This essay was written by Matt Dion. In addition to being a content consultant at Naavik, Matt is a product manager at EA Mobile.
As a relative newcomer to the world of NFTs, one word that I frequently encounter in my research is “interoperability”. This term is often referenced as a key reason why NFTs are so groundbreaking. Interoperability, or in other words, the ability for disparate systems and products to interface seamlessly (either at present or in the future), is a complex topic with many contextual nuances. Yet the importance of digital interoperability cannot be overstated.
As our world becomes increasingly networked and interconnected, having open standards, protocols, and formats will allow for the free flow of information, the efficient upgrading and maintenance of digital spaces, and the standardization of toolsets and capabilities. Interoperability has the potential to revolutionize a multitude of consumer and enterprise applications, from healthcare to finance to engineering and more.
The games industry, too, has been increasingly referenced as one hindered by issues of interoperability. Much of this can be attributed to the avalanche of Metaverse ventures fundraising in the space, as interoperability is often cited as a key prerequisite to unlocking the persistent, live, digital experiences associated with this thesis.
Underpinning this interoperable vision are the non-fungible tokens (NFTs) that form the backbone of many blockchain games’ virtual economies. NFTs endow players with ownership (as their provenance is inscribed in the blockchain), and it is this verifiable ownership that differentiates them from other virtual items found in “traditional” non-blockchain games. Where most virtual assets are trapped in the walled gardens created by their developers, the verifiable ownership of NFTs allows players to take these assets with them out of the game and (at least, in theory) into another game or application.
In a game development context, this sort of interoperability implies that there are other blockchain games prepared to utilize NFTs and recognize their value accordingly. Otherwise, an NFT is still only valuable within the context of its original game. If an NFT’s utility exists only within the confines of the game in which it originated, it’s not much different from the many collectibles, art projects, and profile pictures being minted every day outside of a gaming context. There’s nothing inherently wrong with that, of course -- many of these projects are quite interesting in their own right -- but they don’t fit the definition of interoperability, and are therefore beyond the scope of this exploration
It’s not hard to see why interoperability is a worthwhile pursuit for gamers. Being able to take earned or purchased digital assets from one game to another -- and even out of the game entirely -- provides players with much more value and ownership than today’s free-to-play models do. The digital theme parks of the future would (ideally) allow players these freedoms. The ability to bring digital ownership from one context to another is a prerequisite for bringing digital style, digital prestige, and digital identity along with it. Once digital identity is persistent and transferable, entirely new forms of self-expression, culture, and society will emerge.
However, the case for developers and publishers to pursue this vision is less clear, at least in the near term. While embracing interoperability will eventually become table stakes in a world where a fully-fledged Metaverse has taken hold, in today’s gaming industry the incentives are not so straightforward. For large developers and publishers with established IPs and entrenched fanbases, the impetus to interoperate is not as strong (as I will discuss below). These incumbents are more likely to protect their own interests, rather than open up their ecosystems to external influence or allow their intellectual property to be used elsewhere.
For others though, interoperability has the potential to bring about a “rising tide lifts all boats” effect. Immutable* co-founder Robbie Ferguson touched on this in the Gods Unchained blog:
“Developers benefit under this model as each use-case compliments the other, raising asset-liquidity and value of the product. When items are worth more to players, they’ll be worth more to developers. And the movement towards decentralization will birth a new breed of creatives, eager to capitalize on the burgeoning market of interoperable items.”
While this sort of compounding value may hold true in the long term, there are still many obstacles to overcome before the value of interoperable items can overtake the value of today’s digital assets.
In practice, interoperability poses a major challenge. Imagine the level of coordination required between stakeholders -- developers, creators, internet service providers, hardware manufacturers, and more -- just to agree on open standards, such as those required for graphical rendering. Each party would have its own incentives for choosing one format over another, and getting all parties to agree on something this simple would be a Herculean task. Looking ahead to a Web 3.0-driven, Metaverse-esque scenario, all of these stakeholders and more would need to agree on these and a variety of other technical requirements in order to interoperate at scale (for gaming purposes or otherwise). Cooperation alone may be the biggest obstacle of them all.
Yet we need not think as far ahead as the Metaverse to see why interoperability is a major challenge (though Matthew Ball has dedicated an entire entry in his vaunted Metaverse Primer to this very topic). Consider the problem of potential first movers in this space. Which major gaming IP would willingly give up control of its brand, narrative, or leading characters to allow other IPs into its game? What benefit does Nintendo derive from allowing Axies into its Pokémon games, or from permitting Princess Peach to be brought into Star Atlas?
Astute readers might offer a counterfactual: “Isn’t Fortnite already doing this by bringing other IPs into its universe?” To be sure, Fortnite is perhaps the closest thing to a shared universe of intellectual properties in existence today. The recent push by Riot Games to promote its Netflix show Arcane in Fortnite and other leading games gives further credence to the notion that IP co-mingling is desirable for both creators and players. Yet all of this IP remains locked in Fortnite’s ecosystem. I can buy thousands of dollars of cosmetics in Fortnite, but the moment I leave that game I must also leave my purchases behind. I can even buy the Jinx skin in Fortnite, but it’s still useless to me in League of Legends or Teamfight Tactics, despite those being owned and operated by Riot Games (Jinx’s creator and IP holder). The true dream of interoperability would allow me to bring this and other purchases with me to Roblox, Rec Room, or any other digital sandbox.
Additionally, interoperability faces further hurdles beyond the willingness of IP holders to participate. There are a host of technical reasons why interoperability is (and likely will remain) a challenge in the short- to medium-term future. To illustrate this point, allow me to pose a hypothetical scenario:
Say we have two blockchain games: Grand ETH Auto and PUB: “GM”. The creators of these titles (“Stake-Two Interactive” and “Crypton Games”, naturally) have agreed* to allow the others’ NFTs to be used freely in both games.
*NFTs don’t necessarily require any sort of mutual agreement to operate in this manner, but let’s ignore that for the time being.
Each title relies heavily on shooting mechanics and utilizes the same set of weapons, modeled after IRL firearms (e.g. the AK-47 assault rifle). Both of our fictitious titles also rely on the same set of underlying blockchain technologies. Still following?
Clearly, there are many assumptions built in here, and we will unpack each of these momentarily. For now, though, let’s say that I have acquired an NFT of an AK-47 weapon skin in Grand ETH Auto. Later, I decide to take that NFT into PUB: “GM” to use with my AK-47 in that game.
Let’s first consider the issue of visual rendering, setting aside, for now, the differences in design and utility (we’ll return to these soon). How can I know that my weapon skin will be displayed properly? Both games have entirely different art styles, color palettes, and standards for visual fidelity. They may even use different file formats and encoding standards for their 3D assets. This hypothetical also assumes that both titles are even three-dimensional in the first place (luckily for us, PUB: “GM” is not a 2D side-scrolling platform shooter).
As illustrated above, reliably rendering in-game assets across multiple blockchain titles is a massive challenge with many moving parts. However, there are some early solutions to this problem. One such example can be seen in Cryptomotors, a car NFT that can be used in platforms such as Sandbox, Cryptovoxels, Decentraland, and Somnium, in addition to Cryptomotors’ own racing game. While this is not a perfect solution by any means, it outlines the directional possibilities for overcoming these challenges in the future.
Another assumption built into the hypothetical above is that rendering (or utility, for that matter) must match across titles in any way at all. While this is what people most commonly think of when considering interoperability of NFTs, it overlooks the fact that visual representation is just one part of the NFT itself. Of more importance is the data contained within the NFT governing its properties and ownership. In reality, there’s nothing stopping other game developers from transforming my Grand ETH Auto AK-47 weapon skin into an AK-47 decal on a car, or into an infantry unit in a 4X game. The visual rendering need not match the original context whatsoever. Yet all of these may be considered examples of interoperability, albeit limited in scope.
To this point, we have only covered concerns around our NFT’s visual representation -- after all, our hypothetical AK-47 weapon skin is purely cosmetic in nature. But what if it were a weapon or item NFT, rather than simply a skin? How might other games address that item’s utility? Weapon stats, inventory slots, balancing, item rarities -- these are all commonplace design considerations among today’s digital game assets that would need to be reconciled across interoperating titles. This is no small task and presents an almost limitless number of variables to account for. Just think of all the various items you’ve earned, bought, looted, pillaged, or scavenged in games from the past. Now think about all the different use cases, properties, parameters, buffs, and statistics associated with those items. How could any game developer possibly account for all of those possibilities? And would the benefits of doing so outweigh the costs of solving that problem?
Furthermore, developers must first enable NFTs to even enter their games’ ecosystems in the first place. Today’s crypto-native games rely on a variety of blockchain technologies that may or may not play nicely with one another. Taking an NFT from Axie Infinity to Sorare to Star Atlas requires bridging the gaps between different blockchains (Ethereum, Solana) and sidechains (Ronin, StarkWare), as well as authenticating provenance across all of them - even if there were use cases to support that NFT in each application. There are also different standards in use, each with its own sets of properties (ERC-721, ERC-998, and ERC-1155 being some of the most common).
To recap, developers seeking to build for interoperability must account for a multitude of possibilities around file formats, visual rendering, design choices, item utilities, various blockchain technologies, and token standards...in addition to the willingness of other creators and IP holders to do the same. Furthermore, each of these variables can contain its own set of nested variables, revealing ever more complications. There is no sugar-coating these challenges: achieving interoperability is a massive undertaking in a field as complex as game development.
From Zero to One
We may not reach true Ready Player One-level IP mashups any time soon, but I still believe that NFTs will achieve some measure of interoperability on a broader basis in gaming. I certainly don’t mean to gloss over the challenges -- and hopefully, I’ve illustrated some of the larger obstacles above -- but if you remember nothing else from this piece, let it be that interoperability is not a binary, all-or-nothing outcome.
There are ways for Web 3.0 gaming companies to create momentum for a larger wave of interoperability, though they may seem counterintuitive at first glance. I foresee two likely paths forward in the not-so-distant future:
- Individual Publisher “Microverses”
- Composable Ecosystems
Individual Publisher “Microverses”
A more probable first step in the direction of gaming NFT interoperability would be for titles to interoperate within an individual publisher’s portfolio.
For companies operating multiple blockchain games under the same umbrella, the prospect of taking NFTs from one game to another is far more attainable. In fact, this is something we’re already witnessing the beginnings of in Axie Infinity*. There, players have created additional minigames that utilize the pre-existing Axie NFTs in new and different ways, such as Axie Sushi, a racing minigame, or Flappy Axie, a Flappy Bird clone. The leaders of Sky Mavis, the studio behind Axie Infinity, have also publicly discussed the introduction of land plots as a springboard for future user-generated experiences. Granted, these are small-scale examples of interoperability, but they are directional indicators that illustrate the potential of this approach.
(*For more on Axie Infinity, check out Naavik’s excellent deconstruction here)
When considered in this manner, it’s not hard to see how an established platform like Roblox or Fortnite might undertake a similar strategy. After all, most major game developers and publishers (and seemingly all venture-backed games startups) are now thinking about how best to incorporate NFTs into their game economies. What incentive do these companies have to help each other interoperate before first learning to do so internally?
Consider a casual games publisher that allows players to bring their NFT avatar from one title to another: finding hidden objects in one game, pulling slot machines in another, or helping the hunky gardener rebuild a mansion by solving match-3 puzzles in yet another -- all while maintaining the same digital identity and visual representation. While many of the technical hurdles to interoperability would still remain, these challenges would be far easier to overcome with the unilateral allocation of a single company’s monetary and organizational resources aligned against them, rather than relying on tentative cooperation between rival developers. Art styles and rendering processes can be standardized, tools and technologies can be shared, and learnings can be freely distributed across game teams. Add to that the potential benefits to cross-promotion efforts and interoperability suddenly becomes an intriguing option for keeping a valuable player base within a company’s ecosystem. Of course, anyone who has worked at a large gaming organization can point to the challenges of sharing learnings across distributed teams, but the fact remains that these are solvable problems -- far more solvable than bringing an AK-47 skin from Grand ETH Auto to PUB: “GM”.
Perhaps the biggest obstacle to individual publisher “microverses” is that it may be a solution in need of a problem. After all, why would a company need a blockchain solution to do something like this? How is it any different from something like a Supercell ID or Battle.net account that is already shared across games? The key here will be to approach the design holistically and systematically, considering the player experience across multiple titles and balancing that with business outcomes, while offering players something unique that they cannot otherwise achieve without these technologies..
I believe that a fragmented approach to NFT interoperability such as the case outlined above will be the likeliest outcome for incumbent developers and publishers seeking to capitalize on the NFT boom. Yet new blockchain-savvy game developers are being funded seemingly every week, and other approaches will surely bubble to the surface soon. One such approach, referred to here as “Composable Ecosystems”, is already well under way in the fast-moving crypto gaming space.
Given the decentralized nature of blockchain development (and crypto culture generally), another potential “microverse” outcome may be the formation of different interoperability alliances or ecosystems among developers with unified communities, philosophies, or tech stacks. Other groups may form around a particular blockchain, intellectual property, or even a meme (I am aware of at least two Doge-themed games in development already, for example). So long as a community of aligned developers and players exists, an interoperable NFT ecosystem can be formed.
One nascent example of this can be seen in the Loot ecosystem. Loot relies on another differentiating aspect of NFTs -- composability -- to drive new emergent experiences. Composability allows NFTs to act like building blocks for further applications and derivatives. In the case of Loot, an entire ecosystem of projects has sprung up to support it: everything from currencies to character generators to generative art and even entire games. Not only does this bottom-up approach enhance the value and utility of an NFT, it also decentralizes the entire development process beyond the reaches of any one publisher, studio, or vision-holder*.
(*This is a topic that The Metacast crew recently explored in great detail - well worth a listen!)
Of course, this model comes with it’s own set of challenges. Veterans of the games industry will tell you that some amount of centralization is required to create a great game (and a great games business). Where that nexus of influence lies and how it is distributed among contributors will have major impacts on the pace and effectiveness of each game’s development. It is likely that we will see a variety of experiments in this space ranging from full community ownership to top-down, quasi-corporate examples providing only minor levels of influence to smaller shareholders. I anticipate that this will be a major obstacle for composable ecosystems to overcome, as it is quite foreign to traditional game development models.
However, to those games that can overcome these organizational challenges, composability represents an immense opportunity. When most observers think of NFT assets in a gaming context, they are often considering something that has visual representation in the game: a plot of land, a character, some item or piece of equipment, etc. By abstracting away the visual rendering from the underlying data, projects like Loot free downstream developers from the restrictions that an original game context might otherwise place on its digital assets. This bottom-up approach represents a massive change to the typical top-down model of game development and is one of the key reasons that Loot saw an astronomical rise in value after launching.
Blockchain game developers need not rely on an NFT’s original visual representation whatsoever. While this seems counterintuitive at first, it can actually open up many creative possibilities for game designers. An NFT’s underlying data can be repurposed entirely to inform its utility in another game. Think of each NFT simply as an input into a machine, where the output can be...well, pretty much anything.
Of course, this doesn’t necessarily mean that each NFT input’s value or utility will be equivalent to that of its output in another game. What it does allow for, though, is interesting, unique, and personalized experiences for each player entering the game. By leveraging the non-fungibility of these tokens, developers can create heretofore unseen experiences that will surprise and delight players in exciting new ways.
A Framework for Interoperability
To illustrate these possibilities, I would like to propose a framework for developers seeking to interoperate with digital assets from another blockchain game or application. This represents a series of questions that, when answered, should provide greater clarity in how to think about incorporating foreign NFTs (i.e. those not associated with your game) into your blockchain gaming title.
To game developers seeking to take on this challenge of interoperability, I encourage you to keep an open mind and not be put off by the many challenges outlined above. Think of this as a creative exercise that may unearth new and interesting paths forward in an emerging field that is eager for innovation.
A final note: the most important question any developer should ask themselves both before and after exploring this framework is “Does it even make sense to interoperate?”
Just as many game developers can easily fall into the trap of applying blockchain technologies as solutions in search of problems, so too might designers seek to interoperate without a clear understanding of the potential return on investment. For indie outfits or scrappy developers seeking to explore the potential design space this may be less of a concern, but for business leaders with P&Ls to worry about, this foundational question deserves perhaps the most attention of all.
With all of that said, let’s explore!
Q1a: What is valuable in your game’s economy?
Many blockchain games today structure their economies around a few NFTs that have some amount of scarcity: be they plots of land, characters, ships, cars, horses, or any number of other items. Developers should keep this scarcity in mind when considering interoperability, as the NFTs being brought into the game from external sources may have an impact on the value of these scarce resources. Foreign NFTs should probably have a lower value or utility in your game than your most valuable native assets, lest you risk devaluing your own merchandise (regardless of how scarce it may be).
An interesting twist on this would be to consider the aggregate value of interoperable NFTs within a “microverse”, as described above. What tradeoffs might there be to Grand ETH Auto’s economy if a player were to import an NFT from another “Stake-Two Interactive” game? Would the company be cannibalizing its own sales, or would there be net gains from cross-promotion and shared engagement among the two titles? Much of this will likely come down to business model design, but it is an interesting topic to consider and illustrates the importance of holistic planning before jumping on the NFT hype train.
Q1b: What is valuable to your game’s players?
While the answer to this question may be identical to that of the previous question, there are scenarios where it may not be. One example of this would be a cosmetic economy, where “value” is subjective to each player and digital assets have minimal impacts on core gameplay or competitive balance. This is one area that may be ideal for interoperability experiments (so long as visual rendering issues can be resolved in a way that preserves subjective value). For example, recreating image-based NFTs as decals or decorations should have little consequence to a game’s economy, but provides additional utility to the player for their existing collection and allows them to easily express their digital identity across titles.
For both of the questions above, I would strongly encourage readers to check out Abhimanyu Kumar’s proposed framework for NFT value, which you can read up on here.
Q2: How do you want to represent foreign NFTs in your game?
In other words, will you attempt to reproduce an NFT in your game in a manner similar to its original representation? Will my AK-47 weapon skin from Grand ETH Auto be imported as an AK-47 weapon skin in your game? Or will you use that NFT as a basis for some sort of completely new rendering? Will you rely on the original art at all, or instead use only the underlying data as building blocks?
There is a lot to unpack here. Of course, there is the issue of art style and accurate reproduction. No one game could ever encompass all of the potential art styles being used in NFTs (artistry being one of the main differentiators for most projects), though some styles do tend to be more common than others, such as pixel art or Minecraft-esque voxels. There are also many file formats to consider, from .jpgs to .gifs to fully 3D assets to audio files and many others in between. Supporting some formats and not others will naturally limit your game’s ability to utilize NFTs in some manner, so trade-offs will have to be made. This is somewhat analogous to a game team supporting some devices or platforms and not others (e.g. iOS vs. Android, PC vs. console vs. mobile, etc.).
Another approach would be to avoid any sort of reproduction altogether. In this case, the game team might rather create an entirely new output based on the inputs of a given NFT. There are many possibilities here: generating characters, informing player stats, providing gameplay buffs or nerfs, randomizing game scenarios, and more. To explore this further (and to borrow an idea from the many generative art and profile picture projects), imagine a design that randomly generated an entirely new piece of artwork using foreign NFTs as inputs. The outputs could be based on predefined sets of traits or properties, either mapped to those of the incoming NFT or chosen at random. The resulting render would then be a brand new visual representation of your NFT. This could be useful in generating character art, avatars or profile pictures, perhaps even names or titles. A great example of this from a non-gaming context can be seen in the Mutant Ape Yacht Club collection, which applied different “serums” to Bored Ape Yacht Club NFTs in order to generate entirely new “mutant” creations.
A full set (or season, in a live service context) of items could be generated in this manner: imagine, for example, a battle pass where every cosmetic reward was generated at the moment the player reached that milestone, and was unique to that player alone. Any NFT could serve as the input for this sort of feature. Preferential treatment (e.g. rarer traits, additional properties, etc.) could even be given to affiliated NFT projects -- either as a cross-promotion benefit, or a user acquisition campaign to bring in new players from other influential NFT groups (e.g. CryptoPunks, Bored Ape Yacht Club, etc.). Perhaps the real winners in this area will be the teams most adept at networking and business development with other projects and IPs, rather than those with the most innovative designs or technical solutions?
Where this idea of using NFTs as inputs into game features gets really interesting is when the initial NFT can change over time, as is the case with some of the NFT AI projects gaining momentum right now (a topic I’ve written about previously, here). An AI-based NFT could be generated in one game, then taken to several others -- all the while learning and evolving based on those experiences -- and then brought back to the original game, where it could be utilized in an altogether different manner than originally intended. The emergent gameplay possibilities at the intersection of AI, NFTs, and interoperability are fascinating (if not a bit scary, from a design and balancing perspective). While these implementations are likely less realistic in the immediate future, they could potentially be some of the most impactful designs to emerge from a bottom-up development approach.
Designing for interoperability is by no means a trivial feat. It requires a great deal of planning and coordination, and I’m not certain that any blockchain game has properly addressed it yet. Despite the myriad technical and design challenges, however, I believe that this is a topic worth exploring.
In many ways, interoperable blockchain games may be seen as examples of a classic Innovator’s Dilemma, where incumbent leaders are discouraged from exploring disruptive innovations due to the associated costs, low short-term ROI, poor applicability to existing value networks, and perceived smallness of the new markets. Meanwhile, new entrants are able to capitalize on opportunities and gain a foothold in an otherwise established competitive space. Only time will tell if this will be the case in the games industry, but given the surge of funding into blockchain gaming startups (and Web 3.0 companies generally), it’s clear that there is a growing segment of decision-makers that believe there is a meaningful business opportunity here.
Interoperability will not happen overnight. It is far more likely that progress will come in fits and starts, manifesting in a variety of incremental innovations across the disciplines of design, engineering, art, and product management. While the games industry may never fully interoperate, I am confident that enterprising developers will continue to chip away at the various obstacles preventing this. I am of the opinion that the value of every player’s collection of digital assets will grow as interoperability spreads. If you share this opinion, I encourage you to explore the possibilities unlocked by innovating in this space, because there are many more gamers like me who can’t wait to see what you build.