NFTs (Non-Fungible Tokens) is another revolutionary application of blockchain technology that leverages a decentralized, trusted, and immutable ledger to capture the ownership of digital assets as they are purchased and resold. In basic economics, fungible assets can be readily interchanged-a $10 bill is as good as any other $10 bill. Non-fungible assets on the other hand are unique and can't be interchanged. Non-fungible tokens (NFTs) are simply unique digital assets that you can own or trade; the proof of their ownership is immutably stored on a blockchain.
NFTs have now empowered artists to create provably scarce digital artwork, and in one fell swoop, NFTs are solving the challenges around imitation art, copyright infringement, and stolen art. However, the practical applications of NFTs extend beyond the art world; and in this post, we explore NFTs and how a protocol and product layer blockchain, Verasity is extending their application to the esports and gaming industry.
The convergence of NFTs, esports, and gaming
NFTs ensure the uniqueness, originality, and provenance of digital assets; and since NFTs can't be deleted or duplicated, it is easy for them to retain their value over time. Unsurprisingly, the unique features of NFTs are already causing a massive inflow of funds causing the sales of NFTs to grow by almost 16,000% from a little over US$13.2M in October 2020 to more than US$2.13B in October 2021.
The very nature of NFTs opens up a new world of financial opportunities to artists, creatives, and all participants in the digital/video/knowledge economy. For instance, "Crossroads", a video clip made by digital artist Beeple, which was initially sold for $67,000 was later resold for US$6.6 million on Nifty.
However, the applications of NFTs extend beyond the speculative opportunities that they provide. The esports and gaming industry is a fertile ground for the practical application of NFTs, and below are some of the most innovative use cases of NFTs in esports and variety gaming.
Substantiation of in-game assets
One of the practical applications of NFTs in esports is the substantiation of in-game assets, in-game purchases, gaming achievements, highlights, competitions, and trophies. Before now, in-game purchases only lived within the gaming world of the purchaser; there was no way to trade or transfer these assets with other players. In 2020, a research study conducted by Vorhaus Advisors revealed that as much as 63% of gamers say that they would spend more on virtual goods if they had real-world value, and could be traded or sold. And as much as 64% of gamers say they would also play more often if virtual goods are substantiated in real life.
With NFTs, you can substantiate the ownership of in-game purchases so that they become transferable and tradable in much the same way that baseball cards are liquid. Likewise, NFTs preserve and extend the usability of gaming titles, memorabilia, and trophies beyond the tournament or esport event.
Creating new revenue streams for the esports and variety gaming industries
While the substantiation of in-game assets through NFTs extends the value of the assets for gamers; NFTs also open up new revenue streams for esports and gaming companies by enabling them to put formal structures around the resale market for virtual goods and meet some of the demand for virtual goods met by gray markets. The gray market of virtual goods refers to unofficial, unauthorized, unintended secondary marketplaces in which virtual goods from the gaming and esports industry are sold or distributed.
Industry reports have valued the market for the secondhand trading of virtual goods at about $50 billion. While the legality or illegality of gray markets is debatable, a 2021 study conducted by researchers at Rice University affirmed that "gray markets have a negative effect on both price and quality of products as well as manufacturer profits."
Similarly, NFTs also open up new revenue streams for esports and gaming companies through resale royalties. Beyond the revenue from the initial sale of the assets to gamers; esports and gaming companies can earn additional revenue in perpetuity from the resale of their NFTs. NFTs could potentially become a universal royalty standard because it removes operational inefficiencies by leveraging the blockchain (specifically, smart contracts) to collect and pay royalties.
The commodification of gaming content
Esports and variety gaming have grown to become expansive industries valued at US$1.1B and US$151.06 respectively in 2019. Nonetheless, gaming expertise, performance, and achievements are only still mostly respected within the esports world and the bragging rights do not yet count for much outside gaming circles.
Now, NFTs provides an opportunity to repurpose gaming content for new audiences outside the gaming community in the forms of exclusive tournament videos, highlights, footage, and documentaries, among others. This opens a new market opportunity for esports players and enthusiasts. By commodifying gaming content as NFTs, they could also become valuable to traders and investors who may not necessarily be gamers themselves.
Verasity is trailblazing the adoption of NFTs in esports and gaming
Verasity is setting up what could potentially become an industry standard for the application of NFTs in the esports and gaming industries. Rather than building blockchain-powered games, the company is unlocking opportunities at the intersection of the existing gaming, esports, and crypto industries with the introduction of in-game and out-of-game NFTs. These NFTs attract crypto enthusiasts into the world of esports and it would concurrently introduce gaming communities to an emerging technology that is revolutionizing how value is stored, tracked, and transferred.
Verasity has also developed a proprietary blockchain-powered Proof-of-View (PoV) technology for the digital content economy. This patented Proof-of-View technology could also become valuable in the commodification of gaming content by transparently recording interactions with video content to protect publishers, viewers, advertisers, video streaming platforms, and all other stakeholders in the video economy.
Similarly, the company has developed and patented an innovative blockchain solution for the transparent authentication of NFT art, NFT sellers, and NFT marketplaces to proactively prevent NFT fraud. This solution verifies that NFT buyers are purchasing from the authorized seller, with verification of the content's authenticity and accuracy of details - much like art appraisers in the non-digital world. Through this innovative solution, Verasity is de-risking the adoption of NFTs for esports and gaming platforms by ensuring that their users do not have to worry about falling victim to fraud.
The adoption of blockchain across industries is inevitable and undeniable. With the opportunities that NFTs provide, the esports and gaming industry can no longer ignore blockchain technology; and, with the fraud prevention that Verasity offers, companies can comfortably adopt the technology and leverage its benefits for themselves and their customers.