While I am still bullish on the NFT gaming / blockchain gaming sector, there are some very glaring issues that have arisen in the last few months. These issues may prevent mainstream adoption and provide even more negative press to the play and earn / NFT gaming sector. There has been a ton of game tokens and releases in the NFT space recently. Almost TOO many in fact. It’s incredibly hard to keep up even as someone paying attention. In my opinion, 90% of NFT Games will more than likely go to 0 adding fuel to the scam or P&D narrative. Some games well intentioned, with others being outright rug pulls. This is not financial advice to please don’t sell your NFTs in your favourite game. Do proceed with caution though!
Here are some of the problems with NFT games in general and some potential solutions.
Most of the games aren’t deep enough for long term engagement
This one is pretty easy. As a gamer who has done professional esports tournaments and events and gamed all their life; current NFT games are super shallow. This isn’t true to all of the games but I’ve played quite a few NFT games and they follow the shallow trend. Games aren’t easy to make so kudos to the legitimate teams building. There is however, tons of hopium, lots of positivity and very little substance to the majority of the games. The grand majority of investors / gamers who are into NFT games believe in the cause and are willing to give benefit of the doubt and invest based on potential. Unfortunately, the good will only goes so far. It’s similar to the beginning of the free to play era. Tons of garbage while being bombarded with microtransactions and very questionable gameplay. Compounding the issues are the pressure to build consistently, create economic output for gamers AND maintaining a healthy economy for your game.
When there is less than 30 minutes of actual gameplay or if the gameplay is extremely repetitive, it becomes tough to keep gamers engaged AND invested in your game. Building a game is not easy, it’s incredibly tough and factoring in the economy, it’s even harder. Some teams are very experienced while others are doing this for the first time.
While the gold rush moment is happening, building a sustainable and long term game that is fun will be key. Teams need to think long and hard about what is being put out into the sector as reputation management is vital.
A lot of the economics aren’t sustainable
Instead of complex economies that balance themselves over time or that can be balanced by dev teams via normal game changes, the grand majority of play to earn games are not sustainable at the moment. The current trend is, token release, large pump and then large dump. Token mint ratios get out of control and excess supply becomes a big problem. Some games face liquidity issues and aren’t able to properly sustain trading or price action. NFT tokens in games are seen as investments primarily, when the devs make game balance changes they can negatively impact a lot of the parity of someone’s investment. This raises the question of, is this a game first or a investment simulator first?
Other examples are breeding. The current breeding structure in some games is wayyyy to easy. Literally NFT A + B = C. Compounding the issue is that there are few use cases for the in game tokens. The majority rely on breeding and little else as a burning mechanism. Creating game depth and not just burn mechanisms that prop up investment players is key to long term sustainability. Ie, in path of exile, currency is burned while crafting and acts as a sink. The economy is balanced around the multiple layers of in game currency with rarer and rarer currency.
Meta changes can destroy economic balance
In normal games, meta changes are frequently welcomed and provide fresh to gameplay. New patch = win and an excitement. From an NFT gamer standpoint, this can be financially punishing due to the costs of some NFTs. For example, if an NFT in your game cost $1000 and it got nerfed, it would depreciate in value and you’d lose out. This can be argued similar to a hero in other games like a moba but not on the same scale. Investors then feel deceived may create negative feedback loops to the development team or to potential players looking to enter.
This is incredibly tough to solve. Gaming should be the primary focus and attracting gamers who understand meta changes can help. Overall though, education and time will more than likely solve for the risk aspect of these investments or games.
Being early is key and super important
Being as early as possible is key in NFT games due to the current structure is vital to your economic health. Imagine getting a game token when it just minted or even during a private sale. Now imagine it goes parabolic and is garnering interest from outside. You can either dump your tokens or continue playing the game. The smart play is to remove your initial and let the rest ride + taking profits. However, not everyone is always that fortunate. Many investors go into hype cycles and buy at the top creating bag holders. However, the problem with this is that someone else loses out due to hype cycles.
Always be aware of hype cycles. This is a very hard thing to solve but look for sustainability of the game and how long it has been in market. If it’s gone through a “crypto winter” or a few hype cycles chances are it might help you make an more informed choice. If you are investing after an 800% run BE CAREFUL! The top could be near.
Many of the players are the same from other P2E / Play and earn games
The NFT Gaming space isn’t that big at all. Many groups / guilds are looking for the next big game. For example, games / guilds are looking to diversify and expand games while making money. Many similar games / NFT game purchasers are going game to game and investing. It’s important to realize that the actual market is still quite small overall and the issues can potentially get amplified with teams that have insider or extra knowledge.
It’s important to do due diligence and who is investing and for what reason. Following wallet transactions can offer additional insights.
The barrier to entry is high
Imagine telling someone they have to spend $1500 to own assets into a game. Then, you have to tell them that their investment can decrease by a significant amount over a period. That’s outright crazy for some. However, in the NFT space it can be the norm. Scholarship models can significantly reduce the barrier to entry via profit sharing. However, those can have other issues in general.
Barrier to entry needs to be reduced in order to create longer term value for everyone involved in the space. This will take time and patience from those investing, playing and new to the NFT gaming world.
Expectations of retail investors is insanely high
Devs have to balance extremely short term needs vs building long term (and trying to build a game). “Wen binance”, “Devs do something”, “Fix price” are just some of the comments constantly found in discords. A lot of the expectations in NFT Gaming is that you MUST make a return on your investment while in regular that’s not the case. You buy a game, sit down and enjoy it. If you bought an NFT and it went to zero but enjoyed the game is that a success? To many in the NFT Gaming space it’s an outright failure. Development teams are looking to focus on building rather than create multiple short term wins that will hinder them long term growth. Retail investors need to provide teams time to build while also NOT investing more than they can afford to lose.
As the NFT Gaming space matures, so will the investors hopefully. At the moment expectations are sky high to get things done immediately without understanding what goes on into game.
Cycles are getting shorter and shorter
Compounding the problem, game cycles and patience are getting shorter and shorter which creates a race to who will hold the bag at the end. Rather than giving time to the dev teams, investors / players are uncertain if the team can be trusted due to bad experiences from other teams. For example, if there are fudders, previous bad investments, poor communication or some incompetence from the dev team, it can kill a game fairly quickly. Unfortunately, this type of scenario creates a very large negative sentiment amongst newer investors and turns them off from playing further.
Traditional gamers hate NFTs + Crypto
In order to attract a broader audience, NFT games must bridge the gap to traditional gamers. The issue is traditional games absolutely HATE crypto and NFTs. Labels such as eco terrorists, scammers, pump and dumps, ponzi schemes have all been thrown out as labels when discussing NFT games. Adding to the fact that general crypto mining has taken video cards and other microchips away from regular gamers and added fuel to the fire.
This is not an easy problem to solve and will potentially take a generation of new gamers to fix. Education on the space, time and continued improvement of the NFT Gaming sector will hopefully bridge some of the gap to our traditional gaming friends.
Macro issues still have a large impact on NFT Games
For now, most play and earn games are coupled and impacted by broader economic markets. Tokens are tethered to eth through cex/dex and they move with that, which has become much more of a ‘traditional’ investment asset that follows global economic news. Once games are more decoupled economically, they’ll be able to avoid broader news or it won’t have as much impact.
Play to earn is not sustainable in its current form
Play-to-earn games are games in which the main goal is to earn. The game’s progress revolves around getting profit. Games like this are usually built-in NFT or blockchain technology and produce currency that can be traded for fiat or other coins. Scholars primarily play Axie Infinity to earn SLP and then exchange that into PHP or fiat. They may not necessarily enjoy the game but are doing it for money. On the other hand, play and earn games are games that playing the game is first and earning is secondary. An example of this could be me enjoying Axie Infinity. I realize that Axie Infinity is out there and decide to play and continue playing because I enjoy the game. Earning to me is now a secondary biproduct and not the primary one.
Earning for just simply playing is not economically sustainable. Not everyone should be expected to make money out of a game as it sets the wrong expectation and attracts the wrong type of audience. Axie has been shifting from the P2E UBI model and more to a skill based game in play and earn. While the merits of P2E are positive, it unfortunately is not sustainable in it’s current form.
The model will continue to evolve with deeper and more complex gameplay. Play and earn is just the first evolution of this while P2E was the originator.
Wallet transactions are a pain to deal with on networks while gaming
Currently, gaming isn’t intuitive on any of these games. It’s a huge pain in the ass to do anything. It’s even more amplified if you have a ledger or trezor connected. Want to go somewhere? Go confirm that transaction. Want to craft an item? Go confirm that tx and so on. Oh, blockchain issue? Tough shit. Go wait a bit while they their fix stuff. Gas too low? Fuck your transaction.
The first team to put a game that individuals don’t know is on the blockchain or doesn’t have constant transactions could be a big winner in the space. Technical feasibility may limit this but there could be options such as game first, nft / crypto 2nd while offering dex’s and other crypto friendly items.
Rugs and scamming teams galore
Anonymous team? No history? Promising the moon? Red flags! Be careful out there. There are a ton of rugpulls and scams in the NFT space. Building a game is not easy so be aware of fiverr unity demos that show cutting edge gameplay but in reality are just put together in 20 minutes by someone else. Anon teams don’t necessarily mean automatic rug but there’s a very high chance.
Try to look and invest in teams that have funding rounds from legitimate investment firms. Do research on the founders and their previous work. Read white papers and try to look for overly complex buzzwords that mean nothing. If your gut says something, avoid it!
Closing
Despite all the cons listed above, I am still optimistic about the future of NFT Games. There are a lot of potential positives and benefits that they can provide. However, as an industry and there needs to be a maturation period and cleaning up in order to grow beyond what it currently is. Many of the issues hopefully will be solved through trial and error and studios in the NFT Gaming space addressing the issues. However, there needs to be caution when investing, building and entering into the NFT Gaming space.
What are your thoughts? Leave a comment below if you want to discuss or contact me.
