Understanding the rift between blockchain and traditional gamers

Editor’s Note: After web3 technology really captured the attention of the gaming scene in 2021, we are ending 2022 with more skepticism than ever. As we approach a new year, we wanted to take a look at the growing divide between blockchain gamers and traditional gamers.

When I was a grad student I took a class in cross-cultural communication. The purpose was to teach students the following: in order to effectively communicate, one must understand and acknowledge the differences between cultural groups. In theory this made a lot of sense. In practice, it was extremely challenging. To do it right one had to be objective and suppress any personal bias. The point of the class was not to turn us all into skilled negotiators or diplomats, but to impress upon us the importance culture plays in shaping opinions.

As I was doing research for this essay, I kept thinking about how this model could be used to better understand the row between blockchain and traditional gamers. Based on what I found, I argue that it was an inevitable outcome given the cultural and ideological differences between the two camps.

The language used by blockchain gamers skews anti-establishment. A key tenet is wresting control from the traditional game industry and pointing out numerous perceived flaws in the widely accepted gaming models that exist today such as the inability to own and trade in-game assets and total centralization of the game development process. This also ties into the broader “power to the people” rallying cry surrounding crypto in general. The language used by traditional gamers, on the other hand, is less dogmatic, focusing instead on the gaming experience. In other words, these players are focused on whether or not games are fun, fair, and a good value for the money. This is not to say that these values are absent from blockchain gaming. Rather, it hasn’t been a key element of its public communications.

To be transparent, I firmly plant myself in the blockchain gaming camp. Therefore, to apply a cross-cultural communication model, the burden is on me to understand the culture of the opposing camp. For this essay, this is where I focused my efforts. I argue that blockchain gaming advocates made some strategic mistakes from a communications perspective. For example:

• A failure by the blockchain gaming industry to acknowledge the core values of the traditional gamer as shaped by experiences with monetization strategies such as F2P.
• Projecting a culture of disruption which showed no deference toward the more seasoned gaming industry as a whole.
• A choice by the blockchain industry to go it alone and market itself as a separate entity from the broader gaming industry as a whole.

To set the stage, I think it’s useful to provide an approximate timeline of what, in my opinion, were some key events that highlighted and, in some cases, widened the cultural fault lines between the two.

The Seeds of Discontent

Free to Play (F2P)

If there was one thing that planted the initial seed of anti-blockchain sentiment, it’s Free to Play. When F2P arrived on the scene it marked a major shift in gaming and most people were opposed to the change. The idea that someone could “pay to win” coupled with the fact that game companies were making huge profits through ads and in-game purchases was blasphemous. It often enabled developers to release “incomplete” gaming experiences that could be expanded upon at a later date. In other words, the very essence of gaming, grounded in “fairness” and “fun” was being disrupted. Eventually, the gaming companies optimized the model and now the F2P genre represents an ever-growing share of the global revenue for video games.

When blockchain gaming arrived on the scene in 2019 it had a similar feel. It claimed that it would “disrupt” and “revolutionize” the industry by giving players control over their in-game assets. However, it required players to invest in high-priced and volatile game assets (NFTs and fungible tokens) using an array of confusing user interfaces and nascent technologies (e.g., Web3 wallets, DEXs, seed phrases etc.). In addition, blockchain games brought in a massive wave of speculators mostly interested in making a profit, a hot button issue for many gamers. Blockchain games were also labeled “play to earn” which sounded eerily familiar to the “pay to win” days of F2P. Given gamers’ past history with F2P and “gray markets” such as Runescape and World of Warcraft, it’s no surprise then that traditional gamers were rankled.

Crypto Mining and GPUs

The surge of interest in the mining of cryptocurrencies may have planted the second seed of anti-blockchain sentiment. Analysts at Jon Peddie Research claimed that the crypto-mining industry was responsible for purchasing 25% of all GPUs in the first months of 2021. As a result, gamers were being denied new GPUs, and faced increased competition for parts, higher prices, and shipping delays. Unsurprisingly, gamers were pissed. To be fair, the issue probably had more to do with a worldwide shortage in microchips but crypto’s impact was undeniable.

In an amusing article in Forbes, the author described the situation as a “war between gamers and cryptominers” and that “miners have wreaked havoc on the $20 billion industry.” Anecdotally, my nephew, who’s a huge gamer, complained bitterly about how he was unable to upgrade his PC due to “f…ing crypto.”

Fault Lines Begin to Form

The Blockchain Gaming Alliance (BGA)

On April 24, 2019, the Blockchain Gaming Alliance (BGA) formally announced its existence describing itself as “a coalition of game and blockchain companies committed to advocating for blockchain technology within the game industry.”

Today, the BGA boasts a huge list of sponsors and members representing some of the biggest players in the blockchain gaming space with names like The Sandbox and Sky Mavis, the creator of Axie Infinity. However, other than Ubisoft, Gameloft (founded in December 1999 by Ubisoft co-founder Michel Guillemot), and Atari there are few major traditional gaming companies listed as members. Today, BGA is less a coalition of traditional game and blockchain companies per its original design but more a collection of blockchain and web3 companies with gaming ambitions.

What’s more interesting to me, however, is the language by which the BGA describes its mission.

“The Blockchain Game Alliance focuses on two key missions.

• Raising awareness about how blockchain can transform games and improve or disrupt existing business sectors.
• Accelerating adoption by overcoming existing barriers through innovation and by catalyzing efforts to create actionable industry standards and best practices.”

I’d like to highlight the phase: “improve or disrupt existing business sectors.” This is consistent with the “disruptive” crypto narrative and implies the traditional gaming industry is in need of an overhaul. It may be subtle but, as you will see later, this language became a lot more aggressive after Valve banned blockchain games in October of 2021.

Axie Infinity and the Play-to-Earn (P2E) movement

Axie Infinity and the concept of Play-to-Earn (P2E) really exploded during the summer of 2021. This is often described as the heyday of blockchain gaming. People around the world, especially in the developing world like the Philippines, were intoxicated by the possibility of earning a living wage by playing a video game. As a result people were “aping into” any game slapped with the P2E label. Token and NFT prices were surging.

Leaving the painful lessons of F2P behind, some major traditional gaming companies also entered the fray. Eager to capitalize on the NFT gold rush, Sega, GSC Game World, and Ubisoft (a BGA member) tried to integrate NFTs into some of their popular titles. They were poorly received by fans. Not a surprise given the industry’s initial experiences with F2P. It was also an early warning sign to the blockchain gaming industry that even with the hype, acceptance by mainstream gamers was not a foregone conclusion.

Furthermore, cracks in the P2E edifice were already starting to appear. There were signs that Axie’s game economy was heading towards collapse due to poor design. On March 23, 2022 hackers drained $620 million in Ethereum and USDC tokens from Axie Infinity’s Ronin network bridge. At the time this was the largest hack in crypto history and it dealt a severe blow to blockchain gaming as well as crypto. It also reaffirmed to critics that the industry had serious structural problems.

Valve/Steam Bans NFTs

The largest setback to blockchain gaming came from Valve. On October 14, 2021 Steam updated its rules and guidelines declaring that: “Applications built on blockchain technology that issue or allow exchange of cryptocurrencies or NFTs” could no longer be published on Steam.

At the time, little explanation was given. However, in an interview with Chris LoVerme, CEO of SpacePirate whose game Age of Rust was removed, he implied that the signs were coming. LoVerme said that in 2019 Steam appeared “very open” to blockchain gaming but over time, the conversation with Steam went from open to progressively more serious in nature. He cited several calls with Valve’s legal team to discuss things like “real world value” and “gambling.”

However, LoVerme said that Steam’s move to ban had more to do with competition. He said: “It’s about insulating themselves with their walled garden approach with the Steam marketplace and controlling their APIs and how games work with a centralized model for the games that they host.”

To protest the move, The Blockchain Gaming Alliance in partnership withFight For The Future and 26 other blockchain gaming companies published an open letter to Steam from its members. Sebastien Borget, President of the BGA, said:

“Blockchain games are pioneering a number of new concepts that will invigorate the gaming industry for players and publishers alike. To cut-off this burgeoning sector at such a crucial stage of development is to ignore the remarkable progress we have achieved this year, while creating unfair access to market for incumbents.”

What’s also telling is that the BGA teamed up with Fight For The Future, an organization with an anti-big tech mandate. From the FFTF website:

“The last decade presented many new challenges and has made uncompromising, strategic organizing, like that of Fight for the Future, ever more essential. Centralized, privately-controlled platforms have amassed monopolistic power and swaths of digital territory, downplaying the dangers they pose to individuals and society. But we haven’t let attempts to normalize abusive practices and weaponize technology go unnoticed. We’ve continued to run hard-hitting campaigns that keep runaway Big Tech in check.”

If the goal of the open letter was to strike a conciliatory tone with Steam, the largest distributor of PC games, aligning with Fight For The Future was an odd choice.

Suffice it to say the Open Letter was ineffective. This was confirmed on February 26, 2022 when Gabe Newell, the President of Valve, made aseries of statements in an interview summing up his thoughts on blockchain gaming and crypto and why they were banned from Steam. Here are some of the key quotes from that interview:

• “The people in the space, though, tend to be involved in a lot of criminal activity and a lot of sketchy behaviours.”
• “Similarly, at one point Steam was accepting cryptocurrencies for payments. And it turned out that it just made customers super mad.”
• “There was the issue of volatility… Volatility is a bad thing in a medium of exchange. That was one problem, that sort of volatility was creating more pain for our customers than the value of having the option of using cryptocurrencies.”
• “Another thing was that the vast majority of those transactions, for whatever reason, were fraudulent, where people were repudiating transactions or using illegal sources of funds and things like that.”
• Similarly, with the actors that are currently in this NFT space, they’re just not people you really are wanting to be doing business with. That doesn’t say anything about the underlying technology, it’s just a reflection of the people right now who are viewing it as an opportunity to rip customers off, or engage in money laundering, or other things like that.”

What’s interesting about Newell’s comments is that it shows a genuine openness to the technology. However, when it started to affect the customer experience, Steam decided to prohibit it. This was a reasonable response given all the turbulence in crypto gaming at the time. Blockchain gaming advocates called it anti-competitive but it objectively aligns with the sentiment and values of the traditional gamer which make up Valve’s main audience.

In defense, the blockchain gaming industry often points to Epic Games’ continued openness to crypto games as proof that Valve was being unreasonable. I believe this move was more a marketing tactic than an endorsement. There are strict conditions that still have to be met before blockchain games can be listed on the Epic Games Store.

Minecraft Bans NFTs and Blockchain

On July 20, 2022, the chasm between traditional gaming and blockchain gaming became wider when Minecraft announced its ban on NFTs and blockchain.

“To ensure that Minecraft players have a safe and inclusive experience, blockchain technologies are not permitted to be integrated inside our client and server applications, nor may Minecraft in-game content such as worlds, skins, persona items, or other mods, be utilized by blockchain technology to create a scarce digital asset.”

It’s unclear how much Newell’s comments influenced their decision but the rationale given was similar in tone.

• “NFTs and other blockchain technologies creates digital ownership based on scarcity and exclusion, which does not align with Minecraft values of creative inclusion and playing together. NFTs are not inclusive of all our community and create a scenario of the haves and the have-nots. The speculative pricing and investment mentality around NFTs takes the focus away from playing the game and encourages profiteering, which we think is inconsistent with the long-term joy and success of our players.”
• “We are also concerned that some third-party NFTs may not be reliable and may end up costing players who buy them. Some third-party NFT implementations are also entirely dependent on blockchain technology and may require an asset manager who might disappear without notice. There have also been instances where NFTs were sold at artificially or fraudulently inflated prices.”
• “To ensure that Minecraft players have a safe and inclusive experience, blockchain technologies are not permitted to be integrated inside our Minecraft client and server applications nor may they be utilized to create NFTs associated with any in-game content, including worlds, skins, persona items, or other mods.”

If we return to the initial values of the traditional gamer, Minecraft’s announcement makes perfect sense. Customer retention and customer satisfaction were the key considerations. When viewed within this context, Minecraft acted predictably.

Apple “Taxes” Blockchain Games

In October 2022, Apple updated its “app review guidelines” allowing NFT sales and related services, but only through in-app purchase. These new guidelines would also entitle Apple to a 30% cut — the same it charges for traditional gaming apps. While not banning NFTs and crypto outright, many industry leaders interpreted the move as a “tax” (Tim Sweeney) and “an effective ban” (Ric Moore of Oxalis Games) on blockchain games.

Why did Apple do this? If you align with the Tim Sweeney camp, Apple was simply furthering its monopolistic ambitions while at the same time stifling innovation. To play devil’s advocate, it’s equally plausible that Apple was simply playing it safe with a nascent technology with a checkered past. Looking once again at the content of Sweeney’s Tweet, one could argue that Epic was similarly conservative toward accepting blockchain games albeit without charging a fee. As of today, very few blockchain games are listed on the Epic Game Store.

Conclusion

After reviewing these key events, it’s clear the days of a unified community of traditional gamers and blockchain gamers are still a ways off. It’s also clear that blockchain gaming advocates made some strategic mistakes from a communications perspective. The first, a failure by the blockchain gaming industry to acknowledge the core values of the traditional gamer as shaped by experiences with monetization strategies such as F2P. The second, projecting a culture of disruption which showed no deference toward the more seasoned gaming industry as a whole. To that point, many of the things touted by blockchain gaming are not new concepts. Many had already been tried by the traditional gaming industry with little success (e.g., Diablo III Auction House). This leads into the third mistake, a choice by the blockchain gaming community to market itself as a separate entity.

Given these missteps, it’s not surprising that the “new kid on the block” faced an uphill battle from the start. Add to that a hasty rollout of games on top of a rapidly evolving and widely misunderstood technological stack and you have the core ingredients that led to the current state of affairs. In other words, there were clear signs that adoption of blockchain gaming was in for a rough ride, but they were largely ignored.

In the last GDC State of the Industry Survey developers were asked about their interest in NFTs or cryptocurrency as a payment tool: “6% said they were very interested, 21% were somewhat interested, and 72% were not interested at all. The remaining 1% were already using it.”

It’s not that traditional gamers hate blockchain gamers per se, it’s just that the two cultures have yet to find a common thread on which to align. This may take some time, given the carnage some suffered via scams and bad actors, but there are rays of hope. One thing that can be said about the blockchain gaming space is that it moves and adapts quickly. After the implosion of Play to Earn (as evidenced by the collapse of Axie Infinity’s economy), blockchain games started to modify how they describe their games. Play to Earn has now been supplanted with terms like Play and Earn, Play and Own, and now Free to Own. This may just be fancy marketing, but it does represent an acceptance and/or recognition that all games need to be fun, fair, and a good value from a player perspective.

For example, NOR, a gaming platform being developed by Brooks Brown, endeavors to incorporate the best of both worlds. From their white paper:

“Here at Consortium9 — the team behind NOR — we believe that video games cannot continue to exist within their current incentive structures. We believe there is a way to restore the purity of play in video games, and ensure that players know exactly what they’re getting, free means free, purchased means purchased, and competitive means competitive.”

Maybe a hybrid gaming model is where the two different camps will finally converge.

Ryan Wyatt of Polygon said it best when answering a question about how to bring more players into the blockchain gaming space. Pushback from players is certainly warranted given the current state of the environment:

“It is not their (players) job to be forward thinking or to make bets on where things are going. They don’t give a shit and they shouldn’t. Is there a really cool game experience for me right now, yes or no? The answer (right now) is largely no. It’s not their job to care or align with us long term. People come around when great experiences are built. Full stop.”