.

“The existing user experience surrounding NFT is terrible.” 

——This statement is completely correct. This situation happens frequently in any emerging market. At present, the threshold of NFT is still relatively high, user interaction is poor, and the steps of exchanges and transaction points are cumbersome-almost no one can cope with the complicated environment of the market, and the entire encryption circle is full of their own terminology and rhetoric.

Although this is related to the launch of the game now, it may improve quickly.

Misunderstandings of crypto fans

“Players want to add this feature to your game.” 

——There are many features players want, but not all features can enhance the gaming experience.

The job of a game designer is to create fun, rather than simply piling up features.

“We want to be able to bring items from one game into another game.” 

——In the future, there may be some games that allow the transfer of items and equipment between different games, but these games are likely to be designed from the ground up for this concept.

“You will not be able to stop this change.”

-It is true that these technologies will not be prevented, but they will not replace all existing virtual economies.

Centralization is a major feature of many games. The opportunity that NFT brings is to create new types of games, not to replace existing games. This technology may play an extended role, not a destructive role.

Opportunities for game developers

Magic: The Gathering (MTG) is a desktop collectible card game. When it was launched, Internet games had not yet become popular.

The current maximum price of an MTG card is $510,000, because it is very powerful and extremely rare (it has never appeared in the beta version of the game).

MTG is a “competitive” game, the basic rule is that players play against each other. However, it didn’t take long for players to start inventing new game modes. For example, players invented various multiplayer game formats Two-Headed Giant and round robin. Sometimes they will make their own rules of the game.

This is a case of the player community controlling the game system itself, and it is also the result and opportunity brought by decentralization.

In a centralized economy, how many virtual items are sold for $510,000? Owning an item and its life cycle is even longer than the game itself, the idea itself needs to be supplemented.

In a decentralized, permanent collectibles economy, even if players abandon the game, they can still display their favorite collectibles in places like Cryptovoxels.

What are these use cases?

Preserve the player’s experience

This applies to existing games and new games, and can be used to help record player experience.

Imagine exploring an interesting place, thus winning a game, reaching a certain level, and thus winning a trophy. After the player stops playing a certain game for a long time, that memory may be engraved in a virtual item and become part of the player’s permanent collection.

In a story-driven economy, this type of memory is more important than ever.

Increase value perception

Players put aside their doubts about the game and pretend to own virtual items, a move that promotes a trillion-level industry.

But if they really believe that they own these items, they will pay more attention to these items.

You can imagine to what extent this sense of ownership will change the way you interact with the game world.

New forms of financing

The game is currently funded by equity investors, publishers, or crowdfunding (pre-sale).

Selling limited edition items may be a new way to fund game development earlier than crowdfunding. Unlike crowdfunding, this also provides trading and liquidity advantages.

Players with assets may enjoy the dividends brought by the success of the game. If you value the relationship with the player, the player may become a huge promoter.

In fact, one of the biggest costs of game development at present is the high cost of customer acquisition, but what if developers can transfer these costs from operating expenses by airdropping collectibles to loyal fans?

New opportunities for e-sports and anchors

Since NFT can prove the provenance, one of the ways an item generates value includes not only what the item is, but also who holds it.

The game clothes worn by the best performing e-sports star players during the tournament will carry this story-and may become a model for the e-sports industry and game publishers to earn extra income.

Anchors who broadcast games, report events, or assist in the release of games can obtain items that are valuable to their community: they can give them to fans or resell these items to increase their source of income.

In fact, this is also an important part of Theta’s vision. Theta is currently building a decentralized streaming network on its own blockchain.

A game built for trading

Magic: The Gathering’s economic system is open, and they have proven that this open economic system can add value to the collection.

Focusing on asset value creation instead of selling software ontology allows game companies to freely build new experiences that players can enjoy.

Unlike trading cards in the real world, developers can use smart contracts on the NFT to obtain transaction shares every time they are resold.

Games built for the community

As a player with real assets, what does it mean to allow players to add software as part of a decentralized ecosystem?

From a glimpse of user interface scripting in MOD games and MMORPG, we can find that decentralization can fundamentally make the experience of the game world more updated.

P2E (make money while playing)

In Part 1 of this series, I wrote about earning revenue from games in the context of e-sports. But this may create new ways for players to earn revenue: they can work hard to find scarce and attractive resources and items and sell them to other players.

Developers of MMORPG-type games in a centralized economy are more inclined to characterize it as speculation (and regularly prohibit players from trading in the secondary market), but this may be a compelling aspect of a new type of game-and if used With the above smart contract, the developer does not have to return the income that has been generated.

Limit the number of players

What if you create a game where participation is prohibited? There are similar stories in the music industry.

Wu-Tang Clan released their Once Upon a Time in Shaolin (copyright bought out by the notorious “Pharma bro” and Martin Shkreli). 3LAU has just sold 33 specially made Ultraviolets with revenue of more than 11 million U.S. dollars.

It is conceivable that a game not only has unique items of this rarity, but may also limit the number of people who can play the game. Some games may benefit from a smaller group of players instead of competing to fill the game world with as many people as possible.

Portable assets in the meta universe

This is indeed a thorny issue, and I think it is not possible to bring items found in World of Warcraft into League of Legends.

But some virtual spaces function more like social gatherings than games-I think many people will like to display their trophies, costumes and artifacts from various games in these places.

The meta universe will be more like a multiverse than a single virtual reality space. There is ample space for virtual fashion designers, jewelers and tattoo artists to explore.

The above are just some of the ideas that come to mind when considering provable provenance, provable scarcity, permanent ownership, decentralization, and programmability.

If you start to think more along these lines of thinking instead of simply thinking that these features should be added to existing games, I think your excitement is the same as mine.

Options for implementing technology

In the following part, I will introduce the technologies currently open to game developers.

First of all, it is important to realize that most of the following technical methods are new.

Developers who are starting to practice now will usually need to build more infrastructure than subsequent developers-but most of them will change rapidly in 2021.

Developers can build games on three types of blockchains:

Blockchain based on Ethereum

This is the birthplace of most existing NFTs, mainly in the field of digital art, including Nifty Gateway, Mintable, manufacturersplace, SuperRare and Rarible.

On Ethereum, a new currency can be derived from the underlying ETH token, which is called ERC20 token.

Enjin is a representative of the ERC20-based blockchain, built specifically for the gaming industry. Similarly, NFTs on the Ethereum network have an ERC721 standard that allows them to interoperate in various applications.

The main problem with Ethereum is that it is a proof-of-work (PoW) blockchain, which means that transactions and smart contracts are executed on a network of computers, and these computers perform a lot of encryption work to verify any events that occur.

This process is slow and expensive (and many people also care about the ecological impact, which I will discuss below) and most games require a lot of microtransactions, and are fast and inexpensive.

Therefore, PoW is not an option at all for most games.

There is a new type of verification technology called Proof of Stake (PoS) that will result in a significant reduction in the amount of computation that needs to occur on the network.

Ethereum 2.0 will be based on the PoS algorithm, but it is not known when it will be available.

At the same time, another option is to use a Layer 2 network. These networks usually use PoS on the side of the main Ethereum network, and this network adds an additional entry and exit door.

Imagine the Layer 2 network as an independent theme park, with many independent rides: all transactions in it are fast and cheap, but if you want to bring something out of it, you will incur costs for exporting or importing to the outside world.

If your goal is to build on Ethereum (it does have obvious advantages, the most important of which is that Ethereum users who hold a lot of property have consumption needs), then you should have a deep understanding of this technology.

Immutable, which supports Gods Unchained, is another emerging Layer 2 solution based on Ethereum that can process a large number of microtransactions at low cost. Other Layer 2 networks include Optimism, Arbitrum, and Polygon.

Dedicated blockchain

Some of the most popular collectible “trading card packs” and games are built on proof-of-stake blockchains, which are themselves rebuilt for the micro-transactions and high speeds required by games.

For example, Worldwide Asset eXchange (WAX), and Flow created by the developers of CryptoKitties (NBA Top Shot is an NFT collection game based on the Flow public chain).

The unknown part of Flow, Immutable, and WAX is how they scale over the long term, yet they benefit from games and decentralized applications that require fast and cheap transactions.

Ethereum killer

Ethereum has been plagued by the “scalability trilemma of blockchain” for a long time-that is to say, it is extremely difficult to provide a decentralized, scalable and secure network.

Scalability means high concurrency, low cost and high speed. If you have ever used the Ethereum Dapp, you may be shocked by the high “gas fee” and the slow speed.

This gave birth to many “Ethereum killers” built on PoS.

Avalanche, Polkadot, Algorand, and Cardano are the largest, and Theta’s decentralized video streaming network also uses NFT to achieve emoji sending and badge collection functions. They will all support their native NFT.

However, most of the completion is not very high. When the construction is completed, there may be plumbing work to be done.

Nevertheless, people will soon have new options for themselves to choose from.

Which blockchain should you build on?

If developers need to release games as soon as possible, their best option is to switch to private networks such as WAX, Immutable, Flow and Enjin.

If you have plenty of time, you might as well take a look at the performance of Ethereum 2.0 and Ethereum Killer in 2021 before making a decision-the current Ethereum is something you must never consider. Because your game will almost certainly require small transactions.

Digital art collectors may be willing to pay a $100 gas fee to buy a $1,000 artwork, but they will not pay a $100 gas fee to buy an NFT that may only be worth a few cents.

What we need is more than just the blockchain-technology to manage virtual inventory and economy, and a user interface for users to use, otherwise it would cost a lot of money to build them ourselves.

Ecological impact

In February 2021, the Ethereum network consumed 24 terawatts of energy, accounting for about 0.1% of the total global energy.

This sounds small, but it is actually about the same amount of energy consumed by the entire country of Ireland in a month. Many people worry that using so much energy to support NFT will have ecological impact.

There should be no games on the main Ethereum network. Even if you don’t care about energy usage, Ethereum’s gas fee and slow speed are not good for the game.

If you focus on PoS networks (whether it is a dedicated network like Flow, a Layer 2 network like Efinity, or an upcoming solution like Avalanche), users will not have such troubles, because the customers you provide services will be Enjoy fast and cheap transactions with minimal energy costs.

It can be said that the energy usage structure of other non-gaming applications of NFT is problematic.

From the perspective of decentralized transactions currently deployed in the PoW blockchain, the cost of decentralized transactions is much higher than that of centralization. Since the NFT of digital art mainly uses Ethereum, these transactions do consume a lot of energy.

But simply comparing the transaction costs between centralized and decentralized systems does not reflect the full cost.

A centralized financial infrastructure includes buildings, costly roadshows, a large number of middlemen, and vaults full of gold. These vaults consume huge amounts of energy and transfer excessive economic benefits from investors to tenants. . Similarly, the traditional art market consists of galleries, transportation companies, and storefronts. These stores only leave 10-20% of the selling price to creators.

When PoS becomes more widely used within a year or two, the high energy cost of the digital art market will be greatly reduced-it may be reduced by 99% or more.

The future of the meta universe is decentralization

In the next few years, decentralization will change the fundamental elements of our economy: the decentralization of technology, financial markets, and applications.

Decentralization is also expected to inject new fun and experience forms into the game.

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-does-nft-transcend-the-two-underlying-logics-of-digital-collectibles-and-games/
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