What Are NFT Games and How Do They Work?

NFTs are one-of-a-kind digital collectibles recorded on a blockchain, making them perfect for representing characters, consumables, and other tradable items within games. This unique quality has fueled the rise of NFT games in the Game-Fi sector, where players can earn money by trading in-game NFTs with fellow enthusiasts or by accumulating tokens through play-to-earn systems. When transferring your NFTs, ensure you use a compatible wallet and remain cautious of scams when interacting with NFT marketplaces or other users. Typically hosted on Ethereum and BNB Chain, these games range from battle-oriented experiences like CryptoBlades and Axie Infinity to collectible card games such as Sorare. Additionally, platforms like Binance have introduced NFT Mystery Boxes that offer a chance to obtain NFTs of varying rarities as part of partnered collections.

Introduction

NFT games have come a long way since the early days of the CryptoKitties craze. Today, they incorporate play-to-earn mechanisms that blend finance with gaming, giving players a chance to earn an income simply by participating. Instead of relying solely on finding or breeding rare collectibles valued at thousands of dollars, players now have the freedom to explore a variety of gaming models and themes that extend far beyond collectible animals.

What Are NFTs?

Non-Fungible Tokens (NFTs) are digital, cryptographic tokens on a blockchain that uniquely represent an asset. Their applications are broad—ranging from in-game items and collectible art to representations of physical objects like real estate. NFTs solve the long-standing challenge of establishing decentralized ownership in a world where digital content can be endlessly copied. Unlike fungible assets such as bitcoin, where one unit is identical to another, each NFT is distinct. Even in a series of NFT artworks, every token carries unique metadata, much like numbered editions of a limited print series.

How Do NFT Games Work?

NFT games are much more than simply holding digital collectibles in a wallet. They weave NFTs directly into their game mechanics, rules, and player interactions. In these games, your character, avatar, or the items you collect can all be NFTs that you later trade with other players for profit. The play-to-earn model—where you earn tokens or additional NFTs as you play—further enhances the potential for generating income.

From a technical standpoint, developers integrate NFTs into games using smart contracts—self-executing pieces of code stored on a blockchain that define the creation, exchange, and use of these tokens. For example, CryptoKitties relies on a few key smart contracts, including its well-known geneScience contract, which governs the random traits that determine new cats’ characteristics. Initially, the code was kept under wraps, prompting players to develop tools to analyze trait probabilities and strategically breed more valuable cats.

What Are Play-to-Earn NFT Games?

Play-to-earn NFT games allow players to create an income stream by simply engaging with the game. As you play, you typically earn tokens—and occasionally NFTs—that can be used in the game’s crafting system or traded externally. Tokens tend to offer a more stable reward, while NFT drops are usually based on chance. This model has gained significant traction, especially in lower-income countries, where it serves as an alternative or supplement to traditional income sources.

A prime example is Axie Infinity. In this game, you start by investing in a trio of Axies, though some players can join via scholarship programs. With your starter team in place, you complete various tasks and challenges to earn Smooth Love Potion (SLP), an ERC-20 token that is tradable on exchanges. SLP also plays a crucial role in breeding new Axies, thereby fueling an in-game economy. This model has been particularly impactful in regions like the Philippines, where some players earn between $200 to $1,000 per month—sometimes even more, depending on market conditions and the time invested.

What Are In-Game NFTs?

Aside from earning tokens, many NFT games reward players with collectible in-game NFTs. Unlike fungible tokens such as SLP or SKILLS, these NFTs represent specific items whose value can fluctuate based on factors like design, rarity, or utility within the game. For instance, CryptoKitties relies exclusively on the collectible aspect of its NFTs, where success is largely left to chance. Today, most NFT games incorporate a blend of both play-to-earn tokens and collectible items to enrich the gaming experience.

How Do NFT Games Generate Revenue?

The earnings you can generate from NFT games depend on the game’s mechanics and the market demand for its tokens and NFTs. Income is usually derived from other users willing to pay for in-game assets, and cashing out involves selling these assets on marketplaces, exchanges, or auction houses. The value of these assets is determined by either their collectibility or their in-game utility, with both factors often driving speculation.

Can You Lose Money or NFTs in NFT Games?

While NFT games offer exciting income opportunities, they also come with risks. The amount you might lose depends on the game’s design, the inherent volatility of NFTs, and broader market forces. Financial loss does not necessarily indicate fraud—it’s often a result of the speculative nature of digital assets. As with any investment in the crypto space, you should only risk what you can afford to lose.

The fear of losing valuable NFTs is common. Whether you purchased your NFTs or earned them through gameplay, it’s crucial to secure them properly. Here are some common scenarios where NFTs might be lost:

1. Incompatible Transfers: Moving NFTs to a wallet that doesn’t support the specific token standard.
2. Scams: Falling victim to fraud and sending your NFT to a scammer.
3. Malicious Smart Contracts: Granting a smart contract access to your wallet, which then takes your NFT.
4. Game Mechanics: Losing NFTs as dictated by the game’s rules.

To protect your digital assets, follow these best practices

• Verify Transfers: Double-check that any wallet you send NFTs to is compatible, and be aware of common scams (see guides like “5 Common Cryptocurrency Scams and How to Avoid Them”).
• Understand Protocols: Familiarize yourself with the token standards (such as ERC-721 and ERC-1155 for Ethereum or BEP-721 and BEP-1155 for BNB Chain) used by your wallet and the game.
• Engage Only with Trusted Contracts: Interact only with reputable smart contracts to minimize the risk of unauthorized access.
• Review Game Rules: Read the rules of any NFT game thoroughly to avoid unexpected losses during gameplay.

Conclusion

• NFT games have revolutionized the gaming industry by integrating blockchain technology, enabling true digital ownership, and introducing play-to-earn opportunities. Unlike traditional video games, where in-game assets hold no real-world value, NFT games allow players to trade, sell, and even earn a living through their virtual achievements. While these games offer exciting financial possibilities, they also come with risks, including market volatility, security threats, and the potential for financial loss.
• To navigate the NFT gaming space successfully, players should educate themselves about blockchain mechanics, carefully manage their digital assets, and stay informed about scams and security best practices. As the Game-Fi sector continues to evolve, NFT games are likely to become even more immersive and financially rewarding, shaping the future of interactive entertainment. However, as with any investment, it is essential to approach them with caution and only spend what you can afford to lose.