Introduction
There has been an unprecedented surge in the attention given to non-fungible tokens by crypto enthusiasts, mainstream media, and collectors. According to Adam Blumberg, NFTs have a low barrier of entry and are attracting a new set of investors.
What has attracted the Gen Z audience to this new phenomenon is the incorporation of gaming into non-fungible tokens. This young generation of investors and gamers are not only interested in real estate or art, which NFTs are known for, but in playing and earning through video games.
Despite all the buzz they have garnered, many people are still skeptical about non-fungible tokens. What are non-fungible tokens? How do I buy non-fungible tokens? Do I need cryptocurrency to buy them? How do NFTs and gaming work together? How is it possible to start earning money through NFT gaming?
This guide will answer these and other questions about NFTs in the gaming world. If you are curious about NFTs and play-to-earn, this eBook is for you.
Fungible and Non-Fungible Tokens
Source: Pixabay.com
Non-fungible tokens or NFTs are unique tokens confirming ownership of an asset. These assets can be anything from digital art to real estate. NFTs are cryptographic, irreplaceable tokens that give holders the right to these assets.
To better understand non-fungible tokens, it helps to know how they differ from fungible cryptocurrency. A fungible asset is one you can exchange for a replica. You can replace a US$20 note with another US$20 bill without any change in value. In the crypto world, Bitcoin, Ethereum, and other crypto coins are fungible. They are replaceable and can be divided into smaller pieces for investors to possess. I Eth is equal in value to another Eth. Therefore, Eth is interchangeable and as such fungible.
Non-fungible assets, on the other hand, are not replaceable. They are unique and belong to only one person until they’re transferred to another. There can be copies of the item around, but they are not the real thing. This implies that you have full control of the possession on a blockchain. Think of an NFT as a digital certificate of ownership to own virtual and even real assets. There are programs where you can learn NFTs for free.
What Is Blockchain Technology?
Source: Pixabay.com
The Blockchain is a distributed ledger technology. It’s a global network of computers that record transactions. Blockchain technology provides security for NFT transactions by assigning authentic ownership of the digital assets. Most NFTs are built on Ethereum blockchain, but other blockchains such as Binance Smart Chain, Flow, and Tezo also support non-fungible tokens. Recently, it has been reported that Binance Smart Chain is the most used Blockchain protocol for gaming, with 658,000 unique users and 350,000 daily users.
In contrast to coins (which have their own blockchain), tokens use blockchain technology that’s already developed. For instance, a token can be built on Ethereum Blockchain using ECR-20. The creator of a token will be provided with validation and security by the Blockchain. Non-fungible tokens can represent digital properties like media, arts, real estate, or even assets in a game. The fact that NFTs are built on blockchain technology means they are one of a kind. The value of an NFT is not equivalent to another. The decentralized nature of the blockchain means that it has a record of ownership of the asset and can be publicly accessed but not tampered with by anyone. That is, the Blockchain uses an immutable hash value that is not controlled by any central authority. Transactions carried out with your tokens are irreversible. However, they can be traced since they are carried out through smart contracts.
What Are Smart Contracts?
When a developer on an Ethereum Blockchain creates or mints an NFT, they execute code stored in smart contracts. Smart contracts are codes that contain the agreement between two parties. They are stored on a blockchain and are executed when the condition of the agreement is fulfilled. For instance, if the specification of the smart contract includes the payment of royalties to the creator of an artwork, the condition must be met for the contract to be completed.
What Are NFTs Used For?
NFTs have a wide range of applications. NFTs in the form of art and collectibles have recently gained in popularity. But this is a limited utilization of NFTs. Gaming is a more sophisticated use of non-fungible tokens. NFTs have changed how many of us play video games. Instead of playing a game to win, players can use their tokens to buy, sell, or trade an in-game asset.
Devin Finzer, founder and CEO of OpenSea, has stated that the NFT community is a tight-knit group, and the various NFT ecosystems overlap.
Where Can I Buy an NFT?
There are numerous marketplaces where NFTs can be bought and sold. You can buy gaming NFTs in an NFT open market or on the native market of the game. Gamers can buy virtual swords, land, businesses, cosmetics, and more. These virtual items are called collectibles. Because NFTs are unique, collectibles bought in a marketplace are not owned by the developers of the game but by players who can do with them as they wish. Some NFT marketplaces include:
OpenSea
OpenSea has dominated the NFT marketplace for a while now. OpenSea is currently one of the biggest peer-to-peer marketplaces for buying and selling NFT art and games. The platform charges a 2.5% brokerage fee. The low brokerage fees and the diverse range of NFTs available on the platform make the marketplace stand out among its competitors. You might consider using OpenSea if you want to bid on digital assets with your Ethereum wallet. While OpenSea is flexible and has a low fee, the high frequency of cyber attacks leading to users losing their accounts has given it negative publicity recently.
Rarible
Rarible leverages the Ethereum blockchain to connect buyers of rare digital art with sellers. Rarible supports content creators and artists by allowing them to earn royalties on future sales of their items. Artists are automatically paid any time their virtual items are re-sold. Also, Rarible has a governance token known as RARI, which gives its holders the non-binding power to vote on issues.
AirNFTs
Developed on the Binance Smart Chain (BSC), AirNFTs is an NFT marketplace where users create and carry out NFT-based transactions. AirNFTs provide an easy way for artists, collectors, and developers to connect with a wide range of audiences and fans. The $AIRT token on the platform allows holders to participate in network governance and earn other token rewards. Although recently launched, AirNFTs is one of the fastest-growing decentralized apps in the crypto-collectibles industry. The high amount of gas fees on Ethereum inspired the development of AirNFTs. AirNFTs not only rewards consistent members but also have a shorter wait time and low gas fees.
Axie Marketplace
Axie Infinity is an NFT game that you can find on Axie Marketplace. There, you can buy Axies to use when playing Axie Infinity. You can also mint Axies on Axie Marketplace, then sell them on other exchanges. That is not all the Marketplace offers. You can also buy NFT art and other games here, making it one of the top NFT marketplaces in the world.
DMarket
Specifically designed for gamers and esports fans, DMarket allows users to buy and sell NFTs, virtual in-game items, and technology for building metaverses. DMarket is specially made for developers who want to make money to connect with fans and players globally. Through DMarket, players can trade items across platforms and also earn from in-game NFTs.
How Do I Buy NFTs?
Depending on the marketplace you choose, buying NFTs usually requires a digital wallet. For example, to buy an Axie, you need to have Ether; you must use your Ethereum wallet to proceed. An easy comparison to the real world is that of a casino, where chips are needed to play.
If you want to buy an NFT on OpenSea, for instance, you need to create a digital wallet. For this, OpenSea recommends a MetaMask plug-in for Chrome. Follow these steps to create a digital wallet on OpenSea:
1. Go to the OpenSea website and tap the profile icon on the top right corner.
2. Click on ‘Get MetaMask.’
3. Select ‘Install MetaMask for Chrome.’
4. After the plug-in is installed, select ‘Get Started.’
5. Proceed to ‘Create a Wallet.’
6. Then, create your password.
7. Keep your seed phrase safe to access your account in the future.
8. Connect your MetaMask wallet with your OpenSea account.
9. You can buy Ether using the newly created Digital wallet, as this is the currency you will use to buy your NFT.
10. Proceed to bidding on or buying NFTs auctioned on the platform as desired.
11. Checkout and Submit.
12. Confirm a gas fee (transaction fee) or set a lower or higher gas limit to process the transaction.
13. After making the payment plus the gas fee, you are the proud owner of the NFT.
What Is a Gas Fee, and Why Do I Have To Pay It?
A gas fee is the money you pay to carry out transactions on a Blockchain. As the level of complexity of transactions differs, so does the gas fee paid for the transactions. Miners who process and validate transactions use large amounts of electricity and effort. Gas fees compensate miners for this effort. Transactions involving Decentralized Finance (DeFi) usually cost a lot of gas on the Ethereum Blockchain. Most NFTs are built on Ethereum Blockchain and sometimes the gas fee you pay might be more than the amount of the NFT you are dealing with due to the level of complexity. Just like the prices of cryptocurrencies fluctuate, the gas fee also goes up and down.
You can set your gas limit to the maximum amount you are willing to pay for a transaction. The higher your gas limit, the faster your transaction. Buyers, sellers, and creators of NFTs pay a gas fee. For some networks like Rarible, you pay a gas fee upfront. Other marketplaces take percentages of the item you wish to sell or auction. The choice is left to you whether you want your transaction carried out quickly or if you wish to pay a low gas fee.
The Proof-of-Work (PoW) system is a way of ensuring the efficiency of miners using hash rate. The gas fee is a way of attracting more miners. However, this is especially present in the Ethereum Blockchain, which most NFTs are built on. The Ethereum gas fee is denoted by “gwei” or gigawei. One “gwei” equals 0.000000001 ETH, and each “gwei” is a denomination of ETH.
Why Are Gas Fees Sometimes So Expensive, and How Can I Save Money on My Transactions?
Gas fees are determined by the size of the transaction (in bytes) and by the supply and demand on the blockchain. Studies carried out on Ethereum Gas Charts have shown that the busiest and most expensive time to make a transaction on Ethereum Blockchain is from 8 am to 1 Pm (EST). In contrast, the best time to make ETH transactions is on the weekend when gas prices are lowest. The least busy time is between 12 am and 4 pm (EST). Gas prices are at their highest on Tuesdays and Thursdays, which are the days the network is busiest.
If you prioritize speed over low gas fees, Tuesdays and Thursdays are the days to carry out your transactions while increasing your maximum limit. However, if you want to save money on gas, you can hold off on making your transaction until the gas fees are low. In any case, you cannot avoid paying gas fees; you can only reduce the cost. It is worthy of note that if you set a gas limit too low, your transaction may take too long to process or even fail, meaning you might have to pay another fee. Also, the network sometimes returns unused gas to users. Keep in mind that selecting a gas limit usually implies that you agree to have the maximum amount of gas fees deducted.
When I Buy My NFT, Do I Get It Immediately?
When you buy an NFT artwork, the ownership is transferred to you, but not the copyrights. The copyrights are retained by the artist or creator of the NFT. When you buy an in-game token, you can own and re-sell the token in the virtual environment. But how soon can the ownership be transferred to you? After all, many transactions are occurring on the blockchain at all times and miners have to go through a process of validation for each transaction. The speed at which you get your NFT is determined by the type of blockchain your NFT resides in, the gas fee limit you are willing to pay, and the volume of demand and supply on the blockchain. Binance Smart Chain prides itself on faster processing time than the Ethereum blockchain.
Can I Lose My NFT?
Source: © Rokas91 | Megapixl.com
The short answer is yes—you can lose your NFT. However, you shouldn’t. Despite the permanent nature of the Blockchain technology where NFTs are stored, some buyers have complained of missing NFTs from their wallets on OpenSea. The incident was attributed to a bug in the system that was later resolved. Note that the record of your transaction stays on the Blockchain irrespective.
Why NFT Games?
How you make money from an NFT game depends on the specific features of the game. In most cases, you can make money as a player through in-game utility and collectibles. You can trade, auction, or exchange NFTs on a third-party marketplace or the game marketplace if available. Non-fungible token games have assets that are limited in volume. Most experts believe that the rarity and scarcity of these items add to their values.
Unlike traditional games where players do not have a stake in the objects they use, NFT games give gamers the ability to own a portion of their assets. Before NFT gaming, when a game platform was discontinued, the players not only lost their progress, but also lost the investment they made buying objects. Conversely, on NFT games, each object is a token and, in most cases, can be traded. This is thanks to the Blockchain, which holds a record of all NFT transactions and the ownership of each token.
Gamers and game developers alike make money from NFT games. With the introduction of tokens that are native to a game, the developers can generate money from skin and land sales, while players realize money from selling the token for fiat money. Mobile games platforms generated as high as $10 billion in the first half of 2021, and the global gaming market is predicted to reach $314.40 billion by 2026. NFT games are expected to be the next big thing in the gaming industry due to their incorporation of blockchain technology, which has been termed GameFi.
What Is GameFi?
Source: WeGame.com
Andre Cronje coined the term ‘GameFi’ in September 2021 to explain the intersection between blockchain protocol and gaming. Blockchain protocol, in this case, has to do with decentralized finance, which may include yield farming, stablecoins, and token minting.
Yield farming is the process of staking an asset for a period to earn rewards. You can find NFT yield farming in games such as Axie Infinity where players stake their AXS token to earn daily compounding interest. A stablecoin is a cryptocurrency that pegs its value to fiat currency or other commodities. Decentralized finance (DeFi) is an alternative financial system built on a blockchain and operates outside of the traditional system without intermediaries. Rarible is a typical example of a DeFi NFT project. GameFi exists when these NFT concepts crop up in the gaming world.
GameFi also exists any time non-fungible tokens are present in a gaming environment. Game objects that had no real-world value prior to the introduction of NFTs into gaming are converted into assets that can be traded and allow gamers to play-to-earn.
A similar concept is gamification. Gamification is the application of game or game-like activities to a non-gaming environment. In this case, gamification is a way of blending the virtual environment with the real world to form a metaverse.
What Are Guilds?
Guilds are communities of gamers who form teams to play online games. Through guilds, members can sponsor new gamers who cannot afford in-game assets through scholarships.
How Do Guilds Work?
Play-to-earn games often require an initial purchase of in-game characters and assets that newcomers might not afford. Guild members can help these newbies by renting them their assets. This is called scholarship. Using the rented, in-game NFT assets, the new players can earn their own NFTs through play. At the same time, guild members can win in-game prizes by staking their assets.
One major guild is Yield Guild Games (YGG), which brings players together in play-to-earn blockchain games. Yield Guild Games is a community that enhances collaboration among players of blockchain games to ensure token holders enjoy maximum benefit. It also enables scholarships for new players.
Popular games like The Sandbox and Axie Infinity are under the umbrella of Yield Guild Games DAO. In Axie Infinity, a player must have at least three Axies as part of a starter team. However, Axies are expensive. A player who cannot afford them can get scholarships from guild members. Furthermore, guild members can own governance tokens which allow decisions to be arrived at through consensus.
What Is a Governance Token?
Governance tokens give the holder the right to participate in the decision-making process of a protocol. So, they give users more control. Decentralized Autonomous Organizations (DAO) offer governance tokens that allow users to propose, vote, and vet for change in the blockchain infrastructure.
Governance Tokens and Decentralized Autonomous Organizations (DAO)
Simply put, a DAO is a trustless organization run by computer codes distributed across networks and nodes instead of people. Rather than handing control of an organization over to a single entity, DAOs provide governance tokens to users, giving them decision-making power. Owners of governance tokens help decide the direction and fate of the organization.
Think of Decentralized Autonomous Organizations as the opposite of a central government that makes rules on behalf of an entire population. Rather than an authority or a government, DAOs utilize blockchain smart contracts to create automated rules. The rules of the organisation are contained in the DAO’s smart contract. The smart contract also contains the treasury of the organisation. So, nobody can spend the organization’s money or make a decision for the organisation unless it is through a vote by everyone who has a stake in the ecosystem or as stipulated in the smart contract.
Some experts believe that Bitcoin is the earliest example of a DAO. Bitcoin operates without a hierarchy as it is not controlled by a central authority. Furthermore, Bitcoin currency incentivizes members of the network to participate actively in the network.
As governance tokens incentivize everybody in the ecosystem, players and developers of NFT games sometimes leverage the tokens to participate in the game platform. Axie Infinity Shard (AXS) is a popular governance token native to Axie Infinity. Polyient Games also has a governance token known as PGT, which allows holders to vote in the ecosystem.
Top NFT Games in 2021
Source: AxieInfinity.com
Axie Infinity
Axie Infinity is a digital pet universe where players battle fantasy creatures known as Axies. As Axie Infinity is a play-to-earn (P2E) game, players can earn tokens through their contributions to the ecosystem and the game. Players can raise and battle their Axies, build kingdoms for them, and trade them among other players.
Before you can join Axie Infinity as a player, you must buy at least three Axies as part of a starter team. You can get your Axies on Axie Marketplace. However, aspiring players who cannot afford to buy Axies may be given a scholarship by a community of players.
The Philippines is the country with the highest number of players of Axie Infinity in the world. Axie game assets known as collectibles exist as tokens. Axie Infinity has two types of tokens—Axie Infinity Shards (AXS) and Smooth Love Potion (SLP). Smooth Love Potion (SLP) tokens are used to breed new Axies. The Axie community provides a complete step-by-step guide on how to get tokens to play. As a leading NFT game in the industry, Axie Infinity’s market cap is $7,737,767,166.
How Does the Staking Feature Work with AXS TOKEN?
Staking your token means leaving your token for a while to accrue rewards, consequently increasing the number of tokens you have. Staking your tokens also gives you voting rights and a say over the use of the community treasury. When you stake your token, you earn daily interest, which compounds. The advantage is that you can withdraw your AXS at any time without any withdrawal fee attached. When the AXS token was launched, gamers who staked their rewards were paid 400% APY. The APY has since declined as many people have joined the staking pool.
To stake your token, you must first connect your Ronin Wallet with your AXS. On your AXS Dashboard, click ‘Stake’ and input the number of tokens you would like to stake.
If you would like to sell or give out your Axie, you can unstake it at any time. Simply visit your AXS Dashboard and click ‘Unstake.’ You can unstake all your tokens or take them out. You can also choose to re-stake or claim the rewards you have accrued over time.
As your Ronin Wallet contains your AXS tokens, collecting your rewards adds to the total number of tokens you own. Alternatively, re-staking your AXS token adds to the number of tokens you stake and therefore increases your daily rewards.
Gods Unchained
This is a free-to-play online trading card game built on the Ethereum blockchain. In Gods Unchained, players can buy in-game items that they cannot sell back. To make money playing the game, players can earn GODS tokens. As the players accumulate collectibles over time, including rare cards, they can exchange them for $GOD and convert that to fiat currency. This incentivizes the players to play. One of the game’s unique features is the freedom it gives players and their true ownership of the token.
In September 2021, GODS tokens were launched on CoinList for players to register and buy. GODS tokens are designed to help players buy chests, card packs, and craft card packs. Just like with AXS tokens, players can stake their GODS tokens to earn rewards. The downside is that it is not available for residents and citizens of countries where CoinList is unsupported. You can trade your rare cards on the God’s Unchained marketplace or an open marketplace like OpenSea as they are built on the Ethereum blockchain.
The Sandbox
Source: Bitcoin.com
As an Ethereum-based, community-driven metaverse and gaming ecosystem, the Sandbox allows you to play voxel games. The Sandbox metaverse enables players to design, sell, and share in-game voxel assets. The Sandbox is a decentralized game that gives creators and gamers complete ownership of their in-world creations.
The Sandbox, just like Axie Infinity, is under the umbrella of Yield Guild Games (YGG). YGG is a Decentralized Autonomous Organization (DAO) based in the Philippines. It aims to build a more stable virtual and gaming world economy. In the Sandbox, players can own LAND and build the world they want.
The Sandbox is divided into:
VoxEdit
VoxEdit allows users to create voxel models, rig them, and animate their voxel-based non-fungible tokens. Through VoxEdit, creators can make voxel assets that can be used in the Sandbox games and sold in the Sandbox’s marketplace.
The Sandbox
After VoxEdit is Sandbox. Here, artists and creators of voxel assets can upload and publish their creations. The assets created are stored through the InterPlanetary File System. Since Sandbox was built on the Ethereum Blockchain, all ownership can be verified and traced.
The Sandbox Game Maker
This is for developers and game makers who want to build 3D games but do not have the money or coding skills necessary.
Sandbox is built on a merger between decentralized finance and gaming. Users have complete ownership of the community. $SAND is the native token of Sandbox and can be used to buy LAND and other assets in the game. You can build properties on the LAND, host experiences, events, or contests, or even rent them out. There is a limited supply of 166,464 LAND on the Sandbox, but users who own LAND can have governance power in the Sandbox metaverse. You can buy LAND on OpenSea. There are other assets created by players on Sandbox which can be exchanged on the marketplace.
Battle Pets
Battle Pets is the first blockchain game built on Binance Smart Chain. Players can purchase pet eggs and hatch them into a bunny, puppy, or kitty. Then they can arm the pets with weapons to allow them to battle others. Battle Pets uses the concept of yield farming to incorporate DeFi into the game. To buy a pet egg, players can use the Battle Pets token $PET, a Bakeryswap token, BAKE, or stable coins such as BUSD, BNB, or USDT. Pets eggs cost 500 $PET each, but the value of $PET against the dollar fluctuates. After buying a pet egg, you can go ahead and train, arm, and level up your pets to make them grow stronger. You can also find mates for your pets and raise their babies. As the pets are non-fungible tokens, you may choose to trade them on the market.
Battle Pets Tokens
The Battle Pets game has three native tokens: $PET, $FRUIT, and $WEAPON. However, $PET is the most prominent token in the game.
$PET
You can use your PET token to buy eggs on Battle Pets and to forge and upgrade weapons for your pet. Your PET token is the currency you use for transactions and interactions in the game. You can win PET tokens during battles. Another way to get a reward in the game is by staking your PET tokens. On Battle Pets, you can challenge one of the top 50 players in a tournament and battle their pets against yours. If you win, you will take their rank and position. A player can also play in the Siege mode by battling the cave guards. If successful, you will be rewarded with the ability to farm another Battle Pet’s token, $FRUIT.
$FRUIT
Winning a battle on Battle Pets, whether tournament or siege, gives the player the ability to farm $FRUIT. To farm the FRUIT token, a player first needs to stake their pet. Among the top 50 players in the tournament, the farming speed decreases as the rank gets higher. So, the top ten trainers will be able to farm faster than those below them.
Source: BattlePets
$WEAPON
Weapon NFT can be transferred from one trainer to another in the game. You can generate $WEAPON through farming, but there is a limited supply of 50 million WEAPON tokens in the game. Players can forge or melt their WEAPON as they deem fit. PET, WEAPON, and BAKE tokens can be used to forge weapons in the game. However, when a player melts a weapon, 90% of the WEAPON token will be burned, and 90% of the PET and BAKE token used to forge the weapon will be returned.
Conclusion
The NFT gaming world is on the rise due to an increased interest in non-fungible tokens. The economic impact of gaming, combined with that of DeFi, has brought a new trend to the financial market, where it’s now possible to earn money through play.
Bibliography
Blumberg, Adam. “Why NFTs Are Important for Financial Advisors.” Blockworks. March 2, 2021. https://blockworks.co/why-nfts-are-important-for-financial-advisors/.
Finzer, Devin. “The Non-Fungible Token Bible: Everything You Need to Know About NFTs.” OpenSea. January 10, 2020. https://opensea.io/blog/guides/non-fungible-tokens/#Smart_contracts_mean_assets_last_foreever.
Seals, Tara. “OpenSea ‘Free Gift’ NFTs Drain Cryptowallet Balances.” Threat Post. October 13, 2021. https://threatpost.com/opensea-nfts-cryptowallet-balances/175453/.
“Ethereum Gas Charts.” Ethereum Price. https://ethereumprice.org/gas/.
Sarkar, Arijit. “OpenSea Bug Appears to Have Destroyed Nearly $100K in NFTs.” Coin Telegraph. September 9, 2021. https://cointelegraph.com/news/opensea-bug-appears-to-have-destroyed-nearly-100k-in-nfts.
“2021 Mobile Gaming Tear Down.” App Annie. https://www.appannie.com/en/go/2021-mobile-gaming-tear-down/.
Menon, Siddharth. “How Crypto Gaming (GameFi) Is Emerging as the New Way to Make Money.” Financial Express. September 9, 2021. https://www.financialexpress.com/money/how-crypto-gaming-gamefi-is-emerging-as-the-new-way-to-make-money/2326958/.
“axieinfinity.com September 2021 Overview.” SimilarWeb. https://www.similarweb.com/website/axieinfinity.com.
