Reed Smith Guide to the Metaverse

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A lot of what the metaverse is likely to look like can already be found in the world of video games. In the future, you may enter games through a headset and feel the game through a haptic suit, but at the core, the experience is likely to bear many resemblances to how players today immerse themselves in a game’s universe and environment.

So what will change?

As discussed in this document, NFTs as a concept can be applied to pretty much everything that can be tokenized, including in-game assets. If there is an industry that is ripe for the “endowment effect of NFTs” to take hold, it is undoubtedly the games industry.

Games developers and games publishers have long used their players’ desires to unlock special powers, features, and assets as ways of monetizing their games. A powerful technique that can sometimes become frustrating for players is realizing that their “purchases” only last for as long as they play the game the asset has been “bought” in. Open a new game, and all your shiny virtual objects disappear.

In a world where players feel that they “own” their in-game assets, NFTs are seen as a way of “fixing” this problem by making these special games assets sellable to others and portable from one game to another. Both concepts deserve a closer look.

Marketplaces for tokenized games assets

The idea that NFTs can transform a digital asset into something tradable needs to be corrected. In reality, what makes an in-game asset sellable to another player is whether or not the game’s publisher agrees with tradability as a concept and has built the necessary in-game infrastructure to do so. A games publisher allowing in-game assets trading arguably would not need to tokenize its assets on the blockchain in order to do so. A far more simple (and less energy-consuming) solution may do the job just as well. What’s more, by controlling their in-game marketplaces, games publishers would be able to commission each sale and continue to monetize their assets, albeit from a different angle.

From a legal point of view, this in-game solution would be far more in-line with the nature of the transaction really taking place when players “buy” and “sell” in-game assets, which of course has as little in common with a “sale” as Mario and Lara Croft. As discussed in the NFTs section, in-game assets cannot be sold separately from their intellectual property, and you can rest assured that games publishers are not in the business of selling their intellectual property lightly. Also as mentioned when we discussed art NFTs, in-games assets are licenses – not sales: they give you access to the asset for a limited time and within a particular context as (should be) explained in the game’s terms and conditions.

Does it mean that in-game assets will never be traded on NFT marketplaces? Probably not. The hype around NFTs is far too intense for logic and reason to prevail, but we would urge caution as licenses are far less easy to trade than property rights and may well cause more than one game NFT to not be worth the digital ink it has been written with.

Key takeaways
  • A lot of what the metaverse is likely to look like can already be found in the world of video games
  • In-game assets are untradeable on NFT marketplaces … but that may change
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