Many teenagers grow up with a dream of earning a living by making and playing video games. With the rise of non-fungible token based online games, that dream can be a reality. One of the hottest cryptocurrency trends is playing video games to earn NFTs on platforms like Axie Infinity and Animoca.
What Is an NFT?
Non-fungible tokens are digital assets that correlate to digital investment, such as in art, video games, videos and music. Whereas a traditional art collector might purchase a bronze sculpture, an NFT collector would purchase a digital representation of a sculpture as well as any metadata the creator wants to include in the file, such as a digital signature.
In addition to the work itself, the NFT buyer gets exclusive rights to the digital work. The blockchain secures those rights by ensuring that no one can modify the record of ownership or insert a new NFT onto a blockchain, according to Ethereum.org, the organization that supports the Ethereum network — the network most widely used for NFTs.
The market first saw NFTs in 2014, although they only gained popularity over the last few years.
What Is the Purpose of an NFT?
NFTs offer a way to monetize digital assets. In other words, they give creators the ability to sell their work without involving a third party. For example, Jack Dorsey — one of Twitter’s co-founders — sold the first tweet he ever wrote as an NFT and profited over $2.9 million.
Are NFTs Cryptocurrency?
No, NFTs are not a cryptocurrency.
NFTs are similar to cryptocurrency only in that they exist on a digital platform and utilize similar technology. Physical money and cryptocurrency are considered “fungible” because you can trade dollars for dollars and tokens for tokens based on a uniform value for each currency.
NFTs do not offer a uniform value and cannot be traded in the same way. Each NFT has a unique digital signature.
How Do NFTs Work in Online Gaming Platforms?
NFTs are a way of decentralizing video game ownership. Instead of major corporations taking all of the profit from gamers, the gamers are stakeholders within the platforms. NFTs in online games work in two ways. The first is with platform-specific NFTs and the second is earning NFTs for playing. The latter is referred to as “play to earn.”
A gaming NFT might consist of an avatar, a video game skin, a skill or an in-game item used to advance in a particular game. The NFT owner gets exclusive rights to the item, so they can keep it, sell it or trade it.
Good To Know
Gaming platforms that reward players often require an up-front investment to gain access to the network. Some games cost over $1,000 before players can join. It’s possible to join with less money, but a lower initial investment also lowers the profit margin of earnings within the game.
Platform-Specific NFTs
Each NFT has its own set of rules that outline how gamers can trade and use it. It is important to note that some gaming NFTs only exist within their platform. For example, someone may create a character or avatar and sell or trade it to another gamer. The idea is to trade up and earn more valuable NFTs as time goes on.
The technology that regulates NFTs is called a smart contract. A smart contract contains the rules for how an NFT may be used within a game. When those requirements are met, the smart contract executes automatically and is stored on the blockchain to establish a history of value and trading.
Earning NFTs for Playing Video Games
There are also ways to earn NFTs for playing on certain online gaming platforms like Axie Infinity and Animoca Brands, which has a popular game called The Sandbox. The platforms reward users with tokens and NFTs for playing longer.
NFTs may exist within the game or outside of the game in the general digital realm.
Turning NFTs Into Money or Cryptocurrency
The question that many consumers have is: How can you turn an NFT into real dollars or cryptocurrency?
How much a player earns is based on the perceived value of the asset within its platform. Players can sell and trade assets in-game by using the game’s utility token. Players of The Sandbox, for example, conduct transactions using SAND tokens, which are available on a number of exchanges. NFTs can also be sold and traded using an online market, auction house or exchange platform.
If players sell NFTs for cryptocurrency tokens, they can use the tokens to make purchases from retailers and other businesses that accept that specific cryptocurrency as payment. They can also sell cryptocurrency tokens for real money if needed.
What Are the Challenges of NFTs?
Right now, NFTs appeal to a small demographic of consumers. They are highly technical, so they present obstacles to the consumer who isn’t as tech-savvy. Another hurdle is that an NFT’s value is implied based on how gamers and other consumers value it. Consumers face a risk of losing money on NFTs in the long term.
There’s also a risk that some gamers won’t use NFTs as they were intended, within their digital platforms. Selling an NFT outside of its platform for profit may have a negative impact on gaming platforms.
NFTs also raise security concerns. Earlier this year, hackers stole $600 million worth of cryptocurrency from Axie Infinity’s Ronin Network. Although NFTs weren’t affected, and Ronin quickly identified the fraudulent transactions, the hack goes to show that blockchains aren’t 100% invulnerable — and, considering that the game’s economy is NFT-based, neither are the NFTs.
Final Take
Earning NFTs in online games may be a lucrative way to earn money — not to mention fun. Learning more about the rules and regulations before getting involved in trading NFTs is the best way to cash in on NFTs safely and securely.
NFT Games FAQ
Here are the answers to some of the most frequently asked questions about NFT games.- What are the top NFT gaming platforms?
- Popular NFT games include:
- Alien Worlds
- Axie Infinity
- Battle Racers
- Gods Unchained
- Gold Fever
- Guild of Guardians
- Neon District
- Splinterlands
- The Sandbox 3D
- Popular NFT games include:
- Are NFTs secure?
- NFTs are secure if players understand how they work, how to transfer them and how it's possible to lose them. Examples of ways that consumers lose NFTs include:
- Transferring an NFT to a digital wallet that doesn't recognize its value.
- Falling victim to fraud attempts and transferring the NFT to a scammer.
- Giving wallet access to a smart contract that is malicious (hacks can be common in the digital space).
- Losing an NFT to another player based on the rules of a particular game.
- NFTs are secure if players understand how they work, how to transfer them and how it's possible to lose them. Examples of ways that consumers lose NFTs include:
- Can you lose money on NFTs?
- Yes, it is possible for particular NFTs to become less popular. Since the perception of value plays a role in pricing an NFT, it is possible to lose money on a particular NFT.
- What is the future of NFTs?
- Right now, NFTs exist in their own space. Experts predict that the industry will have to make NFTs more mainstream for consumers for them to reach their full potential. This may mean tying the value back to a cryptocurrency or similarly tradable token.
Daria Uhlig contributed to the reporting for this article.
Information is accurate as of May 24, 2022.
This article originally appeared on GOBankingRates.com: NFT-Based Video Game Helps Gamers Earn Crypto While Playing Online
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
