The partially misguided concept of “ownership” in Web3 Gaming
Web3 Gaming has reached a state, at which I am seeing discussions about it on social media every single day. People keep coming up with new or old concepts around the interception of Blockchain and Games. This is great and it is even greater to see people being creative about coming up with interesting concepts in a space that requires constant creativity and innovation. However, I keep encountering this deep misconception around actual reasons for using Blockchain in Games and feel like sadly, we have started to go down a path that doesn’t use the actual promises of Web3 elements effectively and instead works to “upgrade” a proven model into a cumbersome process for all users.
This is where I wanted to jump in and try to clarify a few assumptions by adding my thoughts on where Web3 should and should not contribute in creating a successful new generation of Games. When these Games actually launch, we will quickly see a strong divergence between the leaders and the rest, so it is time to try to find out what the leaders might do differently.
Web3 game ownership
Ok, first things first, let’s talk about the main argument that is probably used 99% of the time when talking about the perceived unique offering of Web3 in Gaming: proper ownership of assets. This is true, but heavily dependent on how we look at it so we should dive a little deeper on what matters here. What actually matters is a concept of “external dependencies” and the framework I am going to use has been outlined in a very comprehensible way by Derek. These external dependencies are usually what Web3 tries to minimise to empower users in their own sovereignty and what will define an actual digital “store of value”. As Derek described it accurately there are 3 conditions to be fulfilled 1. Asset Sovereignty, 2. Content Durability and 3. Contained Value. Let’s look at them in an example:
An item in a traditional Game like Fortnite is hosted on their server, and tied to your account, which is again hosted on their side, so there might be some ownership on your side, but it all depends on the counterparty. This means Epic Games could theoretically (but I don’t see a single incentive for them to ever do that) change the ownership of assets and take them away from you without any obstacles. On the other hand, in Web3, your account (given you use a non-custodial wallet — what many already don’t do) actually belongs to you and so do the assets you hold in it. This means that let´s say Yuga Labs (even if they had nefarious intentions) couldn’t take your assets away from you, thereby granting you a level of asset sovereignty (1). This is definitely a point at which we can argue for an improvement, but it is not a sufficient criteria. Most people forget that there is more to an asset than just owning it, people care about the durability, price and utility of it, otherwise ownership is worthless, both legally and emotionally.
This takes us to content durability (2), which depends on the asset being independent enough that it would exist as a standalone asset. This is rarely the case, as even Yuga Labs NFTs are basically receipts pointing to a file location, which means that the asset ultimately depends on the file stored elsewhere. For sure, one can argue that decentralised storage options like IPFS do guarantee a level of security here, however it is not a significant improvement to a traditional gaming case. The exceptions are fully on-chain stored assets, where the whole data to generate the asset is stored properly in the ledger, however this is usually prohibitively expensive and therefore exceedingly rare, especially in a gaming environment that requires a large amount of high-quality assets.
More interestingly however, things start to fall apart on the contained value (3) front. All asset prices as well as utilities ultimately depend on the Web3 studio behind it, meaning that in the absence of continued maintenance and updates of the game, the assets are practically useless. This also means that even though a Yuga Labs couldn’t take your NFT away, they could release a copy of the collection, attribute all further utilities to it and there would be a high chance that your assets would be rendered worthless. This is not a problem, as this is just the nature of these products, but it is a false promise to treat any of these assets as a “store of value” that would exist without any external dependencies.
Psychological vs. Legal ownership
I will keep this section short as I already outlined this problem in a previous article. The problem is that fundamentally, we have a distortion between what people feel like they own (psychological ownership) vs. what they actually own (legal ownership). The inherent issue is that assuming that someone will care more if he legally owns something is a false assumption. The same applies that someone can’t feel more ownership over something that they have absolutely no legal claim on than something they actually own. This has broad implications on the promise of Web3 to promote legal ownership, as it is only a “nice to have” for many and usually doesn’t come with a strong feeling of ownership. We tend to underestimate the importance of building lasting emotional engagement with a product in Web3 and are trying to substitute it with technological verification processes. We need to get to a stage where we prioritise the formation of strong emotional bonds to the product and avoid corrupting them with excessive financialisation that promotes mercenary behaviour to the product.
Digital self vs. physical self
Taking the previous point of psychological ownership a little further leads us to also understand that many younger generations now care a lot more about their digital self than their physical self. This is important because it means that the probability of them feeling strong emotional ownership of an asset in the digital realm is high and therefore they should also be granted legal ownership of it as it will have a stronger impact on their lives than before. However, this can not be guaranteed, as seen above even Web3 ownership rights don’t necessarily mean anything if the platform behind it was to disappear. Therefore, the real potential will again lie in allowing digital self expression with unique things that people can show off for status, reputation, achievement etc.. This might just transform a lot of self-oriented purchases into digital transactions and the concepts below will outline a few options of serving that demand of digital self expression.
Don’t upgrade — look for new concepts
What is really important to understand based on what we have seen above is to move away from the attempt to “upgrade” the “outdated” infrastructure, as this is simply not true. There are undoubtedly promising potentials to use Web3 but this doesn’t at all need to replace many of the existing solutions and should rather be perceived as a promising new layer that can transform the user engagement & experience with the game. As we will see later, focusing on building new concepts around great games using Web3 is highly promising, whereas building games fully around the blockchain concept will usually heavily compromise game quality, user experience and psychological ownership / intrinsic motivations for users.
In short, the first improvement in asset sovereignty would improve games, but the costs of replacing the entire infrastructure instead of adding this improvement to the game would outweigh the benefit by an order of magnitude, therefore compromising long-term value creation as a game. This is not to say that in the short term one might make a huge profit with the right hype of a game centred around blockchain, as we have seen with Axie Infinity, but it will tend to be zero-sum profits as there was no lasting value creation and instead just a transfer of value through speculation.
Apart from these issues, the Gaming industry has tested many potential concepts with their decades of experience and Steam is a great example to understand the problem many Web3 projects tend to neglect. Steam does not allow direct fiat off-ramps (e.g. selling your in-game skins for dollars), because of legality issues and the strong implications on user retention it has. There are options through third party sites to do that, but it is usually against the terms of Steams usage. The reason is very apparent, as the asset value is a strong retention factor for users towards the platform and if someone would open the “floodgates” back to money, the retention costs for Steam would rise dramatically. I doubt that many of the Web3 concepts promoting strong liquidity in and out of the project would be able to compensate for those high costs of retention to build lasting user loyalty. So to me, many of these attempts of “interoperability” and “openness” seem to be the attempt of someone to become the next centralised entity that would also raise barriers to exit once they are established in their competitive position.
But the most compelling false assumption seems to be that ideally the whole game economy should be backed by blockchain technology. I don’t see the unique new promise of having all my 3 cent CS:GO skins verified on-chain and having to pay transaction fees, which even among the scalable chains makes the asset basically worthless. Similarly, where is the benefit in having a skin series in League of Legends that is accessible forever in the store with unlimited pieces stored as an NFT on-chain? However, having a unique series of skins issued for a highly exclusive event e.g. a world championship, where potentially even the skin used by the pro player himself might be a unique piece to own, that sounds like an interesting case for blockchain. This is again, where I strongly believe that blockchain should come in as an additional component for unique use cases, but there is absolutely no need to run the whole game economy around this concept. This is probably just a question of the technology becoming more mature and people finding the right uses, where blockchain can actually be powerful instead of broadly applying it to the whole game.
To put this into perspective, we will explore some promising potentials of Web3 in Gaming that can be wrapped around a game without recreating the whole infrastructure.
Concepts for effective Web3 usage
Now if the items are supposed to be unique like the word “non-fungible” in NFT suggests, what application cases remain that are actually very promising and what could they mean for studios leveraging them properly?
Ok, you have probably heard that Web3’s largest strength lies in community-building. But many of the great potentials of Web3 lie outside of the gameplay as an additional layer that retains players, allows for further engagement & participation in the project’s success. Pairing that with a unique access to specific tiers of benefits can be extremely powerful. This may also allow studios to merge the digital experience of their games with physical experiences created for this selected group of hardcore fans. This can increase player retention, as the social aspects of Gaming are among the strongest forces for a player to stick with the game. Successful NFT collections like BAYC and PROOF already provide a great playbook for creating unique communities around this promise of Web3. Pairing that up with non-digital experiences such as in-person events can amplify the community experience by another order of magnitude. The demand & buzz around the Ape Fest by Yuga has probably proven that.
But reiterating the importance of digital identities to our newer generations, many verifiable Web3 elements can also act as a badge of achievement, a signal of status or just a showcase of passion. This will become increasingly more important as people care more about the digital appearance than the physical, which we have outlined above. Moreover, this will open up a huge market for digital objects that people can use, ideally interoperable between platforms.
But enough of interesting broader concepts, let’s have a look at a few that will be highly interesting to games.
Reputation, Achievement, Collection — digital identities for players
So if we are not putting our 3 cent weapon skins on-chain, what are we offering to players that would benefit from being stored in an automatically verifiable way?
As quickly highlighted before, having highly limited and specific items, skins etc. for players to connect is promising. Especially as it will allow players to show their commitment to the game. Some studios already used to do this, e.g. Riot Games making seasonal skins available to players or giving out highly exclusive skins at in-person events like the Gamescom / PAX etc..
The only problem with this approach is that these end up lost in some old accounts with people trying to sell the whole account tied to those skins. This leads to a whole ecosystem of trades getting lost as latent demand can not be fulfilled with any secondary trading. Especially as many firms start incorporating loot boxes into their games as well it would be a much appreciated step by the community to allow this tradeability. However, the question regarding the setup still remains questionable, as the part about Steam outlined before.
Even more interestingly, reputation and achievements could be verifiably stored on-chain and being directly tied to the digital identity. In a world where these identities are becoming increasingly important to users, it offers great potential to unlock more mechanics that provide users with unique ways for players to distinguish and express themselves digitally.
If you made it all the way to the end, I hope you enjoyed reading and feel free to leave a comment down below!
