nft-games

NFT Games: What Are NFT Games And How Do They Work?

NFT games are those that incorporate non-fungible tokens (NFT) as a way to drive growth. In essence, NFT games enable developers to monetize their creations while giving users the ability to earn cryptocurrency just by playing the game, what’s known as the play-to-earn business model.

Understanding NFT Gaming

NFT games use blockchain technology to authenticate unique, in-game collectibles such as characters, avatars, and other items players can collect to assist in their gameplay. Each collectible is an NFT, with smart contracts determining how each function within the game itself. Like all NFTs, the value of a collectible depends on its use or rarity and each can be traded with others in a designated marketplace

play-to-earn
The play-to-earn model is a business model allowing gamers to farm or collect cryptocurrency and NFTs that can be sold on the market. This model has become a standard already in the “crypto gaming industry,” where the blockchain-based games enable token economics to kick in as an incentives mechanism at scale for users to play and be engaged.

For the user, NFT games are play-to-earn. This means they are rewarded with more tokens or NFTs the longer they play the game. This model has found particular success with users in developing nations as a viable alternative to a fixed income or social security payment.

With the above in mind, we’ll devote the rest of this article to discussing some of the most popular NFT games available today.

CryptoKitties

One of the first NFT games to achieve mainstream success was CryptoKitties. Launched on the Ethereum blockchain in 2017, CryptoKitties players collect, breed, and trade digital cats. 

Each cat is a unique NFT with smart contracts defining its characteristics, rarity, and ultimate value in the NFT marketplace.

Axie Infinity

how-does-axie-infinity-work-and-make-money
Axie Infinity is an NFT-based online video game developed by Sky Mavis, a Vietnamese game studio founded by Trung Nguyen in 2018. Nguyen combined his interest in blockchain accountability and the CryptoKitties craze to launch the game in August 2018. Sky Mavis generates the bulk of its revenue via the 4.25% fee it charges on all in-game purchases. This includes land purchases, monster NFT trading, and monster breeding. Axie Infinity requires that all new players purchase three monsters to get started. Since the cost can run into hundreds of dollars, Sky Mavis will lend players the monsters and collect a 30% interest fee once the player starts earning currency.

Axie Infinity is an NFT game based on the metaverse, where players can collect, raise, and battle with NFT creatures known as Axies. Some consider the game to be the NFT equivalent of Pokémon.

Axie Infinity requires that new users purchase three Axies in the marketplace before they can participate in the game. With the cost of NFT monsters climbing in recent times, users have created an informal market where “managers” rent out their monsters to “scholars” and take a cut of any subsequent rewards.

The metaverse governance token AXS is used to breed Axies and had a market capitalization of approximately $7 billion at the time of writing.

Splinterlands

Launched in 2018, Splinterlands is a card-based strategy game operating on the Hive blockchain. With approximately 520,000 active users, Splinterlands is the most popular NFT game on the market.

Splinterlands is a collectible trading-card-based game. Each card represents a monster with various unique stats and abilities, with users able to battle others and win rewards. The game recently released the Splintershards (SPS) cryptocurrency governance token to provide an increased level of decision-making ability and control for the user base and asset owners.

Alien Worlds

Alien Worlds is a more recent NFT game having only been launched in December 2020. It is another metaverse game in which players stake the Trilium (TLM) game token to lease spacecraft, travel on missions, vote in elections, and run for planetary council.

Players may select NFT game cards for their strategy on the Binance Smart Chain (BSC) and WAX carbon-neutral blockchain, with these cards able to be used for mining and fighting, among other things.

CryptoMines

CryptoMines is a science fiction NFT game released in September 2021. Like Alien Worlds, it is based on the Binance Smart Chain, and users are required to travel through space in search of rewards that help them extend the lives of their characters and make a profit from playing.

Workers and spaceships are NFTs minted in the ERC-721 standard for representing ownership of non-fungible tokens. Players can also stake the reward token ETERNAL in a liquidity pool with the potential to increase the value of their holdings.

Key takeaways:

  • NFT games are those that incorporate non-fungible tokens (NFT) as a way to drive growth. In essence, these games enable developers to monetize their creations while giving users the ability to earn cryptocurrency just by playing the game.
  • CryptoKitties was one of the first NFT games to achieve relative success. Today, Splinterlands is the largest NFT game which over half a million active users.
  • Alien Worlds and CryptoMines are NFT games based on the Binance Smart Chain, requiring users to travel through space in search of rewards. Metaverse game Axie Infinity requires users to collect and battle monsters in a way similar to Pokemon. 

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Connected Business Concepts to NFT Games

ea-sports-business-model
EA Sports is among the largest gaming publishers, with a hybrid strategy of fully-owned games and licensed games distributed with a cross-platform approach. FIFA is the game that most contributes to its revenues and live services (Ultimate Team in particular) are the largest revenue contributors to EA revenues.
gaming-industry
The gaming industry, part of the entertainment industry, is comprised of three main types of players. From game engines, which help developers build their games. To publishing gaming houses. And gaming consoles. While the prevailing business model for decades has been that of selling the console at cost, and make money on games. Digital games changed the way games are distributed and sold, and it opened up the way to free-to-play models.
roblox-business-model
Roblox is an online gaming platform where users can create avatars and explore various gaming experiences. Each experience will be monetized based on how its developer has structured the game. For instance, free games allow users to spend the platform’s currency, called Robux, to get specific enhancements or purchase items like clothing accessories for the avatars, simulated gestures from the Roblox Avatar Marketplace. Therefore, Roblox makes money by earning a commission on each transaction and through its internal ad network.
what-does-tencent-own
Tencent is a Chinese multinational conglomerate founded in 1998 by Ma Huateng, Zhang Zhidong, and Xu Chenye. Among its various global subsidiaries are companies in the online services, music, and artificial intelligence industries. But it is perhaps best known for its interest in the video game sector – both as a game developer for the Chinese market and the acquirer of several established gaming companies. Tencent is a vast company with a stake in more than 600 companies. Following is a look at some of the companies and subsidiaries it has a majority stake in.
free-to-play
A free-to-play is a model that became particularly popular in gaming. Free-to-play is also commonly referred to as free-to-start. For instance, companies like Epic Games have launched popular games like Fortnite’s Battle Royale, which had ingrained a free-to-play model. This is a model that become extremely popular in the digital age of gaming.
blockchain-economics
According to Joel Monegro, a former analyst at USV (a venture capital firm) the blockchain implies value creation in its protocols. Where the web has allowed the value to be captured at the applications layer (take Facebook, Twitter, Google, and many others). In a Blockchain Economy, this value might be captured by the protocols at the base of the blockchain (for instance Bitcoin and Ethereum). However, according to blockchain investor Paivinen due to ease of forking, incentives to compete and improved interoperability and interchangeability also in a blockchain-based economy, protocols might get thinner. Although the marginal value of scale might be lower compared to a web-based economy, where massive scale created an economic advantage. The success of the Blockchain will depend on its commercial viability!
proof-of-stake
A Proof of Stake (PoS) is a form of consensus algorithm used to achieve agreement across a distributed network. As such it is, together with Proof of Work, among the key consensus algorithms for Blockchain protocols (like the Ethereum’s Casper protocol). Proof of Stake has the advantage of security, reduced risk of centralization, and energy efficiency.
proof-of-work
A Proof of Work is a form of consensus algorithm used to achieve agreement across a distributed network. In a Proof of Work, miners compete to complete transactions on the network, by commuting hard mathematical problems (i.e. hashes functions) and as a result they get rewarded in coins.
non-fungible-tokens
Non-fungible tokens (NFTs) are cryptographic tokens that represent something unique. Non-fungible assets are those that are not mutually interchangeable. Non-fungible tokens contain identifying information that makes them unique. Unlike Bitcoin – which has a supply of 21 million identical coins – they cannot be exchanged like for like.
vbde-framework
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
ethereum-blockchain
Ethereum was launched in 2015 with its cryptocurrency, Ether, as an open-source, blockchain-based, decentralized platform software. Smart contracts are enabled, and Distributed Applications (dApps) get built without downtime or third-party disturbance. It also helps developers build and publish applications as it is also a programming language running on a blockchain.
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