NFT gaming: what you need to know about fractional NFTs

Non-fungible tokens (NFTs) have been in the spotlight over the last couple of years, not least due to NFT gaming. By exploiting the underlying blockchain infrastructure, NFTs enable secure ownership of digital assets. There are, however, limitations in what NFT holders can do with their assets. This has led innovators to push the boundaries and introduce fractional ownership. Fractional NFTs also allow retail users to enter the NFT market and increase market liquidity.

NFTs

Let’s discuss NFTs before we turn to NFT gaming more specifically.

NFTs became mainstream in 2021 as a new way to determine ownership of digital assets using blockchain technology. What’s more, NFTs represent a paradigm shift in digital asset ownership as it becomes decentralized and more transparent.

Of course, one of the key features of NFTs is their guaranteed exclusive ownership. An NFT can’t be replicated or forged; it’s a one-of-a-kind token. Moreover, once an NFT is owned by a person, it solely belongs to them. Any future changes of ownership will be tracked in the blockchain.

In NFT gaming, NFTs can be found as part of in-game items, but they aren’t limited to the gaming world. Indeed, NFTs are now present in domains such as digital art, virtual real estate and many others.

Fractional NFTs

The NFT bubble of 2021 to 2022 led to increased public awareness of NFTs. This was not just in the NFT gaming sphere. However, as NFT prices skyrocketed, retail investors struggled to join the market. This is when innovators in the field thought of creating fractional NFTs (F-NFTs).

NFT fractionalization involves splitting a single NFT into multiple pieces. As a result, a high-value NFT can be divided into more affordable and tradeable pieces. Therefore, a fractional NFT is simply a whole NFT that has been divided into smaller fractions. This allows a number of people to claim ownership of a piece of the same NFT.

Before we explore the world of NFT gaming, it is important to consider F-NFTs in more detail.

F-NFTs lower the entry barrier in the NFT market for investors, thereby allowing them to easily diversify their investments. As a consequence, NFT fractionalization brings more investors to the NFT space and increases liquidity. F-NFTs also facilitate monetization and improve the future value of an NFT.

Thanks to F-NFTs, investing in NFTs is accessible to everyone. 

From a technical standpoint, an NFT is a token that uses Ethereum’s ERC-721 standard. Next, a smart contract splits the ERC-721 token into multiple fractions in the form of ERC-20 tokens. Each one can then be traded independently.

NFT gaming

The gaming world is constantly evolving. A recent step forward was the introduction of blockchain NFT games and, hence, NFT gaming became a reality. Such games rely on Web3 technologies and make use of NFTs. They are also known as play-to-earn games, rewarding players with tokens or NFTs for time spent playing. Tokens are usually the main rewards, while NFTs are gained by achieving a particular result. In addition, players can buy NFTs from other players and hold onto them until the value increases before reselling.

In the gaming space, NFTs are digital assets. They represent avatars, collectibles and in-game content such as skins, guns and armor.

Fractional NFTs in gaming

Of course, when discussing NFT gaming, we mustn’t ignore the potential that F-NFTs have in this area.

Most play-to-earn crypto games allow players to own and trade various types of in-game items, some of which are NFTs. Such multiplayer games can use F-NFTs to allow players to come together and purchase expensive in-game assets through fractionalized shares. For example, the developers of Axie Infinity, the well-known online video game, are exploring F-NFTs. They are looking at fractionalized ownership in respect of the game’s most popular in-game NFT asset, namely the rarest Axies.

As we have seen, F-NFTs allow players in the NFT gaming world to team up to buy expensive in-game assets. Players are then often able to win the relevant battle or race.

The biggest gaming studios are looking at adding F-NFTs as in-game purchases. Furthermore, since these games have millions of players worldwide, F-NFTs perfectly suit this use case. This is because F-NFTs allow users with a limited budget to enjoy the game and participate in the NFT market. 

Conclusions

Gaming and crypto have come together in the form of NFT gaming to allow gamers to earn money while playing. The game space has also become an investment opportunity in different ways. One of these investment opportunities is the chance to purchase NFTs, which represent digital assets in the game.

Players, therefore, can not only earn money while playing their favorite games, but make investments as well. This obviously makes their activity even more profitable. F-NFTs expand this even further by allowing retail users to invest in a fraction of an NFT. As a result, liquidity is brought into the market and the market becomes more dynamic too.

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