NFTs and Video Games are a Bad, Unsustainable and Forced Marriage. Here’s Why

(UPDATE — I have added more detailed reasoning to explain my thoughts at the end of this article and highlighted it as an updated section. Do check it out it’s a deeper dive into the technical and economic aspects to explain why NFT implementation in video games is a bad idea)

Ever since the NFT boom started happening, as a game designer, producer and founder of an indie game studio I’ve closely observed the implementations of NFTs and often wondered if it even serves any purpose in making video games better. In this article, I present my findings and opinions.

Technology is supposed to do one of the two things,

• Solve a problem
• Make the existing processes easier

Implementations of NFTs in video games do neither. It’s puzzling the entire community as to why there’s even a push for NFTs as it does nothing that existing options cannot nor does it improve anything. In fact, it further complicates things. Here’s how,

• It’s just microtransactions with a few extra and complicated steps
• There’s ZERO novelty in claiming “Play to Earn” as there are game economies (secondary markets) where players have been trading in-game assets for real money for almost 2 decades without blockchain / NFT tech. These pre-existing secondary market structures can be expanded to many game economies.
• It’s morally questionable as games built around the concept of rare and hard to get collectables (also powered by artificial scarcity) profits from gambling addiction/problem gambling (a clinical mental disorder). The governments are already cracking down on loot boxes and Real Money Games. If this continues, a crackdown on NFT is not far away.
• NFT games often come with considerable grind mechanics that further frustrate the players.
• Claims of owning unique digital assets is NOT a thing. When someone buys an NFT they are merely purchasing the token and not the digital asset, the copyrights stay with the producer of digital assets and are further enforced via a smart contract and in the vast majority of cases, the rights that the NFT owner has is severely restricted and controlled by the producer of the digital asset.
• Video games are a means of entertainment and escapism but a quick look at the current crop of NFT driven games that proudly claim to be a “Metaverse” makes it crystal clear that those games are more so a platform for commerce rather than entertainment. Many of these “games” don’t even have an element of gameplay and skills! A trend that gamers worry about would spread across the industry and ruin their preferred outlets of entertainment given the track record of big publishers and what they have done and still continue to do with loot boxes and microtransactions.

But the Web 3.0 and NFT believers will have you convinced that it’s the next big thing that’s going to revolutionize the world but when asked how their responses are usually either way too vague or filled with a nonsensical mix of jargon in hopes that people leave them alone and not ask such questions.

Truth be told, NFTs are another monetization model that is designed with the sole intention to make corporations and their shareholders richer. There is nothing wrong with it, businesses exist to make healthy profits after all but as the owner of an indie game studio myself, I feel making money should not come at the cost of consumer experience and/or creating questionable behaviour patterns in them.

NFTs literally add nothing of value to the game and player experience but rather detracts from it as the games are made to work around the NFTs. A decision that obviously compromises the game’s design and by extension the player experience.

It’s no surprise that most implementations of NFTs within and outside video games are facing backlash and controversy. Here are a few recent examples,

• Ubisoft’s NFT, Quartz had an embarrassing performance, selling a grand total of 15 NFTs totalling some $300 and creating considerable PR damage (Getting ridiculed all over the internet/YouTube trailers getting 95% dislikes and eventually delisted) that Ubisoft went into damage control mode and released few statements which received further backlash.
• GSC Game World’s S.T.A.L.K.E.R. 2 NFTs created mass outrage/backlash that made the company remove NFTs from the game altogether.
• Steam has completely banned NFTs from its marketplace. Xbox boss Phil Spencer is of the mindset that current implementations of NFTs are exploitative and there’s no place for such practices within the Xbox ecosystem.
• Epic Games CEO has confirmed that his company will not enter the NFT space as it’s filled with scams and fraud. Hard luck for those who expected NFTs in Fornite!
• Many game developers and studios are declining offers to work on NFT powered games

What’s happening in the game industry now?

The investors want to jump in on the NFT boom, they find a blockchain company or make one themselves and somewhere in that process the realization dawns on them that they don’t know how to make a video game. That’s when they try to acquire or outsource the work to game studios to help them make the game.

In my time I have spoken to enough NFT backing investors that I can confidently say that most of them have no clue about how games function and have little to no understanding of what gamers find fun/interesting. That’s not necessarily a bad thing because why would I expect outsiders to know the dynamics of video games (but one could make a reasonable argument that due diligence is a non-negotiable aspect of being an investor)

What’s worse is that all of their ideas are centred solely around the concept of squeezing the most money out of a gamer through the NFTs placed in the games rather than making a good game in the first place. This fundamental shift where the “game design” takes the backseat and NFTs become the star of the show is what’s wrong with the approach. It’s a compromise or should I rather say a deliberate focus that happens to suck the fun out of the games that players no longer feel like they are playing a game.

What’s the root of all these problems?

The excessive speculative investment and the gold rush felt by the ones with deep pockets and/or those who have control over corporations.

Either the shareholders are forcing the game companies to implement NFTs into the game or there are ridiculous sums of money floating around to fund such projects that most gaming companies have a severe FOMO (Fear of Missing Out) and want to jump on the bandwagon. Let me give you a personal example.

At Outlier Games (the indie studio that I founded) we solely focus on making narrative-driven single-player experiences. We are a young studio working on developing the vertical slice (prototype) of our first game. In search of funding, I have met with many investors and whenever I happen to meet an investor who’s big on NFTs, all their questions focus on implementing NFTs in our game and me telling them why it’s a bad idea as it’s a premium narrative-driven single-player game.

In the end, they would basically lay it out that they would be interested only if we agree to integrate NFTs and me walking away from the deal. One could ask why not make a narrative-driven game but then release artworks and music related to the game as NFTs later, it’s a massive slippery slope. Once you agree to do that and sign up with an investor, they would eventually pivot the focus of the company more and more towards NFTs and less towards whatever your initial creative endeavour was.

From my own experience, I can tell that fear of missing out is real as securing funding for making premium games is already difficult. Our game studio is in India, we don’t have global crowdfunding (Kickstarter, Indiegogo) options here and the investors here focus solely on mobile games as they feel their business model works best with them and on top of that the demands to pivot towards NFTs by some investors are making things more challenging.

At the end of the day, it just feels like a bad, unsustainable and forced marriage wherein everyone except the investors is wondering — what’s even the point of this?

PS. To me, the current implementations of NFTs have all the markings of a speculative bubble that is on its inevitable way toward a burst but most of the investors are not bothered about it as they would cash in by selling/exiting their positions long before it crashes and when that happens and when the dust settles, the technology will definitely stick around but its implementation/use case and the laws surrounding it would be vastly different

UPDATED SECTION (Added on January 6th, 2022)

On New Year’s Day, the president of Square Enix published a letter about the direction in which the company is headed. It had three buzzwords — Metaverse, NFTs and Blockchain. Not surprising in the least but there were certain phrases in his letter that pissed off the gaming community at large and it pissed me off enough to update this article.

So yeah, here are more reasons detailing how NFTs in Video games is a BAD idea and they are and will be a bad, unsustainable and forced marriage.

Unsustainable / Flawed Play to Earn Economy

For their Blockchain/NFT driven Metaverse games to be sustainable, it is impossible for them to hand out net payouts to all players. Basically, the money pouring in from players should be more than the money going out to the players. This is basic economics but what are the implications of this you ask? Well,

• Most consumers are expected to lose money on their activities
• The potential earnings of the consumers will decrease drastically over time

Admittedly there is a “Play to Earn” aspect to these games but it’s quickly getting unsustainable and worse it is actually fostering gambling addiction/behaviour, wherein people cyclically invest their money in hopes of big returns. This is a problem waiting to be scrutinised by world governments.

From a marketing standpoint, the concept of metaverse greatly benefits from the opportunity to own digital lands and If one thinks the feature of digital lands will help create sustainable game economies and make the games much more fun, well I have bad news. It does the opposite. Why? These digital lands are designed to be scarce, yet be necessary to access parts of the game experience or provide significant advantage/utility to players who own them.

The combination of this promotes two things — Unhealthy levels of excessive scalping and speculation that screws up the fun quotient and game experience for the whole community. Scalping and speculation have led to disastrous housing crises in the real world and the virtual game worlds over the past 2 decades and all signs point to it happening all over again, in fact, it has already started in a certain popular NFT Metaverse game. It is an inevitable problem.

Check this article for a super insightful breakdown of how the feature of digital lands can kill a video game’s growth/economy

Blockchain Games Violate the Tenets of Blockchain

The very existence of blockchain is built on the tenets of three things,

1) Decentralisation

2) Immutability

3) Trustless-ness

This is what every Blockchain game markets itself as but is it necessarily the truth though? One doesn’t have to read through the fine print to know that what a consumer perceives to be NFTs — the digital assets, exists outside of Blockchain. The digital assets/files exist in the private and highly centralized servers/data banks on which the producer has full control.

The moment the blockchain is connected to an external game/app service there are zero guarantees for decentralization, immutability and trustless-ness. What an NFT buyer cares about is the digital asset itself and not the token stored in the blockchain and in principle, there is a lot of “trust” involved here.

By its very nature, it’s not so different from any regular non-blockchain game services. The problems of centralization, trust and mutability that Web 3.0 believers talk about in an ironic way apply to their own blockchain-powered games too. If you think I don’t know what I’m talking about, then do read through the terms and conditions of one such Blockchain/NFT game and you’ll find out the truth. Promises of Blockchain benefits are just a marketing gimmick when it comes to games!

The Myth of NFT Afterlife and Universal Compatibility

Web 3.0 believers claim that the NFTs people purchase will have an afterlife in other games. It is a big fat LIE. People who are excited about interoperability in games have zero ideas of what they are talking about.

The anatomy of every digital asset varies from game to game quite drastically. Without getting too technical, the way a 3D asset is modelled and animated, its level of detail/quality, the intricate steps that are taken to achieve its art style and most importantly the gameplay it can support are extremely specific for the game in which it is used.

So, it’s hilarious to even think why another game company would go through the pain to port the digital assets they didn’t develop in the first place. It's a hell of a lot of work with no incentives and not to mention there are a lot of complicated legal issues along the way due to the intermixing of various IPs and licenses. It is a legal nightmare.

There is one way in which interoperability can work and that is a global standardization, something along the lines of what constitutes a kilometre/mile or kilograms/pounds. Such a standardization structure won't work for video games.

Will all Blockchain game companies agree to develop digital assets based on the exact same technical parameters and technology stack? That just won’t happen as visual uniqueness/variety is a major selling point in video games as it informs and enhances the “game experience” and also makes an NFT more appealing in the first place. Even if someone does do it (because technically it is possible but within the game catalogue of their own company) the output is going to be massively bland, generic and rudimentary as it is supposed to have wide compatibility.

So yeah, all in all, it’s just a scam in plain sight because games do not benefit from NFTs in any meaningful way that a player will care about but rather diminish the fun and compromise the game design. But you may ask why are there so many people highly optimistic about Blockchain / NFT games if it’s such a bad thing? And to that the simple answer is a combination of sunk cost fallacy and optimism bias, people have already invested ridiculous amounts of money into such games that they can’t help but be optimistic.

I can put this in another and I will quote a dialogue from the movie, The Big Short “People hate to think about bad things happening, so they always underestimate its likelihood”