The digital gaming market is booming. According to data compiled by Newzoo, the worldwide video game market exceeded $138 billion in value in 2018, with the market continuing to grow at double-digit percentage rates. It’s no surprise, then, that gaming has become one of the first real adoption cases for blockchain technology. From CryptoKitties to Etherbots and Beyond New York, virtual games involving animals or characters have been highly popular. Non-fungible tokens are an essential element for those games. Let’s explore what these tokens are and why they matter so much in gaming.

What Are Non-Fungible Tokens?

Non-fungible tokens (NFTs) are a specific type of digital token that is designed to be unique and non-interchangeable. NFTs are a type of token that is designed to represent something that isn’t easily interchangeable. So while cryptocurrencies like bitcoin are fungible, meaning one token is identical to the next, NFTs are not interchangeable. They are unique, either because they are indivisible or because they are associated with a particular owner. Unlike fungible tokens which can be exchanged for any other token of the same type, unique tokens come with built-in metadata that ensures each token has a specific and distinguishable value. Tokens can represent virtual goods, such as in-game items and collectibles, physical assets like real estate, or even rights to a service.

Why Are NFTs So Important for Gaming?

One of the earliest and most popular use cases for blockchain technology was gaming. Digital collectibles, or “crypto-kitties,” combined the excitement of collecting unique digital assets with the security and transparency of the blockchain. Gaming is a massive market with a huge potential for growth, and blockchain-based tokens can have many benefits for games. The digital gaming market is expected to reach $180 billion by 2022. Tokenization of in-game items can provide a wide range of benefits to both gamers and developers. Gamers can benefit from a more secure system that allows them to prove ownership of their digital assets and resell them if they desire. Using non-fungible tokens instead of digital assets that are currently stored on centralized servers can protect gamers’ items from being hacked or stolen. Developers can also benefit from using NFTs by being able to create limited edition items, transfer items among players, and integrate an item marketplace.

How Will Non-Fungible Tokens Change the Game?

One of the biggest trends in gaming is the shift from centralized servers to decentralized models that allow gamers to retain control of their data. While the centralized servers used by gaming platforms like Fortnite and PlayStation are currently much more secure than decentralized models, there are several benefits to decentralized gaming and cryptocurrency. Gamers could choose to earn or purchase tokens that represent in-game items and trade them on decentralized exchanges, which could result in the rise of a secondary market for in-game items. In-game economies depend on liquidity and the ability to easily and quickly exchange items for cash. The most promising token systems are those that allow gamers to easily sell their digital assets for cash or use the tokens to purchase other digital items.

NFTs and Cryptoeconomics

NFTs can be used for more than just gaming collectibles. Once a token has been created, it can be programmed to represent almost anything — from a song to a real-estate deed. With the help of protocols like the Ethereum blockchain, non-fungible tokens can be programmed to represent specific items and prove their authenticity. This can make them ideal for a wide array of industries. Cryptoeconomics is the study of blockchain-based systems, including their design, incentive models, and the role of tokens. Cryptocurrencies like Bitcoin are fungible, but NFTs are non-fungible. The difference between the two is important, particularly as gaming and other industries continue to embrace blockchain technology. Because NFTs are unique and can be easily verified, they are particularly well-suited for industries like gaming that rely on trust and authenticity.

Conclusion

NFTs are a promising use case for blockchain technology, particularly in gaming and other industries that rely on trust and authenticity. NFTs can be programmed to represent unique items and be used to facilitate secure and efficient digital tokenization. NFTs offers several benefits to both gamers and developers, and they are becoming increasingly important as the gaming industry continues to grow and evolve.