A Games Industry Guide to NFTs


NFT or non-fungible tokens are non-interchangeable digital tokens that can be used to represent ownership of unique items. They can only have one official owner at a time and they’re secured by a blockchain – no one can modify the record of ownership. NFTs can represent many kinds of digital files such as photos, videos, and audio. Because each token is uniquely identifiable, NFTs differ from a coin of a blockchain cryptocurrency, such as Bitcoin. (Source: Ethereum documentation and Wikipedia

Fungibility is the property of a good or a commodity whose individual units are essentially interchangeable and each of whose parts is indistinguishable from another part. Money, for example, is a fungible good because all 10 dollar bills are interchangeable and indistinguishable from another. Squirtles, Charmanders and Bulbasaurs are fungible pokémons since they are indistinguishable from another. (Source: Wikipedia)

Non-fungibility is the property of a good or a commodity whose individual units are unique and non-interchangeable. The original Mona Lisa painting for example is a non-fungible good because it is unique and distinguishable from other reproductions. Ash’s Pikachu in Pokémon is non-fungible – there are many Pikachus in the world, but only one is Ash’s Pikachu.  (Source: Climate Replay)

Blockchain is a persistent, transparent, public, append-only ledger. It is a peer-to-peer network system in which you can add data but can’t change previous data within. It does this through a mechanism for creating consensus between scattered or distributed parties that do not need to trust each other, but just need to trust the mechanism by which their consensus has arrived at. (Source:  Finn Brunton)

Consensus mechanisms A consensus mechanism is a fault-tolerant mechanism used in a blockchain to reach an agreement on a single state of the network among distributed nodes. These are protocols that make sure all nodes are synchronized with each other and agree on transactions, which are legitimate and are added to the blockchain. (Source: The Blockchain Technology for Secure and Smart Applications across Industry Verticals, 2021)

Proof of Work is one of the consensus mechanisms that allows decentralized cryptocurrency networks like Ethereum or Bitcoin to agree on things like account balances and the order of transactions. This prevents users from “double spending” their coins and ensures that the chain is tremendously difficult to attack or manipulate. Validators in this mechanism are called miners. (Source: Ethereum documentation)

Proof of Stake is a type of consensus mechanism used by blockchain networks to achieve distributed consensus. It requires users to stake their cryptocoins to become a validator in the network. Validators are responsible for the same thing as miners in Proof of Work: ordering transactions and creating new blocks so that all nodes can agree on the state of the network. (Source: Ethereum documentation)

Play-to-Earn games are games in which players can transfer or sell in-game assets to other players for money or cryptocurrencies. The blockchain + NFT technology is used to ensure ownership and facilitate and validate transactions that are made outside of the studio’s marketplaces and servers. (Source: Climate Replay)

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