Entertain Through Blockchains: NFT Videogames – Fin Tech
30 May 2022
Klein Moynihan Turco LLP
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In addition to NFT Sweepstakes and NFT fantasy sports contest-like games,
companies are developing various gamified NFT collections or
“NFT videogames.” In such games, minters use NFTs in many
ways, including as rewards for player participation (i.e.,
completion badges) and as the means of entry to gameplay (e.g.,
tokens that users may digitally insert to play a game). NFTs that
offer holders added benefits, such as the right to play certain
videogames, are otherwise known as “Utility NFTs.” It is important
to note that companies which sell utility NFTs may face serious
penalties if they refuse to follow through with advertised
ownership benefits, including regulatory investigation and
potential litagation.
NFT Videogame Platforms
While major videogame companies have proposed incorporating NFTs
into existing web-based games, the most popular mechanism that
mixes NFTs into games is through use of NFT dApps (short for “decentralized
applications”). dApps are applications that operate
automatically through smart contracts on a blockchain. NFT dApps
incorporate the use of NFTs into their software. User activities
are transmitted on the relevant blockchain via Internet Service
Providers to other users.
It is important to note that NFT videogames have been banned
from some mainstream platforms, including Steam.
NFT Videogames
Well-known NFT videogames include Splinterlands, Sorare, and
CryptoBlades. One of the most successful NFT videogames to date
is Axie
Infinity. The Axie Infinity dApp is a Pokémon-style game
where Pokémon-type fighting characters take the form of
NFTs. To play the Axie Infinity NFT Game, character NFTs must be in
player crypto wallets in order to participate and breed NFT
characters.
Beyond creating a singular NFT videogame, some companies are
creating videogame ecosystems that use and allow players to earn a
shared cryptocurrency. In these ecosystems, players may earn
digital currencies or NFTs for their accomplishments in applicable
videogames (otherwise known as “play-to-earn” mechanics).
For example, Netcreeper Media Limited has created one
such NFT videogame ecosystem (named “FEAR”), which
consists of multiple horror games, including Crypt, Clucking Hell,
Araya, and Undead Neighbour. These games reward players with Fear
tokens for achieving specific goals, which can be used to purchase
FEAR NFTs that, among other things, unlock characters, certain
abilities, and the pay-to-earn feature in Undead
Neighbour.
Over the past few months, NFT minting controversies, including
controversial launches (e.g., NBA’s Collection NFTs), phishing scams,
and rug-pulls (e.g., the Frosties Scheme), have flooded the news cycle.
Given the foregoing, it is advisable to obtain guidance from
attorneys experienced with NFT marketing before offering NFTs to
the public.
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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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