NFTs in play: a new era for digital assets?
Over the past couple of years, non-fungible tokens (NFTs) have opened up a whole new industry centered around the sale and purchase of digital assets – often digital works of art. But is one of the core applications of NFTs being overlooked?
S&P Global Market Intelligence says video game publishers currently earn more than $3.6 billion a year from in-game NFTs, and he expects that number to skyrocket to $15 billion by 2027 as their popularity increases.
How are NFTs used in games?
Tom Whittaker, who is a senior associate in the technology team at independent UK law firm Burges Salmon, explains: “NFTs will play a central role in gaming and the metaverse because they can enable consumers to monetize their digital assets (such as renting and re-selling), allow brands to monetize secondary sales (which they traditionally haven’t been able to effectively), and allow a new relationship between brand and consumer. All of this depends on the terms of the smart contract.”
James Rodd is head of marketing at Gamesta, which develops games where the lending, trading and buying of NFTs from blockchains is baked into the gaming environment. He tells FinTech Magazine: “NFTs, or non-fungible tokens, are being used in the gaming industry in different ways. One of the most common use cases is for in-game items and assets – such as skins, weapons, and characters. Using NFTs, game developers can create unique and rare items that players can collect, trade and sell on blockchain marketplaces.
“Another way NFTs are used in gaming is to provide proof of ownership and authenticity for virtual items. With traditional gaming, players do not own the items they purchase; instead, they are licensed to use them in-game. But with NFTs players can own their items and even transfer them between games or platforms, giving them more control over their gaming experience.”
This of course improves the gaming experience for players – but NFTs can prove to be a valuable new business opportunity for game manufacturers as well. Rodd explains that developers can sell virtual real estate as NFTs, allowing players to buy and sell virtual lands in a game, or they can use NFTs to crowdfund game development and manage player behavior—for example, encouraging players to participate in certain games within the game. modes or features, or rewarding loyal players for reaching in-game milestones.
Legal implications of NFTs in play
Despite the obvious enthusiasm that exists around the growing use of NFTs in gaming, the technology’s infancy gives rise to some legal and compliance concerns.
“A number of potentially legal issues need to be navigated,” continues Burges Salmon’s Tom Whittaker. “These include gambling, advertising, privacy and IP, to name a few. If financial services brands want to use NFTs, they must also navigate financial regulations about what digital assets they can sell, how and where.”
