What Are NFTs and How Could they Change Esports?
Eat, Sleep, NFT, Repeat
Several years ago, the meaning of NFTs was scarcely known to anybody outside the tech world, however, by now it’s hard to find a person who hasn’t heard about it or read headlines stating that here and there people make millions by selling NFTs.
Many have wondered what an NFT is. Well, NFT stands for a non-fungible token, but does it make it any clearer? So, let’s try to look into the matter and understand it once and for all. It is worth starting with a bit of history which roots down to the blockchain. Blockchain technology, which was first introduced in 2008 in Bitcoin transactions, lies at the core of NFTs. Blockchain is an inevitable part of NFTs as it creates a digital trail from the seller to the buyer that verifies the transaction. This encodes the distinctive ownership rights to the new owner. Unlike Bitcoin, which is fungible, each NFT is one of a kind and can’t be replaced with something else. Essentially, NFTs allow people to create something unique that can be stored digitally and that can hold value.
The very first NFT was created on May 2, 2014, by digital artist Kevin McCoy and is known as “Quantum”. Quantum is a pixelated octagon filled with different shapes that pulse in a quite hypnotic way. This Quantum art piece was sold for over $1.4 million at a Sotheby auction in 2021. While the most expensive NFT ever sold is “The Merge”, created by the artist who goes by the pseudonym Pak. Nifty Gateway marketplace sold this NFT for the record sum of $91.8 million.
At a very high level, most NFTs are typically held on the Ethereum blockchain, although other blockchains support them as well. Anyone active in NFTs will be aware of the strong crossover between the cryptocurrency and NFT markets. That is partly because to buy an NFT you need to use cryptocurrencies as a means of payment. NFTs are marketed and distributed through online marketplaces such as OpenSea, Crypto.com, SuperRare, and many others.
The beauty of NFTs is that anything can be tokenized — drawings, music, photos, video clips, even tweets, and not only digital. Although the tokenization of physical items isn’t yet developed. But plenty of projects are starting to explore the possibilities to tokenize the real estate, one-of-a-kind fashion items, and many more.
NFTs have opened up new opportunities for artists and companies to monetize their assets. Creators can even make shares for their NFT which makes it possible for investors and fans to own a part of a token without having to buy the whole thing.
The NFT topic is interesting without a doubt but there are serious drawbacks. One of them is that copies of the art you own as a token can be found on the Internet and there is nothing stopping people from copy-pasting these files on social media. Another disadvantage of NFTs is an environmental issue. Any record that enters the Ethereum blockchain takes significant computing, which requires a huge amount of energy. Moreover, a recent Cambridge University study suggests that everything to do with blockchain is highly unsustainable due to the amount of energy used. However, improvements are on the way, Ethereum is working on decreasing its carbon footprint and becoming more efficient.
NFTs without a doubt have brought many opportunities to the entertainment area, and esports is no exception. The list of application scenarios seemed to be endless. Cryptographic tokens could be introduced in any in-game purchased items, i.e., skins, weapons, collectibles, champion or hero cards, etc. Esports organizations and content rightsholders continue to explore new ways of integrating NFTs into their consumer offers. Already North American organization 100 Thieves launched their NFTs collection. Others, like OG Esports, started a collaboration with marketplace Nifty Gateway, where they sell digital art and collectibles. OG has had three drops of NFTs and managed to earn $1 million. Furthermore, esports organizations, Natus Vincere (Na’Vi) and Team Heretics have each launched their own digital tokens available for purchase by the fans.
Many esports organizations and development companies will be able to open up an additional source of revenue by using NFTs thus providing a whole new experience to their fanbase or users. Owning certain NFTs, fans would be able to unlock VIP spaces, and channels to watch exclusive video content created by their favorite esports teams or streamers.
We should keep in mind that most gamers are used to buying virtual goods and the perspective of buying something with real-world value that is stored securely in the blockchain could only increase the esports market. Nowadays many players are restricted by the region they are living in. Such physical limitations could be a thing of the past if NFTs are introduced. Fans would be able to buy or simply be rewarded with sellable crypto tokens just by owning a crypto wallet or account on NFTs marketplaces.
Adoption of NFTs in gaming means not only acquiring some collectibles or watching exclusive content, it redefines some games and leads to the creation of new ones. What’s more, such games allow players to earn just by playing them. Each of these games use different mechanisms, some require an initial investment, while others are free-to-play. Games with play-to-earn mechanics allow users to create value through in-game activity. The value could be cryptocurrency, NFT, or increasing the value of the already purchased NFT.
These facts suggest that the movement of esports toward the NFT sector is already happening, because esports, as a globally recognized form of entertainment, yearn to provide more and more experience to the fans. The development of new business models with further utilization of NFTs by esports organizations, content creators, developers, and event organizers will lead to new entrants coming into play bringing with them bigger investments. It seems that when the history of esports is written, NFTs will not just have their own page, but their own chapter.
