Why you should care about NFTs0.2

We explore the world of non-fungible tokens (NFTs) and assess their potential impact on Web3. In particular, we look at Gods Unchained - a game that brings trading cards to the digital sphere.

In last week’s post I broke down the different types of cryptoassets and what they aim to enable. This partially focused on non-fungible tokens (NFTs), a type of cryptoasset which rose to prominence late last year thanks to CryptoKitties. The game was briefly so popular it caused the Ethereum network to grind to a halt for days at a time. Since then much has been written about how NFTs, given their applicability to both the gaming and collectable markets, will be the main driver of consumer interest in crypto. Let's dig into that claim.

Gods Unchained; an example of a collectible driven game built around the NFT mechanic.

Why are NFTs interesting?

NFTs are essentially a token standard which enables developers to create tokens which have unique characteristics. Games like CryptoKitties exemplify this. All CryptoKitties are created in the same way but, because they use the ERC-721 as opposed to ERC-20 standard, are all different, with no two Kitties the same.

This simple change of allowing for uniqueness opens up a new range of use cases. When combined with other benefits of blockchain technology, such as provable digital scarcity (all tokens are recorded on the public ledger), it opens up a range of applications fungible tokens cannot cater to:

Gaming

NFTs are most often spoken about in the same breath as gaming, because NFTs – a means to create unique digital goods – are well suited to meet the burgeoning market of micro transactions and gaming items. This includes provably rare accessories such as swords and weapons, but would also allow for streamers to sell ‘their’ items – not a replica, but an item they used themselves.

Furthermore, NFTs could be used across games as they are interoperable across anything based on the same blockchain/protocol. Because NFTs aren’t locked down, it also means that others can build on top of the core concept. Allowing games to become platforms brings forth creativity and ideas which would never have emerged from the original team and acts as a supercharged concept of how mods regularly breathe new life into PC games. There are already multiple projects building on top of CryptoKitties, highlighting this potential going forward.

For example, KittyRace is built on top of the same assets as CryptoKitties, but instead lets CryptoKitty owners race their Kitties against other owners. The winner takes home the prize pool of ETH. Although it uses the same tokens, there was no co-operation between the two development teams and nor is there any kind of permission needed. Other projects provide accessories such as hats and stickers.

Collectibles

The collectibles market is huge, with billions spent yearly on the likes of trading cards. The provable scarcity of crypto, combined with the ease of buying/selling in a global market, means the collectibles market is a prime use case for NFTs.

One of the largest trading card markets is that of Major League Baseball, with the rarest cards selling for seven figures. Taking advantage of this existing market, the Los Angeles Dodgers gave away tokens to fans attending their matchup vs the San Diego Padres in September which provided attendees with a unique code to unlock a ‘digital bobblehead’ representing three players.

These digital bobbleheads are then viewable through the MLB viewer, which the organization will turn into a more fully fledged game, and will be the sort of asset wallets of the future will need to support, as collectibles become a more important part of crypto.

The NFT experience 

Gods Unchained is an example of a collectible driven game which is built around the NFT mechanic. It is an online trading card game in which you battle against other players using the cards you get in packs. Below is a short animation of my experience in buying and ‘opening’ my packs of cards. 

Furthermore, there is a good breakdown of how the contract underpinning this activity actually works, and it highlights how concepts like provable scarcity and random card discovery are programmed into the game’s contract by developers. The developers additionally use Ethereum to programme in game tickets, with players receiving special tokens which count as their entrance. 

The game made a duo of announcements last week. The sale of their 1 millionth card took the headlines, but equally important was the announcement that their cards would be tradeable on exchanges and powered by the 0x protocol.

Gods Unchained
@GodsUnchained

Achievement Unlocked! Today we sold our millionth card. That's insane. One million unique NFTs, floatin' around on Ethereum. Thank you all for your support! medium.com/@fuelgames/1-m…

  • 4 months ago
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This is important for two main reasons:

  • It enables the decentralized sale of all game assets – rather than them being locked to your account or having to sell through third-party services who take large cuts of the buy/sell price, you can buy/sell/store your game assets forever yourself
  • It enables access to global liquidity

This means that instead of players being restricted to trading with their friends, or on reputation led forums, they can trade with whoever they want whenever they want. This in turn will likely increase the appeal of the assets. This liquidity is important, not just for gaming assets but for NFTs as a whole because NFTs can be used for a wide range of assets including artwork, property, legal documents and much more. This shouldn’t be confused with price appreciation – liquidity does not necessarily mean price increases – but rather that it just enables a greater level of access to the underlying asset.

The Future

Although there is lots to like about the way NFTs are progressing and the potential they afford, there are reasons to be skeptical.

Firstly, there are very few people worldwide who actively worry about their items being centralized. Most companies aim to build good relationships with their customers, and generally do not go around seizing assets. Furthermore, while it can be tricky to sell assets, most do not buy with the intention of selling on a marketplace for profit. They buy them because they’re fun (and most are cheap throwaway purchases).

Furthermore, NFTs are not a substitute for gaming. So far there has been little concentration on the gaming mechanics, with many games launching either bereft of features or looking suspiciously like existing games. A bad game will not magically become a good game simply because of NFTs. Developers need to figure out how to create new types of games which take advantage of NFTs, rather than just replicating what is existing and expecting users to care. Early adopters likely myself try out many DApps just for the novelty – but that is not a sustainable way to build a user base. For that, you need to provide an experience wholly different or an improvement on what is already on offer. 

Finally, NFTs need the wider ecosystem to develop to encourage true adoption. Developers need assets to be viewable in well-presented wallets, they need tradeable marketplaces such as the 0x protocol to gain traction, and they need more gaming developers to experiment with them. I suspect this will largely be confined to indie developers to begin with – the larger developers have no such need to experiment with new technology when audiences are clearly happy with their current offering. Much as with cryptoassets as a whole, there is still a long way to go before NFTs achieve relevance against pre-existing counterparts.

Disclaimer: I own Gods Unchained cards. 

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