The Future of NFTs
with Michael Gu from Boxmining
In this episode of Magic Internet Money, host Brad Mills invites Michael Gu onto the show to discuss the recent NFT boom. Michael is the lead editor of the cryptocurrency news website, BoxMining.com. Michael offers his past experiences working in the games industry as an example of what future NFT value might look like. The two offer their thoughts on how NFT technology may change the field of collectables and art sales. Brad warns of NFTs being a “tulip style bubble” that will crash, but the technology is here to stay. Michael and Brad speculate on altcoins, the effects of macromarkets on the cryptospace, and the philosophy of Bitcoin. The two further speculate on the future of crypto asset based games and the potential for success it has.
NFTs: What are They Good For?
An NFT is a Non-Fungible Token. This token runs on blockchain technology which is simply a decentralized digital ledger. This ledger acts as a database for “deeds” so to speak to a given digital asset, or a proof of purchase for an antique. That asset could be art, a 3D model, digital real estate, or game assets, the list goes on. NFTs as a technology have a wide variety of applications in the field of collectables. instead of as a currency. So an NFT is not money, but it is valuable. Thus far, NFTs have mostly been successful with the field of collectables, but the technology could expand to other uses.
No two NFTs are of equal value and they cannot be exchanged with each other. Instead they have to be bought with a currency only. Currently, Ethereum has been the popular contender for this currency but NFTs on Bitcoin have been making a comeback. Brad remarks that this is a “Non-ponzi use case” for Ethereum that could perhaps clear up it’s reputation for DeFi related ponzi schemes. He further remarks that this could shift the culture of Ethereum over to being the dedicated currency for buying NFTs and digital assets. In Brad’s opinion, this would be a good thing but Michael feels that is a maximalist take. Michael also studiously notes that NFTs are like “the internet bubble” from the 1990’s and their value will likely plummet spectacularly.
Both Michael and Brad think that NFTs are here to stay for a number of reasons, even after the possibility of a tulip style bubble popping. Michael cites his experience in the games industry throughout the podcast and remarks that digital 3D gaming assets are a strong use case for NFTs. A good example of this is the online game, EVE. This game takes place in outer space and players can buy ships for an in-game currency called Isk, which all in-game transactions are made with. The game even includes a fully simulated, player run economy. Battles between ships (NFT assets) in EVE have cost players thousands of dollars in in-game damage. But such things are part of the value scheme of an in-game NFT asset.
The Fun Theory of Value
Michael’s experience in the games industry leads him to make some insightful remarks about how NFTs are going to express value in gaming. Games are primarily played for competition and fun, meaning that in-game NFT assets depreciate as a game changes with updates and new content additions. As a game’s meta changes, so do the items of value within that game. In addition to this, a game has to be good and have a large player base to encourage economic and competitive activity. However, this is not always a good idea. Michael recalls his experience with the game, Diablo 3, where players just stopped playing the game because the best way to acquire items was through the in-game auction house. It discouraged engaging in the game beyond basic currency accumulation and thus the playerbase dropped and economic activity died.
What is an economy? In many ways it’s a game and good games have rules and conditions that never change. So in an economy where those with the largest accumulations of resources control the rules of the game, it’s no wonder all of its players are moving to a different table to play a game that suits them better. The other table in this analogy being Bitcoin, moving away from a fiat based economy. Just like the Diablo 3 players moved away from their game once the economics of it became unbalanced.
The potential usefulness that NFTs offer to the field of gaming is potentially huge. People learn best when they are at play and if simulated, in game economies are complex enough, players will be learning investment skills that can transfer to real life. As well, they can develop assets while at play and earn money while relaxing playing a game. Seems like a match made in heaven, but as any gold farmer can tell you, a lot of work goes into a valuable digital asset.
Time Stamps
00:00:43 - Show start
00:00:56 - Brad explains that the NFT craze is a bull market and it’s altcoin season
00:04:59 - Brad and Michael discuss how ETH relates to NFTs
00:08:40 - Michael draws upon his experience in the game industry to explain that not every game asset could be an NFT
00:13:08 - The two recall their past experiences with ETH and Bitcoin
00:17:58 - Brad elaborates on the philosophy of Bitcoin maximalism
00:21:23 - Michael offers his counter-argument to maximalism and explains his thoughts on life motivations
00:24:12 - Brad and Michael discuss current risk projections that the cryptospace may be facing
00:31:50 - Risks for newcomers in the crypto space. Brad explains what “Degen pits” are
00:39:00 - Michael explains why he doesn’t debate about altcoins and their effects on the cryptospace
00:43:04 - The two discuss how traditional, macro markets affect Bitcoin
00:46:36 - Michael brings up Samson Mow’s new game, Infinite Fleet and talks about the possibilities of NFT video game assets
01:00:27 - Brad offers his experience playing and working on online games and how the “metaverse” could be influenced by them
01:05:10 - The two speculate on how NFTs may change the collectables market and discuss the Pokemon cards boom
01:12:03 - Michael talks about the current state of cryptocurrency centered games and some games he’s been playing recreationally
01:15:06 - Brad and Michael make their final recommendations about the subject of NFTs before wrapping the show up
01:20:14 - Closing remarks and outro