How NFTs Work In Gaming: A Player’s Perspective

Enrico Schaefer - August 15, 2022 - Non-Fungible Tokens (NFTs)


Gamers all over are diving in on this new and rapidly growing trend of NFTs in video games. 

NFTs can be creatively incorporated into almost any style game from MMO’s to Action RPG’s. Players are using these digital assets to express themselves, make a little money and show off their hard work. 

What are NFTs?

The basic explanation is that an NFT, or “non-fungible token” is a digital asset that links ownership to unique digital items. These could be things like images or even unique assets and items that can be used in online games or virtual worlds. Non- fungible tokens have been designed to give a person ownership of something, kind of like modern day digital collectibles. The original creator of the NFT can still retain copyright and reproduction rights, just like any piece of physical artwork. Any individual can buy an artwork print, but only one person owns the original piece. AN NFT shows proof of ownership for a digital object. 

NFT Technology

Non-fungible tokens (NFTs) are typically created using block chain technology, in a similar fashion to cryptocurrencies. While NFTs are created by a similar technology, they do not function in the same manner as cryptocurrencies. 

Buying NFTs

Many consider NFTs to be a new and potentially a safer way of investing in the digital space. Just like any unique collectable, digital objects have the opportunity to grow in value over time, allowing the original buyer to sell and potentially turn a profit. Another reason some individuals buy non-fungible tokens is to secure digital ownership of a physical asset.

NFTs in Video Games

Almost anything in a video game has the potential to become a non-fungible token. Developers are ultimately the ones who determine what NFTs will go into their games and which games they will go into. With the expansion of Web3 and the Metaverse, in the future, gamers may have the opportunity to create their own NFTs. Some in game asset NFT possibilities include:

In-Game Assets 

  • Unique Player Cosmetics including: hairstyles, clothing (skins), equipment 
  • Virtual Homes
  • Virtual Land plots
  • Personal Vehicle (items used for player traversal)

Why Buy a Video Game NFT?

There is a wide variety of NFTs and a wide selection within that variety. The endless possibilities and variations that create that unique digital asset has a few different benefits to gamers.

Self expression

NFTs such as custom clothing, equipment, hairstyles, and personal vehicles all entice gamers to express themselves. Their personalities can be seen in a world where historically they are not seen. 

Financial Investment

NFTs can be used as a financial investment. Much like cryptocurrencies, an NFTs value can go up or down overtime depending on several variables. Players may choose to purchase an NFT in the hopes to resell at a higher price later for financial gain. 

Players Clout 

Let’s face it, gamers love to show off their unique and rare items. Some NFT possibilities allow players to do just that. If there are only 10 digital copies of an in-game asset that can be purchased, that item is rare. Players who are lucky enough to obtain that NFT will proudly show it off in game as much as they can. 

Purchasing & Reselling Video Game NFT’s 

Players can purchase NFTs from developers or other gamers and then resell or trade that NFT (unless there are legal stipulations that prevent reselling or trading) with another player.

Is Video Game NFT Buying & Selling Considered Gambling?

Purchasing and selling NFTs in video games is not considered gambling unless you are selling an item that is not clearly defined (items are a mystery) and those included assets could then be resold for additional money. You cannot create an “NFT mystery grab bag” that contains items that can be purchased with real world cash. 

What Do I Own When I Purchase an NFT?

When you purchase a non-fungible token, you are actually purchasing a token that represents a unique item. What you own is a very small digital record that contains a URL or serial number that is sent to your address on a blockchain. You do not own the rights to the digital asset itself. If you are unsure of your legal limitations, consult with a legal NFT expert to protect yourself. 

Legal Considerations for Video Game NFTs

As with any financial investments and transactions, there are legal considerations to be aware of when working with video game NFTs.  

Video Game NFT Theft 

Any digital asset can be hacked, including non-fungible tokens. NFTs can be hacked in the same way that crypto assets are hacked from digital wallets and exchanges. Keeping your passwords and wallet information private is one simple measure to help prevent NFT theft. 

NFT Taxes 

Buying and reselling NFTs in video games can have tax obligations. The rate at which you are taxed can vary based on state and how long the digital asset was kept. The IRS can view the NFT as either a capital gain (an item held for appreciation to resell) or as a sale of collectibles which is typically a higher tax rate. 

Non-fungible tokens are still a relatively new technology especially in the gaming industry. Without firm industry standards, navigating ownership of them can be a little complicated. DO your research, ask questions, and keep records of anything you buy, sell or trade. At Traverse, our NFT legal experts are ready to advise you.

Stay Up To Date with Blockchain and NFT Lawyer Enrico Schaefer.

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This page has been written, edited, and reviewed by a team of legal writers following our comprehensive editorial guidelines. This page was approved by attorney Enrico Schaefer, who has more than 20 years of legal experience as a practicing Business, IP, and Technology Law litigation attorney.