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Hot Button Discussion: The Interoperable NFT Asset Concept

September 30, 2022

As new digital data concepts like “blockchain,” “NFT,” “Web3,” and others infiltrate further into the entertainment space, it can be hard to keep up not only with what these concepts mean, but also in what manner they might impact existing and new forms of media entertainment.

Take blockchain, for example. That is basically a technology originally designed as an un-hackable digital ledger that permits data about certain transactions to be widely and securely tracked along a distributed network, thus fueling the rise of digital currencies like Bitcoin and Ethereum, among others. However, along the way, for the entertainment industry, blockchain has started to have relevancy on the business side of the equation as a clean, trustworthy, unbreakable method of tracking royalty payments, distribution destinations, and other financial interactions. It has also become the foundation of the so-called NFT (Non-Fungible Tokens) craze, which introduced yet another new idea into the mix. That idea: that artists can represent entirely unique artwork or assets on a blockchain that can be tracked, sold, and traded using blockchain networks, significantly mitigating fraud involving such assets. And now, this concept has evolved from the idea of single NFT’s being valuable for their uniqueness like an original piece of art to the idea that an NFT could be the foundation of unique videogame elements or visual effects material that could, under certain conditions, travel to or from different platforms as special elements incorporated strategically into online game play or even a movie.

In the opinion of Adam Lesh, a longtime industry consultant/fractional CTO, this evolution is not only likely, but certain to have a meaningful impact, perhaps as soon as the next couple of years. At presstime, Lesh was slated to join others to address this and other new-media topics at the upcoming SMPTE Media Technology Summit in a panel event called “Where Web3, Games, Movies, and Television Converge: A Discussion.” On his website, Lesh recently penned an article explaining how NFT’s might be incorporated into online games, and how potential concerns might be mitigated or minimized, and he recently discussed these issues further with Newswatch.

The central point he emphasizes is that quite a bit is possible in terms of including NFT’s in videogames, and possibly other forms of entertainment, as long as a standardization process is designed to make such unique assets, in essence, interoperable on different platforms.

“NFT’s are obviously a relatively new technology, part of blockchain, that allow for either a limited number or unique assets to be created, stored on chain, and therefore be accessible by anybody that accepts content from that chain,” he explains. “Right now, you can have a digital wallet, place NFT’s in it, minted on Polygon, and then, any application can read the information in that wallet and recognize what those assets are, and then allow you to buy, sell, or trade them in some form of crypto exchange.

"That characteristic makes them interoperable by definition. It does not mean they are interoperable across multiple chains, but within that chain, multiple applications can access them and do something with them. So, in my view, the concept that a game asset could utilize this technology seems like a natural fit.”

He elaborates that the term “interoperable” in this context is essentially a slightly different flavor of the way the term is typically used in the media world and, before that, the IT world, but conceptually it has the same relevancy.

“There is a good analogy in the entertainment space,” he says. “Take something like MPEG or D-Cinema, for instance. When those standards were created, the purpose was for different forms of hardware or software to be able to read an asset or a file that was created using that standard, regardless of who made the equipment or who wants to read the file, and then be able to play it back or work on it successfully. The purpose of those standards is to let files be created and be interoperable across whatever platforms people are using. Or take WMV files—the Microsoft version of a digital video file. Not every media player can play them back, but some can. That’s the same thing we are talking about in terms of game assets. Some games will import an asset, some games won’t, but they will all be able to recognize the asset if they want to, because there will be a published standard that allows them to go in, download the asset and read its metadata, which is sitting on a blockchain, and then decide what they want to do with it. They may recognize it and decide not to let that particular asset into their game, but they will be able to identify it.”

Lesh emphasizes that gaming platforms are themselves unique in the sense of offering different properties, actions, interactions, themes, characters, colors, and textures. Therefore, he explains, gaming platforms need to have a way to identify what the properties are of an NFT asset in order to decide what to do, if anything, with them.

“The challenge isn’t just the technical reading of an NFT but understanding what the metadata is that goes along with them,” he relates. “After all, a game asset is different than a [static] picture on a [traditional] NFT. So, you have to get into what the properties are of that asset. In game, is it a sword or some kind of gun, or a mount like a horse, a tank, or a car? These things need to be defined, and you need to have a standard that says, here is your baseline for these things. If you do that, then any application could recognize it and allow it to be imported into the game, or not, depending on what the game designers prefer.

“In one game, it could be a magic sword, and in a Star Wars game, it might be a light saber or laser pistol. But you can still define its essential abilities or properties—it does this kind of damage, has that kind of durability, and other properties. So, the most important aspect of it is not what the specific item is, but rather what properties it can bring into game play.”

Thus, when Lesh talks about designing “standards” for such things, he is referring to finding ways to define an element’s properties “essentially as some kind of common denominator. Then, you allow the game to take it from there. It can be something that fits their game play, with their limitations, that works within their game engine.”

After all, he elaborates, “games are balanced,” and therefore users can’t be allowed to bring “any” asset into “any” game, “because that could break the game. "Games are balanced in several ways, including in-game currency management and items’ rarity and power.  Games will have to carefully manage the items that are allowed to come from other games in order to preserve the balance and ensure the game does not break."

All of which leads to the essential challenge of such an effort—how can interoperable game assets be created using what Lesh calls “a proper standard” that the game itself can still manage? Will the asset be allowed into the game at all? Will it be recognized but essentially de-powered (called ‘Nerfing’ in videogame parlance), or allowed to participate in all its glory?

In Lesh’s aforementioned article on this topic, he emphasized that that the concerns over this approach, given the nature and culture of online game play, largely fall into three categories. The first he calls the issue of “fidelity.” By that, he means that a key aspect of a videogame is its foundational design. “Many games have a high degree of graphic design,” he relates. “They have detailed textures and colors and things like that. That production quality is what makes the value of that particular game so great. If you bring, say, a sword [NFT] into the game and that game doesn’t have the same libraries, textures, and colors as another game, then the question arises, how do you recreate and maintain the object’s fidelity from one game to another?”

The answer to that question, Lesh emphasizes, is you shouldn’t even try. Those original design elements—the item’s “fidelity”—is the intellectual property of the designer or owner of that asset, and few designers are willingly going to share that IP information without proper compensation, if then. And therefore, he adds, the goal would be to make the asset conform to the look of each game it is imported into and be rendered accordingly. Or, of course, game designers would have the option to simply not let that particular NFT asset into their game to begin with.

“If [the asset owner] wants it to be interoperable, then they have to be willing to lose or change the fidelity of their NFT from one game to another,” he elaborates. “So, the rules and limitations can be set either by the creator of the NFT or the game designers, who can say we will import or not import that kind of asset, or we will import some, and not others. If you import it, and it looks like [it originally did], it gets depowered, or it gets [transformed] to resemble the look of our game, and so on. In other words, my argument is you cannot maintain fidelity in an interoperable game asset, so don’t try. Instead, set your rules—both the object creator and the game creator, so that it can be transferred or not from one game to another.”

The other big concern Lesh mentions revolves around the issue of “game balance.” By that, he means that a typical element of an online videogame platform is the idea of doling out rewards to players in the context of that game’s economy.

“That’s a delicate thing,” he says. “If you allow currency to go from one game to another, that could be ridiculous, because in one game, the currency, or rewards, might be freely given out, and in another, they might be scarce. So, you don’t want one player to be rich because they came from another game. That is what destroys the economy of the game.

“But there are several solutions for this. One is the idea of scale—an exchange rate. If you bring ‘gold’ to my game, then the system looks at the amount you have and does an exchange rate, or only pulls out ‘X’ percent from your inventory for that particular game. That’s up to the game designers to decide.”

Lesh adds that the related idea of “trusting assets” is the third concern some people have.

“Designers create a certain set of assets, and there is a scarcity involved in each one,” he explains. “If you have an independent asset creator minting NFT’s at a number greater than what your game would want, they are again unbalancing your game. But once again, that is simply handled, in my view, because the game’s creators can decide what they want to import and what they don’t.”

All of which brings up a host of business model issues, he adds, such as licensing elements of a designer’s IP, such as asset libraries and textures, to be able to import them and use them in different games. In this area, he suggests, “an NFT can become a vehicle for graphic designers or visual effects artists to be able to create assets that can be used, reused, and licensed over and over again. That is absolutely a possibility and a good opportunity for such designers. And by virtue of the fact that they are NFT’s, being tracked uniquely on chain, the history of the asset can be assured and monitored by its creator. There will always be a solid record of every transaction." 

With this model, of course, NFT’s would rarely be totally unique items in a videogame, but rather would be made available in limited numbers. In some cases, Lesh says, they could be used as essentially unique items in a model somewhat similar to how unique assets can be created for existing games like “Dungeons & Dragons,” and in other cases, they could be available on a purchase-within-the-game model much like elements can be purchased in an online game like “Fortnight.”

“In the gaming world, items range from common to singular, with very few of those,” he explains. “Many times, a batch of items will all be identical with the exception of numerically—which one was created first, second, and so on, but overall are scarce in the game. Rarity is part of determining both in-game and real world value. For example, there might be 250 magic swords based on a particular NFT, for instance, and so only 250 people can buy them and use them in that game. This would probably be a bigger use case for selling and tracking a limited number of particular assets that are exactly the same except numerically, and that can add real value to the game. The NFT, in and of itself, is not the asset—it represents ownership of the asset. One of the fun parts about this is that you can allow the asset to go out of the direct control of the game without losing track of it, and therefore value from it. Users could sell it off the gaming platform, or on an NFT marketplace like Open Sea, and it can still be tracked by the game. This creates a collector’s market, a secondary market for the asset beyond the original use of it as an asset in the game.”

For all these reasons, Lesh believes that formal standards could be created and implemented that could allow interoperable NFT’s to become part of the gaming world, and possibly to be eventually bought and sold as visual effects’ images or clips. As it relates to the question of exactly who should create and implement such standards, he explains that there are two existing organizations looking into different ways of getting this job done.

The first is an organization called the Open Metaverse Alliance, which is a collaboration of Web3 Metaverse platform creators. (Web3 is a future iteration of the World Wide Web currently in development designed to decentralize networks of computers using blockchain, empowering individual users to be the primary owners/users of available content.) Lesh is not involved with that group but says “they are actually trying to publish standards, to be a standards’ body for Metaverse-related issues like this one.”

The second organization is the Metaverse Standards Forum, which Lesh is involved with. That group, according to Lesh, is taking the approach of “first creating an outline or even a sort of draft of a standard, and then they want to work with an existing standards body, like a SMPTE, to formally publish the standard when it is ready. In other words, they would be part of a larger process.”

“They are already working on a broader set of standards for things revolving around the Metaverse—not just NFT’s or blockchain,” he continues. “The concept of creating interoperable game assets is one of many things we are proposing with them. We also have to keep in mind that it wouldn’t be a one size fits all concept. Interoperable game assets are one area we are looking at. And there are other interesting opportunities. In the visual effects world, an NFT standard could be created for interoperable visual effects type assets, or with virtual reality type stuff running on [game engines like] UnReal Engine or Unity.”

While most of this is very embryonic in general, let alone on the media landscape specifically, Lesh feels that the world of online gaming will shortly be incorporating the notion of interoperable NFT’s as game assets, and that the concept will probably travel elsewhere in the media world.

“I would hope that while maybe a year would be a bit optimistic, that maybe within two years, there will be some kind of standard for interoperable NFT game assets,” he says. “It will be a very early version 1.0, but once that happens, then it will start iterating and continue to get better and better, like any other standard. I don’t know how many companies will adopt it widely—some may resist. But in the end, if you look at a smaller group of companies out there, there may be a competitive advantage to maybe 20 of them grouping together as they build games, to allow assets to travel between them, which could attract players. Maybe that would be a competitive way for smaller game designers and companies to actually create an offering that is competitive with larger ones. I’m hoping someone kicks the whole thing off very soon.”

Michael Goldman

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