Never Count Out NFTs: When Games Are On (the) Line
Lesson 20: How Entertainment Drives NFT Value
I remember the days after college of being skint and simply wanting to rock climb as much as possible. I was able to live virtually rent-free at a house in Santa Barbara, California filled with climbers. It was fondly (and notoriously) referred to as “The Castle”. I slept in a tent in the giant backyard, which contained a 32' wide inverted climbing wall and a defunct pool with three feet of brownish green ooze playing host to a few pieces of broken furniture. One evening a large opossum lucklessly wandered into the backyard, whence it was killed and torn in half by two of the resident huskies.
Sound grim?
Key to living that lifestyle was conserving funds and staying lean for climbing. When not climbing and training, distraction was a huge strategy to avoid spending money and eating. Video games (like Doom, Quake, and Dark Forces) were integral to nurturing an enthralling form of distraction.
And that was in the 1990s! Games have since evolved to such complexity and nuance that they really do seem like alternative worlds in which one can dwell . . . and unfortunately die.
Such is the power of games. And it is one of the main reasons why NFTs will remain a strong presence in our world. As I will later suggest, this role may be more of “the fictional world of gaming shaping reality” than “gaming art imitating life”.
Before we get going, if you need a refresher on what NFTs are and how they work, please check Lesson 18 in our cryptocurrency educational series for The Art of the Bubble.
The video game industry is estimated to be worth $90.13 billion, but perhaps what’s more important is that games are powerful instruments in shaping lives and embedding new phenomena and practices within our everyday world. This is because the most well-crafted games offer strong narratives, characters, interaction, and rewards which allow their human users to participate in a new world and a second life. What has traction in the gaming world can soon find traction in the real world.
NFTs & Games
Imagine playing a game where the pawn, character, or avatar you use is an item you actually own. Whether it’s a Monopoly dog, a Barbarian named “Thundarr”, or a cute cartoon beastie with special attack powers, we tend to think of game pawns as in no way unique.
They may have a specific look or a specific character, but it’s the case either that there are several more or less identical versions of the game with same pawns (dogs, battleships, race cars, and top hats); or that the character one customizes is a basic template for other players to do the same (anyone can get Thundarr, though each player may upgrade Thundarr in a different way).
So ownership in the conventional gaming universe is rather weak or thin. One just owns a replica. But what if the actual strength of ownership was based on a claim in perpetuity of the specific item in question.
That would change the game entirely (sorry for the pun!).
Why? Because despite any resemblances between pawns or characters, the specific iteration of a pawn would be linked to ownership by a user. For example, I may own a white Honda CRV; Kelly may own a white Honda CRV, and Falstaff may own a white Honda CRV. But the vehicle title is what confirms our ownership of our respectively unique vehicles.
Extending this logic to gaming characters and pawns is in one sense revolutionary. It draws on blockchain technology to ensure that any specific pawn or character has a unique identification code. Think of this as the equivalent of the VIN for a vehicle. (I refer to it elsewhere as a signature.)
The VIN, in this case, is the blockchain code which entails the creation date and creator of the item. Because this code is permanently stored on the public ledger system of a blockchain network, and because this code is also unalterable, each player can pretty much count on security and authenticity with respect to ownership rights.
This way of technologizing pawns and characters is, of course, simply to make such gaming items unique, non-fungible tokens, or NFTs.
Axie Infinity Ushers in a New Era
Enter Axie Infinity. It’s a play-to-earn Web3 game in which players buy their beast characters as NFTs in order to develop (or train) them in order to do battle with the characters of other players. Meet Gompers:
In order to play Axie Infinity, you need to buy three characters. And as you might expect, as a NFT, players can in turn sell them on the marketplace (e.g. Gameflip) or even rent them to other players for a share of the earnings from battles. This sales transaction feature will prove decisive, as I will later explain. For now, let’s unpack how this trading feature is enabled.
There are two currencies within the Axie ecosystems–AXS and SLP. For the sake of simplicity, it’s sufficient to know that both can be earned in the game. AXS is the more valuable token (financially speaking) and is used for governance. SLP is used for in-game actions, like breeding your NFT.
And there’s more. Axie also includes a virtual land system that is also NFT-based. In this case, you can think of the NFT as the title to a plot of land on which you can grow your base, etc. The main driver of value is therefore a virtual scarcity of quality land in order to do specific things. It’s a good primer for learning one of the basic tenets of value creation in classical economics.
But apart from that, like any platform or ecosystem where items are actually worth money, there can be a problem with “pumping and dumping”. While the game itself may be fun, it is driven by a play-to-earn principle in which the actual treasures equate to real money. Think of it this way:
Imagine playing Monopoly, when halfway through the game, someone announces that the Monopoly currency (M dollars) can actually be exchanged for real US dollars!
That would change the nature of the game, and players would be engaging in everything from more conservative play to watching the exchange rate between M dollars and US dollars. What if the price goes way up in favor of M dollars?
You’d bet that a lot of players would cease playing the game and simply dump or sell their M dollars and cash out. As you can expect, this happened to Axie. AXS was at an-all-time high in November of 2021, which was just under $160. The death spiral involving the mass sale of tokens, as well as a hack of the Ronin bridge which Axie was using, has meant a steady decline in value. At the time of writing, the token is about $9.
But all this shouldn’t matter if one genuinely loves the game . . . or should it? That’s a question to answer another time.
The Function of Gaming NFTs in Re-shaping Reality
What’s important to take away from the manner in which NFTs have been used by the gaming world is how quickly aspects of gaming can be become infused in our everyday lives. I don’t just mean role playing and gaming clubs.
It’s all about real opportunities, which are defined by some philosophers as opportunities to which people actually, as opposed to only theoretically, have access. So, for instance, we might want to believe our own society presents each of its inhabitants with an equal opportunity to education. But when we examine things more closely, we might find that those from poorer economic parts of the society don’t have access due to constraints relating to family or job obligations, lack of transportation, or lack of educational infrastructure. By the lights of a philosopher like John Stuart Mill or the Nobel Prize economist Amartya Sen, this situation would not count as a real opportunity for education.
Games, in contrast, present real opportunities in at least two ways.
- Games financially empower: We saw earlier that Axie Infinity offers players without assets or money to rent NFT characters in order to play. This, in turn, opens up possibilities for financial gain if they “play-to-earn” successfully.
- Character development through gaming characters: There are games, such as Original Game Life (OGLife), whose aim is to use the gaming character as a tool for personal development. According to DigFin, “OGLife offers coping mechanisms and training in basic software and other basic business skills, as well as earnings from gaming.”
It’s an age-old philosophical debate as to whether virtue can be learned. Regardless, a venue in which human users can participate in specific practies and decision-making skills seems a great asset in an age where an increasing amount of time is being spent online, as opposed to in the physical presence of others.
Gaming worlds can also offer a productive form of role playing, allowing users to distance themselves from their personal hang-ups and imagine themselves acting in ways they would like. This exercise shouldn’t be underestimated. I’ve used it in my own consultation on meaningful work.
The uphsot: With such a powerful medium, games are quite quickly making NFTs the staple of new and ideally sustainable practices for a wider swathe of people than so-called normal reality presents.
Call it a digital detour to empowerment.
Avatars & Art: the Power of NFTs
Finally, I should mention the role of NFTs with which the reader is probably most familiar. Highly valued (or perhaps over-valued) digital art and avatars.
If you come across the acronym PFP, it stands for “profile pic”. A PFP NFT is a NFT that has been made or purchased as a user’s digital avatar. Obviously in the world of social media and trends, choosing a PFP NFT is about more than just buying any old NFT. PFPs are symbols of status, and so CryptoPunks and BAYC NFTs tend to be the most prominent due to their value and association with celebrities. There are alternative NFTs that are related more to identity and gender as well as utility.
Utility involves how users can employ their PFPs in their own projects–such as launching one’s own platform, brand, or personalized products. Utility can also include gaining voting rights within the NFT-specific project. As PFPs become more prominent, authentication of originality and ownership has become more important.
BAYC and Otherside are worth noting. Bored Apes Yacht Club (BAYC) is a collection of digital artwork and avatars and is owned by Yuga Labs. Their NFTs have been likened to trading cards, but the entire platform is also seen as a network in which you can potentially make a lot of money and mingle with celebrities who want to sell or buy a NFT. While BAYC can gather support for specific causes, like the Ukrainian war, it has come under fire for alleged ties to racist artwork. As of August 2022, Decrypt reports that BAYC was valued in billions of dollars with a floor price of $114,000.
Yuga Labs also owns Otherside, which is a virtual world in the metaverse where users can interact with each other and own plots of virtual land by purchasing “otherdeeds”. NFTs are the medium for otherdeeds as well as user avatars. It therefore qualifies as a MMORPG (Massively Multiplayer Online Role-Playing Game). The project is still developing, and currently users can purchase otherdeeds.
The upshot: NFTs may become so engrained in how we conduct financial transactions and represent ourselves digitally that we may no longer even refer to NFTs. They will just be transparently a part of our daily routines. As the philosopher of technology, Martin Heidegger, noted: such items “disappear” or are no longer noticed while being used. This is because they enable us to achieve ends on which we become intently focused — like distraction from spending money in order to live a climber’s life(!).
How This Can Be Applied
I used to be an academic philosopher. One of my undergraduate students in his final year opted to write a dissertation and pitched me on the virtuous effects of games. I was extremely hesitant and doubtful the idea could be argued and defended sufficiently, let alone be a viable philosophy dissertation. This was in 2012.
When he outlined his strategy, I agreed. He used research in aesthetics and hermeneutics to link gaming life to narrative-based practice, therapy, and personal development.
Don’t count out the gaming world, which is both a microcosm and catalyst of human behavior and practice. NFTs simply augment these features of games.
After all, as most cultural anthropologists know, life is mostly a form of play.
This article is a part of the Crypto Industry Essentials educational program presented by The Art of the Bubble. Its thesis on the ability of games to re-shape reality is taken from the hermeneutical philosophy of Paul Ricoeur.
Though this article is credited to me, it contains some written material by Sebastian Purcell, PhD from his The Art of the Bubble education series on cryptocurrencies.
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