NFT Market collapses as Video Game Publishers bet on it

A 92 percent fall in sales of NFTs comes just as major video game publishers like Square Enix and Ubisoft invest heavily into this form of blockchain technology, a move deeply unpopular within many gaming circles. But it will take a much more sustained drought in NFT sales before the industry will be convinced to drop the idea permanently.

The opening line of a recent Wall Street Journal report is simply, “The NFT market is collapsing.” With a 92 percent fall in sales of NFTs, and a drop of ‘active wallets’ by 88% since November 2021, it is hard to argue with that assessment. And it isn’t just sales that have hit the bottom, according to Google trends searches for the term ‘NFTs’ have fallen roughly 80% since January. This comes just as major video game publishers like Square Enix and Ubisoft invest heavily into this form of blockchain technology.

How does the blockchain integrate into gaming?

NFTs are bitcoin-like digital tokens that act like a certificate of ownership. The use of blockchain technology has been offered as a way of solving problems that exist in the traditional paper money system. Fundamentally, a blockchain is a chain of data blocks on a computer network that is transparent to all of its users. It cannot be altered or relocated.

On this, the player holds a particular amount of digital assets called NFTs, or non-fungible tokens, in the same was as cryptocurrency. NFTs are one-of-a-kind and cannot be forged, and could be an in-game sword, bow, shield, staff, or clothing, for example. In a blockchain-based game, you can see how many of this type of item are available in the game. This rarity implies a certain value, which players will pay in order to own the item through the NFT.

Proponents of NFTs will also say that these items can be transferred from one blockchain to another, so that even if a game service ends or is no longer developed that you could keep the NFT and possibly utilize it in a new game, although so far this is little more than a sales pitch as it would require each game developer to implement the new item individually.

An appealing route for publishers

For game publishers, NFTs and blockchain are promised as a lucrative way for them to build out their in-game marketplaces, especially those that offer video games as a service. Fortnite for example, is free to play, but its 350 million registered players are encouraged to make small payments in exchange for in-game items, like costumes or unique weapons. On this alone, it turned over $5.1 billion in revenue in 2022.

While integrating NFTs is not something that Fortnite or Epic Games has made any announcements about, it is a good example of where a company might want to explore the possibilities promised by NFTs and Blockchain. Introducing unique, rare items of a limited number that can be bought by its players offers another revenue source. Another promised application of NFTs is to potentially allow players to create their own unique items that they can sell and that can be resold within the game market.

Not everyone wants NFTs

But for all the promise of lucrative earnings and engagement, integrating Blockchain and NFTs into gaming is not a straightforward, or even necessarily desired route. In 2019, the game publisher Valve found scammers using its own loot boxes to launder money, and it has banned NFTs from its stores. 

NFTs and blockchain gaming remain deeply unpopular within many gaming circles as well, with players seeing it as a way for publishers to squeeze more money out of a game, instead of delivering a high-quality product. Indeed, when Ubisoft tried introducing a new NFT system for its games, called Quartz, it was so unpopular the company canceled it after just a few months, the total revenue coming to barely 400 USD.

Is this the end of NFTs?

Despite the currently bleak outlook for the NFT market, it is unlikely to ‘die’ anytime soon. One of Ubisoft’s chief strategists has already doubled down on NFTs stating that gamers ‘don’t get it,’ and that they should be excited about the idea of selling in-game items for ‘money’ after they’re done playing. The CEO of the Japanese game company Square Enix recently made similar comments, implying that playing video games for fun is an outdated idea.

Square Enix recently sold some of it’s biggest IPs including Tomb Raider, The Avengers, and Deus Ex, allegedly so the company could focus on Blockchain. The comments from fans of those games have not been kind to Square Enix.

Despite this, whether it is Square Enix, Ubisoft, Sega, Team 17, Zombie Atari, Konami or GameStop, many companies in the industry are exploring Blockchain technology, and it will take a much more sustained drought in NFT sales before the industry will be convinced to drop the idea permanently.

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