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👩🌾💎👨🌾Non-Fungible Token (NFT) Farming
As soon as economies in games became large enough, people started “farming” in-world game currency. This activity is often called “gold farming,” and is characterized by players acquiring the in-game currency with the intention of selling it for “real-world” money.
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Gold farming has often been looked down upon by game developers because, God forbid, users are able to earn a living playing their game. Truth be told, most game developers don’t like how gold farming impacts their game’s economy. There are also many regulatory issues involving the movement of real-world currencies, and game developers definitely want to avoid issues with financial regulators.
For those reasons and more, game developers have been banning accounts associated with gold farming for as long as it has existed. Despite this, we still see large, human-powered gold farming operations around the world. Often existing in low-income countries, these operations provide a valuable service to both locals and gamers alike: they employ the local community with comparatively well-paying jobs while giving gamers quick access to better gear and opportunities without needing to grind for 100+ hours.
If anyone wants to learn more about a modern gold farming operation headquartered in Venezuela, then I highly suggested checking out The Delphi Podcast which has a series about this exact topic called Metaverse Musings. My good Friend Piers Kicks from Delphi Digital speaks with the head of a real Runescape gold farming operation and it is an extremely interesting listen.
A New Era
Luckily, we are at the dawn of a new era where gold farming will finally be considered a normal activity that does not need to be kept in the shadows. Virtual worlds and games are being created on an uncensorable global financial system called the blockchain, which enables users to have real property rights within digital worlds. Importantly, blockchains can enable users to acquire items and transact with anyone with full confidence that they won’t be stopped from engaging in regular commerce. This is possible because all game assets are literally on the blockchain, which are native financial infrastructure. This means users buying and selling can happen anywhere at any time and cannot be stopped.
If blockchain enables all of this, what does it mean for gold farming in the NFT world? In short, we are on the precipice of a massive shift in the NFT farming industry. In the next few years, we will see NFT farming operations rival early bitcoin mining operations in terms of scale and potential revenue generation.
The major difference between NFT farming and bitcoin mining will be greenhouse gases! (half-joking). NFT farming will be powered by people (at least for now, more on that later) in low-income countries, while bitcoin mining is powered by machines. Both will provide immense value to the networks, games, and even farming operation owners. What's perhaps most important is that NFT mining will also provide value to the employees performing the mining because all types of gold farming operations tend to pay significantly above whatever minimum wage is in their area/country.
Axie Infinity Farming
So what does an NFT farming operation look like? Really it's just people playing games in order to acquire in-game currency or NFTs. An example of this type of activity is occurring in the NFT game Axie Infinity. There are many people in the Philippines battling Axies for the sole purpose of obtaining a crypto token called “Small Love Potions,” or SLP, which are used to breed more Axies. CoinDesk has a great article that covers this in much greater detail.
There is a constant and steady demand for SLP. As a crypto token, it can be traded on any venue that will accept it and “pulled out” of the Axie ecosystem. Holders and farmers can take their assets anywhere. This means that the value is not confined “within” the game, unlike nearly every other traditional game where you can acquire in-game currency and goods but are unable to take them out of the ecosystem or even sell them for real money.
Farming in Axie Infinity is ideal because the farmers have optionality in this situation: they can keep farming SLP tokens to sell them or use the SLP tokens to breed other Axies, which have their own value. Today, these types of farming opportunities are scarce in the NFT world, but I am very confident we will see a massive increase in NFT farming in the coming years, especially with the rise of new token models.
Platforms Launching Tokens For Incentivization
The COMP token, launched by the money-market protocol Compound, taught us that a successful product can launch a crypto token in order to incentivize specific user behavior. COMP is used to reward users who are providing liquidity to their asset pools or loaning assets from their liquidity pools. This token opened people’s eyes and helped them understand that users could have a real upside in the success of a platform. Suddenly, everyone began launching tokens that rewarded users for doing X and Y activity.
The NFT art platform Rarible launched the first token directly related to the NFT ecosystem, called the RARI token. This token is rewarded to users based on their trade volume on Rarible, thus users farm this token by buying and selling NFTs on the marketplace. This token-economic system was a massive success and we saw Rarible become the dominant NFT marketplace almost overnight. The rapid rise and success of Rarible is an example to the rest of the ecosystem and I expect many platforms, games, and virtual worlds will launch their own tokens in the near future.
A trading card game could launch a token that rewards users for winning duels. A collectibles project could launch a token that is given to users each time they acquire a collectible. A virtual world could launch a token to award users if they build in-world. Virtual worlds need content. Without content, specifically user-generated content, they are not exciting - hence tokens could be used to incentive this content generation. There are an unlimited number of options here for teams launching all types of projects to utilize tokens to incentivize specific user behavior.
You may have noticed that I did not touch upon the functionality of these hypothetical tokens, I only discussed how users obtained them. This is because NFT projects can truly enable whatever type of functionality they want. Some will be used for governance, some for revenue sharing, and some for specific functions within the game or platform (like breeding, reducing trading fees, etc.).
We are quickly heading towards a world where NFT farming opportunities will become common and widespread. Users will be able to farm all types of different in-game assets whether they be erc20 tokens, NFTs, other non-ethereum based tokens, I foresee this growing into a massive opportunity set. If you are looking deeply into NFT farming opportunities, then I suggest reaching out to my friend Gabby Dizon who is working on something exciting in this arena called Yield Guild Games.
If NFT farming is going to become as large of an opportunity as I suspect, then it will inevitably cause a war: a war between savvy users who create AI bots to farm for them and the game developers who ban these bots. Today games allow users to farm but if there is even an inkling of users using bots then they will get banned as it is considered unfair.
Rise Of The Bots - Using Artificial Intelligence To Farm NFTs
Even before NFTs existed, there has been a constant arms race between game developers creating systems to detect bots and users that create bots for gold farming. Game developers do not like bots because it gives the bot owners an unfair advantage over users who are actually playing the game and “grinding” (putting in long hours). Because of this, bots almost always get the ban hammer once they are discovered.
If we see the world I think will exist, where billions of dollars are at stake from NFT farming, then that means the technologies developed within this industry will become extremely sophisticated. NFT farmers will have an incredibly massive incentive to develop highly advanced AI bots that can operate like people so they can go undetected. With this amount of money at stake, I believe we could see top AI talent move into the ecosystem to develop their own sophisticated NFT farming bots.
Today, when a company wants to enter the bitcoin mining industry, it needs millions of dollars of initial capital to be even remotely competitive. Soon it will just be people in lower-wage countries on their computers farming for tokens within games and virtual worlds. In the future, this could evolve into massive server farms dedicated to running sophisticated AI whose sole purpose is to farm. Consider the huge success and growth of the bitcoin mining industry: from mining on a laptop to the industrial-scale facilities we see today. This shows us that anything can happen when the incentives are large enough. The NFT farming industry is just getting started and we will see it expand into a global multi-billion dollar per year industry.