Non-fungible Tokens in Games

Friday , 16, August 2019

There’s a lot of excitement around blockchain-based games and the promise of non-fungible tokens (NFTs) to enable new opportunities for players to own in-game objects that have utility across game platforms. I get the vision, yet I think it’s mostly a case of overinflated expectations.

Let’s break it down. Tokens are standardized digital assets issued on some blockchain (or similar) platform. They are not the coins that are native to a blockchain, but rather assets issued on top of such a system. There are such token systems on most of the major blockchains currently, and while some are highly standardized they are generally not interoperable between platforms.

Non-fungible refers to the notion that each token in a system can be unique; most token systems support these. US currency has both types for example, the paper notes have serial numbers and are therefore unique but the coins are completly interchangeable.

When people talk about non-fungible tokens (NFT), Cryptokitties are usually the image conjured up. In this Ethereum based game each kitty is unique, based on their “DNA” which is reflected in their appearance.

Note that NFT is a bit of a misnomer in this context though. The kitties breed, and the offspring that result represent a combination of the parents’ DNA. Since there are a limited number of traits that can be expressed in Cryptokitty DNA, collisions are possible. That is to say there are different combinations of possible parents that can produce the same offspring. The probabilities are low enough where this is unlikely though, so for all intents and purposes they are non-fungible.

With that out of the way let’s get to the specific ideas around NFTs being used to provide players of games more opportunities to get utility from their in-game purchases. The general trope goes like this: people will purchase items like a sword or a hat in one game, and be able to use it in other games. The ownership of these assets can be proved by checking with the underlying blockchain on which they were issued, so they should be transferrable or playable in multiple games.

So the X9 Mega Sword I buy in a medieval combat game might be a useful weapon, say a 35 caliber rifle, in a contemporary first person shooter game. A hat I buy for my Cryptokitty should be wearable by a Rarepepe. I chose these two ficticious examples because I think they are illustrative for my counter-narrative. I believe NFTs are going to be of great value in many non-game contexts; for creative works of art, loyalty and reward programs and even in games. But the early investment of development effort and investment money is seriously misguided IMHO.

Back to my two contrived example use cases – Rarepepes are tied to the platform they arose from: Counterparty. Not for technical reasons, but because that’s where they happened. There was an attempted port over to Ethereum and it just ended being a venue for cloning the original designs, not a platform for a second generation of Rarepepes. Cryptokitties are intrinsically Ethereum creatures. The way the breeding of new kitties is implemented is very much a reflection of the way smart contracts work on Ethereum, as well as the way the ERC721 standard has been defined.

For a purchased item of clothing to work on two blockchain-based entities means that both entities need to be created using the same standards, and probably on the same blockchain. Realistically, if they are not used in games on the same blockchain we have added obstacles, like the rightful owner on one blockchain linking that account to one on another blockchain. Will games on platform X find it practical to verify digital signatures from blockchain Y and keep track of the relationship between addresses on X and Y?

People who think that virtual sneakers purchased in one blockchain-based creation would be wearable by another might expect a world where the games are built on similar blockchains (Ethereum and clones) using APIs that standardize the interfaces defined by the tokens on those blockchains (ERC721, ERC1155) across all similar blockchains. So a helmet bought for a cryptogoblin in an Ethereum based game could be used as a similar helmet for a cryptoracer in an EOS-based game.

This is a compelling vision, because it allows the specific token standards to do their own thing, as long as some basic set of functionality is satisfied. So there are predictable ways to transfer or sell an item, but the individual instances might define different sets of properties for those items. A helmet is always a clothing item that is worn on the head. But in one context it protects a cryptogoblin against attacks with swords and in another it might preserve health points for a cryptoracer in case of a crash event.

Consider the requirements though. Most likely we’re not talking about an inter-blockchain API, we’re probably talking about token standards on a single blockchain. That’s a far less compelling prospect.

The games involved are also going to need some standardization in order to adhere to the idea that hats have these sorts of properties and swords have these other types. It’s not obvious, because it seems like a sword purchased in one game that had properties x, y and z could be used in another game that only recognized property x, and added it’s own default values for properties a, b and c. That overlap for property x is essential, so a sword can still be a weapon in a completely different game. But to have highly standardized objects and properties means the games become more predictable.

What people think will happen with NFTs in games might actually be a rather limiting vision, with games built on the same blockchain, using the same development tooling, using standardized systems of objects and interactions. Is that really the future of online games – 87 variations on WoW? Once I buy armor and swords I just keep playing new versions of the same combat games?

As you can probably tell, I love the concept and idea of provably unique digital assets being used in games. Yet I am highly skeptical that NFTs are going to lead to an investment boom by players in evergreen digital assets they carry from game to game.