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NFTs in Video Games Explained


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If you've been on the internet in recent years, you've probably heard rumblings about NFTs, cryptocurrency, and blockchain. Of late, these technologies have come under fire for their alleged environmental impact, too. But that's not all because the video game industry is beginning to embrace these technologies as well, so many want to know exactly what that means. Don't worry: In this article, we're going to explain what's going on with NFTs in video games.

(As a note, our explanations of these technologies will be extremely simple. Many nuances will be lost, but this is done with the aim of explaining these technologies to the average user.)

What's an NFT (Non-fungible Token)?

First off, a vocabulary quiz: Fungible, what does it mean? If you guessed 'replaceable' you'd be correct. So, something that's non-fungible is unique. Take a trading card, like Pokemon, for example. A Pokemon card is unique, and if you traded your Pokemon card for a Magic the Gathering card, you'd have a completely different thing.

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However, if you have a dollar bill and trade that dollar bill for another dollar bill, you've got the same thing you had before. A non-fungible token is simply that: a digital, totally unique item. This can be art, music, movies, videos, clips, and any variety of digital content.

Where this gets complicated is that first, like trading cards, NFTs can either be one-of-a-kind or they can be like trading cards where a certain number of an item is made. Second, unlike trading cards, NFTs aren't the actual item that's being bought.

This may sound confusing, but it makes sense if you think about it. For example, you might buy a digital artwork NFT, but this digital artwork, as a file, may still be widely accessible online, meaning anybody can enjoy looking at the digital artwork without paying for it.

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However, if you own the digital artwork's attached NFT, you own the rights to that particular artwork. Though, it's important to remember that like traditional artwork the actual artist, regardless of if it's an NFT being sold, will retain the copyright to that particular work and have rights to reproduce it.

To a very real extent, this muddies the waters when it comes to the 'value' of owning something because on the internet content is everywhere and it's free. So, if all you want is to enjoy a particular artwork, chances are you'll be able to search it up and take a look. You just won't own it.

NFTs, Cryptocurrency, and Blockchain

NFTs exist as a function of a blockchain. Again, this might sound complicated, but big picture, it's less complicated than you might think. A blockchain is a database spread across different points in a network, and the way it works is when a certain 'block' is filled with data, a new block is added to the chain. This creates an unchangeable, chronological ledger.

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Like NFTs, cryptocurrency is a product of blockchain technology. These technologies exist within a certain blockchain, using the blockchain to distribute, protect, and verify cryptocurrencies and NFTs. Depending on the blockchain, there may be a different attached cryptocurrency or type of NFTs and vice-versa. For example, Ethereum is a blockchain, while Ether is the attached cryptocurrency.

While NFTs and cryptocurrency rely on blockchain technology to exist, these two technologies don't depend on one another. You don't have to buy NFTs with cryptocurrency or sell them for cryptocurrency, and you can buy an NFT from a certain blockchain with a cryptocurrency from a different blockchain.

NFTs in Video Games: How They Work

NFTs themselves are only just beginning to get popular, and while blockchain and cryptocurrency technology have been around for a while, they haven't been around that long, either. So, these technologies coming to video games is very much a new, ongoing thing. This means that how video games make use of NFTs will likely change and evolve.

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As it stands today, though, NFTs and cryptocurrency are slowly being introduced into games in fairly familiar ways. For example, rather than buying a particular skin from the shop of a particular game with virtual currency you either buy with real money or earn in-game, you might instead buy an NFT of that skin instead with a cryptocurrency built for that game.

Ultimately, the argument from developers or publishers is that these new technologies are not majorly different from how they already monetize their games, while this way of doing business ensures a customer's privacy as well as that the item you buy is actually yours, can retain value, and can even be resold.

The truth of the matter lies likely somewhere inbetween, because game publishers are not exactly known for their generosity, so the devil will most assuredly be in the details, and that's also where publishers will make their money.

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