What Are NFT Games And How Do They Work

Aside from many other industries, the rise of the popularity of crypto-related technologies has dramatically affected the gaming industry as well, and now, more than ever, we see new NFT games being released one after another, thus leaving a great majority of people wondering: “What are NFT games and how do they work?”. 

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Non-fungible tokens, or NFTs, have caused a significant transformation in the gaming sector by offering gamers the chance to possess their in-game assets while providing game developers with new prospects for earning revenue. 

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In this blog, we'll dive into the details of NFTs, the use case of NFT in gaming industry, various kinds of NFT games, the perks of ownership, how NFT games are superior to traditional video games, and overall address the question: what are NFT games and how do they work. 

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We will also look into how NFTs can be acquired for games today, the common challenges associated with NFT handling, and what the future holds for NFT games.

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What is NFT?

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To understand what are NFT games and how do they work, it’s essential to understand what NFTs are in the first place. NFTs or non-fungible tokens are digital assets that represent unique and one-of-a-kind items.

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NFTs are kept on a blockchain, which provides a secure method of recording their ownership and transfer history. Being stored on the blockchain also guarantees the protection of NFTs from any attempts of alteration or theft. 

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In addition, unlike cryptocurrencies, NFTs can't be exchanged for something worth the same amount, so they're truly one-of-a-kind.

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NFTs have revolutionized the concept of digital ownership and trading, presenting creators with an innovative method of monetizing their work and giving consumers a unique way to prove their ownership of something special. Furthermore, with their secure and transparent nature, NFTs are a significant step forward in the realm of digital assets.

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What are NFT games?

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NFT games are a new video game type that uses non-fungible tokens to create unique in-game assets that players can buy, sell, and trade. They run on a blockchain, a secure and transparent digital ledger that records every transaction related to those NFTs.

These games are a significant development because they allow players to truly own their in-game assets, which is impossible in traditional video games. As a result, players now have the opportunity to monetize their assets outside of the game by selling or trading them, presenting new and exciting opportunities for both creators and consumers.

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And it doesn’t end there:

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Investors also find the NFT games business model quite interesting and are open to investing in the NFT gaming market too. Data from DappRadar x BGA Q1 report suggests that blockchain games have received a staggering $2.5b investment from various VCs and backers within the first 3 months of 2022. 

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Different types of NFT games

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Various types of NFT games vary in many different ways. However, they mainly don’t differ from their traditional counterparts regarding the game genre and overall concept. The list below includes some of the most popular NFT game types.

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1) Collectible NFT games

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Collectible NFT games have been gaining popularity in recent years. In collectible NFT games, players collect and trade NFTs to build a unique collection they can showcase. 

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In these games, the NFTs represent various in-game items such as weapons, armor, characters, or even virtual land. Each NFT is unique and cannot be replicated, making them valuable to collectors. Their rarity and perceived value in the community can also influence their price in the market.

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Collectible NFT games offer a new level of ownership and investment in the gaming industry. Players can truly own their in-game assets and even profit by selling them on NFT marketplaces. 

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This has led to a growing interest in collectible NFT games, with some games generating millions of dollars in sales. One of the most well-known collectible NFT games is Axie Infinity, a game where players can collect and battle creatures called Axies. 

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The game has amassed a significant following and has become a cultural sensation in various countries, particularly in the Philippines, where players can earn a livelihood by playing the game and dealing with NFTs.

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2) Role-playing NFT games 

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Similar to its traditional alternative, role-playing NFT games are a highly sought-after type of game that provides players with a highly engaging experience through the opportunity to create a particular role and connect with other players in a digital universe. 

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These games make use of blockchain technology to generate exceptional and valuable in-game assets that players can possess and exchange, giving rise to a new level of excitement and control in the game. A defining aspect of role-playing NFT games is the ability to create a distinct character that embodies the player. 

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Players can navigate the game world, accomplish missions, and engage with other gamers by choosing the character's looks, talents, and abilities. As players progress through the game, they can earn and collect valuable NFTs representing their accomplishments and skills.

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3) Strategy NFT games

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Strategy games are a type of video game where players must use their strategic thinking skills to win. In an NFT strategy game, players must make critical decisions that influence the game's result, such as constructing units, their placement, and attacking their opponents. 

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Strategy NFT games also appeal to players who enjoy a competitive and challenging gameplay experience. These games require players to think critically and strategically to outsmart their opponents and achieve victory. 

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Furthermore, the rarity and uniqueness of NFT assets add an extra layer of excitement to the gameplay as players strive to obtain the most valuable and rare assets.

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Do gamers want true ownership?

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On the one hand, gamers want true ownership of their in-game assets. Traditionally, gamers have rented or leased virtual items from game developers without control over their assets. However, with NFT games, gamers can truly own their in-game NFT items, giving them more control and value. In addition, owning in-game assets gives gamers a sense of accomplishment and pride. 

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Owners of digital items usually put in significant effort to acquire them, and they wish to showcase them to others and even possibly sell them in the future. NFTs allow gamers to do just that, without fear of losing their assets due to unexpected game shutdowns, or other unforeseen incidents.

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On the other hand, some argue that true ownership can have negative consequences for the gaming industry as a whole. For example, if gamers truly own their in-game assets, it could decrease revenue for game developers. 

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Furthermore, this practice might lead to an uneven playing field among gamers, as those with more financial resources would have an unjust upper hand in competitive gameplay.

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Despite these concerns, it seems that most gamers want true ownership. In fact, many have already embraced NFTs and are actively participating in NFT games. The benefits of true ownership, such as increased control over their assets and the ability to profit from them, outweigh the potential drawbacks for many gamers.

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What are the benefits of NFT games compared to other video games?

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There are many benefits of NFT games compared to traditional video games, and they go beyond the mere pleasure of collecting unique in-game items. With NFTs, gamers have true ownership of their digital assets, which means they can do with them as they please, including selling, trading, or even using them in other games.

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NFTs facilitate true ownership

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In traditional video games, ownership is an illusion. Although players spend countless hours getting their hands on long-awaited in-game items, they lose them all as soon as they move on to another game or when the original game's servers are shut down. 

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With NFTs, however, players can rest assured that their digital assets will remain with them forever, regardless of what happens to the game or the company that created it.

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Monetization opportunities

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NFT ownership also opens up new opportunities for gamers to monetize their gaming experience. For example, players can sell their unique in-game items to other players for real money, creating a new economy within the game. 

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In fact, some players have even turned gaming into a full-time job, making a living by selling rare and valuable NFTs.

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Exclusivity and Status

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Moreover, NFT ownership provides a sense of exclusivity and status to gamers. It's no longer just about winning or being good at the game but also about having access to unique and rare digital assets that others do not. 

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This sense of ownership and status can be particularly interesting to gamers who enjoy the social aspects of gaming and are willing to showcase their achievements to their fellow gaming friends.

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Security

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Security is another crucial perk of NFT games worth mentioning. In many traditional games, players spend countless hours and a lot of effort to earn a specific in-game asset, only to risk losing them in case their account is hacked. However, with NFT games, ownership of these assets is stored on the blockchain, providing a secure and transparent way to track ownership and transfer of ownership.

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This means that players can rest assured knowing that their hard-earned digital assets are secured by advanced cryptographic technology, making it nearly impossible for them to be stolen. 

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There have also been some instances of hackers stealing players’ funds from NFT games, but again, this shouldn’t undermine the very high level of security that’s present in blockchain technology.

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It gets better:

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Owning NFTs can also have practical benefits. 

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For instance, NFTs can be used to verify ownership and authenticity of digital assets, which can be particularly important in the context of gaming competitions or tournaments. 

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With NFTs, players can prove that they own a particular in-game item and that it is genuine, which can help them gain a competitive advantage.

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How can NFTs be obtained today for games?

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In short, NFTs can be obtained for games in several ways, including:

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• Purchasing on marketplaces: Players can buy NFTs on marketplaces, such as OpenSea, Rarible, or Nifty Gateway.
• Playing NFT games: Each NFT game is different, and there’s no set rule for all, but most of the time, players are rewarded with NFTs for completing specific tasks or achieving certain milestones within the game. 
• Participating in NFT drops: Developers may release NFT drops, which are limited releases of NFTs that are often sold on marketplaces or auctioned off to the highest bidder.
• Creating/Minting NFTs: Players can also create their own NFTs, such as custom skins, items, or artwork, and sell them on marketplaces or use them in NFT games.

Common pitfalls of handling NFTs

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There are several pitfalls of handling NFTs that players and developers should be aware of. 

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Security

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NFTs are stored on the blockchain, but if a player's private key is lost or stolen, they can lose access to their NFTs. And as the nature of blockchain technology is irreversible and unchangeable, they won’t be able to transfer or do anything to their NFTs unless they regain access to the wallet that holds those NFTs. 

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Liquidity

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NFTs’ value often fluctuates quite a bit, and it might be challenging to find a genuine buyer for an NFT at a fair price, let alone sell for profit. This issue can make it tough for players to monetize their investment in NFT games, and developers may struggle to generate revenue from their creations. 

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Additionally, players may be hesitant to purchase NFTs in the first place if they are unsure of their long-term value or the ease with which they can sell them. The change in the value of the NFTs might be affected by numerous factors such as market demands, the popularity of the specific game, etc.

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Scalability

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Current blockchain technology may not be able to handle the scale and complexity of NFT games, leading to slow transaction times or high fees. This issue can be particularly problematic for games that require frequent transactions, such as buying or selling items or characters, as slow transaction times can lead to a frustrating and unenjoyable experience for players. 

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Although developers have already overcome the scalability by deploying the games on their own blockchains or coming up with rollups and other blockchain solutions that facilitate faster transaction speeds and cheaper transaction costs, these solutions may potentially lead to the problem known as centralization. But this is a topic for another discussion.

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The future of NFT games

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Now that the topic of what are NFT games and how do they work is clear, let’s see what awaits NFT games in the future. 

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The current state of NFT gaming is not perfect, nor are the NFT games themselves. Still, the underlying technology and the overall advancements in the field are already changing the gaming industry.

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In the future, we can expect to see more NFT games that offer new levels of ownership and engagement for players, as well as new opportunities for developers to monetize their games. 

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With the increasing popularity of blockchain technology and the growing interest in NFTs, NFT games are poised to become a significant part of the gaming industry. 

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But again, for this to happen, developers must find new ways to overcome the current challenges, come up with more creative solutions and develop games that are not only played to make money but also to be simply enjoyed.