Reza Jafery

Blockchain Lead @Akoin / Blockchain Consultant @PwC / Partner at @BMA

The Future of Video Games: NFTs, Blockchain, Real Valuables

I’ve worked in the blockchain industry for years and been a gamer my entire life. Yet merging the two never crossed my mind. When I thought of blockchain games I’d think of games like CryptoKitties, which is more of a collectibles platform than an actual game. While CryptoKitties saw a lot of success and has arguably gotten more attention than any other dApp in the marketplace, it turned me away from the industry as a whole.
If blockchain gaming was going to be about collectibles, I wasn’t really interested. I understand the value that tokenization can bring to digital ownership, that the first CryptoKitty is one of the first verifiably owned digital items that has existed in history — I’m not trying to take away from that. Admittedly, I didn’t understand the point of NFTs at the time.
In all honesty, CryptoKitties, and most blockchain games out there suck. If I want to play 2D turn-based games I’ll play Final Fantasy 6, and even mentioning CryptoKitties and Final Fantasy in the same sentence is an insult to Final Fantasy.
For the most part, video games that are completely on-chain are slow, clunky, and difficult to use. It doesn’t make sense for a game to live completely on a blockchain, it’s inefficient. Thus, I stayed clear of blockchain games, until recently.
A couple of months ago my workload tripled. I stopped having time for a social life, hobbies, and gaming. When that happened, I knew I had to maintain some sort of activity that I did just for fun if I also wanted to maintain my sanity. I figured that if I quit traditional video games, and switched over to blockchain games, I could at least justify that as research, and maybe even earn some money along the way.
Since then, I’ve become obsessed. My initial analysis of blockchain games was wrong, they’re so much more than I thought. The concept of digital ownership in itself is a huge topic to unpack: what actually owning the items in a game means, what that allows with player-to-player trade and interactions, and the potential opportunities to generate real profit within a player-owned economy.

What are Blockchain Games?

Before we get too deep into the subject, let’s define blockchain games.
A blockchain game is a game where ownership and storage of the assets used within the game are decentralized. In Counter-Strike for example, you may have a rare skin for your gun that’s worth thousands of dollars, but you don’t actually own it. The skin is stored on Counter Strikes server, and if the game developer chooses to, they can take it away from you — they own it, they’re just letting you use it.
With blockchain games, the in-game assets are owned and operated by the players. Blockchain games utilize this at varying levels of decentralization. If a game were to be completely decentralized, it would be slow and clunky like some of the games I mentioned earlier. Blockchain games that are really making a dent, or are primed to make a dent in the near future, use a hybrid solution: one that allows them the benefits of decentralization without all the drawbacks.
This hybrid solution is essentially managing all of the commerce or economics of a game on a blockchain, and all the actual game mechanics on a central server. This allows players to really own the elements in a game, without slowing down the entire process of playing the game itself.
We’ve talked a lot about digital ownership, at this point, you might be asking,
“Who cares if I own it or not? I can still use it in the game.”
Well, it matters if you own it because if you can prove you own something then you can sell it. Games like Counter-Strike have vibrant aftermarkets where people buy and sell in-game items, but it’s largely seen as a gray market that most game developers would rather not exist. Fortnite, for example, will ban players that are caught selling skins or accounts that have access to rare skins.
With blockchain games, in-game assets such as skins, weapons, or whatever your character uses are generated as Non-fungible tokens (NFTs). If you end up doing more research into the industry, chances are you’ll see this term thrown around quite a lot. Being able to tokenize in-game assets and turn them into NFTs was one of the first big breakthroughs that allowed this kind of gaming to be born. While many were spinning off the planet thinking about how much money could be made tokenizing real estate, some beautiful human being was sitting in an office or basement somewhere and thought,
“Wait, what if my World of Warcraft character and all of his or her items were NFTs.”

Why NFTs can revolutionize gaming

NFTs are a core element of blockchain gaming, mainly due to their ability to prove ownership and authenticity, as well as their ability to be easily transferred between parties. Yat Siu, chairman of Animoca Brands, explained this beautifully in a recent interview.
“If I buy a Picasso, I have to go to a museum or a curator, I have to go to an art collector, he has to certify, he has to give me a document. The painting without the document and the certificate is not worth that much because I don’t know if it’s true. It could be fake. Only with the certificate is it valuable. Blockchain auto-certifies everything that occurs within it. Every time we do something digital, we get a certificate, so you can do it en masse.”
With physical goods, there are often characteristics that help us define whether or not is authentic. We can gain an idea of whether or not a designer bag or belt is authentic by examining the material and the stitching, or checking for a certificate if it’s a new item. Even so, knock-offs still exist. BBC claims that over 3 million consumers buy counterfeit goods per year, and that only includes individuals who are aware that they have purchased fake goods.
What I’m getting at is, if an item does not give its owner the ability to generate revenue, or have some form of utility for the end-user, then its value is based on its proven authenticity and (or) scarcity. Which is why NFTs are so revolutionary. Until the invention of NFTs there was no way to prove the authenticity of an image or digital asset. Blockchains are immutable, there’s no room for forgeries and no way for someone to make copies of a digital item without it being very obvious that the copy is not the original.
Similarly to how I can write “BITCOIN” on a Chuckie Cheese token and call it a Bitcoin. It doesn’t mean someone is going to pay me $10,000 for it.
This means that NFTs can take the elements that give items value in the physical world, and transfer those same elements to the digital realm. I’ll lean on Yat Siu once again, in his interview he discussed a future where digital items can have their value increased by means of how they’re used, a future that would be impossible without NFTs.
For example, if a professional League of Legends or DOTA player wins a $200 million USD tournament with a specific skin, is the value of that specific skin now higher as a result?
As these games function now, no. The skin he used is just a copy, a download that the player doesn’t actually own. He’s borrowing it from the developers. If these games had blockchain-backed player-owned economies, the value of that skin could skyrocket. Because the owner can prove that the skin is the exact one that was used in the tournament. Think of it similarly to people spending more for a baseball that was hit for the last home run in the World Series vs. buying one off the shelf in a sporting goods store.

NFTs allow us to digitize value.

The best example of this that I can think of is the recent sale of Star Trek ships in a game called Crypto Space Commanders (CSC). Lucid Sight, a blockchain game development company, struck a deal with Star Trek for the rights to tokenize a few ships from the franchise. The ships would be somewhat mass-produced in-game, but there are also one-of-one special edition ships that can never be duplicated.
The special edition ships sold for $2-$30,000 USD. When I first fell down the CSC rabbit hole, it was in part due to the fact that other people had already seen so much value in it. For open systems to work, they need a community around them, they need users. Seeing that this community had already valued the NFTs being generated at such a high level really sucked me into their world. It demonstrates the lengths gamers are willing to go to truly own their gaming experience.
They successfully tokenized the brand value of Star Trek.
So far, CSC is one of the best examples of what blockchain can bring to video games. As well as one of the best examples of a true player-owned economy that I’ve come across — but it’s just the beginning.
I can’t wait to see what the future holds for video games, there are few things I find more exciting than the potential of a world where your time spent gaming isn’t seen as a sunken cost. It’s difficult not to imagine a time when “going to work” could be diving into a virtual world and contributing to a digital, player-owned economy.
Disclaimer: I’m not associated with Crypto Space Commanders in any way. BUT, if you want to check the game out, consider using my referral code.
All proceeds go to growing my Entrepreneurial-Space-Ventures and my intergalactic mining operation.

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