What are NFTs?
The abbreviation NFT stands for non-fungible token; an authenticated digital object that, just like cryptocurrencies, is based on blockchain technology to ensure security and authenticity. NFTs are, in a way, highly limited collectors’ items. They are not restricted to a particular file format and can come in the form of images, GIFs, videos, a thousand different variations of the same digital drawing of a monkey... almost anything.
"BoredApe" NFT series
The technological value of NFTs is in their ability to be authenticated; as opposed to buying a framed Ikea poster of a Matisse, you’re buying an original painting. And as opposed to taking a screenshot, you’re paying almost US $300k to have a certificate tell you that you, indisputably, own this screenshot of a monkey.
Jokes aside, all eyes are on NFTs right now, with many speculating that this will become the new way of buying and selling art and assets online. Just last year, the digital art piece “Everydays: The First 5000 Days” was sold at auction for around US $69.3 million, or around 38474.82 in Ether.
Everydays: The first 500 Days
Who benefits from NFTs?
One goal of NFTs is to give back autonomy to smaller artists,, who have the chance to sell their art without involving third parties. This argument has already been criticized by artists, but mostly because currently, only a minority of popular creators hold the majority of the attention on the NFT market. Unlike traditional collector’s items or art, the value of NFTs has not yet been settled. Their value today is mostly speculative in a similar manner to cryptocurrencies. This process must be concretized so as to make small creators more independent.
How will NFTs affect the future of gaming?
In theory, there are multiple benefits to implementing NFTs in gaming. The foremost is user commerce. Once you buy a game asset as an NFT, you’ll have full ownership over that asset. This means that your ownership over the said object is not tied to the developer, or their servers themselves. Whether online services go down, or you lose the physical copy for a game (yes, these things still exist), if you’ve purchased a blockchain encrypted item in-game, it’s yours forever! Unless you want to sell it at a mark-up, of course.
It makes a lot of sense for popular franchises that already allow players to trade items to implement NFTs in their games, and the potential value in profits made possible by offering blockchain technology is immense: not only can developers sell limited items as NFTs at a higher price, but NFT technology also allows for studios to charge a fee of choice for every further transaction in perpetuity. So, no matter whether you are buying from the developer, another player, or even online market alternatives, the developer will always take a cut of the payout. But there’s more: by having an external technology that encrypts in-game items, people could be able to independently create content for their favorite game and contribute to other players’ experiences.
Since there is already a lot of money involved in selling exclusive items in gaming, it’s very easy to see why so many big companies have taken an interest in implementing NFTs into their online services. Here are some quotes from industry leaders discussing their plans for NFT technology:
Promotional image for UBISOFT's Quartz NFT campaign
UBISOFT’s Didier Genevois spoke to Decrypt about their own NFT initiative called Quartz, which currently only sells NFTs for Ghost Recon Breakpoint, Assassin’s Creed, and Far Cry:
“This experiment is meant to understand how the value proposition of decentralization can be received and embraced by our players. We know it is a major change that will take time."
ELECTRONIC ARTS CEO Andrew Wilson said this in a business call in November 2021:
“I think that in the context of the games we create and the live services that we offer, collectible digital content is going to play a meaningful part in our future. So, it's still early to tell, but I think we're in a really good position, and we should expect us to kind of think more innovatively and creatively about that on a go-forward basis.
At a December 2021 management meeting, Sega CEO Haruki Satomi commented:
“We need to carefully assess many things such as how we can mitigate the negative elements, how much we can introduce this within the Japanese regulation, what will be accepted and what will not be by the users. Then, we will consider this further if this leads to our mission ‘Constantly Creating, Forever Captivating,’ but if it is perceived as simple money-making, I would like to make a decision not to proceed.”
Epic Games CEO Tim Sweeney tweeted in September 2021:
“We aren’t touching NFTs as the whole field is currently tangled up with an intractable mix of scams, interesting, decentralized tech foundations, and scams.”
Haruki Satomi
Criticism
Aside from financial extrapolations and volatility, what are some of these other “negative sentiments” that developers are worried about? The environment seems to be at the forefront of all debates around NFTs. The NFT encryption process is very complex and needs high-performance computers working at their maximum around the clock. This doesn’t only apply to buying and selling; even the smallest of processes, like registering an NFT, leaves a measurable impact on our global emissions. Uploading your NFT to a platform like OpenSea consumes the same amount of energy as the average American household in 9 days.
Another estimate by independent researchers suggests that a single NFT has a carbon emission of 211 kilograms, which is equivalent to flying for two hours or using a laptop for 3 years
Lastly, with the hype and mysteries of NFTs, it's easy for bad actors to flourish in the blockchain world. People are challenging the security of NFTs by hacking other people’s accounts, stealing NFTs and crypto (despite the keen reassurance of security by some blockchain technologies), or developing scams out of non-fungible token systems.
Paving the future
Since this is a novel technology, many will approach it by different means. Therefore, this is an opportunity for exploring and innovating. The explicit nature of these problems should not cast a shadow over this technology, but rather should light the way toward solutions that would improve the technology for the better.
Donating profits from NFTs to carbon credits is one way in ameliorating the impact. The Sandbox, a major player in the metaverse industry, has been acquiring carbon credits through platforms such as Nori to compensate for emissions.
It also announced in May 2021 its partnership with Polygon with the aim of migrating to a novel eco-friendly NFT layer that uses up to a hundred times less energy than Ethereum. The idea is that blockchain layering enables users to batch-up transactions that are performed outside of the blockchain, entailing a one-go of expenses instead of consistent dispersions.
Industry legend Gabe Newell, owner of Valve, leads with a similar mindset. Although he has recently commented on his ban of all NFT-related content on his platform Steam, Newell has reiterated his interest in what blockchain technology can do for us in the future.
“You have to separate the underlying technology versus which actors are utilizing that technology (…)" said Newell. “So it's much more about the actors than it is about the underlying technology or the rationale for what we're doing.”
Gabe Newell
Which might mean, are we asking the right questions for using NFTs in a productive way? Not only questioning security within the blockchain technology but also questioning the social and support systems around it. This could build a better bridge towards making this technology, that is at the front of current-world technological developments, feasible.
At this point, UBISOFT is the only reputable developer that has sought to implement NFTs into its games. As with the metaverse, most major players in the industry are treading cautiously when it comes to NFTs, studying the landscape to accommodate proper NFT usage. NFTs are, however, certainly pushing their way into the mainstream gaming world. It is in the hands of developers and investors to figure out not only what value in gaming means, but also what form it will take.
