We’ve been hearing a lot about cryptocurrencies, NFTs, smart contracts, and related terms in the past few years. They all rely on blockchain technology, which promises to revolutionize several industries, including financial services, supply chain management, and even gaming. Earlier this year, Square Enix doubled down on its commitment to blockchain projects, even after much criticism from journalists and gamers. Is this a wise decision? Are blockchain games the future, or is it all hype?
Blockchain, NFTs, and Their Uses in Games
We need to understand the basics of blockchain technology before tackling its applications in the gaming industry. Try checking out the report R47064 from the US Congressional Research Service for a short but comprehensive overview.
What Is Blockchain?
Blockchain technology is a decentralized record of transactions stored in blocks of data. Decentralized means it’s not stored in a single computer; instead, every member of the blockchain has a complete record. The transactions could be anything you want. Any piece of data, like text, audio, or video, can be part of a blockchain.
Blockchains make tampering with records an uphill battle — changing a transaction in one block means you’ll have to update the next block, then the next, and so forth. Blockchains also use consensus mechanisms to validate new blocks and prevent further tampering. The most widely used consensus mechanism is proof of work, in which blockchain members called “miners” solve computationally-intensive math problems.
What Are NFTs?
NFT stands for non-fungible token. A token is a piece of data: text, images, videos, etc. Non-fungible means it’s not interchangeable, as opposed to, for example, currency: one dollar is one dollar, regardless of where it comes from.
In contrast, each NFT could represent a different asset.
Blockchain in Games
Since 2021, developers and publishers have been interested in using NFTs and cryptocurrencies for trading in-game items in play-to-earn games, where players earn tradable items or cryptocurrency (not just by paying real currency). This Wikipedia article gives a reasonable summary of the history of blockchain technology in games. Here are some of the arguments both in favor of and against the technology:
- Proponents argue that NFTs give players ownership because the tokens have value outside the game and can be traded freely. Critics point out that NFTs are meaningless once a game shuts down its services.
- With NFTs and cryptocurrencies, game companies can avoid problems they would face developing and maintaining their own marketplaces. In practice, however, Ubisoft’s Quartz program received heavy criticism for being just like a traditional centralized marketplace while waiving all liabilities even though the transactions were on the blockchain.
- In theory, NFTs could allow players to use items in different games, but this would require a lot of infrastructure and cooperation between companies. Even if a blockchain solves the problem of where to store the data, this is just the tip of the iceberg.
Can You Make Money With Play-To-Earn Games?
The play-to-earn model seems like a win-win for everyone, at least on paper. Players get to, if not make a living, at least earn some pocket money while having fun, and developers can take a cut from every transaction. Games like CryptoKitties, Axie Infinity, and The Sandbox tried to capitalize on this model, but play-to-earn is still far from mainstream adoption. Some of the reasons include:
- Most developers come from the blockchain community and are more experienced with the technological and financial aspects than game design. Playing these games becomes a chore after a few hours.
- Unsurprisingly, most players are more concerned about making money than having fun in the game, treating it like a job.
- You might spend anywhere from a few dozen to a few hundred dollars as part of an initial investment. In games like Axie Infinity, you can find sponsors that help you begin, but in return, you have to give them a portion of your earnings.
- The economy is unsustainable. You’ll sell your items or characters to other players to make money. These players will only buy your stuff if it can help them make more money by selling their own items and characters later. Because of points 1, 2, and 3, barely anyone plays for fun, as this system relies on new people constantly coming in. It’s a pyramid-like economy that only works for those who enter early.
- NFTs and cryptocurrencies associated with these games are part of a large ecosystem; market crashes can also affect them. For example, Axie Infinity’s associated token, SLP, crashed and caused many players to leave after the cryptocurrency market plunged in 2022.
Final Thoughts
Blockchain technologies have potential, but whether they bring anything unique and worthwhile to the gaming industry is an open question. Even if you only care about making money, there’s no need to invest your hard-earned money to play a boring game for hours. You’re better off doing surveys and other short tasks that don’t take much time. You can even start earning passively now if you want.
As for game developers and publishers, while there’s nothing wrong with trying out new technologies and business models, they shouldn’t forget that making good games is the priority. Players want to have fun, not get a second job.