What is NFT Gaming? Blockchain-based ‘play-to-earn’ features may soon change the gaming landscape

Non-fungible token (NFT) marketplaces are increasingly changing the way creative assets including art, media and entertainment can be auctioned or traded on a digital platform. With a bid to diversify the NFT ecosystem, companies are now exploring play-to-earn games, which are gradually piquing the interest of Indian gamers and crypto experts. In addition to Facebook, Microsoft, Roblox, Tencent, Epic Games and Animoca Brands are some of the many companies that are already exploring the NFT gaming space.

First, a little background. What even is an ‘NFT'? "‘Non-fungible' means that it's unique and can't be replaced. For example, a bitcoin is fungible - trade one for another bitcoin, and you'll have exactly the same thing," explains Parth Chadha, founder of EWar Games. The prospects of this unique, irreplaceable collectibles have inspired a number of celebrities, sports stars, and business giants to collaborate with platforms to launch their own NFTs in the form of movie posters, digital art, 3D avatars and other exclusive digital tokens.

For instance, last week, singer and composer AR Rahman partnered with HBAR foundation to create content for a music NFT platform set to launch in the first quarter of 2022. In 2021, actor Kamal Haasan became the first Indian celebrity to have his own digital avatar in Metaverse - a digital space incorporating 3D collectibles and AR and VR content for communication and trade - with platform Fantico.

So how would NFTs work in the gaming universe? "In a gaming ecosystem, there are multiple uses for NFTs, for example, game characters can be NFTs owned by the users or they can be made into trading cards that users own as NFTs as well as play games with them. The value of these NFTs can significantly rise based on how rare they are and the demand they generate," Chadha adds.

Mid-day Online reached out to Chadha and Abhayanand Singh, group CEO of Fantico, a digital collectible platform exploring NFT gaming along with art and entertainment, who elaborate on what NFT gaming is, how it is different from traditional games and what its scope is in India.

What is NFT gaming and how is it different from traditional games?

Singh: In the simplest terms, Non-Fungible Tokens (NFTs) are digital collectibles that are built on blockchain technology. These collectibles can be characters, which can be used in games. These characters can have attributes and features such as special powers, dialogues, unique appearances, etc.

NFTs have taken the blockchain ecosystem by storm and breathed new life into traditional gaming platforms, with P2E games, through which gamers now have an option to "play-to-earn" rather than just "play". With traditional online games, developers made financial gains while gamers only spent money to enjoy. But, the new breed of gamers brought a change by seeking incentives for the number of hours spent in the virtual gaming world, and the advent of the metaverse made this possible. This led to the rise of the play-to-earn (P2E) model.

In traditional games, gamers acquire in-game tokens (or credits) through in-app purchases or as a form of reward. These tokens have in-game value only and cannot be ‘exported' out of the game for use on other gaming platforms. With blockchain, gamers now have an avenue to "export" these tokens out of the game and use it within another accepting game that resides on the same blockchain or even saving these tokens as NFTs and trading them on an open NFT marketplace for income. With the arrival of the 'play-to-earn' model, all the digital assets owned within the game are empirically owned by the gamers, and they can do whatever they want with them.

When we say ‘play-to-earn', what does it mean? Would the gamers earn crypto coins to access higher levels or to purchase something on an NFT platform? Please explain in simple terms for our readers.

Singh: NFT/ P2E gaming is not as daunting as it sounds. Fundamentally, it allows gamers to own unique digital collectibles and use these assets within their games. These NFTs can be used as an entry ticket to play the game or to improve their experiences like traditional in-app purchases.

Tokens, in-game NFTs, and other tradable items can be earned and sold on (NFT) marketplaces for income or these NFTs can be traded for in-game currencies or tokens, which can then be traded on appointed crypto exchanges, for other cryptocurrencies or cash. ‘Staking' is another model within the P2E gaming ecosystem which allows gamers to earn passive income on their earned token holdings. The way players earn is different for every game.

Chadha: There can be multiple ways in which NFTs can be integrated into games. Any element of a game like characters, relics, or weapons can be converted into NFTs which make them unique and irreplaceable. Subsequently, users can now engage in the game using their NFTs which can be upgraded by earning more points or credits in the game. For example, the game Axie Infinity has characters which are minted as NFTs and users can breed to produce more characters (NFTs) that are unique which can then be sold on marketplaces in exchange for cryptocurrencies. In simple terms, anything in a virtual world can be made unique and irreplaceable through NFTs which essentially converts them into an asset that has value and can be traded.

Who according to you would be the target audience and what are the challenges involved in making it accessible to the regular gamers?

Singh: Currently, blockchain projects, games can be intimidating and difficult to participate in. They are catered towards an exclusive community of crypto-centric gamers and traders. Efforts are underway to make it accessible, relatable and easy-to-use through less blockchain jargon, FAQs and guides for gamers, which will be less daunting for first timers.

Chadha: The target group would be a cross section of two huge and growing markets in India - the esports market and the NFT market. The biggest challenge is to expose the target audience to NFTs and make them inquisitive and interested in it. There are 750 million+ esports enthusiasts globally, and the challenge would be to educate and expose as many of them to NFTs as possible.

What are the challenges involved in developing an NFT gaming site? Is it about developing new games altogether or providing NFT options in existing games?

Singh: The gaming fundamentals between a traditional game and those of a P2E game are very similar. It must offer enjoyment, without which the stickiness will wear out. To convert a traditional game to a P2E game requires a definite re-engineering effort and this depends on many factors, such as existing game mechanics, payment interface, reward structure, education and of course resources.

One example where a traditional game transformed into a P2E game centred on the blockchain, is Sandbox, which was initially launched in 2012 on mobile platforms. In January 2018, the Sandbox project started developing a new version of the game - a 3D, multiplayer platform using blockchain technology (Ethereum) to offer a virtual world where players can build, own, and monetise their gaming experiences.

Some challenges faced by P2E gaming platforms are that it is over-hyped, and gamers are sold on the idea that owning an "NFT" will make them money. NFT games that are based on highly influential community pools or creating new tokens can experience market manipulation, resulting in wide fluctuations for the in-game currency or token value. Any type of product that makes use of the blockchain network can become a bubble, and this is true for games as well. Products that have no real utility are doomed in this scenario.

Chadha: Depends on what you are building essentially. Understanding the product dynamics and the tech to be chosen for the specific use cases - considering pricing (gas fees + tech maintenance), managing transactions, plus integrations with the game you are building for. Building a decent game is a mammoth task on its own, integrating NFTs not so much, provided the developers allow support for it or you are building one yourself.

What according to you is the scope of NFT gaming in India in 2022?

Singh: There is an increasing amount of data which shows that virtual gaming is an activity on the rise. Just on mobile platforms alone, India has 430 million gamers with a forecasted 650 million gamers by 2025. Internet and Mobile Association of India suggests that over 40 percent of gamers spend a monthly amount on mobile games. An analytics portal highlights that India has more than 60 percent smartphone adoption rate in 2021, with a forecast of more than 80 percent by 2026.

Chadha: The NFT and esports market is growing at a rapid pace in India. The esports market is more than $1.5 billion in India, growing at 45 percent compound annual growth rate, while the NFT market has had multiple new marketplaces exposing the Indian market to NFTs whose trading volume has surged. Hence, the future looks very bright for the NFT gaming space and will only get better as the technology is made more accessible and easy to use.