Entertainment

NFTs and blockchain gaming had a breakout — and controversial — year

This past year saw the collision of crypto and gaming in unprecedented fashion.

Axie Infinity

The blockchain title Axie Infinity combined cryptocurrencies and NFTs to create a real-world economy in the shape of a video game.

Image: Sky Mavis

Click banner image for more holiday coverage for 2021

Twelve months ago, if you had told anyone working in games that the industry would be split into factions now at each other’s throats over the future of game monetization and design, your first assumption on what to blame might be the age-old console wars. After all, top of mind for most gaming fans last December was trying, and likely failing, to procure a PlayStation 5.

Instead, 2021 was the year crypto and video games collided, bringing non-fungible tokens, cryptocurrency and the broader promise and perils of blockchain gaming into the limelight. And now it’s gotten ugly, as the so-called Web3 movement has become ensnared by a wider-scale fight for the soul of the internet and who really stands to benefit by rebuilding it for a new generation.

It’s been many years since the mobile industry rose from its crude beginnings on the fringes of what’s considered gaming’s mainstream, and many of the monetization tactics from that market — free-to-play, pay-to-win, loot boxes and microtransactions — have become commonplace in the biggest, most established series on console and PC.

Despite the detractors, those tools became effective ways to keep games active and profitable over long periods of time, giving rise to the games-as-a-service model and helping offset, at least partially, the ballooning costs of big-budget game development. Too often, however, this has come at the expense of the average consumer now paying for games in more ways than one.

To crypto skeptics, this newfound obsession with speculative assets like NFTs and crypto tokens is yet another exploitative practice from an industry that has perfected the act of extracting revenue from customers and sustaining products long after their shelf life. Like the crypto market at large, the NFT and blockchain gaming space has its fair share of scams, as well as get-rich-quick and pyramid-structured schemes designed to sucker those late to the party for the benefit of the early movers. That large game makers now want in and Silicon Valley is pouring money into startups casting this future as bold and revolutionary is a sign of moral bankruptcy in the eyes of some of Web3’s harshest critics.

“Not only is this ethically dubious, but there's no practical reason to implement NFTs into your game. Certainly not for buying/trading ‘unique’ loot,” Harper Jay MacIntyre, community manager at Psychonauts creator Double Fine, wrote on Twitter in response to Ubisoft’s recent NFT product launch. “It's a scam. The more people in our industry who are willing to say so publicly, consequences be damned, the better.”

Xbox chief Phil Spencer has also cast some doubt on the near-term future of these technologies, saying they hold promise only if the industry can find real problems to solve instead of creating speculative markets designed primarily to enrich a small slice of participants.

“There's a near-term kind of hysteria around NFTs, which I think is as much driven by speculation as real end-user benefit. And so I'm just leery of that,” Spencer told Protocol this month. “In the long run, I think there is a real benefit to players to having open standards for digital entitlements, so that I don't have to buy the same content multiple times on different devices, so that I can gift the things that I own to different people.”

But the true believers think the rest of the industry is missing out on the next big wave in the game industry. This paradigm shift, in which decentralization, alongside new platforms and business models, will revolutionize digital ownership of virtual goods and give players an opportunity to both earn money from and be invested in the success and direction of new virtual game platforms.

We’re seeing it happen already with games like Sky Mavis’ Axie Infinity. In 2021, the Pokémon-like game, based out of the Philippines, became the poster child of this so-called pay-to-win model, in which cryptocurrencies and NFTs create what looks very much like a real-world economy in the shape of a video game. Some players are now playing Axie Infinity as a primary source of income, and one can participate in the game’s DAO (decentralized autonomous organization), overseeing its future direction, although its financial stability has recently come under fire over concerns of volatility.

Back in October, Andreessen Horowitz general partner Arianna Simpson said decentralization “is rapidly changing the web as we know it, and nowhere is this more obvious and exciting than in gaming,” in a blog post announcing the venture firm’s investment in Sky Mavis. “Giving players freedom and ownership in a gaming experience drives immense loyalty, as Axie has proven,” Simpson added. “What this means for the future of games, and really the web as we know it, is as big as your imagination will allow. We can’t wait to see where this pioneering team takes their community next.”

At the convergence of all of these developments is the metaverse, the supposed next-generation version of the internet where gaming, social networks and new technologies like AR and VR will supposedly collide to create a 3D, inhabitable world that will transcend existing platforms and perhaps even create an all-new computing layer overlaid on the real world.

It’s what Meta, formerly Facebook, has bet the entire company’s future on. “We believe the metaverse will be the successor to the mobile internet,” Meta CEO Mark Zuckerberg said when announcing the company’s rebranding earlier this year. “Within the next decade, the metaverse will reach a billion people, host hundreds of billions of dollars of digital commerce and support jobs for millions of creators and developers.”

It all sounds fantastical and wrapped in hype — because right now, it is. But if this year made anything clear, it’s that NFTs and blockchain gaming are just a subset of a much larger movement with substantial momentum, and none of it is likely going away anytime soon.

"Everybody in gaming that I know, if they weren't working on an NFT game already, are thinking about how they'd do it or are pivoting hard to it right now," Twitch co-founder Justin Kan told Protocol earlier this month. Kan himself has gotten involved, co-founding a new gaming NFT marketplace called Fractal that was in the news recently because it fell victim to a Discord scam costing users a collective $150,000. Kan and the Fractal team said they will compensate victims, but cautioned users in a blog post that “we must use our best judgement as there’s no ‘undo button’ in crypto.”

The numbers don't lie about the sector’s eye-popping growth. Investments in blockchain and NFT-related gaming companies comprised 20% of the total $9 billion in private financing in the first nine months of 2021, according to investment firm Drake Star Partners. And NFT games generated more than $2.3 billion, or 22% of all NFT trading volume, in just the third quarter of the year, according to a report released this month by the Blockchain Gaming Alliance. The same report says the number of new digital wallets created for blockchain games rose 2,453% in the first nine months of this year.

“Blockchain gaming has firmly established itself as the industry’s darling. With the consumer growth participating in blockchain games, dapp and gaming trends will come together into something even bigger and potentially all-encompassing: the Metaverse,” Dragos Dunica, co-founder of decentralized app store DappRadar, wrote in the BGA’s report. “We’re headed towards a complete shift in how we form communities, create, play, trade, and socialize. Blockchain gaming is catalyzing the establishment of the virtual hubs that will host this new digital life.”

Yet even as the movement gains steam and collects massive funding along the way, mainstream consumers appear to be rejecting efforts to inject these technologies into traditional products. Ubisoft’s Quartz announcement became a lightning rod for debate around NFTs, with tens of thousands of people downvoting the company’s YouTube video. Earlier data about aftermarket sales of Ubisoft’s Ghost Recon NFT cosmetics also shows paltry sales in the low double-digits with a total trading volume of around $400.

In an interview with Protocol this month, Ubisoft defended Quartz as an early test of blockchain gaming. “Ninety percent of the people now saying you can do the same with older technology, they haven’t tried [blockchain gaming],” said Nicolas Pouard, the vice president of the publisher’s Strategic Innovation Lab, which conceived Quartz. “It's not enough to disregard what they’re saying. We have to respect what they’re saying. There’s real concern … For people who don’t believe in it, just start by trying it.”

While many of Ubisoft’s peers have either kept quiet or steered clear of NFTs and blockchain gaming, other smaller companies have dived in, to mixed results. Developer GSC Game World announced and then quickly canceled its plans to add NFTs to its upcoming shooter S.T.A.L.K.E.R. 2: Heart of Chernobyl after massive fan outcry. “The interests of our fans and players are the top priority for the team. We’re making this game for you to enjoy — whatever the cost is. If you care, we care too,” the company wrote in an apology note.

Meanwhile, Fable co-creator Peter Molyneux, who now runs indie studio 22cans, announced his newest simulation game, Legacy, a blockchain title made in partnership with Gala Games that has already sold more than $50 million in virtual real estate before it has even launched.

“Legacy is a game that makes you feel creative. Now, the fact that you feel creative is great. You know, I love spaghetti Bolognese or a beautiful picture. But if no one ever sees it, if no one ever buys it, then you know, you might as well not have done it,” Molyneux told The Verge about why Legacy needed to be a blockchain game. “The fact that your design has gone on to be seen and appreciated by other people that make money is, I think, the big thing. That’s in addition to the fact that this is blockchain gaming and people can make money while playing a business simulation.”

Where this all goes from here is anyone’s guess, but the feud between NFT and blockchain proponents and those who don't want it anywhere near the game industry is likely to grow more bitter. “It’s becoming increasingly difficult to discuss anything blockchain-related. The topic has saturated the airwaves and we’re only allowed to be in favor of, or against it,” wrote game industry analyst Joost van Dreunen in an issue of his newsletter earlier this month. “You’re either a self-indulgent social media exhibitionist showboating your digital wealth or a ‘true creative’ who prioritizes art over ownership.”

What van Dreunen has correctly observed, however, is that the future of the game industry is in the gray area between these extreme positions on crypto. Video games are undergoing substantial change in how they are made, funded, distributed and monetized due not only to Web3 technologies, but also models from music and other industries like subscription gaming and cloud-based streaming.

The biggest game makers in the world are trying to adapt to a services future because the old model of pumping out giant hit after hit to a core audience that wants to pay only $60 for a game forever is not reflective of the much larger, more casual and mobile-centric gaming audience or the direction of the medium as an art form. To figure out where crypto fits in here will involve a sustained back-and-forth between the skeptics, the true believers and those tasked with actually building the products and keeping them afloat.

“We started the year thinking it would be impossible for the market to match 2020, as delays for AAA releases and ongoing supply shortages for new gaming hardware gave people little opportunity to spend. Yet, nine months into 2021, we realized that the market would grow again,” said Tom Wijman, Newzoo’s head of Reports and Forecasting, in the analytics firm’s annual end-of-year report.

“If anything, this shows that the games market is definitely no longer the seasonal, hit-driven business it once was,” Wijman added. “New gaming content no longer means new games or new hardware — a new season pass is just as likely to drive revenues.”

Workplace

How 'Dan from HR' became TikTok’s favorite career coach

You can get a lot of advice about corporate America on TikTok. ‘Dan from HR’ wants to make sure you’re getting the right instruction.

'Dan from HR' has posted hundreds of videos on his TikTok account about everything from cover letters to compensation.

Image: Dan Space

Daniel Space downloaded TikTok for the same reason most of us did. He was bored.

At the beginning of the COVID-19 pandemic, Space wanted to connect with his younger cousin, who uses TikTok, so he thought he’d get on the platform and try it out (although he refused to do any of the dances). Eventually, the algorithm figured out that Space is a longtime HR professional and fed him a post with resume tips — the only issue was that the advice was “really horrible,” he said.

Keep Reading Show less
Sarah Roach

Sarah Roach is a reporter and producer at Protocol (@sarahroach_) where she contributes to Source Code, Protocol's daily newsletter. She is a recent graduate of George Washington University, where she studied journalism and mass communication and criminal justice. She previously worked for two years as editor in chief of her school's independent newspaper, The GW Hatchet.

Sponsored Content

A CCO’s viewpoint on top enterprise priorities in 2022

The 2022 non-predictions guide to what your enterprise is working on starting this week

As Honeywell’s global chief commercial officer, I am privileged to have the vantage point of seeing the demands, challenges and dynamics that customers across the many sectors we cater to are experiencing and sharing.

This past year has brought upon all businesses and enterprises an unparalleled change and challenge. This was the case at Honeywell, for example, a company with a legacy in innovation and technology for over a century. When I joined the company just months before the pandemic hit we were already in the midst of an intense transformation under the leadership of CEO Darius Adamczyk. This transformation spanned our portfolio and business units. We were already actively working on products and solutions in advanced phases of rollouts that the world has shown a need and demand for pre-pandemic. Those included solutions in edge intelligence, remote operations, quantum computing, warehouse automation, building technologies, safety and health monitoring and of course ESG and climate tech which was based on our exceptional success over the previous decade.

Keep Reading Show less
Jeff Kimbell
Jeff Kimbell is Senior Vice President and Chief Commercial Officer at Honeywell. In this role, he has broad responsibilities to drive organic growth by enhancing global sales and marketing capabilities. Jeff has nearly three decades of leadership experience. Prior to joining Honeywell in 2019, Jeff served as a Partner in the Transformation Practice at McKinsey & Company, where he worked with companies facing operational and financial challenges and undergoing “good to great” transformations. Before that, he was an Operating Partner at Silver Lake Partners, a global leader in technology and held a similar position at Cerberus Capital LP. Jeff started his career as a Manufacturing Team Manager and Engineering Project Manager at Procter & Gamble before becoming a strategy consultant at Bain & Company and holding executive roles at Dell EMC and Transamerica Corporation. Jeff earned a B.S. in electrical engineering at Kansas State University and an M.B.A. at Dartmouth College.
Podcasts

1Password's CEO is ready for a password-free future

Fresh off a $620 million raise, 1Password CEO Jeff Shiner talks about the future of passwords.

1Password is a password manager, but it has plans to be even more.

Business is booming for 1Password. The company just announced it has raised $620 million, at a valuation of $6.8 billion, from a roster of A-list celebrities and well-known venture capitalists.

But what does a password manager need with $620 million? Jeff Shiner, 1Password’s CEO, has some plans. He’s building the team fast — 1Password has tripled in size in the last two years, up to 500 employees, and plans to double again this year — while also expanding the vision of what a password manager can do. 1Password has long been a consumer-first product, but the biggest opportunity lies in bringing the company’s knowhow, its user experience, and its security chops into the business world. 1Password already has more than 100,000 business customers, and it plans to expand fast.

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editorial director. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Boost 2

Can Matt Mullenweg save the internet?

He's turning Automattic into a different kind of tech giant. But can he take on the trillion-dollar walled gardens and give the internet back to the people?

Matt Mullenweg, CEO of Automattic and founder of WordPress, poses for Protocol at his home in Houston, Texas.
Photo: Arturo Olmos for Protocol

In the early days of the pandemic, Matt Mullenweg didn't move to a compound in Hawaii, bug out to a bunker in New Zealand or head to Miami and start shilling for crypto. No, in the early days of the pandemic, Mullenweg bought an RV. He drove it all over the country, bouncing between Houston and San Francisco and Jackson Hole with plenty of stops in national parks. In between, he started doing some tinkering.

The tinkering is a part-time gig: Most of Mullenweg’s time is spent as CEO of Automattic, one of the web’s largest platforms. It’s best known as the company that runs WordPress.com, the hosted version of the blogging platform that powers about 43% of the websites on the internet. Since WordPress is open-source software, no company technically owns it, but Automattic provides tools and services and oversees most of the WordPress-powered internet. It’s also the owner of the booming ecommerce platform WooCommerce, Day One, the analytics tool Parse.ly and the podcast app Pocket Casts. Oh, and Tumblr. And Simplenote. And many others. That makes Mullenweg one of the most powerful CEOs in tech, and one of the most important voices in the debate over the future of the internet.

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editorial director. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.

Policy

Biden wants to digitize the government. Can these techies deliver?

A December executive order requires federal agencies to overhaul clunky systems. Meet the team trying to make that happen.

The dramatic uptick in people relying on government services, combined with the move to remote work, rendered inconvenient government processes downright painful.

Photo: Joe Daniel Price/Getty Images

Early last year, top White House officials embarked on a fact-finding mission with technical leaders inside government agencies. They wanted to know the answer to a specific question: If there was anything federal agencies could do to improve the average American’s experience interacting with the government, what would it be?

The list, of course, was a long one.

Keep Reading Show less
Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

Entertainment

5 takeaways from Microsoft's Activision Blizzard acquisition

Microsoft just bought one of the world’s largest third-party game publishers. What now?

The nearly $70 billion acquisition gives Microsoft access to some of the most valuable brands in gaming.

Image: Microsoft Gaming

Just one week after Take-Two took the crown for biggest-ever industry acquisition, Microsoft strolled in Tuesday morning and dropped arguably the most monumental gaming news bombshell in years with its purchase of Activision Blizzard. The deal, at nearly $70 billion in all cash, dwarfs Take-Two’s purchase of Zynga, and it stands to reshape gaming as we know it.

The deal raises a number of pressing questions about the future of Activision Blizzard’s workplace culture issues, exclusivity in the game industry and whether such massive consolidation may trigger a regulatory response. None of these may be easily answered anytime soon, as the deal could take up to 18 months to close. But the question marks hanging over Activision Blizzard will loom large in the industry for the foreseeable future as Microsoft navigates its new role as one of the three largest game makers on the planet.

Keep Reading Show less
Nick Statt
Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at nstatt@protocol.com.
Latest Stories
Bulletins