11th Jan 2022
NFTs, or non-fungible tokens, have been a big news item all year. As new investors ask what is NFT stock, NFT enthusiasts are predicting that the blockchain-based tokens could have a revolutionary impact on every aspect of our lives, and one of the big areas is likely to be gaming.
According to DappRadar, trading volume for NFTs reached $10.67 billion in Q3 2021, up 704% from the previous quarter, and 22% of that total was generated by in-game items1. But what could NFT stocks really do for the gaming industry, and is that potential within reach?
What are NFT stocks?
An NFT stock relies on NFTs, digital assets that cannot be interchanged with any other asset, and can be traded, collected or utilized just like physical real-world assets. Typically, NFTs represent digital items like digital artwork, or for gamers, assets like avatars, weapons, or unique abilities.
What makes NFTs so exciting, and is helping lift NFT stock price, is that for the first time it’s possible to prove and experience true ownership over digital assets, which is an important added aspect for value and trade.
Why do NFTs matter for the gaming industry?
Up until now, game developers have been the true owners of every in-game asset, but NFTs can solidify a player’s ownership, so that items you unlock could be yours forever.
Dean Takahashi, lead writer at VentureBeat, wrote that “In the past, players were more like serfs, working for the lord of the estate. These walled gardens generate money for the game company, and its shareholders, but nothing goes to the players.2“
By proving immutable player ownership NFTs create enduring value for in-game assets and could bring a revolution in gaming culture, changes which could seep out beyond the game.
1. NFTs enable gaming investment
Players put money into a game, but that money is lost if your account is stolen or locked, and left behind if you move to play a different game. NFT immutability promises to turn gaming into a larger investment ecosystem. As predicted by Gabe Leydon, former CEO of Machine Zone, “It will change the whole nature of video games. It won’t be spending anymore. It will be investing.3”
2. NFTs open up trade
Up until now, any items that a player earns, finds, or unlocks in a game only have value within that game. NFTs offer more equitable ways for gamers to trade in-game items on secondary markets, loan them, fractionalize them, and more.
If you don’t have to buy and sell bicycles on a bike-only marketplace, why should that restriction apply to a virtual bicycle that your avatar rides?
Play-to-Earn games are creating a new type of work
Thought leaders are predicting that NFTs could lead to a new model for work and employment, where people earn real money for in-game achievements, or lease their WoW character as a mercenary, and use the revenue to buy their next pint.4
Play-to-earn games are already here. Most games are free to download, but you have to buy NFTs in order to start playing. As you play, instead of earning trophies or badges, you earn crypto, which you can use to buy more in-game NFTs. Your NFTs are yours to trade or sell as and when you like.
One of the fastest-growing NFT’s is Axie Infinity, developed by Vietnamese studio Sky Mavis, a game where players collect, raise, breed, battle, and trade digital creatures. Its player base boomed during COVID-19, when people lost their jobs and found that Axie offered a pandemic-friendly income. Some invest their own capital, but others loan creatures to people who can’t afford to invest, in exchange for a cut of the profits. Axie players earn up to around $4-500/month5.
Axie saw sales reach $2.05 billion6, with over 1 million daily active users7 and a daily trading volume of around $650 million as of early September8. Axie’s native token, AXS, spiked 10,000% over 90 days9, and the company is responsible for $2.08 billion of the total NFT gaming trading volume of $2.3 billion in Q3 202110.
Other popular play-to-earn games include:
- Gods Unchained, where you create and mint cards as NFTs;
- Sandbox, a virtual community where you use and earn NFTs to develop digital “land”;
- Guild of Guardians, an RPG game where weapons, tools, character skins, etc. are bought and sold as NFTs;
- Sorare, a fantasy football game where you earn NFTs when your virtual team wins a match.
The potential of NFTs is still evolving
NFT gaming hasn’t yet hit the big time, although there’s widespread confidence that the time will come. Writing in TechNative, Derek Lau, Game Director for Guild of Guardians, says “NFT gaming has run headlong into an adoption barrier, and the industry hasn’t yet witnessed a truly “killer app” to convert the larger gaming community or industry leaders.11“
Even NFT proponents admit there are still weak points to NFT gaming. The gameplay is often below par, with money-making tending to form the raison d’etre of the game instead of enhancing it. Some warn that there’s a risk of creating an ecosystem that is “pay to win” instead of “play to earn.” If players with deep pockets can buy their way to success, it takes away the joy of gaming.12
Developers also need to improve the way that NFTs are integrated into the flow of the game, and hard questions about what cut the platform takes and how and where the buying and selling take place still need to be answered.
But NFT game infrastructure is strengthening
More people are entering NFT gaming, including celebrities, which is both driving demand for better NFT gaming and expanding the user base to make it more worthwhile and less risky for developers to make improvements.
At the same time, blockchain technologies are scaling to lower the risk of a repeat of the congestion caused by CryptoKitties in 2017. The NFT gaming infrastructure is growing, with several blockchain networks like Binance Smart Chain (BSC), Polygon, Hive, Harmony, Solana and Flow all gaining users.13 NFT startup Hawku recently raised $4 million for its platform to provide data that will enable more accurate valuation for NFTs14, and NFT gaming platform Sandbox raised $93 million in a funding round in October15.
The NFT-gaming partnership bodes well for NFT market growth
Allyson Ray, cryptocurrency advisor, claims that “The success of NFTs in the gaming industry has provided the other business industries with confidence that it is possible to succeed with non-fungible tokens.18” That being the case, it’s not surprising that investors are perusing the NFT stocks list to choose which NFT stocks to buy.
As an alternative to trying to identify the best NFT stocks in a still nascent market, investors are considering an NFT ETF like Defiance’s NFTZ, which offers the opportunity to spread your investment across a number of top NFT stocks and promising stocks in the supporting blockchain and cryptocurrency ecosystems.
1 “Investing in NFT Games” November 1, 2021 https://www.fool.com/investing/stock-market/market-sectors/financials/non-fungible-tokens/nft-games/
2“The DeanBeat: How non-fungible tokens (NFTs) will change games” February 26, 2021 https://venturebeat.com/2021/02/26/the-deanbeat-how-non-fungible-tokens-nfts-will-change-games/
3 “The DeanBeat: How non-fungible tokens (NFTs) will change games” February 26, 2021 https://venturebeat.com/2021/02/26/the-deanbeat-how-non-fungible-tokens-nfts-will-change-games/
4 “Crypto Will Change Value, NFTs Will Change Society” July 19, 2020 https://andrewsteinwold.substack.com/p/crypto-will-change-value-nfts-will
5 “Here’s how Axie Infinity players are earning nearly $500/month in crypto rewards” August 19, 2021 https://www.fxstreet.com/cryptocurrencies/news/heres-how-axie-infinity-players-are-earning-nearly-500-month-in-crypto-rewards-202108190844
6 “Sky Mavis hits $2B in sales for its NFT game Axie Infinity” September 16, 2021 https://venturebeat.com/2021/09/16/sky-mavis-hits-2b-in-sales-for-its-nft-game-axie-infinity/
7 “Here’s how Axie Infinity players are earning nearly $500/month in crypto rewards” August 19, 2021 https://www.fxstreet.com/cryptocurrencies/news/heres-how-axie-infinity-players-are-earning-nearly-500-month-in-crypto-rewards-202108190844
8 “Gaming is Taking Over the NFT Market” September 10, 2021 https://finance.yahoo.com/news/gaming-taking-over-nft-market-164500693.html
9 “Gaming is Taking Over the NFT Market” September 10, 2021 https://finance.yahoo.com/news/gaming-taking-over-nft-market-164500693.html
10 “Investing in NFT Games” November 1, 2021 https://www.fool.com/investing/stock-market/market-sectors/financials/non-fungible-tokens/nft-games/
11 “NFT Gaming is Here to Stay, But Its Model Needs A Rethink” September 23, 2021 https://technative.io/nft-gaming-is-here-to-stay-but-its-model-needs-a-rethink/
12 “How NFTs are creating a generational divide between platforms” October 20, 2021 https://www.theverge.com/2021/10/20/22735719/nft-generational-divide-steam-epic-gaming
13 “NFT gaming proposition in question as regulators and traditional gaming pullback” October 19, 2021 https://cointelegraph.com/news/nft-gaming-proposition-in-question-as-regulators-and-traditional-gaming-pullback
14 “Hawku raises $4M for gaming and utility NFT marketplace” October 28, 2021 https://venturebeat.com/2021/10/28/hawku-raises-4m-for-gaming-and-utility-nft-marketplace/
15 “SoftBank leads $93 mln investment in NFT gaming firm the Sandbox” November 2, 2021 https://www.reuters.com/technology/softbank-leads-93-mln-investment-nft-gaming-firm-sandbox-2021-11-02/
16 “Metaverse, NFTs and Gaming Token Prices Soar as Facebook Goes Meta” October 29, 2021 https://cryptonews.com/news/metaverse-nfts-and-gaming-token-prices-soar-as-facebook-goes-meta.htm
17 “SoftBank leads $93 mln investment in NFT gaming firm the Sandbox” November 2, 2021 https://www.reuters.com/technology/softbank-leads-93-mln-investment-nft-gaming-firm-sandbox-2021-11-02/
18 “The Impact Of NFTs on Gaming” August 6, 2021 https://medium.com/security-token-offering/the-impact-of-nfts-on-the-digital-gaming-domain-b4d0155c03dc