History of skin trading: from penny loot boxes to inventories for $100 000 (and much more)
Hi there, ex corp. here — we create services for those in love with competitive games in general and CS specifically.
Today we’re going to tell you about skin trading in Counter-Strike: how it first emerged, fell and rose up again, eventually turning from a marginal opportunity for spending your mom’s money without asking into a simple way of personalizing your game experience, enrich it emotionally, and, let’s be honest, make some extra money.
What are CS:GO skins and where do they come from?
Today, experts estimate the volume of the global market for in-game items at $ 3 billion — the lion’s share of this amount falls on Counter-Strike: Global Offensive. Cases and skins in CS first appeared in August 2013, a year after the games’ release: they were added with the next update.
Skins are, quite literally, skins: they color the items and do not give players any advantage other than changing the look of their pistol, rifle, and other items.
Basic skins were distributed after the match completion. Occasionally, instead of a skin, a case would drop: a lootbox, as they are colloquially known. Lootbox is a case that contains in-game items; to open it, one needed a key bought for real-world money. The most beautiful and expensive skins were to be found in lootboxes. The rarest of them were the colorings of knives.
How skin trading was born
Similarly to the stock market, trading in the world of skins means buying and selling of assets: in our case, in-game items.
Players could trade them on the Steam trading platform. Neither then, nor now is there an opportunity to transfer the money into a bank account or a bank card: the proceeds from the transactions were automatically credited to the Steam account and the players usually spent them to buy new skins or new games.
By the way, there is a direct connection between sales in Steam and the growth of the skins turnover: as soon as the platform decreases the prices of games, users start selling skins more actively to buy something interesting.
In addition to selling, there was also exchange. It appeared in 2011, long before the release of skins in CS, when users exchanged items from Team Fortress 2.
The first communities of traders emerged at the same time. They were professional salespeople, opening their own forums, arranging exchanges between each other, and setting the prices of rare items at their discretion.
The emergence of first markets…
Nevertheless, the basic economics of in-game items trading was defined on the Steam trading platform. Its users set the price of a skin, taking into account its rarity and appearance. Sellers offered items for sale at the desired price, and buyers either agreed with it or made counter requests to purchase at the proposed price.
This cycle would go on until the equilibrium price was found, considering the interests of the buyer and the seller. Once obtained, it would define the item’s market price.
At the same time, however, this manner of price formation didn’t solve an important problem with expensive items. Steam limited the value of any individual sale by $400, and the number of items valued above that by the market, was growing fast.
…and the shadow economy
Users learned to bypass the restrictions on their own, using the mechanics and rules of exchanges that appeared in 2011. At that time, Steam introduced a platform for transactions with in-game items from Team Fortress 2. To bypass Steam, users had to arrange exchanges or sales of their items in private dialogues or on specialized sites.
Buying a skin for more than $400 is commonplace now, but it was literally a big deal back then. Such a deal would be discussed on forums, thanks to which the community could keep track of the deals in rare items and regulate their prices.
The emergence of first marketplaces
As soon the money started flowing into the industry, it began to grow new services. New sites appeared through which players could find partners for item exchange, platforms emerged where skins were used as a currency for CS:GO betting, and resources for price analytics were developed.
Also, there were automated bots. Services used them to do all of the above: sites automatically determined the value of the items and ensured the safety of the transaction — that’s how the first prototype of CS.MONEY emerged.
An entire industry took shape around skins and, despite the fact that the items bought did not provide any advantages for the gameplay, the market volume rose above hundreds of thousands of dollars. At this time, skins were not yet a full-fledged currency: the Steam balance could not be transferred into a real bank account.
And yet, users did sell in-game items for real-world money, arranging deals in Steam’s shadow, as direct transactions. And of course, not without fraud. To make trading safer, marketplaces emerged, assuming the role of intermediaries that guarantee fraud-free exchange.
The process was organized as follows. The user transferred their skin to the platform bot and waited until somebody bought the item. The proceeds were transferred to a bank card or a bank account. For completing a deal, intermediaries charged a small commission — some popular Russian marketplaces and brokers currently rely on a similar mechanic.
With time, trading was becoming increasingly safer, the economy that emerged around in-game items was growing and getting stronger, and the opportunity of transferring sales proceeds to real accounts was transforming skin trading into a decent source of income.
The development of gambling
Another important milestone of the development of the skin economy was the emergence of gambling: roulettes, casino, and other aleatory games. Gambling platforms showed how to win big money (or their equivalent in skins) without even leaving one’s home.
In gambling, skins have always played a role of an intermediary layer currency, neither taxable, nor regulated by law. One could play from any country, receive one’s winnings immediately in skins, without unnecessary checks and identity verification.
Later, it became possible to play not only for skins, but also for real money. Gambling platforms were similar to pawnshops: people sold skins for currency and used the proceeds to play or to buy new items in the site’s shop.
Exchanges, tournaments, and the growth of the skins economy
At this point, a community and a system of help services take shape around skin exchange platforms. Sites begin to sponsor large tournaments where professional teams play, the number of skins is growing rapidly, the prices for in-game items increase.
First version of the CS.MONEY exchange appears on the scene at around this time. Users were coming to our platform to learn the price of the items from their own inventories and, if they were satisfied with it, to exchange skins.
In just one evening, some players managed to buy skins for real money, use them to play roulette, increase their bank through the wins, withdraw the expensive skins they won from the platform or exchange them for a rare top skin, play with it for some time, get bored, and sell it — again, for real money. At the same time, as happens with any other game of roulette, the majority simply lost their skins. For every transaction, exchange platforms charged a small commission, but there were many transactions. Too many.
Gambling ban and the first market crash
The opportunity of playing roulette constantly, throwing the money at the exchange platforms, made the community concerned. Underage players were buying skins and often using someone else’s money, and this caught Valve’s attention. The creators of CS:GO officially opposed such transactions, banned all commercial activity on Steam and forced projects to close down under the threat of permanently blocking them.
In reality, the actual motives of Valve are hardly clear: the company could easily have been protecting the kids, be angry about roulettes and other third party services that did not share their profits with the publisher, or be concerned about the regulatory implications of trading. After all, kids were buying keys to the lootboxes and donated into the game, and Valve didn’t have an issue about that.
This triggered a panic: players did not understand whether the skins will retain any value, whether further trading will be possible and what to do with expensive items. As happens at times of economic crashes, users started to massively sell their items at prices 1,5–2 times less than the market.
Tradelock and the death of gambling
Guys from Valve finished gambling off: in March 2018, Valve developers invented tradelock — a 7-days freeze of all transactions with the item bought. This did help to fight roulettes and pervasive fraud in the community, but at the same time it made the players anxious.
Traders did not understand how to make money with such restrictions; platforms that used bots were unable to adjust to the market and died out.
Market recovery
The history of skin trading repeats the history of money, albeit on a lesser scale. As in any other economy, we had crises, recessions, recovery and growth. Trading left Reddit and closed Twitter communities and moved out in the open, as more and more people learned about skins. Influencers who talked about how to make money on alternative markets, increasingly focusing on skin trading.
Smaller sites replaced the big players. Gradually, markets calmed down. The interest in CS:GO kept growing, and players started buying skins again: this time largely for personal use, rather than to play on them.
Exchange platforms and marketplaces for in-game items finally replaced roulettes in the users’ minds. Those who wanted to make money on skins re-sold them on the marketplaces; for common players, these services simply made life easier.
Hi China!
In September 2017 a new active player appeared on the market: China. This happened after the official launch of the CS:GO localization by the publisher Perfect World.
According to the study by ex corp. and the analytical agency Nielsen, in 2022 users from China spent about $64 billion on video games. For the Chinese the skin market became a full-fledged investment platform: the country developed its own services for skin exchange, and even those who have never played CS:GO started trading in-game items.
People entered trading who simply bought hundreds of thousands of dollars worth of in-game items, betting on the price rise. There were also wholesale speculators who re-sold skins in batches without logging into the game even once. These trends persist to this day.
Another recent trend is the growing popularity of p2p technologies in trading: skin exchange arranged directly between the users, bypassing the tradelock when interacting with trading bots.
Where are we now?
Currently the in-game items market is experiencing peak popularity. The demand for skins is growing together with the prices: websites with quotes appear where investors, traders, and others can follow item price changes. Recently, Valve has announced CS2, and, as soon as users learned that skins from the first version can be used in the second one, the price of the items, transaction turnover, and the overall interest in skins started to rapidly grow.
A 200–400% increase of a position is not unusual in skin trading: often the price of the rifle skins grows by 1000–2000%, pistols and knives by 500–700%. For instance, the author of this text bought Karambit | Doppler Sapphire (Factory New) for $2 000 in 2019; now the market price of this knife is $11 000-$12 000.
When trading first emerged, players with $1,000 worth of inventory were black sheep — spending that amount of money on in-game items seemed unthinkable. There were also “sheikhs” with unattainable amounts of wealth: users with a set of skins worth $ 10,000–20,000. Today, the trading economy has grown, and the players’ mindset has changed: the lower inventory bar of a skin lover has risen to $2,000, and users who spent over $100,000 on items are considered “rich”.
