The mainstream of NFT shouldn’t just be collectibles. Games have turned NFTs into mining machines and real estate.
Original title: “Foresight Ventures: NFT makes the Internet “Ownable”, games make NFT “Producible”
Written by: WhiteForest, Partner of Foresight Ventures
NFTs Make the Internet Ownable
Everything can be NFT. It is of great significance to permanently confirm the rights of items on the blockchain, because the blockchain is an open point-to-point ledger, which gives people a tool to store value independently, and NFT as a value carrier allows users to store various items. Types of assets. As Jesse Walden (former partner of A16Z) said “NFTs make the internet ownable”, creators issue NFTs, which enable creators to retain ownership of their content without restricting the spread of their files on the Internet. Creators get incentives throughout the entire life cycle from sale to resale. Consumers purchase NFTs to truly own a traceable and irrevocable asset, and conduct unlicensed free transactions through various marketplaces or person to person. Therefore, NFT has the potential to subvert the ownership model of media product creators, audiences, and developers built for them, which is a viable alternative to platform-driven monetization.
Ownership is the source of incentives for creation. In the former private enterprise, only a handful of people controlled the lifeblood of the entire company, and employees and users were completely dominated. With the increasingly intensified market competition and the development of modern corporate systems, companies have begun to tie the interests of employees and the company through the distribution of equity, but it is still unavoidable that small shareholders can hardly affect corporate governance. And this did not solve the conflict of interest between the user and the company. When the company is in a monopoly position in the industry, with the help of advanced big data and artificial intelligence technology, users even become the exploited party. The emergence of DAO has subverted the bloated organizational structure of traditional companies to a certain extent, allowing each member to become a manager and contributor of the organization, and further inspiring the creativity of the members.
Token is the core of ownership. Various blockchain protocols enable users to have the governance rights of the company through the distribution of tokens. Users are equal to the owners of the platform, which truly binds the interests of founders and users, resulting in a strong chemistry. reaction.
Tokens incentivize innocence
The issuance of tokens alleviated the cold start problem of the gaming platform. Many people are always discussing whether the Play to Earn model can be sustainable, because the incentive of tokens has caused some players to play games just to make money, as if this deviated from the original intention of the game, and caused game players after the decline in game revenue Whether the activity of the company can continue to worry about. There is nothing wrong with motivating users through token rewards. It is reasonable for labor to pay the price, whether it is blockchain networks such as Bitcoin and Ethereum, or applications such as SushiSwap and Rarible (issued on July 16, 2020). Layer protocol, every time these innovative platforms sell tokens to motivate users, it will cause such controversy. However, the result is that the tokens effectively stimulated the significant growth of users and developed by relying on product capabilities. For many small game companies, they have brilliant ideas, but they lack sufficient funds and channels to do marketing, because large companies have monopolized the market. Compared with ten years ago, the world’s highest-paid game companies have not changed much. They are still Sony, Tencent, Blizzard, EA and so on.
Source: duneanalytics.com
Token incentives give them a way to attract users, solve the financial difficulties in the initial stage of entrepreneurship, and help these long-tail creators to show their talents. This is exactly the goal pursued by the blockchain.
It is true that players who are purely profit-oriented, such as the gold studio, may have a certain impact on the experience of the game. In the end, a successful game will select the type of players they want to achieve a balance between gameplay and profitability.
Possession of virtual assets is a symbol of status
Human beings are extremely social creatures and have an innate desire to belong to the community. In the period of tribal civilization, it was difficult for a person to hunt effectively and live alone. A good way to be accepted by the group is to show your identity by showing other community members a product of your value. Thousands of years have passed, and people still tend to show their status through the items they buy. There are two cars in the picture below. Even if the car on the left is more fuel-efficient, more spacious, and cheaper (availability), people will still choose the car on the right to show their identity when possible. The ability of this kind of item to show its status comes from its scarcity and even high price itself.
Here are four data:
- On June 28, 2021, the research institute Strategy Analytics released a report stating that half of the world’s population owns a smartphone, which is about 4 billion people.
- According to IDC data, global wearable device shipments reached 400 million units in 2020.
- statista estimates that global shipments of AR/VR devices in 2020 will be 5.5 million units.
- The total number of users of opensea, the world’s largest NFT trading platform, exceeds 200,000.
We can see that this conforms to a pyramid-shaped social structure developed from scarcity.
Source: duneanalytics.com
In the past month, opensea has become the protocol with the most revenue on the eth chain and the destruction of ETH. NFTs represented by CryptoPunks continue to set new high prices, and the rich are willing to spend $4 million to buy an avatar. As early as June 18, the virtual real estate plot NFT in Decentraland was sold for MANA worth more than US$913,000. Collecting is a trait we acquired early as hunter-gatherers (those who collected the most berries have a higher chance of survival), and some psychologists believe that it allows us to connect with something bigger than ourselves. NFT is the only digital asset that people can truly own. NFT allows people from all over the world to identify themselves by acquiring rare and expensive assets.
Therefore, we have reason to believe that virtual assets will replace traditional luxury goods as a way of life for players to demonstrate their strength and identity.
Source: nonfungible.com
Blockchain can make the game’s life cycle longer
According to informal statistics, the average life cycle of terminal games is 3-5 years, mobile games are 6 months-3 years, and web games are 3-5 months. Compared with other formats of the Internet, the life cycle of games is known to be short. This is due to the high competitiveness, high update speed of the game and the demand for freshness of players. The high turnover of the game superimposed on the blockchain project makes people worried that the life of the chain game will be more fragile. The DAU of CryptoKitties, the originator of blockchain games, remains around 100 all year round, while the DAU of the famous sandbox game The Sandbox remains around 50. In stark contrast to the bleak number of players, the land sales in The Sandbox game are hot and continue to hit new sales highs. On July 4, a piece of virtual land in The Sandbox was sold for US$874,000.
Source: dappradar.com
I think the reasons why blockchain games have longer vitality are:
- Custody and user-owned on the asset chain. NTFs make assets ownable.
- Efficient, low-carbon and low-cost creation of assets.
- The permanent operation of smart contracts. Don’t worry about the game operator stopping the server, which also protects the value of the assets held by the user.
- Player autonomy. Hold tokens to participate in game governance and share game revenue. The Sandbox encourages creators to create voxel assets and sell them as NFTs, and can also create games and firepower in the metaverse. Buying the land in the game can freely build and increase its value.
- Tokens incentivize developers. By issuing token financing, developers no longer need to compromise on game revenue and can support their long-term creativity.
- Self-economy. Due to the issuance of tokens and the settlement and value storage of the blockchain, games can build a world that is infinitely close to the metaverse on the blockchain. Good economic model design allows blockchain games to have a more self-consistent economic cycle than traditional games. system.
Players have become accustomed to spending dozens of dollars on a piece of equipment or skin to enhance the experience of the game. If these assets are permanent on the chain, the game will never stop serving. I believe players are willing to pay more to buy this “permanent” ownership”.
Constrained by the throughput of the blockchain, most games at this stage are only settled on the blockchain. At present, there are already larger games completely running on Dfinity. I believe that with the improvement of blockchain performance, more and more games will be completely deployed on the blockchain.
Metaverse cannot do without blockchain
Because of these characteristics of blockchain games, I believe that blockchain is a necessary infrastructure for Metaverse. Even if NVIDIA’s image AI technology is powerful, NVIDIA can only be a company that provides tools, and it cannot be used as a platform to host Metaverse. On the one hand, users do not want the Metaverse, which they set up their lives, to be in the hands of private companies. On the other hand, it is difficult for private companies to compete with the blockchain for a longer lifespan.
Source: NVIDIA
Games make NFTs a productivity tool
We are in “Play-to-Earn is the next Liquidity Mining, is Axie Infinity overrated?” “ Introduced the Play to Earn mode detonated by Axie Infinity. By playing the game, Filipino players can earn $500 a month in the game. This model has inspired a whole new industry—Game farming. Guilds including Yield Guild and many gold players flocked to this farm. We often joked that NFTs are jpg, this is because most NFTs have no use value, but the game allows NFTs to play their usability.
In order to better explore the properties and utility of different types of NFTs, I would like to cite the five categories of NFTs:
- Collectibles: No practicality, only story and collectible, such as NBA Top Shot
- Game assets: assets that have certain utility in the game universe, such as AXIEs
- Virtual land: virtual platforms available for development in the meta universe, such as Decentraland, Sandbox
- Encrypted art: works of art marked and confirmed on the chain, such as “Beeple-EVERYDAY: THE FIRST 5000 DAYS”
- Others: domain name, property rights, insurance, etc.
NFTs generally have meme, collectability, rarity, usability, and sociability.
| Storytelling | Collectibility | Scarcity | Availability | sociability | |
|---|---|---|---|---|---|
| Collection | √ | √ | √ | √ | |
| Game assets | √ | √ | √ | √ | |
| Virtual land | √ | √ | √ | ||
| Encryption art | √ | √ | √ | √ | |
| Domain name, property rights | √ |
We can see that game assets have increased usability compared to collectibles and crypto art.
I thought about it for a long time. The mainstream of NFTs shouldn’t just be collectibles. So what asset type will become the large-scale application of NFTs? I considered the direction of physical assets on the chain and property right confirmation, but I never found a catalyst for the industry. The success of game modes like Axie Infinity was earlier than I thought, allowing me to see a great change.
Game Make NFTs Producible, the game turns NFTs into mining machines and real estate. In a steadily developing game world, holding NFTs can not only enjoy the value-added of the ecology itself, but also get token incentives by playing games.
Play to earn ushered in a new era. This method of mining through NFTs will create huge amounts of assets and value. In the next few years, we will see NFT agricultural operations comparable to earlier Bitcoin mining operations in terms of scale and potential revenue generation. NFT mining will be powered by people in low-income countries to change their income structure. It is also foreseeable that play to earn will also experience a process from small-scale farming to intensive agriculture.
This change can’t help but make people worry that if most of the players in the game are actually artificial intelligence algorithms, is the game still a game? In fact, in our current world, human power has already competed with machines and intelligence on a large scale. Autonomous vehicles will soon replace drivers. The textile assembly line has already eliminated millions of textile workers. The advancement of the world is unstoppable and does not stop with human weakness. When a game develops into a metaverse, it is no longer a game in the traditional sense. The huge number of participants and the value created will be enough to support a normal economic cycle within it.
Play to Earn mainstream mode introduction
NFTs reproduction
This is the typical mode used by Axie Infinity.
- Cost side: 1. Consume ETH to buy Axie; 2. Consume AXS and SLP to reproduce Axie.
- Income end: Sell Axie eggs or mature Axie to get income.
Source: Axie Infinity
Battle reward
Obtain erc20 token rewards through battle, also take Axie Infinity as an example
Players receive battle rewards in two ways: 1. Daily missions receive SLP rewards; 2. The top 300 in the season’s ladder will receive AXS rewards.
Source: Axie Infinity
Tradeable cards
Obtain tradable card NFTs and sell cards for profit.
Take skyweaver as an example.
- Ranking: According to the season ranking, the top players can get card rewards.
- Combat: Through the PVP mode, players can get a tradable silver card when they win once, and a tradable gold card when they win three times.
Source: Skyweaver
Venue commission
In the game, players who use venues or guilds can share the commissions used by the venues or the share of players in the guild.
- Take Derace as an example. Players who own a racecourse can get a share of horse race fees and bets.
- Take Guild of Guardians as an example. Guilds with different levels can get different proportions from the guild sales.
Resource mining
The land owner can obtain part of the resources mined on the land.
Take the League of kingdoms as an example. Players can purchase land NFTs, and each land owner can obtain a certain percentage of output resources, which can also be sold as NFTs in the market. The higher the level of land development, the higher the return for the owner.
Source: League of kingdoms
Game
By betting against the opponent, the winner gets the opponent’s assets or rewards for staking.
Taking derace as an example, players need to pay tickets and staking when racing horses, and get tickets and staking rewards after winning the horse race.
Source: DeRace
The Lego world of NFT has just begun
Due to the programmability of tokens and the composability of smart contracts, we have seen that the DeFi world has built a very large Lego world, and the composability between protocols has created huge liquidity and benefits. NFTs are also programmable tokens, and their potential is far beyond the current transaction.
The famous NFTs artwork Hashmasks has established some exclusive NFT partnerships with Terra Virtua. Now they have or will acquire virtual land in four different digital worlds: The Sandbox, Cryptovoxels, Somnium Space and Decentraland. On these lands, they will host community events, fairs and museums. The Hashmasks team will also commission the development of a video game. The game should use Hashmask as the basis for development.
Source: Hashmasks
The NFT work Fluf World sold on August 8 is designed to expand more in terms of usability. Players who photographed FLUF NFTs will first have a 3D rabbit animation with background music. In the future, Fluf World will withdraw many interesting features for NFT:
- Player design background story;
- Create voxel FLUF in metaverse;
- Add reproductive function;
- Introduce FLUF as a role in different games;
- Invite artists to create theme songs;
- Join the stake function;
- Create entity FLUF etc.
These designs all enhance the usability of NFT and give players a kind of “commitment effect.” Just as a work of art, people will not have other expectations for it, and after adding these usability, players have expectations for it, and NFT will accumulate value as promises are slowly fulfilled. (Conversely, because the artwork does not have the “commitment effect”, its price will increase faster)
Source: Fluf World
GameFi era opens
At present, the global sales of artworks are basically stable at around 60 billion U.S. dollars, and the growth is slow. The total value of global games reached 180 billion U.S. dollars. Obviously, the market space of NFT game assets is much larger than that of artworks. The value-added of artwork is mainly generated in the resale process, and the platform captures less of its value. The cost of creating game assets for game development platforms is very low, and the platform captures greater value.
The current market value of AXS is close to US$4.1 billion, and the total market value of the second to fifth places is less than US$1.5 billion. Therefore, there is still a lack of big projects in the market. Throughout the traditional game market, it can accommodate hundreds of games, iterates quickly, and there is no Matthew effect. There is also less competition between games and games for users, because users have enough time to accommodate several games and pay for each game. Therefore, GameFi’s market structure will be very different from DeFi, full of huge investment space.
As an institution that has invested more than a dozen companies in the field of traditional games, Foresight Ventures will firmly hold its position in GameFi!
Further reading
“NFTs make the internet ownable”
“The Ownership Economy: Crypto & The Next Frontier of Consumer Software”
