Entertain through Blockchains: NFT Videogames - Klein Moynihan Turco LLP

Entertain through Blockchains: NFT Videogames

In addition to NFT Sweepstakes and NFT fantasy sports contest-like games, companies are developing various gamified NFT collections or “NFT videogames.” In such games, minters use NFTs in many ways, including as rewards for player participation (i.e., completion badges) and as the means of entry to gameplay (e.g., tokens that users may digitally insert to play a game). NFTs that offer holders added benefits, such as the right to play certain videogames, are otherwise known as “Utility NFTs.” It is important to note that companies which sell utility NFTs may face serious penalties if they refuse to follow through with advertised ownership benefits, including regulatory investigation and potential litagation.

NFT Videogame Platforms

While major videogame companies have proposed incorporating NFTs into existing web-based games, the most popular mechanism that mixes NFTs into games is through use of NFT dApps (short for “decentralized applications”). dApps are applications that operate automatically through smart contracts on a blockchain. NFT dApps incorporate the use of NFTs into their software. User activities are transmitted on the relevant blockchain via Internet Service Providers to other users. 

It is important to note that NFT videogames have been banned from some mainstream platforms, including Steam.

NFT Videogames

Well-known NFT videogames include Splinterlands, Sorare, and CryptoBlades. One of the most successful NFT videogames to date is Axie Infinity. The Axie Infinity dApp is a Pokémon-style game where Pokémon-type fighting characters take the form of NFTs. To play the Axie Infinity NFT Game, character NFTs must be in player crypto wallets in order to participate and breed NFT characters. 

Beyond creating a singular NFT videogame, some companies are creating videogame ecosystems that use and allow players to earn a shared cryptocurrency. In these ecosystems, players may earn digital currencies or NFTs for their accomplishments in applicable videogames (otherwise known as “play-to-earn” mechanics). For example, Netcreeper Media Limited has created one such NFT videogame ecosystem (named “FEAR”), which consists of multiple horror games, including Crypt, Clucking Hell, Araya, and Undead Neighbour. These games reward players with Fear tokens for achieving specific goals, which can be used to purchase FEAR NFTs that, among other things, unlock characters, certain abilities, and the pay-to-earn feature in Undead Neighbour. 

Over the past few months, NFT minting controversies, including controversial launches (e.g., NBA’s Collection NFTs), phishing scams, and rug-pulls (e.g., the Frosties Scheme), have flooded the news cycle. Given the foregoing, it is advisable to obtain guidance from attorneys experienced with NFT marketing before offering NFTs to the public. If you require assistance with your NFT venture, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

The material contained herein is provided for information purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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Photo by Rodion Kutsaev on Unsplash

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David Klein

David Klein is one of the most recognized attorneys in the technology, Internet marketing, sweepstakes, and telecommunications fields. Skilled at counseling clients on a broad range of technology-related matters, David Klein has substantial experience in negotiating and drafting complex licensing, marketing and Internet agreements.
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