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."