There’s a platform war brewing in NFT gaming. Here’s what it means.

Valve's NFT ban has created the makings of a platform war in the burgeoning blockchain gaming space.

An image from Axie Infinity

Play-to-earn is a whole new paradigm, based on creating real-world value out of in-game items and other forms of digital goods using non-fungible tokens, cryptocurrency and other blockchain technologies.

Image: Axie Infinity

The worlds of crypto and video games are fast colliding. The combination, dubbed "play-to-earn" and more broadly part of the decentralization movement known as "web3," could result in a whole new generation of gaming experiences with real-world economies and new player incentives. This, in turn, could radically upend traditional business models in the game industry.

That is, of course, if the traditional platform gatekeepers in gaming decide to open their doors. Right now, many of them are shut, leaving these games in their corners of the internet, and it's not clear what it might take to get the most powerful companies in the industry to open their arms to these new technologies. Meanwhile, the blockchain gaming market has become one of the fastest-growing segments in the game industry, and it's showing no signs of stopping.

In the beginning, games were pay-to-play, built with quarter slots and arcades in mind. Decades later, through experimentation and pioneering business models, we now have free-to-play, too, which monetizes through an in-game economy of digital goods — Fortnite dances and Genshin Impact skins, for example — tightly controlled by the developer.

  • But play-to-earn is a whole new paradigm, based on creating real-world value out of in-game items and other forms of digital goods using non-fungible tokens, cryptocurrency and other blockchain technologies.
  • This development, if it catches on, could help form the foundation of the sought-after metaverse that so many social media and gaming firms now seem intent on creating. Mark Zuckerberg thinks even the market for virtual clothing in our metaverse future could become a billion-dollar idea.

Crypto is coming for the gaming market. These play-to-earn titles are at first blush just the latest buzzy NFT hustle, as crypto enthusiasts, startups and investors apply the conceptual framework of a non-fungible token to all manner of digital goods.

  • The idea is simple: Instead of buying a game outright or funneling money into a free-to-play title, the game would actually pay you to play it, with built-in incentives to reward your time and often a small financial stake in the company that makes it.
  • By playing such a game, a player can be awarded unique items with verifiable ownership that can then be traded, bought or sold. This is where the blockchain and NFT components come in, as these items have unique identifiers that ascribe to them a variable value, like a supply-constrained good or piece of art.
  • Typically, the exchange is for cryptocurrency operated by the game itself, as is the case with the Pokémon-like play-to-earn platform Axie Infinity, the parent company of which has a valuation of $3 billion after a series B led by Andreesen Horowitz earlier this month.
  • In that way, these gaming NFTs are no different than those created from pieces of digital art, trading cards or other forms of online collectibles that have been swept up in this year's crypto gold rush. But gaming NFTs do interfere with existing game economies, a select few of which already allow real-world trades of in-game goods (though many game makers forbid it).

Valve entered the ring earlier this month, and things have gotten messy. The company, which operates the dominant PC gaming marketplace, quietly issued a ban on "applications built on blockchain technology that issue or allow exchange of cryptocurrencies or NFTs." The company, normally tight-lipped, had nothing more to say on the matter.

  • A Steam ban on blockchain technology all but ensures play-to-earn games won't break into the mainstream, at least not anytime soon.
  • Because no company has yet worked out a mechanism to distribute such software through Apple or Google's app stores, there are few alternative avenues to reach new players outside sideloading on Android or traditional desktop apps, both of which require players to seek out the game on their own.
  • There exists the potential that Apple and Google could allow such games; neither has explicitly banned them. But right now, not even Axie Infinity is available on mobile app stores, though the game's creator intends to try and publish the game on mobile phones in the next few months.

Valve's decision has created a rift in the game industry. Epic, always eager to undermine its rival, stepped in and said it would support blockchain gaming, despite CEO Tim Sweeney's insistence just weeks prior that NFTs and similar ideas were a breeding ground for scams and fraud.

  • Sweeney said Epic welcomes "innovation in the areas of technology and finance," and welcomes blockchain games so long as they "follow the relevant laws, disclose their terms, and are age-rated by an appropriate group."
  • A consortium of blockchain and NFT gaming companies has now issued an open letter to Valve calling on the company to reverse its decision. Valve has yet to issue any official comment on the matter, though it rarely speaks out on policy or moderation issues despite a number of controversies over the years.
  • "Games that utilize blockchain technology and web3 token-based technologies like DAOs and NFTs can positively enhance the user experience of games, and create new economic opportunities for users and creators," the letter reads.

The NFT gaming boom is coming, one way or another. The questions now are how big can the market get without traditional platform support from companies like Apple, Google or Valve, and what will it look like in a gaming environment where even Epic, who stated support for blockchain in gaming, isn't incorporating NFTs into its own products.

  • Axie Infinity is a good example of where this might be going in the near term. The game, run by Vietnamese startup Sky Mavis, has a complex economy involving two currencies used to breed new "Axies," or effectively fictional creatures not unlike Pokémon that are stored on the blockchain. Those currencies can be earned through battling Axies or selling the ones you have.
  • Axie Infinity has effectively propped up an all-new cryptocurrency through a unique game system, and it's now growing fast and earning those who invest in its economy thousands to sometimes millions of dollars.
  • It's easy to see why investors are interested. According to investment firm Drake Star Partners, of the record $9 billion in private financing raised in the first nine months of 2021, $1.8 billion of that was for NFT-related gaming projects. Every day it seems new companies are popping up, investments are pouring in and more-traditional companies are hopping on the NFT and blockchain gaming bandwagon.
  • "Axie embodies a new generation of games, where game creators are not operating from a place of fear but rather as an open, free market economy that allows players to move freely in and out of," explained Andreessen Horowitz general partner Arianna Simpson earlier this month. "The new model allows gamers to actually own aspects of the game and benefit from their contributions, as the game becomes more successful and more popular."

It's inevitable that blockchain technology and NFTs in particular will become an integral part of the game industry in the future. But there's plenty of legitimate concern today about whether those ideas should be unleashed fully, with little to no regulatory scrutiny or oversight, onto an industry already rife with exploitative monetization and addictive game mechanics. That's not to mention the scams, fraud and other financial concerns that arise when dealing with volatile cryptocurrencies that can create or destroy sizable fortunes in a matter of hours.

That Valve thinks it's too early is a predictable move from a large, traditional marketplace, as it's likely Valve's approach may set the standard for Apple, Google and others to follow. That won't kill the blockchain gaming movement by any means. Games like Axie Infinity have proven that the trend is much larger and more organic than previously thought and doesn't have to depend at all on access to any one platform. But such stonewalling could slow the adoption of these games and provide substantial roadblocks to their mainstream acceptance, while also giving Epic a rare and much-needed point of leverage against Steam and its counterparts in the mobile market.

"The narrative from those walled gardens regarding blockchain technologies is similar — it's either not in line with their core model, or the technology is simply labeled a larger risk," explained SpacePirate Games CEO Chris LoVerme, whose company first widely publicized the Steam ban, in a statement. "The future of gaming is decentralized player owned assets, where gamers are valued for their time and efforts spent in-game. Whether that's an NFT or another asset class, change is happening."

Workplace

Everything you need to know about tech layoffs and hiring slowdowns

Will tech companies and startups continue to have layoffs?

It’s not just early-stage startups that are feeling the burn.

Photo: Kirsty O'Connor/PA Images via Getty Images

What goes up must come down.

High-flying startups with record valuations, huge hiring goals and ambitious expansion plans are now announcing hiring slowdowns, freezes and in some cases widespread layoffs. It’s the dot-com bust all over again — this time, without the cute sock puppet and in the midst of a global pandemic we just can’t seem to shake.

Keep Reading Show less
Nat Rubio-Licht

Nat Rubio-Licht is a Los Angeles-based news writer at Protocol. They graduated from Syracuse University with a degree in newspaper and online journalism in May 2020. Prior to joining the team, they worked at the Los Angeles Business Journal as a technology and aerospace reporter.

Sustainability. It can be a charged word in the context of blockchain and crypto – whether from outsiders with a limited view of the technology or from insiders using it for competitive advantage. But as a CEO in the industry, I don’t think either of those approaches helps us move forward. We should all be able to agree that using less energy to get a task done is a good thing and that there is room for improvement in the amount of energy that is consumed to power different blockchain technologies.

So, what if we put the enormous industry talent and minds that have created and developed blockchain to the task of building in a more energy-efficient manner? Can we not just solve the issues but also set the standard for other industries to develop technology in a future-proof way?

Keep Reading Show less
Denelle Dixon, CEO of SDF

Denelle Dixon is CEO and Executive Director of the Stellar Development Foundation, a non-profit using blockchain to unlock economic potential by making money more fluid, markets more open, and people more empowered. Previously, Dixon served as COO of Mozilla. Leading the business, revenue and policy teams, she fought for Net Neutrality and consumer privacy protections and was responsible for commercial partnerships. Denelle also served as general counsel and legal advisor in private equity and technology.

Entertainment

Sink into ‘Love, Death & Robots’ and more weekend recs

Don’t know what to do this weekend? We’ve got you covered.

Our favorite picks for your weekend pleasure.

Image: A24; 11 bit studios; Getty Images

We could all use a bit of a break. This weekend we’re diving into Netflix’s beautifully animated sci-fi “Love, Death & Robots,” losing ourselves in surreal “Men” and loving Zelda-like Moonlighter.

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.

Workplace

This machine would like to interview you for a job

Companies are embracing automated video interviews to filter through floods of job applicants. But interviews with a computer screen raise big ethical questions and might scare off candidates.

Although automated interview companies claim to reduce bias in hiring, the researchers and advocates who study AI bias are these companies’ most frequent critics.

Photo: Johner Images via Getty Images

Applying for a job these days is starting to feel a lot like online dating. Job-seekers send their resume into portal after portal and a silent abyss waits on the other side.

That abyss is silent for a reason and it has little to do with the still-tight job market or the quality of your particular resume. On the other side of the portal, hiring managers watch the hundreds and even thousands of resumes pile up. It’s an infinite mountain of digital profiles, most of them from people completely unqualified. Going through them all would be a virtually fruitless task.

Keep Reading Show less
Anna Kramer

Anna Kramer is a reporter at Protocol (Twitter: @ anna_c_kramer, email: akramer@protocol.com), where she writes about labor and workplace issues. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.

Fintech

A crypto advocate’s plea: Cool the Twitter trash talk

A top blockchain advocate says the SEC is wrong in its efforts to regulate crypto, but crypto advocates’ personal attacks aren’t helping.

Chamber of Digital Commerce founder Perianne Boring spoke with Protocol about how crypto can strike a better tone.

Photo: Chamber of Digital Commerce

Chamber of Digital Commerce founder Perianne Boring cites a Bible verse to sum up her philosophy about how the crypto trade group should take on the industry’s many critics.

Her Twitter page refers to Ephesians 4:29, which says — oh, let’s use the King James version, it’s more fun: “Let no corrupt communication proceed out of your mouth.” For her, it’s a reminder that trash talk in defense of crypto is unacceptable.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Google Voice at (925) 307-9342.

Latest Stories
Bulletins