Blockchain, NFT and crypto gaming explained: everything you need to know

Ghost Recon gets NFTs. Stalker 2 should get NFTs for a short time. Steam bans games with NFTs. Xbox boss says they’re ripping off gamers with NFTs, and EA thinks they’re a great idea. What NFTs are, what they have to do with blockchain and cryptocurrency, and why gamers are confronted with them, we explain in our detailed special.

Video game manufacturers are talking about the NFT year, according to Square-Enix’s boss, and it should continue under this star in 2022. Cryptocurrencies and NFTs will define the gaming future, decentralized gaming is expected to become a big deal, and new types of user-generated content will make for thriving in-game economies.

What NFTs are, how blockchain works and why I need to know this as a gamer is what we tell you in this special. We also explain the answers to important questions: why are graphics cards so expensive, will there be a metaverse, and can’t I just not avoid the NFT bandwagon in the future?

Let’s first look at Ghost Recon: Breakpoint. Ubisoft proudly announced that there are now NFTs in the game, in the form of skins. Cosmetic items are really nothing new, so what does this have to do with NFTs?

NFT – Non-Fungible Token

Ubisoft’s NFTs for Ghost Recon Breakpoint were not as well received as hoped. This shows well how speculative the trade with NFTs is.  

Non-Fungible Tokens are virtual, non-exchangeable items. They can be a weapon in a game, a piece of music or a picture. Unlike other data, they cannot be copied just like that. They have a license and metadata that identify them as the original.

That’s why NFTs are always available in limited quantities, since each one must be made manually. So, if the skins are sold out, there are not new ones just like that. This limitation, combined with demand, is what gives it value. Like paintings in the real world, only the original has value. With NFTs, however, it is significantly easier to determine who owns the original because the data cannot be falsified.

NFTs are collector’s items, and any price fluctuations are purely speculative. If everyone wanted the skins from Ubisoft, even though they are sold out, they could be resold at a significantly higher price. But even though NFTs often cross the table for vast sums of money and a now large market of crypto games has developed, Ubisoft could hardly sell any of the NFTs on offer.

More reason, then, to be skeptical and ask the big questions from a gamer’s perspective: Is it safe? What does it mean for the environment? Can’t I just not care about the issue? Where are the graphics cards? And: What is this actually?

Blockchain: Explanation of terms

Who owns the NFT is controlled by many people at once, through what is called the blockchain? Each digital currency has its own blockchain, which is based on different technical systems. Basically, it is a data network of very many computers. Everyone who participates here checks with every sale whether everything is above board.

There is therefore no single, possibly faulty central office where checks and decisions are made, which is why we are talking about a decentralized system here: the great advantage of blockchain. Those who participate in the system receive a fraction of cryptocurrency for each validation, which is why we also talk about “mining” here, i.e., generating cryptocurrency through computing power.

Since many computers are connected to the system, large amounts of electricity are consumed, which the Bitcoin currency is regularly accused of.

Proof of Work: The power guzzler

Bitcoin is based on the Proof of Work system. Here, all computers are given a computational task for each requested transaction. The one that can solve the task the fastest enters it into the system, whereupon all other computers must verify the solution. The computer that solved the task gets the winning bid, so it gets to append the transaction to the blockchain and extend it.

The task exists only so that the system cannot be tricked. If someone were to feed in a wrong transaction, they would have to make sure to get the award, which would not be worth it because of the high computing power required. As a benchmark, one Bitcoin transaction is said to consume as much power as an average household uses in 5-6 weeks.

Proof of Stake: Environmentally Friendly Alternative     

With Proof-of-Stake, it is no longer the fastest computer that matters, but who owns most of the currency that is being traded. A draw is then held among the people with the most shares to determine who gets to validate the transactions, and the person then receives a reward in the form of transaction fees.

The system is secured by the fact that faulty validations are penalized, and you get some of your currency taken away, even in case of unintentional mistakes. Since far fewer people need to participate here, cryptocurrencies on this basis are very efficient. The currency Tezos, which is used by Ubisoft, is based on proof-of-stake and uses 25 million times less energy than Bitcoin for a transaction.

Ethereum: where are the graphics cards? 

The most popular currency in crypto games is Ethereum. It is based on the proof-of-work principle but is still significantly more environmentally friendly than Bitcoin. Currently, they are working on having part of the transactions run over a new blockchain that is based on proof of stake and is supposed to be significantly more environmentally friendly.

Ethereum’s problem, however, is a completely different one. Proof of Work, in fact, requires strong computing power to participate, “mine,” and earn money. In the meantime, separate devices are being built for Bitcoins, so-called ASIC: Application-Specific Integrated Circuits.

In Europe, this is a component that is intended for a very specific process: In this case, to solve the task of the Bitcoin blockchain. These devices also exist for Ethereum, but they are significantly less efficient.

Therefore, many opt for the alternative: graphics cards. These not only have the advantage of being able to “mine” any type of cryptocurrency, but also that of being a graphics card, so you can even play games with it. This is especially interesting for private crypto “miners”, but with the current rise of Ethereum, it ultimately ensures that the prices for high-quality graphics cards rise to astronomical heights and stay there.

Crypto gaming: what is it actually?

The term crypto gaming keeps popping up, but it is misleading because it suggests that you can get cryptocurrency by playing the game itself, which is not the case. You can, however, “earn” NFTs in certain titles – mostly after investing them first – and then sell them to other players. The return depends on speculative factors such as the price of the currency, supply and demand. The system bears the catchy name Play 2 Earn.

Play 2 Earn: Axie Infinty     

Kind of like Pokémon only with NFTs and a bunch of money to buy with.

An example of such a game is Axie Infinity, in which you fight Pokémon-esque characters, breed them, and eventually sell them. Before you can start the game, you first must buy Axies yourself, which go for a few hundred dollars across the table. For breeding – that is, earning money – you also need love potions, which you win through battles and are given by the game at regular, but rare, intervals.

Since each Axie can only mate seven times, you always must weigh up when to sell. Strong Axies with good stats that have been used little for breeding bring in more money.

Theoretically, an individual can earn an extra salary with them, but practically it is a speculative business. Prices depend on the real economy and the number of players, as well as the current price of the cryptocurrency Ethereum, which itself is subject to constant fluctuations. As it is with cryptocurrencies.

The gameplay of the game takes a back seat in this form of Play 2 Earn and only needs to be functional. Too complicated or sophisticated game mechanics would make earning money difficult and get in the way of the principle of the game.

Max Nichols, Senior Technical Designer at Bungie, also complains about this (a corresponding tweet has since been deleted). The motivation to play a game because it’s fun would be overshadowed by the motivation to earn money. The mere possibility of earning money would ensure that fun would fall by the wayside.

Here we talk about intrinsic and extrinsic motivation. Intrinsic motivation describes when you play a title for its own sake, extrinsic factors, on the other hand, come from the outside and become the main problem for many players when it comes to Play 2 Earn. After all, the psychological effect occurs even when you don’t want to.

The Metaverse: Can’t I care?

There are already countless Play 2 Earn games that normal gamers usually can’t care about. They are only used to make money, and not because they offer such a great gaming experience. On marketplaces like Gala Games, horrendous sums go over the table for various mobile games like Town Star, where people easily spend 6000 euros for a virtual basketball court. Again, this is pure speculation with limited goods, which you can simply avoid, right?

Unfortunately, it doesn’t remain that simple, because more and more major developers seem to have made it their task to create a or rather the Metaverse: a place where video games and the real-world merge.

The ideal includes trading equipment across game boundaries, so that you can, for example, carry a sword from WoW in Final Fantasy or always have your favorite mount by your side. This is a utopia that would only make sense if we all live in all games, and we never end up in a PvP lobby where all the other participants are stronger than us.

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