How NFT Rental will drive mass adoption of Blockchain
- Global gamers growing rapidly, now 3.1 billion
- Gamers understand tokenisation and tech required with crypto
- Traditional game companies are masters of onboarding….
- ….and are joining the next wave of blockchain games
- NFTs are core to blockchain games
- NFT rental lowers the barrier to entry in blockchain games
- NFT rental normalises gamers to wallets, crypto, NFTs and GamerFi
Welcome Generation Gaming
The global video game industry is on a meteoric rise, expected to grow 50% by 2025 to $268.8 billion. Growth in player numbers is dominated by the Asia Pacific region, with 1.2 billion gamers, and China by far the largest gaming country with 685 million people playing games.
Gamers are tech savvy, more so than the average consumer. They are more likely to use smart phones and streaming devices, more ‘digitally social’ and more likely to adapt to new technology and multitask effectively. If playing multiplayer, they often need to understand connection latency, optimisation of processing power, transitioning between varied platforms and logins across multiple devices. The cross-over between crypto and esports is not a coincidence. Both are largely male-dominated industries populated by young, tech-savvy adults who grew up consuming video games, using Discord and watching YouTube.
Tokens, coins and assets
Gamers already understand and embrace tokenisation. Take for example the popular PC game League of Legends. The basic currencies in the game are LP and RP. LP is the play-to-earn currency that you spend on new playable characters and some other rewards. RP on the other hand is the paid-for currency that unlocks premium skins, season passes and other premium aesthetic items.
Along with these basic tokens, there are a multitude of event tokens and special tokens including blue essences, orange essences, gemstones, hextech keys, skin shards, champion shards, lunar revel tokens and dozens more. To a non-gamer this would be bewildering, to a gamer embedded in this system, it makes perfect sense.
Many free-to-play games utilise these varied tokenisation systems. It becomes second nature to the gamer. In the world of blockchain, tokens abound. It is therefore not a huge leap of imagination to understand Axie Shards, Smooth Love Potions, Atlas tokens, SOL, or whatever other utility tokens a game might use.
This is one step away from BTC, ETH, USDC and BNB adoption.
The blockchain door is already open to most gamers, they just need to walk through it.
Forgot About Onboarding
Two steps forward, one step back. Traditional games need to onboard their players effectively, it's their lifeblood. They spend significant time obsessing over the process of onboarding and early game retention, whole dev teams orient their sprints around retention data. The competition is too high, player attention is fragile at best and many other distractions exist (Oh look, puppies on YouTube). A carefully optimised, data-driven first-time experience is a must.
Onboarding expertise will be critical in mass adoption of blockchain.
To a large extent the first wave of blockchain games have thrown these lessons out of the window. Mainly because they have not been trying to appeal to the traditional gamer. Instead they have focused on the economic player, who wants to play regardless of game quality, in order to make money. The rush to get these game out the door meant leaving some things at home.
In addition, the large majority of blockchain games, touting themselves as play-to-earn have either required an upfront NFT purchase to play (in many cases before the game is even launched), or require NFT purchase to quickly get ahead in the game. As all these games involve some interaction between their player base, high ticket NFT purchases are very firmly in the pay-to-win zone.
Pay-to-win and poor onboarding are a digital wet-fish-slap in the face to the traditional gamer.
It means that the first wave of gamers embracing blockchain games have done so for predominantly economic reasons, in order to try to monetise their NFT assets and/or use the game to generate real revenue. All in spite of the game quality, pay-to-win and onboarding issues
As blockchain gaming has matured, things are changing. The crypto bear market, the Axie Infinity hack and the realisation that in-game economics need significant sophistication to survive long-term has thrown the evolutionary hammer at the newly-built glasshouse of blockchain gaming.
Games that focused solely on economy have all experienced rapid in-game inflation, reduced earning potential of their economic player base, and a crash in player activity.
After crashing, these games have been forced to pivot to widen their appeal in order to survive. They have seen the need to bring in the traditional gamer. These early games have shown the potential of blockchain, provided a use case for further development and highlighted some of the critical issues. They are now changing their approach.
As well, more established developers are entering the space, bringing their deep knowledge, in order to fix these problems. According to research by Stratis, a leading blockchain platform, more than half (58%) of 197 video game developers surveyed in the U.S. and U.K. are now beginning to use blockchain technology. While nearly half (47%) of respondents have already begun incorporating NFTs in their games.
Blockchain game development is once again focused on game experience, fun and smooth onboarding. Chain diversity is growing with most growth away from the congested Ethereum network where high gas fees kill the chances of any game requiring full blockchain integration. Chains like BSC and Polygon have seen the largest growth.
Second Wave of Blockchain Games
The types of gamers needed in order to survive has evolved. The second wave of game developers getting into blockchain games are much more focused on fun and gameplay, before economy. This focus on ‘fun before finance’ and less focus on pay-to-win mechanics appeals to the traditional gamer.
This doesn’t mean a shift of focus away from revenue generation. It just means a more subtle monetisation, built more on long-term balance, and less on short-term pay-to-win monetisation. This focus on long-term development makes the game less attractive to short-term economic activity, with the early gold rush being largely over and done. This is reflected in a drop-off in players as we transition from first wave to second wave.
Though this might look like the decline and potential death spiral of blockchain games, it is more of a pause for breath. The underlying investment and development is still there. The first half of 2022 saw top funds in the NFT and blockchain gaming space raise a cumulative $10.5 billion in capital. More sophisticated blockchain games require more time and resources in order to hit the quality bar set by web2 games. Heads are down, working furiously and often under the radar, with less headline releases and more silent ‘quality grind’.
With a fully integrated blockchain foundation, sophisticated economy built for the long-term, intelligent management of tokens, compelling core loop and focus primarily on good game design, this is music to traditional gamer's ears.
“The number one priority is ensuring we’re creating a fun product,” said Michael Wagner, creator of Star Atlas. “It doesn’t matter how good the financial incentives are. Our focus is on building a cool, high-quality experience that will attract people in. Of course we have the financial incentives as well, but that’s just an enhancement to the gameplay.”
NFTs are the Heart of Blockchain Games
NFTs are the essential asset in blockchain games. Earnable, tradeable and value storing. They will be the driving force of the new game economies. Ownership of NFT assets will be the key to unlocking game content and progression, the primary unit of status and power, the workhorse for generating in-game earning and the main economic off-ramp allowing players to turn their blockchain assets into fiat currencies or more usable crypto.
NFTs have significant utility which can extend beyond the owner.
Asset lending enables the owner to make better use of their full NFT portfolio. It allows for better utilisation rates, putting to use NFTs that might otherwise be gathering dust. It provides an effective means by which new economic players can rapidly scale up in the game and start to generate revenue. Rental is also a way for players to self-organise into guilds and see economies of scale by sharing assets.
Renting of NFT assets will continue to return revenue back to the original owner in the form of in-game currencies, levelling up their NFT and other varied rewards. Rental also diversifies risk, meaning players can access assets in games they love without over-commitment. Economic players can rent NFTs and completely avoid the initial investment required to enter the game. These factors make organised groups of players a formidable and powerful member of the game economy.
These factors open up a wide variety of economic use cases and a vastly diversified overall ecosystem. When the total elimination of centralised authority in a game is the end goal, these assets will be more likely to hold their value. The governing body of players and game developers in the form of a DAO will make decisions that fundamentally benefit the game health, and not just the bottom line. This creates games that will last and NFT assets that hold long-term value, appreciating rather than depreciating.
Conclusion - How NFT rental will onboard 2 billion gamers into crypto
Gamers are ready for mass adoption of crypto, they are tech savvy and understand tokenisation.
As the quality of blockchain games improves, the requirements of wallet, crypto and NFT assets will be better embedded into the game. You will not need a good understanding of crypto in order to get into the game. This will mean better accessibility to the wider majority of 3.1 billion gamers. It also becomes more attractive to the non-gamer economic players again.
A layer of gamified simplicity will exist above the internal blockchain foundation. This will exist across PC and mobile, with games and supportive apps removing all barriers between devices.
Players who are there for fun and the development of power/status in the game have secure and reliable means to utilise their real-world capital to get ahead. The assets they require can be generated and farmed by the economic player. NFTs will be the heart of this trade equation.
While crypto was seen as the primary use case for blockchain, gaming has been the consistent mover in blockchain adoption making up 55% of all blockchain activity. Blockchain gaming looks poised to disrupt the big console giants and the big global publishers, cutting through monopolies not by creating new centralized powerhouses, but by decentralizing and building a grassroots movement of smaller publishers and communities.
Balancing the appeal to traditional gamers and economic players brings blockchain games into the mainstream. NFT rental is the heart of this new gaming ecosystem, empowering players and opening up new channels for economic gain. NFT asset rental is the node linking diverse sets of players, across games, across ecosystems, meeting varied playing motivations and bringing onboard the big majority of gamers. This will put blockchain in the pockets of 2 billion gamers.