Investment/Business/Trading is all about risk, minimizing risk management, and money management. Since the invention of NFT games, we’ve seen how they can become good businesses. Unfortunately, social media seems to be heralding NFT games’ potential profits while glossing over the loss stories. So it is important to note that NFT gamers experience loss as well.
NFT games aren’t as rosy as media outlets paint them to be. There are several basic issues with NFT games you must learn. These opportunities of making money can all result in the loss of money or cryptocurrencies. This article will elaborate on the essentials of NFT risk management.
How risk can occur in NFT Gaming?
NFT games are infrastructures built on the blockchain. These games offer gameplay rewards, and because they are built on the blockchain, you get ownership of all digital assets attached to you. Also, since the underlying technology for NFT games is blockchain, there’s the promise of security.
However, in light of recent attacks on crypto entities, it is best to understand security and loss risks better. So here are some challenges of NFT gaming that can result in financial loss.
If you follow NFT gaming-related topics on Twitter, your timeline will be full of ‘projects’ that promise profits. However, not all these NFT projects are legitimate. Many are just scams in pretty designs. In addition, there have been several rug pulls where the developers abscond with investor money.
Rug-pulling and scams are the most common NFT game challenges. In 2021, about $14 billion worth of scams were recorded across the blockchain space. The scam risk is heightened due to anonymity, a feature intended to be the ecosystem’s advantage.
Loss of Investment
Many NFT games require buy-in – either characters or utilities. However, there are cases where players lose their NFTs upon jumping on another fishy website. Sometimes, players can lose NFTs from games to scams.
Also, players can lose their NFT investments to the game being played. For instance, if you buy a weapon, you may lose it to an opponent.
Loss of Value
NFTs’ values are 9 based on perception and utility. If a game loses relevance, the associated NFT assets lose value. Many players lose money in NFT games that pack up after just a few months of operations. This can happen when a game isn’t solid enough. When players stop participating in a game, its economy waters down, and it goes into oblivion.
As of when this article is being written, a major pressing issue with NFT games is the disparity between value creation and value extraction. This is because NFT games are based on the play-to-earn model. As a result, early adopters look to get into the game (through their investment) and extract value as fast as possible for these games.
With the increase in the number of players, there is a rise in the number of people looking to extract value. Therefore, when the growth in the number of new players begins to slow down, there will be more value extractors than value creators. Remember, the new people buying into and investing in the game create the most value.
When this disparity occurs, there’s the risk of the project dying. If the project dies and you have not gotten a return on investment, you will eventually experience a loss. These are legal NFT risks, which the developers have no control over, that you must learn to mitigate.
Account phishing and Compromise
Account phishing is popular in the crypto world. Scammers contact NFT owners to persuade them to transfer funds to some account. Sometimes, scammers may cunningly demand details of your coin wallet.
Some other types of compromise may involve scammers transferring some crypto to your account. Getting such crypto from unknown sources is risky, and trying to withdraw them will compromise your account. Remember, your crypto wallet also houses your NFTs.
Since the blockchain world is decentralized, the responsibility to minimize the loss in NFT games lies on you.
How To Minimize Risk Of Loss In Crypto Gaming?
Before and after you get started, you must effectively plan how to prevent loss in NFT games by learning risk and money management strategies. The following guide will keep you abreast with the best practices.
Keep Your Wallet Seed Phrase Secure
You don’t need your wallet’s seed phrase for any application. Always keep it safe. Even when you need to enter your wallet address, double-check to ensure you are on official websites. Your seed phrase holds the key to your wallet. Please don’t keep it on digital platforms. Write it down on a piece of paper.
Research the NFT Games thoroughly
Researching NFT games isn’t easy. Sometimes, there’s too much information, and sometimes, too little. During your research into a game read their whitepaper and ask questions. Know what the developer’s plans are. Find out their growth plan, especially when the new player’s growth rate begins to plateau. Know what will happen when growth stops. A project with no plans for these eventualities isn’t worth investing in.
Beware of Scams
There are numerous scams to be careful of; phishing, bidding scams, pump-and-dump schemes, etc. Once you are involved, your NFT risk management instincts must kick in. These issues with NFT games don’t just go away themselves.
NFT Wallet Compatibility
One significant advantage of NFT games is moving your asset out of the game. However, doing this requires a lot of care. So, if you decide to move your NFTs to another wallet, ensure that the destination wallet is compatible with the in-game currency. This should be part of your research; you must understand all the compatible infrastructure before investing in a game.
Play a Loss-less Game
Many NFT games don’t design gameplay in a way that minimizes risks for their players. However, with CoinFantasy, the experience is designed to ensure players aren’t losing money even when they aren’t winning.
CoinFantasy is a decentralized fantasy gaming platform designed for the crypto-stock market. The game is based on the play-to-earn model, where players get to create a line-up of crypto stocks they predict will perform well and then enter into a contest with other players.
The NFT gaming scene is new, so it remains fraught with risks. Hence, if you’re getting into the industry, it’s vital to learn how to minimize loss risk. Of course, to prevent loss in NFT games, you have to continue to be watchful. If, however, you don’t have any appetite for risk and security breaches, check out CoinFantasy.
Frequently Asked Questions
Yes, NFTs are risky investments. Even when there are no scams or security breaches to deal with, you could get an NFT that will lose value immediately after buying it. Most of the NFT market is based on perception. If the perception of an NFT isn’t great, it won’t sell.
NFTs are a good investment when you are involved with the right project. Getting on good projects involves diligent research. So, you must be patient and don’t just ape into any project you find on social media. Don’t bow to FOMO (Fear of missing out).