One of the main contributors to this bullish cycle is the growth of the decentralized finance (DeFi) sector and non-fungible tokens (NFTs). Both of these cryptocurrency niches have allowed a large number of new investors, both retail and institutional, to take interest in the market and buy bitcoin.
However, even though the entire market has been retracing considerably in the past few months, the NFT market, and gaming coins, in particular, are still holding strong. In this article, we take a look at the reasons why certain gaming coins are gaining value while the rest of the market is struggling. To this end, we will explain the basics behind NFTs and some of their pros and cons.
More importantly, we explore the particulars of the play-to-earn gaming model promoted by the Yield Guild Gaming community. Let’s delve in.
What are NFTs?
Non-fungible tokens or NFTs are digital items that are recorded on the blockchain. They contain a set of unique characteristics that allow us to differentiate them from one another. Thanks to NFTs, we can digitize anything of value, including gaming items, characters, or currency. And because they are blockchain assets they enjoy the properties of the decentralized ledger that was made popular by Bitcoin, including:
- Proof of ownership - NFTs are accessed through cryptography and only the owner of the private keys can access them and send them to other users. This means that gamers genuinely own the items they receive as NFTs in a game.
- Provable scarcity - thanks to the traceability provided by the blockchain digital ledger, we can easily prove the scarcity and uniqueness of each NFT. At all times, we can see when it was created, who owns it and how many instances of it are available
- Easily transferable - the ownership of an NFT can be easily updated to another user without having to rely on a centralized platform. They can be sent between peers as easily as cryptocurrencies are transacted on the blockchain.
- Durable - NFTs are decentralized assets and cannot be destroyed. Even if the game servers ceased to provide services, the NFTs would remain usable and tradeable outside of the ecosystem.
Limitations and concerns surrounding NFTs
With that said, there have been some rising concerns around NFTs, mainly regarding their scalability and sustainability. This is because most NFT-focused projects run on the Ethereum network, which is notorious for its high energy consumption.
The currently used proof of work consensus mechanism is inefficient as it requires copious amounts of electricity to verify transactions. Moreover, PoW blockchains do not scale well for mass usage. This means that as soon as the NFT market explodes and games start including them en masse, the entire network would be congested.
All transactions including supply chain, financial, and gaming would take hours to validate, which would defeat the purpose of the network. These concerns have contributed to the price of Ethereum underperforming compared to other altcoins. However, the ethereum network is migrating towards a much more scalable PoS model that should solve all of these issues simultaneously.
Who are Yield Guild Games?
Many gamers are jumping on the bandwagon to start earning by playing games. Yield Guild Games (YGG) is a decentralized organization of gamers that focuses on investing in gaming projects that offer play-to-earn models. These include the extremely popular Axie Infinity, Decentraland, and The Sandbox games. It’s the rising popularity of the YGG model and the Axie Infinity game that allowed the price of NFT tokens to experience a stark revival in mid-June 2021. The YGG model attempts to bring yield farming to popular gaming projects and allows people to earn passively from their NFTs. In a nutshell, here’s how their model works:
- Their goal is to build a solid community of play-to-earn gamers that will be interested in earning gaming regards in the form of NFTs on a regular basis.
- They plan on turning a profit from the resale of in-game assets such as NFT tokenized land, or by renting powerful NFT creatures to newcomer players.
- Provide funds for research and development of new NFT-based games.
As the market value of different cryptocurrencies tied to these NFT world rise, so will the value of the NFT assets that the players own. The guild members will be able to use the YGG services to resell their assets at the best price or rent them to other players to gain passive income.
The play-to-earn gaming models are still very recent and have tons of untapped potential. With the proliferation of proof of stake smart contract blockchains, we can expect them to become much more popular in the future. Consequently, gamers will have an increasing number of different games to choose from. They will be able to monetize their time spent gaming and earn crypto that can be used to purchase real-world assets.