How NFTs are creating a generational divide between platforms

Steam banned blockchain games; Epic Games welcomed them. Is this the next big platform battle?

Today let’s talk about a fault line that’s beginning to open up in the gaming world, but I suspect will soon be coming to most platforms and app stores. It’s a divide that begins with a simple question: will your platform allow NFTs? Crypto payments? You know … blockchain stuff?

Like it or not, the rise of non-fungible tokens as an engine for fun and profit has been one of the tech world’s big stories in 2021. Using the blockchain to create unique digital objects with verifiable, transferrable ownership has opened up new possibilities in art, digital trading cards, and gaming. At least for the moment, it seems likely that other forms of media will follow.

Recently I’ve written about ways in which NFTs are challenging the current generation’s assumptions about gaming: building a game from the bottom up rather than the top down, as the Loot project is doing; or enabling players to make money directly from their gameplay, as Axie Infinity is. Aleksander Larsen, chief operating officer of Axie’s parent company, told me that he hopes the game will come to mobile app stores, including Apple’s, within the next few months.

But on Friday, it became clear that such games won’t be welcome everywhere. Here’s Mitchell Clark at The Verge:

Games that use blockchain technology or let users exchange NFTs or cryptocurrencies won’t be allowed on Steam, according to a rule added to Valve’s “What you shouldn’t publish on Steam” list. The change was pointed out by SpacePirate, a developer working on an NFT-based game, who said that the change was because the company doesn’t allow game items that could have real-world value.

Steam, if you’re not familiar, is the largest distributor of PC gaming software in the world. With more than 120 million monthly users, it’s the default place for most PC gamers to buy digital downloads. And last week, as some blockchain-based games had begun to appear on the platform, Steam pulled out the rug from underneath them. Parent company Valve has yet to make a comment beyond its update to the Steam rules.

The developer of Age of Rust, a forthcoming adventure game that will award NFTs to players who solve puzzles, was among those whose titles were removed from the platform. The developer, SpacePirate Games, lamented the move.

“Steam's point of view is that items have value and they don't allow items that can have real-world value on their platform,” the game’s official account tweeted. “While I respect their choice, I fundamentally believe that NFTs and blockchain games are the future. It's why I started this journey with all of you.”

But when one app store closes, another opens. The Epic Games Store, a Steam rival that the Fortnite maker introduced in 2018, quickly said that it is “open” to considering NFT-based games. Here’s Clark again at The Verge:

When we asked about allowing games that featured NFTs, Epic told us there’d be some limitations, but that it’s willing to work with “early developers” in the “new field.”

Epic says that the games would have to comply with financial laws, make it clear how the blockchain is used, and have appropriate age ratings. It also says that developers won’t be able to use Epic’s payment service to accept crypto; they would have to use their own payment systems instead.

Among the reasons this came as a surprise is that just weeks earlier, Epic CEO Tim Sweeney had seemed to wash his hands of the blockchain altogether. “We aren’t touching NFTs,” he tweeted, “as the whole field is currently tangled up with an intractable mix of scams, interesting decentralized tech foundations, and scams.”

Sweeney is well within the mainstream of tech commentary when he worries that NFTs are scammy. When I wrote about Axie last week, a lot of you shared similar sentiments with me in the Sidechannel Discord server and in your email replies. Aren’t these NFT projects fundamentally pyramid schemes, you wondered. Why does any of this have to be on the blockchain at all? There are other ways to represent digital scarcity beyond the blockchain, you told me.

In any case, grinding for several hours a day to make money playing a Pokémon clone hardly sounds like most people’s idea of a good time. If it’s a full-time job, can you really even call it a game?

Despite those objections, though, the development continues. Each day brings with it a fresh round of funding announcements for blockchain-based projects, with hundreds of millions of dollars being allocated into crypto-focused startups and VC funds. Games, which have proven to be one of the first crypto projects to attract a user base that does something other than trade money back and forth, often figure significantly in those fundraising announcements. (Here’s $4.6 million for a company that rents Axie monsters to players in exchange for a slice of their income, for example.)

All of which is soon going to put platforms into the same position that Steam found itself in. Do we let these things into the store or not? The easy thing to do is to say “no” — but doing so creates an opportunity for anyone willing to say yes.

To be sure, the sale of in-game items has a checkered history. Blizzard’s popular dungeon crawler Diablo III set up an official in-game auction house a decade ago to let players sell rare swords, armor, and other goods that they had earned in virtual battle. These items weren’t unique in the way NFTs are, but they were rare and had real-world value. Unfortunately, though, Blizzard found that its auction house broke the game entirely: all of a sudden, people could simply pay to win it.

Here’s Bo Moore writing in Wired in 2013, when the auction house was shuttered:

Diablo doesn't have more dungeons, more bosses, etc. Players just play the same procession of levels on harder and harder difficulty levels, picking up better and better loot. In other words, the loot isn't just a helping hand towards their ultimate goal – better loot is the ultimate goal. And with the auction house, players found that the best way to obtain it was to just buy it. […]

And the next thing you know, they're not playing the game anymore. Why would they, when the reward structure that would otherwise motivate them to play was no longer there? Without the promise of better stuff, Diablo was all stick and no carrot.

Games that develop this “pay to win” dynamic are among the most-loathed titles around — but they are very much around. Games that offer free downloads, as many mobile games do, often allow players to pay to gain advantages over their free-loading rivals, even as it worsens the experience for most of the user base. More respectable games, like Fortnite, sell only cosmetic items. But the pay-to-win economy is real.

Of course, there’s no reason that in-game NFTs bought from third parties have to give players advantages in gameplay. A unique Fortnite skin created by a popular artist might have value to both the person who sold it and the person who bought it, and the balance of gameplay wouldn’t change at all.

But even for platforms inclined to support blockchain integrations, there remain a number of hurdles to clear on the policy and user experience side. How and where does the buying and selling take place? Does the platform get a cut of the sale? And if NFTs do affect how the game is played, rather than simply how it looks, how does the developer ensure the game is balanced and accessible to a large number of players?

The questions are coming to gaming first, but it’s easy to imagine them cropping up elsewhere in the new economy. And when they do, platforms will be faced with a choice: shut it all down, as Steam did, and bet that the whole crypto craze will some day fall into the ocean; or be curious about it, the way Epic is, and see if there’s a way to channel all this developer enthusiasm into something creative and profitable.

It’s worth noting that most big believers in the tech world’s other big prediction about the future this year — the metaverse — come down firmly on the side of NFT integration. Mark Zuckerberg described for Facebook employees this summer a world in which people would one day rent NFT art as decorations for parties in virtual reality. The idea of unique NFT skins that people can dress up their avatars in, and take from place to virtual place, is foundational to the metaverse as futurists most often describe it.

Maybe that will all fall into the ocean, too. But one way or another, I think digital scarcity is coming to platforms. And when it does, they’ll have a lot of re-thinking to do. For now, Valve loses nothing by leaving NFTs behind. But there may come a day soon when it’s companies like Valve getting left behind, and developers like SpacePirate laughing all the way to the bank.


The Ratio

Today in news that could change public perception of the big tech companies.

⬇️ Trending down: Doctors say they are seeing a surge of young women reporting tics and other involuntary movements after long-term exposure to tic-related content on TikTok. Absolutely wild story; will Congress pay attention as part of its save-the-teens crusade? (Julie Jargon / Wall Street Journal)

⬇️ Trending down: YouTube was sued for failing to remove videos of animal abuse. I assume the suit will be thrown out over Section 230 issues; still: an activist “provided the company last year with examples of violations on 146 channels with more than 2,000 videos collectively viewed 1.2 billion times.” (Daisuke Wakabayashi / New York Times)


Governing

Facebook agreed to pay more than $14 million in a settlement with the Justice Department over allegations that it intentionally discriminated against Americans in favor of foreign workers. This lawsuit was filed under the Trump administration and reflected its anti-immigration sentiment. Here are David Nakamura and Cat Zakrzewski in the Washington Post:

The agreements came after the Justice Department sued Facebook in December for allegedly failing to properly advertise at least 2,600 jobs — and consider applications from U.S. citizens — before offering the spots to foreigners whom the company was sponsoring for green cards granting permanent residency in 2018 and 2019. […]

Facebook has agreed to pay a civil penalty of $4.75 million to the U.S. government and up to $9.5 million to eligible victims of Facebook’s alleged discrimination, which officials said was the largest monetary settlement of its kind under the anti-discrimination provisions in U.S. immigration laws.

Senate Democrats called on Facebook to end its Novi crypto wallet project. “Facebook is once again pursuing digital currency plans on an aggressive timeline and has already launched a pilot for a payments infrastructure network, even though these plans are incompatible with the actual financial regulatory landscape — not only for Diem specifically, but also for stablecoins in general,” they wrote. (Makena Kelly / The Verge)

Related: Facebook’s Novi wallet is launching a pilot program without the Diem cryptocurrency it was built to house. Instead, it’s using something called the Paxos stablecoin, with custody services provided by Coinbase. What an absolute Rube Goldberg contraption of a product. (Nikhilesh De / CoinDesk)

Google CEO Sundar Pichai called for a federal privacy standard. Congress should listen to the man! (Sarah Perez / TechCrunch)

Related: Pichai talks about Google’s new sustainable campus and its commitment to running the entire company on clean energy by 2010. (Mark Bergen / Bloomberg)

The Google Play Store’s new “data safety” section for apps launches in February. It’s the Android equivalent to Apple’s data privacy “nutrition labels.” (Abner Li / 9to5Google)

Crypto companies are increasing their lobbying expenditures amid threats of new regulations. The libertarian ethos of these companies has meant that historically they avoided building ties to Washington. (Rob Garver / CoinDesk)

Some folks are wondering why Frances Haugen got more attention than Sophie Zhang. I keep seeing this question so happy to answer it: Haugen walked away with thousands more documents and filed eight SEC complaints. That’s it — that’s the whole story! Also it’s not a competition! (Issie Lapowsky / Protocol)

More than half of Roblox users are now older than 13, presenting the company with new trust and safety challenges. The story offers few details on how the company plans to meet them, aside from noting it lets parents set up limits on the usage of the app that children can’t disable. (Kellen Browning / New York Times)

When WhatsApp went down, Brazilians’ jobs went with it. Nice look at the real-world consequences of extended outages; “Fifty-nine percent of the population has a Facebook account and 66 percent use WhatsApp, turning the services into a kind of essential infrastructure for the country.” (Nicole Froio / The Verge)


Industry

Netflix workers released a list of demands ahead of Wednesday’s planned walkout in protest of the latest Dave Chappelle special and its transphobic commentary. Notably, they are not asking for the special to be taken down. Here’s Zoe Schiffer at The Verge:

“We want the company to adopt measures in the areas of content investment, employee relations and safety, and harm reduction, all of which are necessary to avoid future instances of platforming transphobia and hate speech,” employees wrote in a press release, which has not yet been made public but was supplied to The Verge.

Related: An essay about working at the company by engineer Terra Field, who is trans: “Stop pretending that transphobia in media has no effect on society.”

Google unveiled its Pixel 6 smartphones. They seem … fine? (Mitchell Clark / The Verge)

Related: A partnership with Snap means that the Pixel 6 can open to the Snapchat camera with just two taps on the back of the device. (Naomi Nix / Bloomberg)

Google ordered double the amount of Pixel smartphones from its manufacturers than it did for the last model. The company has ordered more than 7 million units. (Cheng Ting-Fang and Lauly Li / Nikkei)

Facebook’s portable new Portal Go video calling device got mostly positive reviews. It costs $199 and starts shipping October 19. (Jennifer Pattison Tuohy / The Verge)

Facebook’s News Tab is poised to get new investments, including curated collections of stories around big events. BuzzFeed says here it’s pleased with the traffic it’s seeing; Facebook wouldn’t commit to continuing payments to publishers for participating. (Sara Fischer / Axios)

Facebook content moderators working for Accenture are protesting their low pay with a billboard targeting Accenture CEO Julie Sweet. Moderators say their hourly wages are not keeping pace with inflation. (Emma Roth / The Verge)

Instagram introduced Collabs, a new way to make Reels together. The company will also now let you upload photos and videos from the desktop. (Jon Porter / The Verge)

YouTube surpassed $3 billion in lifetime consumer spending on iOS. That’s enough to make it No. 3 on the list of all-time revenue generated; Tinder is No. 1. (AppAnnie)


Those good tweets


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