History Tells Us Why NFTs Won’t Work in Gaming

I’d like to tell you the story of the TF2 economy, the Steam Community Market and what it means for digital commodities like NFTs

Recently, NFT gaming reentered the news cycle, with a Kickstarter for a game that leveraged crypto technology failing and collapsing (the developers ran out of money and have ceased development).

The game would have been similar to Pokémon, but also involving cryptocurrency and NFTs to allow for asset trading between players. Hearing this unlocked a memory.

In 2014, all I wanted to do was play Team Fortress 2 (TF2), an online class-based shooter with several different game modes across thousands of servers, consistently played by hundreds of thousands of people. I banked more than 2,000 hours on the game. It retains its popularity today, despite problems, be it through long-time veterans, with others gone on to play newer, more engaging games, or through a current player base of PC gamers attracted by its mechanics and free-to-play model.

The game was excellent: tight gameplay mixed with some of the best multiplayer characters ever written.

The game was also one of the first adopters of ‘loot boxes’, a source of much criticism in gaming, which brought a conversation about gambling in online games to the forefront of discourse in the past decade (to the point of legislation which continues today).

Lootboxes in TF2 gave you items that were unobtainable without opening “crates”, to the exclusion of those that were (rarely) awarded to players randomly as “drops” or through another method, which I’ll mention later. These items were usually cosmetic, taking the forms of hats, outfits, accessories or sometimes a version of a gun that counted your kills (sometimes these items are rarer than others, increasing the value).

The microgame of being able to dress up your player model was everything to me and thousands of other dedicated fans. There was joy to be had in dressing your guy up.

Personally, I must have spent upwards of $300 on the game’s microtransactions (not a tremendous amount, but still enough to have an impact on my life), and while at the time, I (an impressionable, jobless 16-year-old) was interested in making a good-looking avatar, I was also interested in making money from the gambling aspect.

So in the admission of my own addiction to loot boxes at the time, I’m not against much of the legislation against them (though many players were in worse positions than I).

TF2, however, was different to other games with loot boxes. Loot boxes were simply a part of developer Valve’s business model, but it wasn’t the full story. Part of that story involves the Steam Community Market, also owned by Valve, which as the name suggests is a community-oriented online store where players could buy in-game items from other players with Steam credit (purchased with real money) and sell them to other players. Users can also trade without many restrictions.

Just quickly, Valve didn’t allow you to sell the items for real-world currency: only Steam currency (used to buy more items and, of course, games). Yes, you could sell your items and buy a game with the money you made, but all transactions flowed through Valve and the Steam Store unless you agreed to a real-world money trade on an external platform (with the risk of being scammed).

Again, these items were usually cosmetic only, with some not having any gameplay value at all, existing solely on the Steam marketplace and inside Steam inventories, but it effectively sprung an on-selling market from the game, where players could buy and sell the loot they had “uncrated” from loot boxes. TF2 wasn’t the only game to have in-game items redistributable via the Steam market, but it was one of the big ones, besides CSGO and DOTA 2.

Over time, the market has seen much enthusiasm, with avid third-party websites dedicated to selling and buying items that weren’t resellable in the Steam Community Market (this actually was the case for most items). It has also seen an abhorrent amount of inflation, where those who are actively buying the community-led in-game currency (keys, which unbox loot boxes), stand to gain more.

Let me just say that again. Those who have actively bought into the trading microgame and spent more on it will inherently gain more from it, as inflation has worked in their favour by buying a scarce commodity, “cheating” the system.

You see where I’m going with this, right?

From loot boxes to NFTs

This is a short walk to the exact hubbub we apply to NFTs, the latest buzzword awash with environmental problems, creative bankruptcy, scams and ultimately a lack of utility value (they’re not even “decentralised”). In basic terms, they’re online trading cards where the pitch is that you’ll earn more down the track if you sell them on to someone else, who will earn more down the track if they sell them on to someone else, with the well-rounded pitch that they’ll be worth a lot… Someday.

Conceptually, NFTs are quite similar to hats and cosmetics in TF2. Some are rarer than others, some operate through similar “uncrating” systems, and some go on to sell for ludicrous amounts. The TF2 “Burning Team Captain” hat in TF2 sold for thousands long before NFTs were ever sold in the millions.

This is usually aided by a promise that eventually, systems will be developed around your NFT that will give them extra value, such as games or clubs. May as well get ahead now, right?

Fundamentally these are problems we can also apply to cryptocurrency, but NFTs have the added-in line that they somehow benefit artists (this has always been a vague line, with the difference between selling art as NFTs and simply selling your art online being a receipt and the ability to list on crypto marketplaces).

Where it especially strikes a chord with me, as someone who was raised in a quite poor family who hates seeing these valueless schemes, is with gaming, which I’ve been doing for as long as I can remember.

See, NFTs have no utility value, so right now, many stakeholders are looking left and right to give them a purpose. Gaming is often seen as a potential purpose for NFTs, although often it’s clouded over with promises of the metaverse and the evolution of the internet (with “Web3” basically being a marketing term at this point to imply that all of this stuff will eventually be the next big thing in tech).

It’s no surprise that NFTs came into existence given the success of the Steam Community Market, but it is a surprise to see the gall of cryptobros, thinking that they can shoulder-barge their way into the gaming space, where similar, better systems have existed for years.

But will it work? No, it’s highly unlikely to, and it’s actually really simple why it won’t.

NFTs won’t work in gaming

It’s kind of funny to present the Steam Community Market as an example of why NFTs won’t work in gaming: it’s the closest example pundits have, even if it’s similar (also, as a reminder, Steam did ban crypto and NFT games).

While MMOs like Runescape and World of Warcraft have restrictive, heavily controlled in-game trading, items on Steam have community-led marketplaces outside of the Steam app (though, again, trades must flow through Steam).

But fundamentally it’s different because it doesn’t involve blockchain technology, and with that, we can thoroughly defuse why it’s not a use-case for crypto technology in gaming. In my mind, the Steam Community Market proves why games don’t need crypto.

There’s no interwoven server network that verifies the integrity of a wallet’s contents at every check and stop, no mining farms (though of course there are servers), no “gas fees” or convoluted currencies and platforms because it doesn’t need to be that way. It’s achieving the same goal without the pointlessness of crypto, with inventories assigned to Steam accounts that have contents written into them as code in data centres.

Additionally, the items bought and sold on the Steam Community Market and traded between players on Steam also offer value in the short-term: actual enjoyment. Being able to dress your guy up, like I said earlier, is actually a tonne of fun. I’m not going to stop you if you find a JPG online that sparks a lot of joy, and if you want to buy it go ahead, but beyond owning it in an online database, where’s the joy beyond waiting for prospective systems and value to be developed around the JPG?

The biggest part of the whole equation is that, even though third-party websites are a place where Steam items are regularly listed and where people can browse items, transactions and trades are wholly facilitated by Steam. Steam offers several trading tools as the only way to trade items between accounts, and for every listing on the Steam marketplace, Valve takes a cut. It makes them a lot of money.

So, why the hell would any company bother? What does any company in the world stand to gain from offering trading outside of its own platforms?

Were Steam items to be facilitated on a blockchain rather than wholly on Valve servers, then the matter becomes not just unnecessarily complicated, but it doesn’t benefit Valve in any way. Literally none. One might argue that blockchain marketplaces could be the bridge between item trading for PC gaming storefronts… But again, this doesn’t benefit them, because storefront ‘A’ can’t have a controlling hand in the affairs of storefront ‘B’. Besides, there’s no way they’ll ever act in tandem, so this fantasy can be abandoned. Unlike crossplay, it’s not a problem that inhibits group gameplay.

Also, and this is anecdotal at this point, typically the games that have robust in-game trading systems usually have a pretty solid game to play first, with the trading function secondary to the action. With crypto and NFT-based projects, we usually see it the other way around, and a mass-market NFT game is yet to be widely successful. It’s not exactly a fun idea.

Please don’t come for my hobby

Normally I’m not one to write such a personal essay, but my hope is that adding another defiantly oppositional voice to the topic will help guide us away from pretty obvious bad ideas.

I’m no fan of abusive business models. Heck, earlier in this review I was recounting my own loot box addiction and the item inflation within the TF2 economy, but the existence of bad systems does not mean we have to introduce worse systems, especially when they don’t solve any of our problems. Besides, companies like Activision (Call of Duty) and Epic Games (Fortnite) have made billions from their games by selling cosmetics for characters through their online stores, without trading even being part of the conversation. Not that it needs to be.

There’s really nothing else to say. Even when NFT stakeholders present these trading ecosystems as some giant step in the direction of all that is good in the world (it’s not) and a fairer, user-empowered system (it won’t be), it’s still just a tired idea reminiscent of similar, older systems.

Web3 is going great.

This news is republished from another source. You can check the original article here

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