Over the last few years, the popularity of non-fungible tokens (NFTs) has surged. NFTs have not only taken the art world by storm, but they have also been disrupting the gaming industry by enabling innovative and lucrative gaming experiences. However, it's worth noting that NFTs are still subject to taxation by the IRS, which means players could be facing an unexpected tax bill.
In this article, we will dive into the world of current and upcoming NFT games, explore the most popular ones in 2023, and discuss the tax implications of owning and trading NFTs. These games combine traditional gaming mechanics with blockchain technology to provide unique in-game assets such as skins, characters, weapons, land, and more.
What Are NFTs?
NFTs, or non-fungible tokens, are digital assets that represent ownership of a unique item or piece of content, such as a piece of art, music, video, or other creative works. These tokens are stored on a blockchain, a decentralized digital ledger, which makes them secure, verifiable, and tamper-proof.
NFTs differ from other digital assets, such as cryptocurrencies, in that each token is unique and cannot be exchanged for another token of equal value. This makes them "non-fungible." NFTs also have a permanent record of ownership and provenance, which can be important for artists and collectors.
NFTs have gained significant attention in the art world, as they allow artists to monetize their digital creations in a way that was not previously possible. NFTs have also been used for other purposes, such as in-game items and virtual real estate. While the concept of NFTs is relatively new, they have already generated millions of dollars in sales and sparked a debate about the value of digital art and ownership in the digital age.
According to PlayToday, as of April 2023, the NFT market is thriving, with around 5,000 NFTs being sold on a daily basis. The daily revenue generated by these sales is estimated to be around $15 million in 2023. The largest NFT marketplace in 2023 is OpenSea, which boasts over 27,000 daily traders. In 2022, CryptoPunk #5577, one of the original NFTs (Non-Fungible Tokens) on the Ethereum blockchain, made headlines when it was sold for a staggering $7.7 million.
These statistics highlight the immense growth of the NFT market, with buyers and sellers alike taking advantage of the opportunities presented by this exciting new technology.
What Are NFT Games?
NFT games are blockchain-based games that use non-fungible tokens (NFTs) to represent in-game assets, such as characters, items, and land. These games allow players to buy, sell, and trade these assets, which are stored on a blockchain, providing a level of security, transparency, and permanence that is not possible with traditional gaming assets.
In NFT games, players can earn and collect rare and unique items, which can be sold on NFT marketplaces for real-world money. Some NFT games also offer gameplay features that are tied to NFT ownership, such as exclusive access to certain areas of the game world or special abilities for certain characters.
NFT games have become increasingly popular in recent years, as blockchain technology has made it easier to create and manage them. Some notable examples of NFT games include Axie Infinity, The Sandbox, and Decentraland. These games have attracted a large and growing community of players and investors, and have generated millions of dollars in sales of NFT assets. However, there are more games than those mentioned above. Let’s look at the top NFT games list in 2023.
Top NFT Games List in 2023
Numerous NFT games are available on the market, and new games are released every year. However, a few titles have gained immense popularity among both gamers and crypto enthusiasts. Although many existing games focus on trading cards, there has been a surge in the development of more advanced games such as arcade racing and metaverse games. As technology continues to evolve, we can expect to see even more innovative and exciting NFT games.
1. Axie Infinity
Axie Infinity is a game similar to Pokemon, where players can collect and breed NFT-based digital pets called Axies. The game utilizes blockchain technology to pass down traits, strengths, and weaknesses to offspring. Players can earn Smooth Love Potion (SLP), the platform's native ERC-20 token, by completing quests or competing against other players. SLP can be used to breed new Axies. Another ERC20 token associated with the game is Axie Infinity Shard (AXS), which serves as a governance token and is also used for staking services that became available in 2021.
2. Gods Unchained
Gods Unchained is one of the largest blockchain and crypto projects in the card trading gaming genre. Founded by brothers James and Robbie Ferguson, this free-to-play game can be considered one of the best NFT games because it is redefining the space with its play-to-earn model and creating a virtual economy where gamers stand a chance to earn money.
In this game, players collect cards by either buying them or winning player vs. player matches. For every match you win, you get experience points, and when the experience bar is topped, you move on to the next level and get a new pack of cards added to your collection.
Each card is powered by an ERC-20 token, and they are tradeable on the open market. Players who sell these cards get GODS, the native token of the platform, as payment.
3. Splinterlands
Splinterlands is a free-to-play card game that operates on the Hive blockchain. Similar to Gods Unchained, players earn rewards by winning card matchups and can engage in skill-based matches to build their card collection. The game allows players to buy, sell, and trade their digital assets.
The creators of Splinterlands, Jesse Reich and Matthew Rosen, sought to address the issue of players not truly owning their digital assets in games. With Splinterlands, players can own their digital assets and trade them. The game's native token, SPS, is integrated into the gameplay, allowing players to influence decisions about the ecosystem and propose changes to the game.
To start playing, players need to purchase a starter pack of cards and create a Steam account. After revealing their cards in Splinterlands, players can battle other players to advance their skills and win rewards. The Hive blockchain provides a verifiable supply and historical record of all cards on the platform, ensuring transparency and security.
4. The Sandbox 3D
Launched by Pixowl in 2011, Sandbox 3D is one of the most active blockchain-based NFT gaming platforms. In this game, players can create, buy, and sell digital assets.
This voxel-based gaming metaverse allows players to monetize a voxel asset, a pixel, with volume. Look at it as the blockchain version of games such as Minecraft and Roblox. In the game, players get the tools to create and animate objects, and after that, they can sell them in the marketplace. Other than that, players can create bespoke games and play them on the platform.
Sandbox 3D has introduced its native ERC-20 token, SAND. With this token, players can buy in-game items on The Sandbox 3D’s marketplace. Moreover, the game also has NFT tokens called LAND, which are some of the most sought-after assets in the game.
5. Alien Worlds
Alien Worlds is a decentralized NFT metaverse where players compete to gather rare resources like Trilium (TLM), the in-game currency. The game simulates economic competition and collaboration among players, with a focus on exploring other planets.
One of the standout features of Alien Worlds is the multitude of DAOs within the gaming metaverse. TLM holders have a say in who runs the platform and can vote for leaders or become leaders themselves. In the game, players can stake their TLM to planet DAOs, demonstrating their alliance with the planet and earning daily TLM rewards. The amount of TLM staked directly impacts a player's ability to vote for the planet's future. This democratic system makes Alien Worlds one of the most engaging NFT games on the market.
6. Battle Racers
This game is inspired by famous games such as Super Mario Kart and F-Zero. The idea behind this game is to merge different parts and weapons to create the most powerful cars possible, which gives them an advantage on the arcade-sized tracks.
Once you win, you can register your prized cars on the blockchain network as NFTs and earn crypto by selling them on OpenSea. The game can be played in Decentraland, a blockchain-based virtual world.
7. Sorare — Fantasy Football
Sorare is one of the top NFT games on the Ethereum blockchain. This fantasy football trading card game has built a huge collection of NFT football trading cards for players to create their fantasy football team and compete with other players to unlock more NFT cards and with ETH.
This crypto game has more than 200 football clubs licensed on the platform, such as Liverpool, Real Madrid, Bayern Munich, Paris Saint-Germain, and more are being added every week.
It is a free-to-play game, and when players finish their registration, they get a random deck of cards. If players want to progress in the division leagues and win prizes, they have to buy rare cards with ETH.
There are four categories of cards in the game: commons, rares, super-rares, and uniques. With the cards you have, you can assemble a five-player team, choose a captain, and enter into weekly competitions. Players have ownership of their cards and can sell them on NFT marketplaces.
8. Battle of Guardians
In Battle of Guardians, an NFT gaming platform where players must create a team of guardians to take on opponents in strategic battles. Each guardian has unique abilities and strengths, and players must choose wisely to build a team that is well-rounded and capable of taking on a variety of opponents. The game features a single-player campaign mode where players can test their skills against computer-controlled opponents, as well as a multiplayer mode where players can compete against other players.
Players can level up and evolve their guardians, increasing their strength and abilities, and making them more valuable. As players progress through the game, they can unlock new guardians, abilities, and equipment that they can use to further customize their team. The game also features regular events and challenges that offer players the opportunity to earn special rewards and bonuses.
9. Illuvium
Illuvium is one of the best upcoming NFT games that combines elements of role-playing games, collectible card games, and creature-collecting games. In the game, players can collect, battle, and trade Illuvials, which are powerful creatures that inhabit the game world. Illuvials are unique, non-fungible tokens (NFTs) that are stored on the Ethereum blockchain, making them rare and valuable digital assets.
Players can explore the game world, which is divided into various regions, and encounter new Illuvials to add to their collection. Each Illuvial has its own unique abilities, strengths, and weaknesses, and players can use them in battles against other players or computer-controlled opponents.
Illuvium also features a staking system, which allows players to earn rewards by staking their Illuvials in the game's native token, ILV. The game's developers have also announced plans to integrate decentralized finance (DeFi) features, such as yield farming and liquidity pools, into the game.
10. Cosmic Champs
Cosmic Champs is a blockchain-based collectible card game that uses non-fungible tokens (NFTs) to represent game assets. In the game, players can collect and trade digital cards featuring unique characters, called "Champs," that have different abilities and strengths.
The game is set in a sci-fi universe where players can explore different planets and battle other players or computer-controlled opponents to earn rewards and unlock new Champs. Cosmic Champs also features a staking system where players can earn additional rewards by staking their Champs in the game's native token, COSMIC.
11. Thetan Arena
Thetan Arena is a new NFT game that blends elements of battle royale games and collectible card games. Players compete in an arena using unique NFT-based characters, known as Thetans. Each Thetan has its own strengths and weaknesses, and players can use strategy and skill to come out on top.
In the game, players can earn rewards by winning battles, completing quests, and acquiring rare Thetans. These rewards can then be traded or sold on NFT marketplaces. Thetan Arena also features a governance token, TAN, which allows players to influence the game's development and earn additional rewards.
12. Untamed Isles
Untamed Isles is a blockchain-based NFT game that allows players to own and manage their own virtual islands. The game is set in a fantasy world and offers players a chance to explore, adventure, and discover new islands.
Players can acquire and trade NFT-based assets, such as creatures, items, and resources, to enhance their islands and improve their gameplay experience. They can also participate in battles and tournaments to earn rewards and compete against other players.
13. Sidus Heroes
Sidus Heroes is a blockchain-based NFT game that combines elements of strategy and role-playing games. In this game, players can collect and trade NFT-based heroes, each with its own unique abilities and strengths.
Players can use their heroes to battle against each other, participate in tournaments and quests, and earn rewards in the form of cryptocurrency. The game also features a staking mechanism that allows players to earn passive income by holding onto their NFT-based assets.
14. Gold Fever
Gold Fever is an NFT game that combines elements of strategy and resource management. In this game, players can collect and trade NFT-based assets, including mining equipment and land, in order to build a profitable gold mining operation.
Players can explore different territories to find gold deposits, and use their mining equipment to extract the precious metal. However, mining requires resources and energy, and players must balance their investments and expenses to maximize profits.
15. MAD Metascientists
MAD Metascientists is an NFT game that combines elements of strategy, creativity, and science fiction. In this game, players can create and collect NFT-based assets, including characters, equipment, and labs, to build a team of mad scientists and embark on various missions.
Players can use their mad scientists to conduct research and develop new technologies, as well as to participate in battles and other challenges. The game's world is richly detailed and offers many opportunities for exploration and discovery.
NFT Game Taxes
On February 1, 2023, it was reported that sales of non-fungible tokens (NFTs) had surged by 41.96% compared to the previous month. In just 30 days, the total sales of NFTs nearly hit the $1 billion mark, with an estimated total of $997.53 million, according to bitcoin.com. However, NFT game taxes are ambiguous at best. As a result, players should ask their accountants to provide guidance, particularly if they have high-value transactions, and consider being conservative to avoid potential issues down the road.
NFTs are a potential goldmine for the IRS because they produce multiple tax events:
- NFT creators owe ordinary income tax on any digital sales. For example, NFT gamers who mint a new item and sell it may owe income tax on the sale proceeds. Ordinary income taxes can be upwards of 35%, making these taxes significant for some.
- Buyers owe capital gains tax on the cryptocurrency that they exchange to purchase an NFT. For instance, NFT gamers who buy an item with ETH may owe capital gains tax on the ETH transaction, which can be upwards of 15%.
- NFT gamers that flip an NFT for a profit may owe capital gains or collectibles tax on the transaction. Collectible taxes are typically 28% even if the asset is held for longer than one year (e.g., a long-term capital gain).
That said, the IRS hasn't issued any specific formal or informal guidance on NFT game taxes. NFT gamers may want to take a proactive stance to avoid the need to back-pay taxes in the future (as was the case with early cryptocurrency investors). However, you may not be able to claim an investment or gambling loss if you misplace the NFTs.
ZenLedger makes it easy to track crypto transactions, including NFT game taxes, across wallets and exchanges. In addition to aggregating transactions and computing capital gains and losses, the platform autocompletes the IRS forms you need and even integrates with TurboTax. You can also identify ways to save money through tax-loss harvesting.
The Bottom Line
NFT games combine traditional gaming with blockchain-powered in-game assets, including characters, skins, and weapons. These games feature innovative in-game economies, but players should be aware of the potential taxes associated with NFT games. Although the IRS has not issued any specific guidance, adopting a conservative approach can help players avoid potential issues.
Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, tax, legal or financial advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
