Can NFT game assets be traded before they are created?
In 2022, one of the hottest topics will be the debate over blockchain technology.
NFTs in video games, digital art, and other digital configurations are no exception.
Some people believe that owning an NFT is equivalent to owning the Mona Lisa in some situations. Then there are those who believe the trend is "terrible."
For some time now, polarizing views on NFTs have been circulating the internet, whether it's about their carbon footprint or their worth as video game assets. So we're here to provide you with a detailed account of this fad, from the good to the bad.
But first, what exactly are NFTs, one of the most significant video game trends for 2022? And why are people divided about these digital entities?
What exactly is an NFT?
The growing interest in NFTs ensures that it will be one of the most anticipated gaming industry trends in 2022. However, many people are still unsure what they are.
To put it simply, a non-fungible token (NFT) is any digital coin minted on the blockchain.
Okay, perhaps more explanation is required. The minting process, in essence, converts any digital item into an NFT. This digital item is added to the blockchain or ledger that contains all cryptocurrencies and NFTs. Then, until another valid transaction occurs, a record of this transaction (known as a block) should be kept on the ledger.
So, using minting, you enter digital art or video game assets (or anything else digital) into the ledger, and presto! You now have a one-of-a-kind and certified NFT on your hands. And because it's a public ledger, everyone can see that you truly own it.
It's important to note that there are several ledgers or blockchains in use, with Ethereum and Bitcoin being the most popular. And one of the ways these blockchains differ is in the system they use to carry out transactions (we'll get to that later).
In video games, what is an NFT?
In the context of video games, an NFT is essentially the same, except that you get to experience and interact with the digital asset rather than simply beaming with pride because you own it.
According to one of our expert software developers, these tokens will be used in "the rules, mechanisms, and player interactions" of several blockchain-based video games. They are, in fact, part of the design of the video game.
These NFTs can take the form of avatars or game items, which players can "then swap or trade...with other players," according to him.
There are, however, blockchain-based games with NFTs that are designed solely for in-game admiration. A recent example is Louis Vuitton's mobile game. The luxury brand's mobile game allows players to collect the 30 NFTs for free and appreciate their design.
There are also NFT-based video games that encourage users to earn money while they play. It's safe to say that the prospect of making money — and making a lot of money — through NFTs is the primary driving force behind the craze.
The NFT Craze: A Sudden Increase in Cryptocurrency Interest in Video Games
Unbelievable news broke in 2021 about a digital artist earning millions of dollars. Beeple, an American artist, created a virtual piece titled "Everydays: The First 5000 Days."
It's a collage of his work from the last 14 years that sold for an astonishing $69.3 million at auction.
Naturally, this get-rich-quick story piqued many people's interest and prompted a flood of online news coverage. Artists appear to be able to profit significantly from their work as a result of this new technology.
How Do NFT Video Game Users Earn Money?
However, the digital art industry is not the only one using blockchain to make money. On a smaller scale, video games have introduced a new way for a large number of users to profit from NFTs and cryptocurrencies.
Players in the NFT-based game Alien Worlds, for example, can earn money by mining tokens and NFTs in the virtual world of the video game. It's a classic example of the play-to-earn business model, which many NFT-based games use
In a nutshell, this model allows players to exchange in-game tokens for cryptocurrency, which they can then exchange for real money.
Alternatively, NFT game assets can be created and traded prior to the development of the game for which they're intended. The idea of owning these assets apart from the game itself is one of the factors that draws people in.
Others, on the other hand, believe that these NFT game assets have cross-platform capabilities, which are not only difficult to achieve logistically but also nearly impossible to achieve.
The methods of acquiring digital art NFTs and NFT video game assets may appear to be distinct at first glance. However, at their core, NFTs are about certifying ownership on a digital ledger.
According to Digiconomist, a single transaction on the Ethereum blockchain is equivalent to "the average US household's power consumption over 8.2 days." And given the volume of transactions that miners and NFT enthusiasts conduct today, it's easy to see why this is a problem.
The NFT Controversy: Its Contribution to the Already-Extremely Serious Climate Crisis
Environmentalists have raised the alarm about the impending consequences of climate change in recent decades, bringing to light issues such as excessive plastic production and marine pollution. Now, blockchain technology appears to be adding to the growing list of climate concerns.
Environment journalist Justine Calma explains why this could be the case in a report for The Verge. The minting of NFTs is not only energy-intensive, but it is also done on purpose.
Blockchain technology can secure and safeguard cryptocurrencies and NFTs by utilizing a system known as proof-of-work (PoW).
This mechanism prevents anyone from tampering with the highly accessible and public ledger, making it immutable.
The issue is that in order to secure, mine, or validate these assets on the blockchain, computers use computing power to solve "an arbitrary mathematical puzzle," according to Investopedia.com.
As previously stated, this consumes a significant amount of energy. These "arbitrary mathematical puzzles" necessitate large amounts of electricity being consumed by computers, resulting in significant greenhouse gas emissions.
The issue is that in order to secure, mine, or validate these assets on the blockchain, computers use computing power to solve "an arbitrary mathematical puzzle," according to Investopedia.com.
As previously stated, this consumes a significant amount of energy. These "arbitrary mathematical puzzles" necessitate large amounts of electricity being consumed by computers, resulting in significant greenhouse gas emissions.
So, if you're wondering what's causing NFTs and cryptocurrencies to be so energy-intensive, know that the culprit is the transaction method.
At the moment, PoW is the most widely used method for safeguarding NFTs and cryptocurrencies on the blockchain. This system provides security to Ethereum and Bitcoin.
Is There a PoW System Alternative?
An alternative to using fossil fuels is to use renewable energy. Another option is a proof-of-stake system (PoS). It restricts who has access to the blockchain, allowing for less computationally and energetically intensive mechanisms to suffice.
The issue with PoS is that it goes against what blockchain technology is attempting to do, which is to decentralize the power of transaction.
Because control over the digital ledger is no longer open to the public in PoS. River Financial explains that it instead "delegates control of the network to token owners." As a result, it's easy to understand why several blockchain platforms have been slow to adopt this system.
But how much of this problem is caused by NFTs in video games? Aren't they only a small part of the total carbon footprint of blockchain technology?
As previously stated, NFTs in video games are minting in the same way that NFTs in digital art are minting. One transaction could be more damaging to the environment than a week's worth of power consumption by the average American household.
In addition, according to Statista, millions of people have played NFT-based games in the last 30 days. In a month, that could amount to millions of blockchain transactions.
The same Statista report, however, reveals which blockchain platforms these mobile games are built on. Alien Worlds, the chart's top NFT-based game, makes use of the WAX and Binance Smart Chain (BSC) blockchains, both of which use a PoS system.
In fact, the majority of the blockchains listed in the report are PoS, with BSC atop the list. According to the PoS model, energy consumption is reduced by 95%.
According to the think tank Earth.org, in 2021, PoS blockchain Tezos claims its annual energy consumption is 0.00006 Twh. According to Digiconomist, Ethereum has a yearly capacity of 107.79 TWh. This is comparable to the power consumption of the Netherlands, according to the report.
So, do NFTs in video games cause the same amount of harm as they do in real life? Perhaps not, but it's also worth noting that this analysis is limited to blockchain transactions, leaving out other factors such as hardware.
How do you feel about it? Is point-of-sale (PoS) the best option? Please share your thoughts in the comments section.
In conclusion, blockchain transactions, including those involving NFTs, are typically inefficient in terms of energy consumption. Computers are generating so much power through the proof-of-work system, where the digital ledger is always public, that the effects of climate change may be accelerated.
NFTs in video games, on the other hand, could tell a different story. The energy consumed by blockchain transactions can be significantly reduced using an alternative system known as proof-of-stake, which limits access to the blockchain.
