What are NFTs. Why video game companies and streamers join this trend, and why they cause rejection
We review what NFTs are, what they imply, why video game companies want to adopt them and the rejection they cause among users. Are NFTs the future or is it a way to get money out of players?
NFT technology has become one of the hot topics at the start of 2022. In this report we explain what NFTs are, what value they really have and why video game companies and some well-known streamers are jumping in headfirst to this market.
Are they the future or is it a “sold out of smoke”? Today it is difficult to predict what will happen to NFTs in the coming years. As many technologies are not something bad in itself, it depends on the use that is made of them.
The idea of creating unique virtual items has a lot of potential, especially as we take our first steps into the metaverse. But it can also become an “empty” market in which opportunists sell worthless objects at exorbitant prices.
So that you are very clear about what this market is about, its positive values and the risks that NFTs entail, we are going to explain what this technology consists of and what novelties it offers.
What are NFTs
NFT stands for “non-fungible token” or non-fungible item. That is, it is a unique virtual object, which cannot be consumed or replaced. Can be anything; an image, an audio file, a phrase, an animation… and therefore, anyone can create their own NFTs.
To understand how the NFT market works, think of a work of art. Any of us can paint a painting, which is something unique, and place it on the market, but obviously a drawing made by us will not have the same value as a sketch by Frank Miller (the artist responsible for 300 or Sin City) or a Velazquez painting.
The paintings are signed and authenticated, but how do you make a virtual object unique? Keep in mind that it is very easy to duplicate any file on our computer. However, NFTs have a digital certificate, which is unique. A kind of serial number associated with each work.
This certificate cannot be separated from the files, and uses blockchain technology, similar to that of cryptocurrencies. Very simply explained, it is encrypted and validated; it cannot be changed and contains information about who owned the NFT or the value it was sold for that is recorded in a database.
What is the value of an NFT
This is one of the most sensitive issues that NFT technology brings with it. How much is a unique virtual item worth? Video game users are already used to paying for virtual goods, such as DLC, skins, video game objects… but they were not unique. Any user could enter the Fortnite store (for example) and buy the Boba Fett skin.
In a market for unique pieces, the price does not only depend on the intrinsic value of the NFT (in our example, a Velázquez is worth more than a drawing made by us). It also depends on supply and demand, you can speculate on its value.
And this is where one of the biggest risks lies. An NFT can be put up for sale at whatever price we want, and at auction it can skyrocket. Hence the big headlines about skyrocketing prices in NFT sales.
But there is no need to be scared. In reality, most NFTs are very cheaply priced. 75% of these goods are sold for less than 15 dollars. If we enter an NFT auction website right now, we find numerous bids for 0.01 WETH (cryptocurrency that is part of the Ethereum system) that is equivalent to 0.0065 dollars.
The problem is that the price of a piece shoots up due to speculative sales, and then collapses, something similar to what happened with Florida land in the stock market crash of 1929.
Video game companies and NFTs
It is very easy to see why video game companies have jumped into NFT technology. First of all because it goes without saying that users are more likely to pay for virtual goods (we have already mentioned above that we are used to buying DLC, skins, weapons…).
On the other hand, these companies own IP (intellectual property) that already has value. Continuing with our example, it is easier to sell a Tomb Raider token — a prestige brand with a recognizable image — than our painting of a landscape.
And also, since any file can be converted into NFT, these objects may offer specific functions within a game, from an avatar for the user to a unique weapon, a skin that offers special abilities, a unique FIFA card… .
On paper, it seems like a logical and even positive move. How many users would be willing to pay for their character to be truly unique? In addition, it allows players to earn money by playing. But above all, it offers a new way of additional income for video game producers.
Now you can monetize a game with direct sales, DLC and NFTs. What are the companies that have already declared their entry into this market?
Company CEO Yosuke Matsuda stated in his New Year’s letter the company’s intention to adopt this technology.
The arrival of NFTs using Blockchain technology increased the liquidity of digital goods, allowing them to be traded at high prices and making people talk around the world.
I see 2021, not only as ‘Metaverse: Year One’, but also as ‘NFTs: Year One’ […] and I hope they become as familiar as physical objects. To address these business changes, the mid-term strategy we unveiled in May 2020 identified Blockchain AI, cloud and gaming.
Bloomberg (Via VGC) claims that the CEO’s letter caused an 8% increase in Square Enix’s share price. It is, without more, its biggest increase in a single day since August and during the first trading day in Tokyo.
Sega announced last April its intention to enter the NFT technology. In terms of NFT, we would like to try various experiments and have already started various studies and considerations, but nothing is decided at this point regarding P2E, said the company’s CEO Haruki Satomi.
However, the company has shown its intention to back down, due to negative reception from users. Several announcements have already been made about it, including abroad, but at this point there are users who have shown negative reactions to it.
We have to carefully evaluate many announcements, such as how to mitigate the negative elements, to what extent they can be added in the Japanese regulation and their acceptance.
Ubisoft has been one of the early adopters of NFT technology for gaming. The spearhead has been Ghost Recon Breakpoint, but this experience will be coming to new games in the coming months.
Ubisoft’s Digits on Quartz are assets (weapons and gear) that can be used in Ghost Recon Breakpoint, while also representing a representative art object of said work. They can be used in-game, but it’s also possible to sell them on markets like Rarible and Objkt, for example.
With Ubisoft Quartz, we are taking the first step in leveraging the decentralized approach of blockchain to open up new opportunities for our players by making them truly interested in our games, says Ubisoft NFT Director Didier Genevois.
Mainly, the most important thing about the Ubisoft-Aleph union is that it completely detaches itself from centralization. This makes it more secure from possible hacks and DDoS attacks, as well as allowing the formation of dynamic NFTs.
For Electronic Arts CEO Andrew Wilson, these NFT titles and play to win are the future of our industry.
Although he clarified a little later that it is still too early to see how they will work. All this when he was asked about the subject during the conference for shareholders held at the end of 2021.
According to the statements collected by the PC Gamer medium, Wilson says: I think that in the context of the games we create and the services we offer, digital collectible content will play an important role in the future.
By surprise, and just for Three Kings Day, Konami has announced the release of a collection of Castlevania NFTs, under its Konami Memorial NFT Series initiative. It is one of the events for the 35th anniversary of the saga.
Konami has revealed that the collection of Castlevania NFTs (14 pieces that include works of art, parts of the soundtrack or secrets) will be auctioned worldwide on January 12, at 11:00 p.m. Spanish peninsular time in the OpenSea market. .
GSC Game World — S.T.A.L.K.E.R. 2 Heart of Chernobyl
GSC Game World’s open-world game was going to have a metahuman-related NFT, which allowed players to become an NPC for a fee. It was to be auctioned in January 2022.
However, GSC Game World has canceled everything related to NFTs for STALKER 2. The Ukrainian studio says that the support of its fans is much more important than anything else, and apologizes to the community for its recent announcement.
The announcement of this NFT to become a metahuman was not well received, and even many players promised NOT to buy Stalker 2 as a protest against this policy.
As for digital stores, we have two very different examples. On the one hand, the Epic Games Store has integrated NFTs into its service, while Valve has removed NFTs from Steam.
The rejection of the users
Why have users risen up against these measures? In principle, they do not have to suppose something negative. In effect, they would allow a user to earn an NFT by playing and then sell it for a real money reward.
It would also give a player the opportunity to own a piece and use it however they wanted, both in-game and on social media.
However, these policies also seem like a way for companies to charge more for features that could have been included in a game from the start, or to favor those who invest more in competitive games.
It is only a fear, since the technology is still “in its infancy”, but the risks involved in the adoption of NFTs are high and the community is skeptical about the plans of different companies.