A Games Industry Guide to NFTs

Common Questions

How (and how quickly) do NFTs harm the environment?

They harm the environment due to two main factors: the large amount of computational power needed for transactions and the electronic waste generated by the hardware. To ensure transactions are validated, physical computers need to use their power in an energy-hungry process that relies on fossil fuels, which is directly correlated to carbon emissions. Alternative mechanisms exist today, but it will always depend on energy consumption. These computers quickly become outdated and it becomes, then, electronic waste piling up on e-waste deposits. How quickly that harm is done depends on the amount of computers connected to the network, the mechanisms being used and the type of energy being consumed. 

How is it different from owning anything else in the digital space?

The main difference lies in the fact that by owning an NFT your certificate of ownership is registered in a decentralized blockchain as long as it exists. At any point you can access that transaction that says ‘you bought this item’ and hence it belongs to you.

The second main difference is that digital ownership as we know today means having an entry in a traditional, centralized database. With NFTs, this would become an entry in a decentralized, zero-trust database. This, in theory, gives players the option to trade tokens without involvement of the publisher, but also comes with new challenges, like increased latency, higher cost of transactions and a need to enter a very volatile and potentially predatory market.

Regarding legal real-world ownership, NFTs don’t change much because the object is not part of your ownership transaction. What you have is a pointer towards the object, stored outside of the blockchain. Blockchain’s creators have the intention of replacing legal ownership, the method we use today in society, with ‘consensus ownership’ in their future plans.

Are NFTs different from cryptocurrency?

Yes and no. NFTs are non-fungible tokens meaning they are unique and identifiable while cryptocurrencies are fungible tokens, meaning they are divisible and not unique. They are connected in the sense that you need cryptocurrencies to create, buy or sell NFTs and their value is 100% defined by the value of the underlying cryptocurrency.

How did NFTs start? Where did the idea come from?

The first NFT was created in 2014, consisting of a videoclip registered in the Namecoin blockchain network. The technology was called ‘’monetized graphics’’ back then. In 2017, the projects CryptoKitties and CryptoPunks raised public awareness and in 2021 it experienced rapid growth. In 2021, for example, a piece of digital artwork by artist Beeple was sold for $69 million dollars and brought a lot of attention to the technology. The idea of NFTs, though, emerged from what is called a “colored coin”, initially issued on the Bitcoin blockchain in 2012-2013. Colored coins are tokens that represent real-world assets on the blockchain and can be used to prove ownership of any asset, from precious metals to cars to real estate, even equities, and bonds.

Is there a way to lower energy consumption?

Yes and no. All of the consensus mechanisms used by blockchain are energy-hungry processes, even though some consume less than others comparatively. So there is no possible way to reach low energy consumption because it is the nature of the technology. When it comes to consensus mechanisms, Proof of Stake is commonly associated with lower consumption than Proof of Work and many networks are willing to migrate to this mechanism to lower energy consumption, which is the case of Ethereum – the network has stated it will switch to Proof of Stake but there is no guaranteed time frame for that transition. Bitcoin though will likely never switch to Proof of Stake, and it is the reference cryptocurrency for all the others, meaning other coins will always inherently be valued based on a Proof of Work coin. (Read more in our Blockchain section).

Our Pledge

Concerned by the problematic aspects of NFTs in the gaming industry? Make your voice heard by signing our pledge!