Why NFTs must be transferable between platforms for the industry to survive
Correction: A previous version of this article inaccurately reported that Quarters are crypto tokens exchangeable for Fortnite V-bucks; they are utility tokens, and the V-buck functionality is still forthcoming.
This article is part of a 10-piece Digiday series that explores the value of NFTs and blockchain technology. Explore the full series here.
For non-fungible tokens (NFTs) to have lasting value, they must be interoperable — transferable between digital platforms such as Roblox, The Sandbox and Decentraland. Yet many NFT companies are not currently building this into their products, prioritizing short-term hype over long-term value.
The most basic definition of interoperability is the way different systems are able to communicate and interact with each other to form a cohesive whole. Many of the digital ecosystems that form the bedrock of the modern internet are interoperable such as email, where users are able to send or receive messages from several applications rather than a single central feed.
In the context of the metaverse, interoperability enables a user to transfer their virtual identity and digital belongings from one platform to another. In a fully interoperable metaverse, a user would be able to purchase an in-game skin (a graphic that changes the appearance of a playable character or item) inside Fortnite, then use it inside another virtual world such as Minecraft or Decentraland.
“We don’t think there will be one metaverse; we think the world is going to be composed of multiple metaverses, and it’s important for us to succeed that the players or the creators understand that what they build inside The Sandbox can be reused in other worlds,” said Mathieu Nouzareth, CEO of The Sandbox. “If you make an avatar in The Sandbox, it can become your own identity, not only in The Sandbox, but also on other websites.”
The majority of today’s most prominent and highest value NFT collections, including prominent, high-value collections such as Bored Ape Yacht Club (BAYC) and CryptoPunks, hinge on the concept of interoperability in the metaverse to come without actually offering those capabilities yet. Although BAYC offers its NFT holders access to a private online space and in-person events, the primary use of the Bored Ape images themselves is as avatars or profile pictures on social platforms like Twitter. When the metaverse is fully realized, holders will naturally want to use their Apes — or other NFT avatars, like Meebits, or Cryptovoxels or Lazy Lions — as three-dimensional avatars within its major virtual platforms.
Although BAYC creator Yuga Labs has teased interoperability for the Bored Ape metaverse, many of the most prominent NFT companies at the moment treat their offerings as more of an asset class than a type of virtual item with utility across disparate platforms and systems. Sure, users can slap the profile pictures on their social accounts, but most of the value in holding an NFT comes simply from owning it, rather than using it as an avatar or virtual-world calling card.
That’s not to say that the users themselves aren’t clamoring for utility and interoperability. Many NFT holders have a background in gaming, and the ability to truly own and interoperate digital items one of the most obviously enticing applications of blockchain technology for gamers. Just as their users do, the blockchain experts behind these companies understand how important the role of interoperability will be to the metaverse — but few of them are actually working to make it a reality.
Cracking the puzzle of interoperability
There are many obstacles on the path to true interoperability. Perhaps the most obvious is the difficult task of designing virtual items to match the vastly different aesthetics of today’s leading metaverse platforms. An NFT designed for the blocky, LEGO-like worlds of Roblox might look out of place in a more realistic platform such as Second Life. What’s more, interoperable virtual items would have to be able to plug into the numerous game engines used by today’s popular games and metaverse platforms, including Unity and Unreal Engine, a challenge modern game developers are still struggling to overcome.
“I used to be at Activision Blizzard, and on the Call of Duty franchise, we had three different versions of the Call of Duty engine,” said John Linden, CEO of the game developer Mythical Games, which implements blockchain technology within its titles. “Honestly, it was hard enough for us to get one soldier from one Call of Duty engine into another.”
With their fleshed-out virtual economies and a longstanding tradition of digital ownership of items, game developers have been toying with the concept of interoperability for years — another factor that backs up the gaming industry’s claim on the metaverse. But blockchain technology remains an efficient way to track the sales and private ownership of entirely virtual items, and many of the companies looking to implement interoperability in the metaverse are doing so by applying Web3 concepts to pre-existing gaming frameworks.
Taking cues from the gaming industry
The company Pocketful of Quarters, for example, has invented a “universal token for games,” that allows players to use a utility token as in-game money, applying blockchain tech to effectively create interoperability between game currencies. At the moment, the service is mostly available in games built using POQ’s homegrown system, but the company aims for its token, Quarters, to eventually become exchangeable for more well-known in-game currencies such as Fortnite’s V-Bucks, according to POQ COO Tim Tello. POQ is already a verified partner with the game engine Unity, and plans to integrate its software development kit into all versions of Unreal Engine, Tello said.
At the moment, game developers are leading the interoperability charge, both within the traditional gaming industry and the nascent “play-to-earn” space, where players are able to exchange the currency and items they accrue in-game for real-life currency through blockchain-enabled games.
The traditional publisher Little Orbit will soon allow users to mint NFTs within its popular cops-and-robbers game APB Reloaded, which boasts thousands of creators, who design skins, vehicles and other items for in-game use, among its 22-million-plus users. Players will then be able to sell their creations to other players inside the game, with plans to expand the entire system to other games.
For now, Little Orbit’s creation tool is relatively simple, allowing users to wrap their drawings around pre-made virtual items, including weapons, clothes and vehicles. Someday, the same concept could be applied to platforms with more robust in-game economies, such as Roblox.
“Imagine you’ve got this sort of third-party game; the developers have added our platform to their game, and player one uses our UGC tool to create an NFT skin for a weapon,” said Little Orbit CEO Matthew Scott. “That skin can then be sold on the marketplace to player two. Player two is in a completely different game, and he’s able to take that symbol, and instead of applying it to a weapon, he can apply it to a car using the same sort of toolkit.”
There are also simple market forces working against the implementation of true interoperability across major titles. While interoperability of items and in-game money is an enticing prospect for the average gamer, it’s less of a boon for massive corporate game developers such as Epic, whose large captive audience already generates hundreds of millions of dollars in annual digital sales. “We don’t believe that AAA [developers from mid-sized or major video game publishers] ever want to share player pools; they don’t want to share monetization strategies,” Tello said. “Those are the trade secrets, right?”
The inevitability of interoperability
Some observers believe that major players such as Epic will have no choice but to opt into interoperability once it reaches critical mass.
“In general, blockchains are only useful for things that need a global state of synchronization between everybody. When you need convergence on a single status of the system — for example, what are your Fortnite items, or your Roblox items, or your Roblox name — these are things that you want to convert into a single thing,” said Decentraland co-founder Esteban Ordano. “I think that’s a win-win for everybody — users win in the sense that their value is protected.”
Others think that interoperability is inevitable as the metaverse takes shape, whether or not today’s leading platforms get on board. They believe that embracing interoperability could determine which platform becomes the Internet Explorer of the early metaverse — and which will go the way of Netscape.
“For a couple years after the internet was born, financial brokers and advisors couldn’t even have email. Then, as social media came out, everybody kind of broke that mold and it was a shorter time frame to get there,” said David Lucatch, CEO of the blockchain tech company Liquid Avatar Technologies. “Now, what we’re seeing is, OK, the metaverse is here, NFTs are here — let’s just jump in head-first. And if there’s a rock on the bottom, we’ll figure it out later.”
Like the feature image? You can own it! Each of the robot avatars featured in this series is an NFT available for purchase on our OpenSea storefront. All of the earnings will be donated to the non-profit organization Sandy Hook Promise. Digiday is using this NFT drop to gain first-hand experience in creating and minting NFTs in order to get a better grasp of these digital assets and inform future reporting. Learn more about why we’re experimenting with NFTs here.
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