How NFT video games crashed and burned

It felt like 2022 was the year NFTs would take off in video games less than twelve months ago. EA and Square Enix, Square Enix (Zynga, Niantic), Take-Two Interactive, Ubisoft and Square Enix all said at one stage that they were working on ways to include NFTs within their games. It was hoped that tokens non-fungible would be able to replace anything, from loot containers to characters skins to actual characters. None of it actually came to pass.

Studios were tempted by the opportunity to get in on crypto-related action but the players revolted. NFT integration was a complete failure in most cases. NFT controversy in gaming was so huge this year, it became an Apple TV subplot Mythic QuestThis season.

But it wasn’t just gamers who rejected crypto this year. It was also the collapse of crypto markets. A series of economic crises led to the collapse of the Web3 revolution, which Silicon Valley had been hyping in 2022. Investors are again wondering whether the future of blockchain technology is here to stay.

But those in the NFT gaming community — yes, there still is one — now believe that the somewhat humiliating reversal of the NFT’s mainstream adoption might ultimately allow the technology to find its own way to fit in the world of gaming. The developers and users who believe NFTs are valuable have more work ahead. It is up to them to figure out how an NFT game works and why people would be interested in it.

By now you’ve probably heard what an NFT is and, if you still don’t get it, it’s probably because it sounds pretty nonsensical. But contrary to popular belief, most NFTs aren’t the images they represent. It can be thought of as a digital receipt.

A monkey image is purchased, which encodes the transaction onto the NFT permanent. You can sell the NFT on OpenSea again, which is recorded on a blockchain. This allows investors and traders to buy content in large quantities for huge amounts of money, without having to comply with any regulation. However, an NFT could also represent any other thing. And that’s exactly why several big video game studios jumped at the chance to try and integrate NFTs into their upcoming releases. This technology has many issues.

Scams, pump and dumps and one type of cryptocurrency racket known as a rug pull are all part of the NFT market. Rug pulls involve investors buying in to a project, then the founders running off with the funds. It’s also believed that certain NFT artists are anonymously bidding on their own work as a way to either launder money or, at the very least, artificially inflate the price. And we haven’t even mentioned the environmental impact of all of this, which requires pretty intense computing power.

Interest around meme finance exploded after last year’s GameStop pump and then the auction of Beeple’s $69 million NFT project two months later. It was suddenly common to hear people such as Elon Musk promoting dogecoin while on SNL, or Jimmy Fallon and Paris Hilton discussing the million-dollar monkey JPEGs they had purchased for their Twitter avatar.

However, things are clearly not going as planned. An entire year’s worth of gains for Ethereum, the cryptocurrency used most often for NFTs, has been wiped out, bringing its valuation back to where it was at the start of 2021. Gwyneth and Fallon Paltrow are both being sued. Three recent market crashes that sank the whole crypto ecosystem have also been a disaster. NFTs launched inside video games last year didn’t go well.

Ubisoft is the AAA videogame studio that announced an NFT integration. At the beginning of the year, the studio said that it would begin giving away blockchain-based in-game add-ons called “Digits” in the game Ghost Recon Breakpoint. Twitter was abuzz with laughter after the announcement. Players accused it of being a shameless cash grab.

Photo by Nathan Congleton/NBC/NBCU Photo Bank via Getty Images

Laura Shortridge Scott is a freelance game journalist hailing from Scotland. She has spoken out strongly against blockchain technology in gaming. She told Polygon that a lot of video game companies are using a false promise of ownership to convince people to buy into the concept of NFTs and it doesn’t actually make any sense.

“I think most gamers understand digital content enough to know [ownership is] never guaranteed,” she said. “Whether you buy a World of WarcraftMount or remove World of Warcraft NFT, you know it’s only yours for as long as the game World of Warcraft exists.”

This is very similar to Ubisoft’s experience. Ghost Recon BreakpointReceived no updates since April. As for the NFTs, Ars Technica would go on to describe the whole thing as a “dumpster fire” months later. The Digits NFTs weren’t sold by more than 100 people in three months.

However, Ghost Recon BreakpointFlop also revealed a fascinating philosophical question for modern gaming. Twenty years ago, you’d buy a console, buy some physical games for it, and, if you took care of them and your TV still supported it, you could play them forever. We now live in a world where multiplayer online games are available 24/7 with in-app purchase and download content. So what’s the point of making an in-app purchase more complicated by forcing players to buy and sell cryptocurrency with confusing and often insecure crypto wallets?

“The idea of NFTs being useful for gaming in a way that buying items currently somehow isn’t already — that has never been explained to me in a way that makes any sense,” Molly White, crypto critic and writer of Web3 Is Going Just Great, told Polygon.

The typical pitch for gaming NFTs is that they would allow your digital goods to follow you from platform to platform, which White says currently isn’t possible and also doesn’t even sound appealing.

“Why would you want to have a Call of Duty rifle in Animal Crossing?” White said.

It seems that the main games industry is coming to similar conclusions. There are currently no plans from major video game publishers to create NFT products that work with a competitor’s game. You cannot buy NFT products that work with a competitor’s game, even though you might be able to purchase one. Halo InfiniteNFT and Halo Infinite shuts down, you’re not going to be able to use that NFT in a Final Fantasy game.

But even though none of the impulses behind NFTs in video games made any sense, it doesn’t mean the burgeoning NFT video game market beyond AAA studios slowed down. At this point, there is a blockchain-based version of every genre of game you can imagine — fighting games, RPGs, card games, brawlers. That said, looking through any top list of NFT games, you’ll find basically three genres that seem to actually be catching on with players.

Image by Decentraland

Collectible cards and monster-catching are the two most well-known NFT games. A few projects based on fantasy sports seem to have some appeal. Minecraft-esque platforms like Decentraland, The SandboxAnd Evolution Land.

Particularly, 2022 has been a bad year for sandbox gaming. At October 2018, both Dencentraland The SandboxAccording to reports, it had less than 1000 users. To give you an idea of the current state of these platforms, The Sandbox is holding an especially grim “69th Birthday Party” for Playboy this month that will last for 6.9 days.

However, the top NFT game of the year and one that received the most attention is called Axie Infinity. It’s a Pokémon-esque collectible monster game where NFTs are used to represent breedable creatures called Axies. You fight your way through the game, earning crypto tokens that allow you to create more rare and powerful Axies, which you can sell on the game’s marketplace. The game supports an entire economy and players from countries such as The Philippines can make thousands of dollars per month by playing it.

Image: Sky Mavis

Yuga Labs was the company behind Bored Ape Yacht Club NFT, and in November this year it was named the Disney of Web3. This happened during the Web Summit tech conference. On stage, then-CEO Nicole Muniz unveiled the company’s still-upcoming metaverse platform, which is called Otherside. It will combine open-world multiplayer with NFT-owned NFT characters, and NFT plots for land.

It begs question, who is playing NFT-based games? The popularity of NFT gaming is still low enough that GamesIndustry.biz, a trade magazine, has stated for the second consecutive year that it will no longer accept pitches on blockchain-based games. The NFT gaming industry is still a niche market, and continues to grow quietly. One of the most active YouTubers who covers NFT gaming was actually a former mobile gamer before moving into crypto.

Go Shiny Hunter boasts over 50,000 YouTube subscribers. It is the largest channel dedicated to NFT gaming, with more than half of its viewers. He spoke to Polygon in January but did not reply to our requests for follow-up. He said that he’s most interested in games that use NFTs as a way to crowdsource projects in development. A concept for a game is announced, prospective players buy in via NFTs, and in exchange they get rare characters or exclusive loot when — or if — the game ever launches.

“Sometimes there will be scams,” he said. “There will be projects that say they’re going to deliver on something and then might take off with the funds. I haven’t had anyone that has actually ever done that and not developed the game, just because I do a lot of research and tend to speak to people directly linked to the project.”

And he’s right; scams do happen. In December 2021, hackers used an NFT gaming platform to steal players’ money. A PvP NFT-based game was also created earlier in the month. MinecraftSo called BlockverseHe was charged with being a rug pull. So even the network which powers it. Axie Infinity, which is called Ronin, suffered a catastrophic hack in March, resulting in over $600 million being wiped from the game’s economy.

Meanwhile, earlier this year, scammers set up a fake announcement that let players buy NFTs for a game that doesn’t even use them. This means even if your game isn’t offering NFTs, just their very existence makes things a lot more confusing than they used to be. In fact, the existence of NFTs also means that trusting a YouTuber’s video game recommendations is a lot more complicated.

On the surface, Go Shiny Hunter’s channel feels like any other gaming YouTube channel, but every video also has an undeniable aspirational element to it. In a video from last year, titled “DID I JUST MAKE $100K? – THETAN ARENA PUBLIC LAUNCH!!,” Go Shiny Hunter plays through a new NFT-based mobile battle arena game called Thetan ArenaHe spends much of his video showing how much he has made from investing in legendary characters. It’s another common setup for an NFT game: free to play, but also pay to earn. NFT gamers consider NFT games strictly free-to play to be scams.

However, it becomes increasingly difficult to separate the fraudsters and the real players from the NFT games. These games are investments by their players. The more popular a game becomes, the greater its in-game economy. So what’s good for the adoption of the game you play is, quite literally, also good for your crypto wallet.

Starl3xx, a regular NFT player who uses the name Starl3xx said that interoperability among NFTs has never been possible with AAA games but is actually happening in smaller NFT games. Starl3xx said that he’s a big fan of an NFT-based role-playing game called DeFi Kingdoms.

“I just kind of got sucked into the, I don’t know, the aesthetic of it,” he said. “And the idea of the trading card game and gathering resources and doing all that. It’s the only one that I’ve really stuck with.”

DeFi KingdomsActually allows youTo use your NFTs in another community-built game DFK Fight Club. Starl3xx stated that even more intriguingly, if DeFi Kingdoms If the game went offline, for any reason whatsoever, players would be able to create a new support game very easily because it was using NFTs.

“If the marketplace somehow crashed,” he said, “my guess would be that someone would try to fill that void, like, immediately. Because all these people would be freaking out trying to figure out what to do.”