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Why is it important to have a sustainable NFTs game economy?

The traditional gaming paradigm has been turned upside down by play-to-earn gaming. Whereas Web2 publishers and developers frequently employ pay-to-win dynamics that skew the playing field in favor of the wealthy (as evidenced by the much-maligned loot box phenomenon), nonfungible tokens (NFTs) and blockchain games stand to offer more equitable in-game economies in which players can earn tangible rewards for their efforts.

However, while NFTs and play-to-earn mechanics set the groundwork for a more equitable and rewarding gaming experience for users, they are insufficient to ensure a successful and sustainable game economy. To avoid these virtual economies from collapsing into cash grabs, every aspect of asset creation, distribution, and management must be studied.

Why are NFTs used?

Why bother utilizing NFTs at all in the building of a game economy? In recent years, many prominent games have introduced built-in economies utilizing methods that have nothing to do with blockchain. However, while this may benefit game producers' bottom lines, it does very little to benefit the end user.

Meanwhile, the use of NFTs has the ability to provide certain desirable aspects that non-blockchain games simply cannot provide, such as verified, immutable digital ownership. An in-game asset represented by an NFT provides the player with hard-coded assurance that the item is theirs, granting them the ability to sell, trade, or exchange it as they see appropriate.

Similarly, the immutability of NFTs allows game makers to provide their audience with actual, verifiable scarcity. Rather than relying on the producers' word that an in-game item is sufficiently rare, players of blockchain games can ensure that their NFTs are one-of-a-kind by checking the number of issuances on the blockchain's ledger.

This emphasizes a genuine sense of ownership, as well as allowing players to keep the value they put into a game. When a gamer moves on to a different game using NFTs, they will have the option to either sell or bring items made, earned, or acquired on the previous platform with them into the new environment. In any case, the time and money they spent acquiring those assets will not be lost in the ether.

The promise of NFTs must be built upon in gameplay

The fact that blockchain provides the door to profitable games is undeniably appealing. However, it also attracts opportunists and profiteers rather than a devoted and loyal fanbase.

There are already numerous games that advocate blockchain integration and NFTs, but far too many cater to individuals who are in it to use the system for monetary gain. Not to suggest that there aren't great projects out there, but many prioritize generating money over other aspects of gaming, which isn't as appealing to gamers as it is to profiteers.

A quick look at the top blockchain games by user base reveals projects that have already been taken over by an army of bots designed exclusively to manipulate the system and extract value from it.

This is why NFTs must be used in a way that does not undermine the game's goal and encourages a system in which earning and gaming complement each other. Users should be drawn to a game for its fundamental gameplay first, before becoming charmed by the potential of actual asset ownership or money production. Anything less will inevitably result in a mostly monetary audience, and such a user base is unlikely to be sustainable.

The distribution of smart tokens

Token distribution is also important for the long-term viability of an in-game economy. Although we've seen that monetary incentives aren't enough to foster strong gaming communities, the unequal distribution of tokens and NFT products may render gaming communities unviable.

When producers distribute the majority of their tokens through private sales, game users have fewer rewards to win through active gameplay. Early financial investors, who may or may not intend to interact with the game directly, profit if the game is a success and the game's economy becomes unstable as a result.

Developers should avoid selling too many game assets in private sales and find a means to meet their fund-raising goals without detracting from the final product. To that purpose, developers may explore selling just limited edition things in early sales rounds, incentivizing investors but leaving the majority of in-game assets for players to discover themselves during active gameplay.

It's also critical to ensure that the bulk of blockchain items continue to necessitate devoted gaming from players who desire to obtain them. Furthermore, other constraints such as periodic resets to players' progression (applied seasonally, for example) stand to contribute to a more fair playing field over time and diminish the concentration on simply farming for profit.

The utility of tokens

Even though NFTs serve as the backbone of a game's economy, their in-game functionality will serve as the foundation for genuine market stability. Assets should avoid becoming speculative in nature, and their viability should be determined by how they help players beyond their monetary value.

One example would be the use of a utility token required by players in order to mint in-game NFTs. When such tokens are spent, they might be automatically deposited to a collective rewards pool and then redistributed in-game using a staking mechanism. This will encourage active participation on the side of the player by encouraging involvement while also conferring value and demand on the utility token from the start of the game's release.

The problem of NFT distribution is further solved by tying the creation of new NFTs to a native utility token: the game environment is naturally managed and safeguarded from saturation by a sudden flood of in-game objects.

Vesting intervals

Then there's the issue of suitable vesting times, which many cryptocurrency users are already aware of. Vesting periods are frequently critical in convincing investors to participate in a token sale for a specific project. Gaming economies must also be aware of the vesting periods associated with a certain GameFi project. A sudden sell-off of tokens will usually result in a token price crash. This may trap the surviving players in a collapsing game ecosystem with tokens that suck away their value.

Game makers must also use caution when fine-tuning their vesting periods. Asking early supporters to keep their tokens locked up for an extended period of time may deter would-be investors from the start, leaving creators with fewer resources to bring their gaming worlds to life. Shorter vesting periods, on the other hand, may gratify seed and private investors but may result in the aforementioned devaluation of the game's economic base.

Conclusion

Over the last decade, gaming has risen to become the dominant form of entertainment, supplanting the music and film industries. With the global gaming industry predicted to be worth $250 billion by 2025, the benefits for successful GameFi deployments promise to be enormous — but getting there will be difficult.

Many of the key features of a game's native economy must be carefully considered. There is unlikely to be a single model that will work for all games, but rather a range of options that will be more or less effective. Nonetheless, developers who carefully analyze these aspects stand to create platforms with long-term staying power and committed players. Those that do not may strike it rich, but they are unlikely to maintain engaged players and risk becoming little more than a glorified gambling platform.

** Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of USA GAG nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

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