Another new technology for our industry to get to grips with
Legend has it that in the late 19th century, Richard Canfield, owner of the Saratoga Clubhouse in upstate New York, invented the casino chip. This is very probably a myth, but the fact remains that the idea of replacing actual cash with something else when gambling was a stroke of genius.
Stylistic and technological wizardry have since evolved the humble chip into a product sector in its own right, ranging in capability and cost from simple and cheap to extreme and expansive. In the softer, arcade and street sectors, machines began to use metal tokens instead of coins, and continued to do so for decades. Then came cryptocurrencies which, in the context of gambling, perform the same basic function as the clay chips of the 1800s, i.e. representing a ‘real’ money equivalent.
A basic explanation of the concept
The latest of these evolutions is the NFT, a further man-made creation of perceived value that, for the majority of us, needs further explanation as to what it is and what relevance they might have to us.
The term NFT stands for ‘Non-Fungible Token’, a token which holds data on the blockchain and may be traded. However, ‘non-fungible’ means that the token is not interchangeable with a similar or identical item. NFTs are not a currency, like Bitcoin, as each NFT is totally unique. Also unique is the fact that NFTs cannot be broken down into smaller units.
Value created by imagination and acceptance
Because they can be associated with so many forms of media, a vast range of creators are now establishing NFT projects. These include artists and photographers, musicians and celebrities and, significantly, game developers and entrepreneurs. And one of the key features of all NFTs is that their individual values are not determined by any conventional market forces, but by the imagination and acceptance of their audiences.
Relevance and potential within gaming
From an iGaming industry perspective, NFTs might be used to place player deposits, or as in-game tokens or as prizes in themselves. For example, the community-based casino and sportsbook platform BC.Game already accepts NFT deposits. And since NFTs are independent and decentralised, they can be used anywhere and without limits, a feature appreciated by players who have trouble accessing traditional payment methods.
Furthermore, as concepts such as the metaverse and virtual and augmented reality develop further, NFTs could be used to gain access to casinos, membership to loyalty, VIP, tournament or bonus programs. Players could even invest in their own, personal tables or slots, possibly even taking a revenue share from their use by other players. All of this is hypothetical of course, and these ‘virtual’ worlds remain unregulated, but we must not close our eyes to what might be on the horizon.
A transparent and secure technology
NFTs are also blessed with attributes that those with the most serious responsibilities will appreciate. Blockchain technology stores all information about ownership in ‘smart contracts’, with no human involvement, ensuring the highest levels of transparency and security. In addition to protecting players’ investments, the technology can also be used to control access and/or assist with self-exclusion.
A new generation of players
Besides the traditional motives to play games and gamble, a new generation of players for whom NFTs are becoming a known and accepted entity, will be drawn to an offer that belongs to ‘their’ time. Younger players understand and value digital assets and for them, marrying these assets with gaming and betting will provide them with a sense that the industry understands what they want.
Regulation at some point is inevitable
Due to understandable concerns about money laundering, fraud and the financing of terrorism, authorities around the world are examining all forms of decentralised financing. This includes cryptocurrencies and NFTs, and at some point in the future, regulation is inevitable. But NFTs are not a currency, they are assets. Profits or losses from the sale or purchase of assets are normally subject to taxation. But there are few, if any comparable concepts or practices for NFTs, so this process could be complicated and take time.
Early-stage issues that must be resolved
As with any new technology, there are early-stage issues that need addressing. Not wishing to sugar-coat very real concerns in any way, these issues surround cost, volatility, fraud and environmental risk.
Cost: NFTs are tokens and need to be ‘minted’ in order to come into existence. Creators who wish to mint NFTs on the popular Ethereum blockchain must pay a ‘Gas Fee’ and these can be expensive.
Volatility: Like most new markets, NFT valuations can be volatile. Unwarranted hype and disadvantageous speculation can both be influencers during the initial stages of any new market, so values can rise and fall further and more rapidly than many would like.
Fraud: For every successful new creation there are dozens of cheap imitations. Some bad actors in the NFT sector have created an unfavourable perception amongst some, who perceive NFTs as the ‘Wild West’ of the digital world. However, it could be said that some will always be nervous and risk-averse when it comes to new ideas. This is the gambling business and there are many within it who do not enjoy a gamble!
Environment: Certain blockchains use what is known as ‘Proof of Work’ to validate smart contract transactions. This Proof of Work involves a high level of energy usage and so raises environmental questions that clearly need to be resolved.
The future is incredibly promising
Since 2020, the NFT concept has experienced exponential growth. Back then, the entire market was worth around US$85.5m. One year later, there was an explosion and MarketsandMarkets estimates that the sector will grow to over $13bn by 2027. This is in line with the overall global trend towards spending more time and money online.
Going back to earlier times, the gambling industry has always embraced alternatives to ‘actual’ money, be it chips, tokens, crypto or, most recently, NFTs. If we are honest, the beauty of all of these is that if the player becomes immersed in a game, an alternative to hard cash can start to feel as if it isn’t real, and so be spent more fluidly. This is the same effect as the debit card, people spend more freely – especially on leisure – because in the moment, it doesn’t feel like spending ‘real’ money.
Slotegrator can tell you more
Our colleagues at Slotegrator have produced a guide to gambling with non-fungible tokens, a link to which is included below. And the company’s Business Development Manager, Avyar Gabidullin, summarises where this exciting concept currently sits within the iGaming arena: “NFTs were quickly embraced and became a fashionable way to spend and earn money.
“The iGaming industry, no stranger to innovation, saw the potential for NFTs immediately, and game providers began developing titles that incorporated the new technology. Aviatrix, for example, features a ‘crash’ game where players can purchase the in-game avatar as an NFT.
“Ultimately, if the rapid spread of cryptocurrencies is any indication of how popular and effective blockchain technology can be, we have every reason to believe that NFTs will become commonplace for online casinos and sportsbooks.”
Download the Slotegrator guide to NFTs here.