How blockchain and NFTs can drive gaming developers to new levels

The non-fungible token market surged to a record high of $10.7bn in sales in the third quarter of this year

A panel discussion on blockchain and gaming at Gitex Global in Dubai. Alvin R. Cabral / The National

The emergence of blockchain's use in the gaming industry is an opportunity for smaller developers to retain and grow market share, driven by strategic use of the multibillion-dollar non-fungible token (NFT) sector, according to industry experts.

“Three years ago, no one understood what gaming can be in blockchain … today, I believe we have already entered the era of mass adoption,” Ritam Gupta, founder and chief executive of blockchain gaming platform Defi11, said during a panel discussion at Gitex Global in Dubai.

“Gaming is a craze and people are starting to understand that we can move forward with gaming and blockchain together in several use cases.”

NFTs are virtual assets that are unique, cannot be replaced with others and can be sent to other digital wallets. In gaming, NFTs can be used as an item to aid players. As with Bitcoin – the world's largest cryptocurrency – they are limited in quantity, potentially adding to their value.

The advent of blockchain technology – a database structured in a manner that is difficult or impossible to hack and on which Bitcoin was built – has spawned opportunities in areas other than cryptocurrency.

The decentralised nature of blockchain, a system that has no central authority and is owned by several users, also gives smaller players a chance to compete with bigger studios on a larger scale.

The market for NFTs surged to a record high of $10.7 billion in sales in the third quarter of this year, up 328 per cent from the second quarter and a staggering 78,000 per cent leap from only $13.7 million in the first half of 2020, data from industry tracker DappRadar showed. NFTs from games are among the most popular items, trailing only the utility, art and collectibles categories, it added.

The continued transition into a more digital and virtual world is also being pushed by major technology companies, most notably by Facebook chief executive Mark Zuckerberg, who said the world's largest social media network would spend $50m to build the so-called metaverse, a digital space that allows users to communicate and move virtually.

However, there are risks. In August, a fake NFT was allegedly sold through English street artist Banksy’s website after it was hacked by scammers, costing the buyer $335,560 in cryptocurrency. The hacker eventually returned the money to the buyer.

NFTs are also facing increased scrutiny from regulators.

“Governments are thinking how to regulate this, how do we tax this, how much is being taken out of the physical economy,” John Lillywhite, a Google research associate at the Mohammed bin Rashid School of Government, said at the panel.

“Once Big Tech and some of the blockchain players start gaining into the space, it will cascade into a series of economic, cultural and political questions.”

While blockchain and NFTs present a big opportunity, the barriers to entering them are among the challenges as users usually require a balance of native platform tokens, which requires cryptocurrency wallets and exchanges, J C Kim, co-chief executive of open-source platform Planetarium, told the panel.

“Blockchain solves many of the legacy problems of the gaming industry. Technology like non-fungible tokens allows users to own their in-game assets, preventing the challenges of account theft. They could even port them between different games, opening up new avenues of value for the sector,” she said.