Why Magic Eden Is Betting on NFTs Disrupting the Gaming Industry

In brief

Jack Lu, CEO of NFT marketplace Magic Eden, appeared on Decrypt’s gm podcast.
He spoke about the potential for NFT-driven gaming and why he expects the industry (and gamers) to embrace them.

For many crypto advocates, video games offer one of the clearest use cases for NFTs. They enable a user-owned economy that lets players resell and potentially profit from digital assets, plus such tokenized, interoperable assets can potentially be used across multiple games and online worlds.

But there’s one big problem: many gamers absolutely hate NFTs.

Vocal fans from the traditional gaming space have pushed back against companies like Ubisoft and Team17 as they’ve explored the NFT space, and many view the industry as a hotbed for scams and speculation. The environmental impact of NFTs has been a common complaint as well, although that argument is effectively dead following the recent Ethereum merge.

On top of all that, some believe that game publishers will simply use NFTs as another way to extract even more value from players. The backlash to NFTs is similar to that levied against free-to-play games and downloadable add-on content when those respective business models were introduced, and now both are widely-accepted industry standards.

Even amid the vitriol, NFT marketplace Magic Eden still sees long-term potential in gaming NFTs. Magic Eden, which was launched one year ago and was valued at $1.6 billion in June, is the leading marketplace for Solana NFTs and recently expanded into the Ethereum market.

On the latest episode of Decrypt’s gm podcast, Magic Eden co-founder and CEO Jack Lu told co-hosts Daniel Roberts and Stephen Graves that despite the skepticism from players, he believes that NFTs “unlock something completely new for gaming developers to build an economy and build a new business model on.”

Magic Eden has supported a wide array of NFT-based gaming projects through both its launchpad feature and secondary marketplace, including upcoming titles like SkateX, Mini Royale: Nations, and BR1: Battle Royale.

In July, the firm launched a gaming-focused venture investment arm with an aim to help lure game developers to Magic Eden. Part of the marketplace’s approach is to build simple integrations so that developers can put the Magic Eden platform within their games. That way, users can buy and sell NFTs without leaving the in-game experience.

Lu admitted that there’s “so much to unpack” around gamers’ perceptions of NFTs, including the presence of bad actors in the industry and the increasing financialization of digital assets. Also, as a nascent space built around decentralized technology, it’s no surprise that many early NFT-powered games have been simplistic, falling short of some players’ expectations.

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The Ethereum-based Axie Infinity, for example, is the biggest success story in the space with over $4 billion worth of NFT trading volume, and millions of active players at its peak last year. But the monster-battling gameplay was also decried for its repetitive nature, and the game’s play-to-earn economy collapsed amid the growing hype. Also, the game’s Ethereum bridge was hacked for over $600 million worth of crypto.

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As more and more veteran game developers enter the Web3 space and start building, we could see richer NFT-powered experiences ahead—but it may take time. Large-scale video games often take years to build, and are supported by sizable development teams.

Lu said that his team is “waiting for a few diamonds to come, to shine”—that is, great games that showcase NFT functionality—to help spread adoption across the gaming industry.

“Great games take a long time to build—it takes vision, inspiration, and a lot of dev time to build that much content,” he explained. “We are effectively waiting for the most promising game studios to have that time to build out their content, and then work out what is the secret sauce of how to use NFTs in that.”

Lu suggested that once a few of those so-called diamonds hit the market and thrive, they’ll serve as a “case study” to nudge other developers into the NFT space. He described it as a potential “tidal wave that follows the paradigm shifts of the past” in the gaming world, such as the shift to free-to-play games.