NFTs are all the rage, and for good reason too. But while the idea may seem new and radical to many, gamers have been dealing with similar concepts for ages in the form of exclusive, rare, and one-of-a-kind items. So, what is the difference between an NFT and, say, a unique weapon skin in CS: GO? Let’s figure that out.
Non-fungible token (NFT) is a direct, but obscure, term that’s sure to send your head spinning. But it’s a very simple idea. “Fungibility” is a simple concept referring to many items we use every day, to explain that you can exchange an item for exactly the same thing. For example, if you were to trade $1 for $1 you would, without becoming all philosophical, have exactly the same thing. But a non-fungible object means that there is no other item that is the same; the item is unique and cannot be directly replaced. This is most easily understood in the art, as there can only ever be one original painting like the Mona Lisa.
So, in short, an NFT is a token that proves that you own an asset.
Examples are rampant: from buying the works of now-world-renowned digital artist Beeple, the Nyan cat gif, or even a tweet off twitter. To put it bluntly, an NFT can be anything as long as it’s unique.
The way NFTs stay secure and actually prove ownership is that they are stored on the blockchain, providing a public ledger that proves ownership and any transactions that have been undertaken with the asset in question.
This means that NFTs are essentially proof of ownership of a digital, non-fungible asset—and that can be pretty much anything.
Virtual goods and games
While blockchain NFTs are relatively new, similar things have been around in games for ages. Exclusive skins in CS: GO, Path of Exile alternative art items, certain Fortnite outfits, Runescape Party hats and much more are pretty similar to NFTs.
However, there is one clear difference: these game-based items are not found on the blockchain but are instead found on gaming servers themselves. This drops their inherent value all the way down to the big old zero; given that the creators of the game could duplicate, delete, move or remove any of these items at will.
Thus, the value of these virtual goods comes from price tags placed on them either by the game-makers themselves or by players in online marketplaces. That is to say: the value is as much as anyone will pay for it. This can of course lead to purchases such as CS: GO’s infamous Howl skin which sold for $130,000 due to a number of reasons, the prime one being that it had a very low float value (which corresponds to the quality of the skin).
Of course, this isn’t too dissimilar from NFTs, as many NFTs also thrive purely on perceived value—but the difference lies in the blockchain which provides the public ledger that proves ownership, value, and the ability to make transactions.
Existing on the blockchain also means that these items have inherent value outside of any given system. For example, if you were to put your favorite CS: GO gun skin onto the blockchain you would theoretically be able to remove it from the CS: GO context and it would retain its value. Obviously, this isn’t possible due to how it’s all currently set up, limiting CS: GO skins to remain within Valve’s ecosystem.
That said, there are certain places where you can buy and trade skins, such as Eldorado. gg. Their players can buy and sell CS: GO skins, Runescape party hats, and much more with cryptocurrency. But, while the items themselves are outside of the blockchain, they remain inherently different from NFTs.
Will gaming move towards NFTs?
According to a survey by digital media consulting firm Vorhaus Advisors, 63% of gamers say that they would spend more on virtual goods if they had real-world value and could be traded and sold for that real-world value.
On one level this is obvious: players would spend more if they are not “spending” their money but “investing” it in the digital goods which could then be sold on to make back the money. Or, in certain cases, even make a profit.
So, this all sounds great: gaming companies will just jump on board, right?
Well, there will be a tonne of teething issues before NFTs find a real home in gaming.
First of all, selling NFTs in-game would inherently be taking away some profits from game developers. Not only would they now have to ensure certain items have inherent value, but they would be allowing players to sell their items on the Blockchain and away from in-game marketplaces. This means that those cuts that developers charge for transactions would be going elsewhere, resulting in a huge dip in profits.
Secondly, as NFTs work on blockchain, they require transactions to be verified. This incurs gas fees which would need to be paid to the miners facilitating the proof-of-work on the blockchain—hemorrhaging more money to outside sources.
At least immediately, implicating NFTs seems like a challenge for developers. But if the craze continues, we can be fairly sure that NFTs will come to gaming.
So, while NFTs and rare in-game items are quite different, it seems like we’ll probably be stuck with just the latter for now—leaving the control with developers. However, as DeFi becomes more and more mainstream, it’s fair to say that there’s a good chance we will see gaming utilizing the blockchain in the years to come.
Disclaimer: This is a paid post and should not be treated as news/advice.