The concept of yield farming has gained a lot of traction over the past year or so particularly because it enables crypto owners to stake their assets in return for tangible returns within short time windows. And while the thought of earning a profit on one’s investment may not be new at all, the idea behind yield farming — where users can earn rewards for making use of a particular DeFi application — is largely confined to the purview of the decentralized finance sector.
Also, much like yield farming, nonfungible tokens, too, have become extremely popular over the last couple of years. This is because these cryptographic entities — whose values are directly linked to a particular asset — are ideal for owning physical items such as artwork, property deeds, collectibles, such as CryptoKitties, as well as, digital commodities such as game skins, trading cards, etc.
Related: Yield farming is a fad, but DeFi promises to change the way we interact with money
How can NFTs be used within the domain of yield farming?
Ever since the Napster debacle from a couple of decades ago — that saw legendary rock band Metallica take on the file-sharing giant for allowing users to illegally download their music — came to light, conversations pertaining to digital content ownership and rights management have become increasingly more prevalent across the globe.
In this regard, over the course of 2020 alone, NFTs seem to have captivated the imagination of crypto enthusiasts worldwide primarily because they allow for digital data ownership processes to be facilitated in a highly streamlined, efficient manner.
There are various blockchain-based digital collectible card games that are now available online. They enable players to operate within a fantasy landscape, even allowing them to create a number of novel items, collectibles which can then be used in-game in exchange for a wide array of digital goodies or even be sold across various marketplaces for monetary remuneration.
Related: Overview and market trends of crypto games in 2020
Why combining NFTs with yield farming could be huge…
Most globally recognized video game developers — such as Electronic Arts, Activision, UbiSoft — tend to employ a monetary maximization model, wherein they are focused primarily on making as much money as possible with each title release. In this regard, it bears mentioning that over the course of the last 4–5 years, the issue of microtransactions seems to have plagued the entire gaming market, such that players are now required to shell out a small fee for unlocking every small feature present in a host of popular gaming titles, for example, FIFA 2021, NBA 2k21, etc.
Blockchain gaming, on the other hand, seems to be more concerned with providing players with as much value and playability as possible. For example, in a vast majority of blockchain titles, users are provided with an option of minting and selling their in-game items as they please, thus, shifting the balance of power from the hands of game developers to those of the players, particularly from a financial aspect.
What comes next?
As the gamified yield farming market continues to mature, it will be quite natural for the industry to move to a framework wherein in-game rules can be modified by the players themselves. For instance, if a game typically assigns certain attributes to an in-game item — for example, a factory has the ability to only produce 80 cars or 50 motorbikes per day — then with time, users will be given the ability to alter these rules and increase/decrease the production capacity of these defined entities, depending upon the governance tokens they own.
What this means, in the long run, is that players will eventually get to impact core rules of the game through governance — something that was previously inconceivable with traditional video games. Also, from a monetary aspect, such a model can completely shake up the gaming sector since users can potentially alter production rates, inflation standards, etc. within the game — thereby allowing their governance tokens to become more and more valuable over time.
Lastly, the ability to alter in-game protocols means that players with substantial governance tokens can quite easily tweak parts of a game’s economy, which is revolutionary especially when given the fact that blockchain titles are totally decentralized, both in their design and operability.
The future of gaming is here
Empire building games, such as Sid Meier’s Civilization, Command and Conquer, Age of Empires, have captured the imagination of millions of people all over the world for decades. However, as entertaining as these titles may be, they don’t allow players to generate any sort of monetary returns for them in lieu of their spent time and effort.
The concept of gamified yield farming with NFTs can change all that because it enables users to make money from every single in-game asset that they own. Not only that, depending on one’s personal skill set, players can potentially rake in thousands of dollars for something that they enjoy doing daily.
For example, within fantasy landscapes, players can buy collectible NFT game cards that can be used in the game in order to earn a wide array of digital goodies, and they can also be sold on various NFT marketplaces for cryptocurrency. In a yield-farming manner, the NFTs can also be trustlessly rented out to other players to passively earn yield on NFT assets.
That being said, traditional PC/console games still have an overwhelming edge over blockchain titles at the moment both from a visual as well as a functional standpoint, however. When the graphics and gameplay side of things start to become similar between the two, decentralized games will dominate the industry.
This article was co-authored by Jesse Reich and Aly Madhavji.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Jesse Reich is the CEO of Splinterlands. Jesse graduated from Texas A&M University with a Ph.D. in chemistry in four short years, and at the age of 27, he became a professor. He spent 10 years as a leading university sales engineer across major corporate publishers. Upon discovering the economic and social liberties and protections that blockchain technology can afford, Jesse founded Splinterlands with Matt Rosen.
Aly Madhavji is the managing partner at Blockchain Founders Fund, which invests in and venture builds top-tier startups. Aly consults organizations on emerging technologies, such as INSEAD and the United Nations on solutions to help alleviate poverty. He is a senior blockchain fellow at INSEAD and was recognized as a “Blockchain 100” Global Leader by Lattice80. Aly serves as a board member of CryptoStar Corp and has served on various advisory boards including the University of Toronto’s governing council.