Discover why NFT royalties are essential for the sustainability and growth of web3 gaming. Learn how royalties benefit both creators and players and unlock the full potential of NFTs in gaming.
The rise of NFTs (Non-Fungible Tokens) has opened up a whole new world of possibilities for the gaming industry.
The ability to own and trade unique in-game assets allowed gamers to enjoy a more immersive and personalized gaming experience. Worked hard to loot that item from a dungeon? Not only is it yours in-game, but its entire digital footprint is yours for the taking, opening up multiple avenues of revenue from that in-game item.
But NFTs also bring with them new challenges, such as how to ensure creators and studios are fairly compensated for their work. That’s where NFT royalties come in.
NFT Royalties
In the world of web3 gaming, royalties are an essential piece to making the system function.
Traditional gaming models rely on a centralized structure, where studios have full control over their games and their assets. With NFTs, ownership is decentralized, which means that studios need to find new ways to monetize their creations.
Enabling peer-to-peer trading through NFTs affects the value studios can capture through primary sales. In traditional gaming models, studios earn revenue from primary sales of their games and in-game assets. With NFTs, secondary sales can continue generating revenue for the creators as well, as they can earn a take rate on these sales.
Another important factor is that with NFTs, players themselves can become traders and enter the market. This creates a new, less price-sensitive target group that game studios can monetize. With the ability to earn ongoing revenue from secondary sales, studios can offer more value to players and incentivize them to engage with the game on a deeper level.
No Royalties?
However, what happens if we fail to enforce royalties?
Studios may not be able to generate the revenue they need to continue creating games without royalties This could lead to a situation where only primary mints generate revenue, leaving assets with a fast value decline. In this case, NFTs would become nothing more than a marketing catchphrase, with no real value or sustainability.
Without a strong royalty system, the business models for NFT gaming would favor primary mints, leaving assets with a fast value decline. This is not much different from traditional gaming models, where games lose value over time and are eventually replaced by newer titles.
To avoid this, it is essential to develop a strong and enforceable royalty system that benefits both creators and players.
It’s not just studios that benefit from a strong royalty system. Players also benefit, as they rely on studios to create new and engaging games. Without studios, there would be no games to play. By supporting studios through a royalty system, players ensure that they continue to receive high-quality games and can also benefit directly from royalties themselves.
As games lean more heavily into UGC (User Generated Content), players are turning into creators themselves. By creating and selling their own NFTs, players can profit from royalties just like studios. This creates a more diverse and dynamic ecosystem that benefits everyone involved.
Final Thoughts
NFT royalties are an essential component of web3 gaming. They allow studios and creators to monetize their creations and offer ongoing value to players. It’s common for most people who are new to the space to either complain or consider royalties as a scam or scheme. However, looking a bit closer could paint us a much clearer picture on how this industry works.