Not for thee

The rise (and fall?) of video game NFTs

There's been a lot of chatter about NFTs coming to your favorite games, but is there something to it?

Crypto gaming concept. Video game controller with a bitcoin cryptocurrency coin

Be honest with yourself: If your grandmother asked you to explain what an NFT is, would you be able to do it? Probably not, right?

Honestly, we don't blame you. As of right now, you might compare NFTs to that annoying friend who you stopped inviting to parties a long time ago, but keeps showing up somehow regardless. But while the NFT hype will probably continue for months (if not years) in some quarters, there have been a raft of negative stories recently that make it seem like the craze might be headed in the downward direction, at least in the short term.

So what does that mean for the possibility of NFTs coming to your favorite video games? Well, it's a bit complicated. Let's take it question by question:

1. Are NFTs really collapsing?

Somewhat, but it's not really clear. The Wall Street Journal ran a story last week that claimed that the NFT market was "collapsing," which led to a firestorm of discourse on social media. This piece was based on data from the tracker site NonFungible that showed that the sale of NFTs recently fell to a daily average of 19,000, which was a 92 percent decline from its September peak of 225,000. The number of active wallets also fell 88 percent, and some notable NFTs that were recently listed for sale failed to attract competitive bids.

This chart from Reuters certainly paints a dire picture of the NFT market, but proponents dispute the data’s validity.Reuters

Pro-NFT sites like CoinTelegraph quickly countered that NonFungible's data was false or misleading, pointing to data from the firm Dune Analytics that showed that popular NFT marketplaces like OpenSea are still seeing many transactions, and high overall dollar volume. The argument from NFT promoters is that while certain sections of the market are seeing a downturn, "prestige" projects like the Bored Ape Yacht Club (sometimes called "blue chip" NFTs) are still experiencing explosive growth. This would seem to indicate that even the most die-hard supporters admit that the market is oversaturated at the moment, but such is the nature of things.

Regardless of which dataset you trust more, it's not particularly surprising that NFTs are struggling in the current market. The price of notable cryptocurrencies like Bitcoin and Ethereum have been trending generally downward for the past six months or so, and a recent increase in interest rates have made risky investments like crypto less appealing than in late 2021.

2. What about NFT games? Are they headed down the tubes, too?

Not to be confused with the concept of adding NFT items to traditional video games like Call of Duty or Fortnite, NFT games are designed from the ground-up with an economy based around trading and buying tokens. Though there are dozens of examples out there, the most notable one is Axie Infinity, a Pokémon-like idle battler that requires you to buy at least one Axie (which you can sell for real money on the game's crypto market) in order to play.

The Axies of Axie Infinity are certainly cute, but the game is a lot less fun than this concept art looks.Sky Mavis

Because Axies were initially quite expensive — the cheapest one cost $300 back in 2020, for example — many players opted to rent Axies from their owners in order to use them in battle, with hopes of eventually farming enough resources to buy their own. Most of the game's entry-level workers hailed from less developed countries like Thailand, which led Vice to label it "digital colonialism."

Axie Infinity has bigger issues than just its problematic image, though. Back in March, hackers stole $620 million from Ronin Network, which is the "sidechain" (based on Ethereum) that powers the game. That's a lot of Axies let loose in the wild. Since then, players have complained about missed content milestones from developer Sky Mavis, as well as a general lack of profitability. Given that the game isn't actually fun to play, if you aren't making money by pouring hours into it, there's really no reason to play it at all. (This would seem to be the fundamental problem with the current NFT game model.)

As I wrote in a recent piece, the reason that Axie Infinity has become less profitable for these intrepid ranchers is that the game's market requires a steady stream of new users to keep things going. Much like a multi-level marketing scheme, once organic interest dries up, the managers are left playing a bad game for pennies on the dollar.

For now, they mostly seem like moonshot schemes...

The future of dedicated NFT games certainly doesn't look too bright from where we're sitting, but to be fair, new ones are coming out all the time, complete with scams to take advantage of less savvy buyers. If a company actually develops one that's fun to play, that might change, but for now, they mostly seem like moonshot schemes that are unlikely to make significant money for anyone except the people running them. (But they're losing tons of VC money, so it's not all bad.)

3. I don't care about Bored Apes. What about the video games I actually play?

Right now, the future of NFTs in traditional video games is murky, but it's definitely trending downward. Though a few larger companies like Sega, Ubisoft, and Konami expressed interest in experimenting with the concept, a rising tide of opposition to NFTs in gaming has continued to grow over the past few weeks. Many indie developers indicated their categorical opposition to NFTs earlier this year, citing environmental concerns and a general skepticism of "play-to-earn" mechanics — a dystopian phrase if we've ever heard one.

You can sink hundreds (if not thousands) of dollars into limited-edition Fortnite skins, but Epic is steering clear of NFTs.Epic Games

As our sister site Inverse details, Fortnite developer Epic Games stated that it will not "touch NFTs" due to the sheer volume of scams that have emerged over the past few months. That said, other publishers weren't quite so hasty with their condemnation. For example, Ubisoft has repeatedly stated that it will continue to look for opportunities in the NFT space in its games, even though the launch of its "Ubisoft Quartz" platform and limited-edition items for Ghost Recon: Breakpoint were widely mocked in the gaming community. You have to give them points for consistency, at least.

Square-Enix delivered quite a head-scratcher last week when it sold most of its European subsidiary (including Tomb Raider developer Crystal Dynamics) to Embracer Group for a paltry $300 million. In the press release announcing the move, Square-Enix stated that the money from the sale will go straight into new investments in "blockchain, AI, and the cloud." That's quite the morass of buzzwords there, but it's hardly surprising, given that Square-Enix's own president indicated a strong interest in crypto in his New Year's letter to shareholders.

When you consider that big stakeholders like Square-Enix and Ubisoft are clearly willing to dump a lot of cash into these initiatives, it's clear that there's probably some future for NFTs in games. However, in the short-term, crypto's ongoing dip will likely present issues for NFT programs like Ubisoft Quartz, so I don't think we'll see many more for the rest of the year. The broader issue with NFTs remains a fundamental one: So far, we've seen almost zero organic interest from actual players in this so-called "play-to-earn" model. If would-be NFT prophets want to cash in, they'll have to solve that first.