Gaming skins and NFTs are a contentious topic within the $250 billion gaming industry — but will gamers, and gaming studios, be better off if gaming skins implement NFT tech?
Agent skins from Valorant.
What’s Wrong With the Gaming Skins Markets Today?
The ‘Roast Lord’ skin for sale in Epic Games’ ‘Fortnite’.
But there’s a growing movement of gamers who want their skins represented as NFTs, which would mean they could actually own and sell them on secondary marketplaces. This would create a much fairer market for gamers who support the industry.
How Big Is the Gaming Industry Today?
A unique ‘Dragon Lore’ skin from Counter Strike: Global Offensive, which sold for $61,000.
The ‘Star Wars’ skin pack from Epic Games’ ‘Fortnite.’
To those who don’t play videogames, the idea of forking out thousands of dollars for virtual skins might seem far-fetched or even just-plain-silly. But keep in mind, however, that just as fashionistas spend thousands on the latest trends and car-fanatics dig deep for custom rims and alloys, avid gamers will happily splash out for the latest virtual wares.
A case hardened Karambit in CS:GO, whose owner turned down a €1.2m offer for it.
This closed-market model, the developers rightly argue, allows them to sell their games at more affordable prices: the wealthier players spend lavishly on skins, so the devs can lower the retail price of the game itself. It’s basically just a different pricing model, where the base-price of the product is low, but players can optionally buy extras (like skins) that aren’t technically necessary to play the game itself, but which help fund the game’s development.
How Do Loot Boxes Work?
When you pay to unlock a lootbox, a roulette-like wheel of items spins round and round, and whatever item it lands on is what you get. Most of the items are worth less than what you paid for the loot box, but a small percentage are worth vast sums.
The roulette wheel-style loot box animation from Counter Strike: Global Offensive.
Games often dangle these rare and valuable items in front of your nose to encourage you to buy more loot boxes and ‘get lucky,’ even though the chances of this happening are about the same as with a real slot machine.
Could Centralized Marketplaces Solve the Problem?
Some platforms like Steam host markets with millions of skins from thousands of different games, which at first glance seems to solve the problem: gamers can buy skins from games they don’t own and trade them with millions of other gamers.
Steam’s Community Market.
But it’s still a closed, centralized marketplace, which is just a bigger version of the same problem. You can’t sell Steam items outside the Steam marketplace, so Valve – which owns Steam - controls the entire market, just like with Fortnite, World of Warcraft and PUBG. You also can’t withdraw cash from Steam, or most other platforms, which means that once you buy a skin, your money’s locked in.
What Are the Problems With Centralized Marketplaces like Steam?
Steam’s policy on selling accounts.
That same Steam policy also states that if a person buys or sells their account, they will permanently lose access to “purchases or activated games” and “inventory items purchased or acquired through gameplay,” a.k.a. their games and skins.
Steam’s subscriber agreement, which gamers have to sign if they want to use the platform, explains exactly how (3) works: “Wallet funds cannot be moved or withdrawn to a bank account,” it states.
Activision’s ‘World of Warcraft.’
Could NFTs Help Create a Fairer Skins Market?
NFTs have been around since 2014. The technology enjoyed a brief heyday in 2021 thanks to digital artwork sales like Beeple’s Everydays, which sold for $69m. Since then, prices for digital art have fallen dramatically. But even so, gamers are starting to get interested in using NFTs to support the skins market.
Beeple’s ‘Everydays,’ a collage of 5,000 images, sold through Christie’s auction house.
What Are NFTs?
NFTs are probably most useful for verifying ownership over a digital item, like an in-game skin or a digital artwork. But there are thousands of use cases for NFTs: supply chain, event ticketing and art, to name a few.
How Do NFTs Improve on the Tech We Already Have?
Creators can embed rules and conditions which activate every time an NFT is bought or sold, which gives them much more control over their products than they have now.
For instance, a musician could sell copies of her latest track as NFTs, which listeners could resell on secondary markets on the condition that they sell them for less than the list price, and that 10% of any resale profit goes into the musician’s wallet. These kinds of conditions apply everywhere, and would of course apply to NFT-skins as well.
Here’s where people often get confused with NFTs. Owning an NFT that represents something like a music track or digital artwork doesn’t literally stop someone copying and profiting from it, in the same way that owning the copyright to a song doesn’t literally prevent someone using its melody in their music. It does however help you prove you own something, and, most importantly, it can be easily transferred or sold to another person legitimately, unlike iTunes tracks or gaming skins today.
Could Developers Create NFT Gaming Skins?
Given their unique and useful characteristics, NFTs could flourish in the gaming industry.
Age of Rust, a blockchain-based game, which was removed from the Steam platform for incorporating NFTs into its mechanics.
Developers could incorporate the technology into their games so that every time a player unboxes a new skin, it’s automatically minted as an NFT and ready for sale. In order to use the skin in-game, players could keep it in an in-game wallet; equally, they could send their new skin to an external wallet to sell on a virtual marketplace.
From the front end, this could function identically to how today’s skins markets work. All the changes would happen on the back end, and would allow gamers to actually own their skins and sell them wherever, and to whomever they want.
Perhaps most important of all, the developers could keep earning money every time a skin was bought and resold by embedding rules in each of their NFT-skins. They wouldn’t lose any profits, and their customers would be much better off.
Why Some Gamers Do Not Want NFTs in Their Games?
Gabe Newell (source: Wikipedia).
One of the most common is that they’re a scam or some kind of pyramid scheme. This criticism usually stems from a belief that all NFTs are digital art, and that the problems with the digital art markets (scams and pyramid schemes) have bled into all NFT-related projects – even those completely unrelated to digital art. But this isn’t the case at all.
NFTs are a technology, one with thousands of different use cases - only one of which is for buying and selling digital art. Even if all digital art were to suddenly become worthless, it wouldn’t change the fact that NFTs are a fundamentally useful and valuable technology.
Another common criticism of NFTs is that minting and trading them uses excessive computing power and energy, which releases lots of carbon into the atmosphere.
The Ethereum network’s energy consumption after ‘the merge.’
The energy consumption of post-merge Ethereum compared with pre-merge Ethereum and bitcoin.
Another worry is that if developers incorporated NFTs into their games, the producers and studios would become even more financially driven than they are today, and the quality of games would suffer.
Now while it’s undeniable that some studios would do exactly that, there’s no reason to think all studios would, or that those studios would be successful. Most of the joyless, cash-grabbing P2E games we’ve seen so far have already flopped, and their player numbers have never come close to free games like Dota 2, or those without any P2E element like CS: GO, Fortnite, or Minecraft.
In all likelihood, gamers will keep on playing the games they want to play regardless of how many P2E games offer them a few extra bucks. As such, many of the fears gamers have about incorporating NFTs into games are unfounded. But even so, the wider gaming community – and especially developers - remain staunchly opposed to NFTs.
In order for this to change, the big developers like Activision and Valve will want to see that the technology behind NFTS can actually work with skins, and that their profits are protected.
Because if NFTs make skins annoying to trade or the studios lose money from implementing them, then the proliferation of NFT gaming skins will likely not happen.
Major Developers Using NFT for Gaming Skins Currently
Epic Games is so far the only major developer trying to get ahead of this curve.
Its new zombie/ battle royale game - Last Remains - will include NFT-skins that players can optionally purchase.
Last Remains battlepass/ character NFT available for sale on OpenSea.
If a player doesn’t have an NFT character, or they don’t want to buy one, their loot remains ‘soul bound to the Epic Games account,’ just like in most other games now.
The game is currently in beta testing; players who bought the first round of NFT characters can test out the game, while open access is due to launch in December this year.
Regardless of how well NFT skins work out for Epic Games and other developers, some companies like Valve will fight tooth and nail to keep their skins in a closed market. After all, why would any company voluntarily give up a highly profitable monopoly?
In the end though, if gamers got behind NFT-skins and migrated en masse to games which support them, Valve and others wouldn’t have much choice but to adopt NFTs or risk being left behind.
There’s a long way to go to convince the major developers of the value NFTs could bring to their customers. And it could take even longer for gamers to reconsider their position on NFT-skins.
But if the next generation of games includes NFT-skins, the global gaming industry – especially gamers – could be much better off for it.