NFT video games have become a popular entertainment medium and financial investment for players. Games like Axie Infinity and Splinterlands have allowed different individuals to benefit from them. They offer entertainment value that is present in some traditional games while also implementing profitable features that provide competitive earnings. Despite NFT games’ popularity, many individuals may not understand how the medium operates. The new concepts of cryptocurrencies, blockchains, and NFTs make the crypto industry a complex system that the public may find difficult to understand. This research paper will aim to provide an extensive guide regarding the operations of NFT video games and allow the readers to better understand the crypto industry.
Definition of Blockchain
Most NFT and Crypto games utilize blockchain technology to maintain and operate data. The concept of blockchain is essential in understanding how Crypto games work. A blockchain is a database that consists of public-owned computer networks. The network of computers stores information in a digital space (Conway, 2021). The name “blockchain” comes from “blocks” or groups of computers that link to other “blocks”. Blocks possess limited storage spaces which means that to store large amounts of data, individuals must utilize a chain of blocks that connect with each other. Blocks allow individuals to permanently store data within them. They possess an irreversible timeline that secures information and makes them uneditable and undestroyable.
Blockchains are secured digital storage spaces that many industries can utilize. According to Conway (2021), blockchains aims to store and distribute uneditable data. This characteristic makes blockchains secure from hackers and fraudulent transactions since the network of computers can easily identify discrepancies. Individuals in fields like banking, finance, healthcare, real estate, programming, business, and even politics utilize blockchains to store data and allow faster transactions. Fields like banking, healthcare, business, and real estate take advantage of the permanent storage of data in a blockchain. Individuals in these fields can store confidential data in blockchains and ensure the information’s integrity. For example, real estate owners can store land titles within blockchains. This ensures that they do not lose the title and avoid any tampering. The uneditable characteristic of blockchains makes them useful tools in storing sensitive information.
How Blockchain Affects Crypto Games
A blockchain is an integral part of the crypto game industry due to its functions regarding data storage and applications in programming. Cryptogame developers utilize blockchain technology to store NFTs and allow cryptocurrency transactions. One of the useful features of blockchains is a smart contract. Developers can create smart contracts which are computer codes that operate under a blockchain. Smart contracts contain specific conditions that two parties must meet to complete a transaction. Additionally, they can contain NFTs and cryptocurrencies (Ray, 2021). These contracts are useful in crypto games as they allow players to own NFTs and engage in various transactions.
Blockchains along with smart contracts, allow owners of NFTs to transfer ownership. NFTs or non-fungible tokens are digital assets, such as artworks, videos, and in-game items. Individuals purchase and store NFTs within a blockchain. However, the process of transferring ownership of NFTs is more advantageous for crypto games than other digital assets (Let the Blockchain, 2021). NFT artworks like digital paintings are assets that random Internet users can easily copy through third-party applications. For example, an NFT artist may post their NFT on social media. Any social media user can take a screenshot or directly download the file from the page without purchasing the NFT. This allows other individuals to possess a copy of the NFT despite not having ownership of the asset. However, it is important to note that when an individual purchases an NFT, they are taking ownership of a hash code. This hash code act as proof of ownership. Individuals that download copies of NFTs do not gain access to hash codes.
In Crypto gaming, the transfer of ownership does not only pertain to the acquisition of hash codes but also the exclusive possession of the NFT. NFTs in crypto games include in-game avatars, items, and digital game spaces. These NFTs are only available within the crypto game. Individuals cannot copy or download them similar to NFT artworks. Additionally, these NFTs have in-game uses and their values are unique to the game. Even if an individual creates a fabricated NFT, they cannot use it in the game due to the security of blockchains. This makes crypto game NFTs valuable as they are exclusive to a game and individuals cannot easily create or download a copy.
Blockchain’s application as a digital storage space allows users to secure their NFTs despite a crypto game’s condition. For traditional video games, players can lose their in-game items when the game shuts down. This can happen if a video game company experiences bankruptcy or chooses to stop supporting a game. However, blockchains allow crypto game players to safely store their NFTs without the fear of losing them due to the mentioned causes. Even when a crypto game shuts down, the NFTs will remain in the player’s crypto wallet which will allow them to continue trading the asset. Additionally, if a crypto game player decides to leave a game, they can sell their NFTs for cryptocurrencies. This is not an option in traditional games since the in-game items only exist within the game.
Blockchains in the Market
Many blockchain platforms in the crypto market specialize in different fields. Some platforms offer features for developing applications while others aim to innovate blockchain’s commercial use. In crypto gaming, some of the most popular platforms are the Ethereum blockchain and the Binance Smart Chain. These two platforms allow video game developers to associate their products with cryptocurrencies and provide players with play-to-earn games. They contributed to the increasing popularity of crypto gaming and cryptocurrencies.
The Ethereum blockchain is one of the most popular blockchains in the cryptocurrency industry. As of writing, its cryptocurrency Ether (ETH), has the second-highest market value of around 4,200 US Dollars. The Ethereum blockchain allows users to create, publish, monetize, and use applications (Frankenfield, 2021). The open-source platform is useful for business, financing, and entertainment services. Additionally, the currently most popular NFT game, Axie Infinity, operates under the Ethereum blockchain. The blockchain’s features allowed Axie Infinity to establish a play-to-earn model which made it a popular investment in certain regions. Ethereum blockchain continued to grow and innovate as Ethereum-based applications gain popularity and public trust.
Binance Smart Chain
The Binance Smart Chain is another popular blockchain platform in crypto gaming. The platform allows users to exchange different cryptocurrencies. This led to the development of various crypto tokens under the platform. Binance smart chain aims to provide an alternative marketplace where individuals can release, use, and exchange digital assets within a decentralized system (Binance Chain, 2019). Crypto games like Cryptoblades, My Defi Pet, and Splinterlands operate under the platform and offer players with easily-accessible games. Applications in the platforms utilize Binance Coin (BNB) for most of the transactions which has led to the increased value of the cryptocurrency. Binance has become a popular blockchain platform due to the crypto games that operate under it as well as the large crypto exchange that it offers.
How to Start Playing Crypto Games
Crypto games offer a different experience for players due to the blockchain platforms and the play-to-earn model. Traditional video games utilize platforms like the Playstation Store, Microsoft Store, Steam, and others to distribute game copies to players. Players can easily go to these platforms and find the games they would like to play. For crypto games, players must access the game’s website and connect their crypto wallets. DIfferent crypto games will have different instructions and players will need specific currencies to play the games.
Creating a Crypto Wallet
Crypto wallets are digital wallets for storing cryptocurrencies and NFTs. According to coinbase.com, the most popular types of crypto wallets are hosted wallets, non-custodial wallets, and hardware wallets. These wallet types offer different features for users and not all of them are suitable for crypto games. Popular crypto games, such as Axie Infinity and Splinterlands, require players to utilize non-custodial wallets. This makes hosted wallets and hardware wallets unsuitable in crypto gaming. However, individuals that prefer to store their cryptocurrencies in a different space can opt to use other crypto wallets. Also, players may need to access hosted wallets like Binance to exchange cryptocurrencies for fiat money.
To create a non-custodial wallet for crypto gaming, individuals will need to download wallet applications. The most popular crypto wallet application is MetaMask which is available in the Google and iOS Playstore. Desktop and laptop users can download crypto wallet applications as browser extensions. Once individuals have downloaded and installed the applications, they will need to create an account within the application. Non-custodial wallets will provide users with a seed phrase. The seed phrase is a string of random words that will allow users to access the wallet from different devices. Users need to keep the seed phrase confidential as anyone with the seed phrase can gain access to their account.
Purchasing cryptocurrencies require individuals to own crypto wallets. Most cryptocurrency exchange platforms offer hosted wallets that users automatically acquire after creating an account within a platform. Currently, Binance.com and Coinbase are some of the popular cryptocurrency exchange platforms in the market. Individuals can visit these websites and create free accounts. Creating an account will require individuals to submit identifications and complete a verification process. Cryptocurrency exchange platforms are financial trading platforms that require transactions with financial services. The verification process is essential for ensuring the authenticity of a user and the security of the transactions.
Once an individual has an account on the platforms, they will need to fund their account with fiat money. They can do this through various payment methods available on the platforms. Common payment methods like bank transfers and Paypal are mostly available on the platforms, however, other methods may be available depending on the user’s location. Similar to stock exchanges, users can utilize their funds to purchase cryptocurrencies within the platform. Different platforms will have specific instructions on purchasing cryptocurrencies, however, most offer an interface similar to other online transactions. It is important to note that most cryptocurrency exchange platforms do not offer all the cryptocurrencies in the market. Smaller platforms may only offer a handful of cryptocurrencies while others like Binance may offer a wide variety of options. Users that are planning to purchase specific types of cryptocurrencies should be aware of the platforms where their preferred currency is available.
Connecting Crypto Wallets to Crypto Games
When a user purchases cryptocurrencies, it will directly go to the hosted wallet or their non-custodial wallet. This will depend on the platform’s rules as well as the preference of the user. For crypto gaming, users may need to utilize a specific non-custodial wallet that a crypto game recognizes. For example, the NFT game Cryptoblades requires its players to use the MetaMask wallet to start playing the game. Other crypto wallets for NFT gaming are Ronin Wallet, AlphaWallet, and Coinbase Wallet. Users should conduct research regarding the crypto wallet necessary for a specific game to ensure that they fund the correct platform and avoid unnecessary fees.
Once a user has funded their crypto wallet, they can proceed with connecting the wallet to the crypto game. The process of linking a crypto wallet to a game will depend on the platform. Certain crypto games may require the user to link their existing wallet to another wallet. The other wallet can be an in-game wallet or another non-custodial wallet that the game’s coding supports. In other games, users may simply need to copy and paste their wallet’s address into the game which will automatically link the two. Additionally, it is important to note that a crypto game may not support a particular wallet. For example, an Ethereum-based crypto wallet may not work in a Binance Smart Chain-based crypto game. This is due to the different cryptocurrencies available on the two platforms. To avoid such issues, individuals must conduct proper research before purchasing cryptocurrencies and storing them in a crypto wallet.
Crypto Games as Investment
The play-to-earn feature in many crypto games has transformed the gaming genre into an investment opportunity. Popular NFT video games like Axie Infinity, Cryptoblades, and Splinterlands have provided players with another source of income. These games required players to purchase NFTs with fiat money and allowed them to generate crypto tokens that possess dollar values. During Axie Infinity’s peak, Filipino players earned three times more than the country’s minimum wage (Takahashi, 2021). Axie Infinity allowed its players to generate the token Small Love Potion (SLP) by winning fights in the game. Other NFT games adapted this gameplay model which led to the popularity of the genre.
The NFT game Cryptoblades is another example of a crypto game that became a fruitful investment for early buyers. During its early stage, the Cryptoblade token (SKILL) was worth around 0.69 US dollars. However, after a few weeks, the SKILL value increased to 184 US dollars. This large price increase allowed the early buyers to withdraw more than double the amount of their investments. Aside from the initial SKILL tokens that the buyers purchased, they also earned more SKILL from playing and winning fights in the game. However, due to the mass withdrawal, SKILL price slowly went down. As of writing, one SKILL token costs 11.6 US dollars which is still higher than the initial investment during the early stages of the game. Currently, playing Cryptoblades is not profitable due to the low rewards and high gas fees per fight. Cryptoblades showcase not only the high profitability of crypto games as investments but also the risks involved in the industry.
Additionally, it is important to note that the value of crypto tokens from crypto games is dependent on the market. A crypto game developer will establish the initial price for the token which will depend on the token supply. As transactions occur, the token’s price may increase or decrease. As a crypto game gains popularity and receives hype for the game, its token value may increase. In contrast, if the market ignores a crypto game, its price may decrease due to the low volume and pricing of offers in the market. Individuals looking to invest in crypto games must consider the different factors that can affect the token’s price and assess the potential of the game.
Crypto games’ popularity is due to the effective utilization of blockchain technology. The secure and decentralized characteristic of blockchains allowed experts to develop a unique genre of games. The blockchain system allowed players to create crypto wallets, purchase cryptocurrencies, and utilize them in crypto gaming. Additionally, the unique characteristics of blockchains and crypto games provided players with a new investment opportunity. Players can spend money purchasing NFTs and generating crypto tokens by playing video games. This can lead to high investment returns that no other investment option can provide. However, players must also be aware of the risks involved in participating in the volatile market of cryptocurrencies.
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