Current Status of NFT Leasing in Web3 Games

Original Title: "NFT Rental in Web3 Gaming"

Author: Double Protocol, Winkrypto
Translator: Frank, Foresight News

Main Points:

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• Most users in the Web3 gaming space come from a few top games
• 7% of the top 100 games support NFT rentals, with 18% planning to adopt this model
• Main reasons game players use rentals include cost reduction and increasing winning chances in NFT games through the use or combination of NFTs
• Obstacles for game developers adopting their own rental market include technical barriers, lack of priority, or counterintuitiveness

The mission of Web3 games is to enable game players to truly own and sell in-game assets seamlessly, but it goes beyond that. As digital assets become more akin to real-world assets, game players will be able to engage in various other financial transactions with them, starting first with rentals.

In this article, we will explore the following questions:

• How many games have adopted, want to adopt, or plan to adopt NFT rental features?
• What are the reasons behind renting out these game assets?
• What are the obstacles for game developers in adopting their own rental market?

Concentration of Users in a Few Top Games

The data we have chosen is from metadata.io, ranking the top games by the highest average daily active users over a 30-day period as of June 12, 2022. Before examining the rental data of these games, we should first understand the attributes of these games.

From the data in the chart above, it is clear that in terms of users, GameFi projects dominate, with the top three games accounting for over half of the total user base. By looking at the difference between the median and the mean, we can see that most users come from a small number of top games.

Distribution of Blockchain Networks

In terms of ecosystem performance, no player seems to dominate, but WAX, BNB Chain, Polygon, and ETH appear to be the leading GameFi blockchain networks.

25% of Games Have Adopted or Will Adopt NFT Rentals

We then investigated whether the corresponding games in the data have NFT rental functionality. If not, whether they have plans to implement this feature, which are recorded in their roadmap, whitepaper, etc.

Therefore, they can be divided into three categories:

Own NFT rental market/functionality: 7%
Have not implemented NFT rental but have publicly expressed interest or commitment to do so in the future: 18%
Have not implemented NFT rental and have not publicly expressed interest or commitment: 75%

Although rental games seem to be in the minority, we also studied the proportion of players in each category relative to the number of existing games, and the proportion of rental games in the player base is also disproportionate (20.4%).

One possible explanation is that rentals may make it easier for new players to acquire NFT assets in the game, as they may not be willing to directly purchase an NFT to play the game otherwise.

Another possible explanation is that once a game's player base reaches a certain level, game developers may be more motivated or have the capability to establish an NFT rental market.

The main reason game players use rentals is to reduce costs and increase their chances of winning in NFT games by using or combining NFTs.

Reasons for NFT Rentals: Cost Reduction or Increased Winning Opportunities

1. Splinterlands

Overview

Splinterlands is an online collectible card game that uses blockchain technology, where each card in the game can be traded as an NFT. Players can earn income in the game through tournaments, ranked matches, and quests, and the game's card NFTs can be bought and rented through third-party online markets.

Advantages of Renting in the Game Compared to Buying/Trading

• Daily Quests: Game players need to play different factions (water, fire, earth, etc.) but don't need to own enough cards to play each faction; they can choose to rent cards to complete quests.
• Brawl Rentals - brawl (guild fights): This may have certain restrictions on their battles, as to participate in these activities, game players need to use small cards (niche cards) that they are not willing to buy.
• Experimentation: Players have the chance to try new builds and combinations using cards they don't own before committing to purchase.

2. DeFi Kingdoms

Overview

DeFi Kingdoms (DFK) is a browser-based pixel art game built on the Harmony network that combines DeFi features with game elements. Its DEX uses the Uniswap V2 protocol, allowing users to swap tokens and provide liquidity to earn fees.

Advantages of Renting in the Game Compared to Buying/Trading

• Summoning: Summoning a hero requires two heroes; game players can own them but can also rent heroes to summon new ones.
• Reducing the cost of summoning new heroes: The cost of summoning is tied to the generation, so if players have higher-generation heroes, they can always use one of their heroes to rent a lower-generation hero, reducing the cost of summoning. In many cases, renting a lower-generation hero is more economical than using a higher-generation hero, such as a 5th generation hero.
• Maximizing the chance of obtaining excellent heroes: Players can rent premium heroes to use alongside their own heroes, increasing the chance of getting higher-quality heroes.

3. MOBOX: NFT Farmer

Overview

MOBOX: NFT Farmer launched on BNB Chain in early April 2021, describing itself as a unique infrastructure built on the DeFi ecosystem that combines it with games through NFTs. The GameFi infrastructure uses liquidity pools, liquidity mining, and NFTs to find the best profit strategies for users and generate unique NFTs that can be used in multiple games, allowing MOBOX users to play games for free and earn money in the process.

Additionally, MOBOX is also a game DApp where players can stake LP tokens or stablecoins to earn rewards in the form of the token KEY through liquidity mining. KEY can be used to unlock NFTs to be used as game characters or collateral assets on the MOBOX platform.

NFTs play a crucial role in the MOBOX ecosystem as users need MoMo NFTs to be active in the MOBOX ecosystem.

Advantages of Renting in the Game Compared to Buying/Trading

• Players can earn coins by staking MOMO in the MOMO treasury, with common quality MOMO having lower yields, while rare quality MOMO can collect coins at a rate of over 100 per minute. If coins are scarce, renting MOMO is considered the fastest and most secure method.
• Players can participate in raiding functions similar to Clash of Clans. Rented MOMO usually has relatively higher stats, making it a good choice for new players who want to consistently win raids.

4. Thetan Arena

Overview

Thetan Arena, launched by Vietnam's leading game company Wolffun in December 2021, has received investments from venture capital firms like Animoca Brands and has the support of the YGG gaming guild.

It is one of the largest MOBA (Multiplayer Online Battle Arena) games on BNB Chain, combining free-to-play and play-to-earn modes, with two types of tokens - Thetan Coin (THC) and The Gem (THG). Players earn THC or THG by participating in battles or completing other tasks in the game.

Advantages of Renting in the Game Compared to Buying/Trading

• Obtain gTHC through daily battle loot
• Earn Power Points to upgrade the player's NFTs
• Have the opportunity to participate in upcoming special events.

5. Aavegotchi

Overview

Aavegotchi is a DeFi-supported crypto collectibles game developed by the Singapore-based Pixelcraft studio, allowing players to stake NFTs embodied by Aavegotchis with tokens of interest and interact with Aavegotchi metaverse, a unique combination of DeFi and NFT.

Aavegotchis are pixelated ghosts living on the Ethereum network supported by the ERC-721 standard, with their value determined by rarity. Rarity levels are calculated based on various factors such as basic features, the amount of staked collateral/aTokens, and equipped wearables.

To upgrade Aavegotchis, players can participate in various activities, including minigames, governance, and gatherings. Aavegotchis can also enhance their rarity by equipping wearables and upgrades in the game.

Advantages of Renting in the Game Compared to Buying/Trading

• Players can collect tokens in the game to forge a golden altar, and players without ghost NFTs can rent them from the rental market to enter the game.
• Purchasing an Aavegotchi typically costs around 400 GHST, while the cost of renting it is minimal, less than 1 GHST (refer to Aavegotchi rental data).

6. DracooMaster

Overview

Dracoo Master is a strategic Roguelike deck-building game on BNB Chain, where Dracoo's card arrangement allows players to achieve unlimited possibilities in the real-time multiplayer online game Sacred Peak. With utility tokens BAS and governance tokens DRA in Dracoo Master, players can use BAS tokens to breed Dracoos and craft summoner equipment.

Players of Dracoo Master can collect DRA tokens through adventures and battles in the game, while also collecting and evolving different types of Dracoos, earning DRA tokens through battles. Dracoo NFTs can be traded on the NFT market.

Advantages of Renting in the Game Compared to Buying/Trading

• For non-blockchain players, they can rent Dracoo NFTs within the app using fiat currency to play the game.
• Renting NFTs with fiat currency not only lowers the barrier to playing blockchain games but also provides a more economical option for users who cannot afford to buy NFTs in certain regions.

7. Pegaxy

Overview

Pegaxy is a play-to-earn PvP-style horse racing game where players compete against 14 other racers for the top 3 positions, with each race having random elemental variables including wind, water, fire, speed, and more.

Using strategic upgrades, food, and skills, players must place in the top 3 to earn the platform's utility token VIS (Vigorus). In the game, players can breed, merge, rent, sell, and race their Pega to earn VIS tokens, allowing the system to build large guilds, scholarship programs, and even offer opportunities for individual players to earn in-game tokens through daily races.

Advantages of Renting in the Game Compared to Buying/Trading

Pegaxy has three types of rental scenarios: fixed rental, profit-sharing, and direct rental.

• In the fixed rental scenario, once the lessee accepts the agreement and the Pega is in the escrow wallet, the owner will receive a fixed amount of PGX from the escrow account but will not be able to redeem their Pega within a fixed timeframe to ensure that the owner receives the Pega back during the fixed rental period.
• The profit-sharing model incentivizes hard work while reducing the workload of managers/owners. Scholars/lessees can access NFTs at a cost lower than the fixed rental option but must share some profit with the manager/owner.
• The direct rental system is designed specifically for guilds, allowing managers to create rental contracts and send them directly to scholars for acceptance.

Pegaxy implements large-scale rental programs and guild development through in-game economic models, creating extensive opportunities for those who want to access the game for free.

What are the barriers for game developers to adopt their own rental markets?

While the advantages of allowing players to rent NFTs to play games instead of buying them are evident, our observations clearly show that games with this feature are still in the minority.

Here are several possible explanations as to why more games have not introduced their own rental markets:

Technical Barriers

NFTs based on the ERC-721 and ERC-1155 token standards typically cannot be used out of the box, only transferred. While they can be rented out without collateral, this can be tricky and time-consuming.

For this reason, new token standards ERC-4907 and ERC-5006 have been released, which are extensions of ERC-721 and ERC-1155, simplifying the process.

Lack of Priority

Almost all games using NFTs are relatively new projects with new features released every month. With NFT rental functionality, there are millions of different tasks to be completed: new game mechanics, server maintenance, bug fixes, etc.

For some games, developers must address other priorities before implementing something like a rental market, especially when they have not fully understood its benefits.

Counterintuitive Nature

The role of NFTs and cryptocurrencies in games is to "make true ownership of game assets possible," and with no ownership exchange for rentals, NFT rentals may be another cognitive leap built on top of this, which could impact its adoption by mainstream players and game developers.

Conclusion

Games that adopt rentals typically have higher user engagement and occupy a disproportionate share of active users. For new users who are not yet willing to invest heavily in purchasing digital assets for games, rentals make NFTs more accessible and affordable.

Experienced users can choose to rent specific cards or game components for activities, which may be because NFT rentals allow players to try certain gameplay combinations and builds before committing to purchase.

Regardless, we expect the adoption of NFT rentals to grow steadily alongside NFT-based games themselves.

About the Authors

This report was co-authored by Double Protocol and Winkrypto. Data sources provided by mymetadata.io.

Double is an NFT rental market focused on Web3 games and metaverse assets. Double is also the team behind ERC-4907. To date, Double has partnered with over 100 games.