In the last couple of years, NFTs has become almost a mainstream conversation topic although it’s something as trivial as data-objects stored on blockchains. Fungible tokens such as a bitcoin unit, one ether etc act like digital money in the sense the units are all alike - one pound sterling is not different from another one. Non-fungible tokens, however, are unique and can carry a set of metadata - turning it into a uniquely distinguished data object, which can be transferred from one account/user to another.
A regular argument against the role of crypto in the context of gaming is its introduction of financial speculation and removal of the fun which should lie at the heart of a game. It can bring the problem of pay-to-win to an extreme, reducing the game to solve for who can pay the most to win. As demonstrated over several years, crypto seems to almost inevitably introduce bubbles in digital game assets - whether they be currencies, resources or other tradable in-game items.
The concept of tokens that cannot be transferred is nothing new, as the transfer method within the smart contract code defining rules for a (type of) token needs to be included to facilitate transfers in the first place. But the concept of non-transferable tokens dubbed as “Soulbound Tokens” has again entered the limelight after a paper published in May, co-authored by the inventor of Ethereum Vitalik Buterin.
As either fungible or non-fungible tokens become non-transferable, they start to serve purposes other than financial speculation. Indeed, by including non-transferable tokens as a key part of the tokenomics of a web3 game project, you can focus on the utility aspect and have the financial speculation removed.
Typical use-cases for non-transferable tokens, fungible or not, are:
- Trophies and Achievements
- Resources to gate and control player progress
- In-game items that cannot be sold - as opposed to tradable items, reducing pay-to-win
- Expanding DAO governance voting power beyond financial to track-record or skill
The now year-old trend of gaming guilds, where investors and players align their incentives and objectives, can utilise proofs-of-skills issued by games to assess how suited a scholar would be to join and play for them. You can publicly verify their skill level whilst preserving anonymity - with wide-ranging implications.
Non-transferable tokens will be instrumental in bringing the fun into many forms of crypto games and is necessary to progress from pure virtual on-chain economies to games focusing on entertainment value. This requires carefully crafted tokenomics beyond the concepts of in-game currencies, tradable items and resources and character/object NFTs.
