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Traditional Gaming NFTs Need The Sauce

Originally posted on tolusnotes.

NFTs and video games don't seem to mix well, at least from what we've seen so far. Gamers continue to push back against NFTs and anything blockchain or crypto-related.

I'm referring to traditional games. Crypto-native games like Axie Infinity onboard a different group of gamers interested in understanding the play-to-earn mechanics and participating in the digital economy. But these aren't really "games" in the traditional sense. In this post, I'm interested in exploring why gamers have pushed back and how an alternative approach could leverage the existing synergies between the gaming and web3 communities.

Play-To-Escape #

NFTs in traditional gaming titles reintroduce "the real world" into video games, and many gamers aren't interested in creating a real-world economy for their in-game items. They're more interested in the play-to-escape model. The real world is hard, and games can be hard, but at least they're not real. The subset of gamers that don't mind real-world consequences for their in-game actions is small in comparison. Especially on the financial side, free-to-play games are financed by a fraction of the player base. Most players play to escape, they play for fun.

Trading and finance have been at the forefront of NFTs, and gamers easily associate these with microtransactions since both involve spending some real-world asset on in-game collectibles. The idea is probably worse for most traditional gamers because, unlike traditional in-game collectibles, NFTs are very liquid. Their differences are irrelevant once people make this connection.

But as far as gaming is concerned, microtransactions aren't going anywhere. Free-to-play is becoming the dominant model because it removes the most significant friction to adoption. F2P makes gaming accessible to anyone with some disk space and a good internet connection. From Fortnite to Warzone to the recently released Halo: Infinite Multiplayer, it seems like the industry has found a sweet spot. Most gamers don't mind microtransactions as long as they only modify cosmetic finishes and don't impact in-game performance. Cosmetic NFTs like Ubisoft's Digits seem to fit the model but don't work because they're not interoperable. I noted in a recent write-up that third-party marketplaces already exist for in-game skins and finishes. Though fragmented, these centralized marketplaces serve the need for something like Digits. It's a nice experiment, but NFTs aren't the problem in this equation.

The Sauce #

A centralized closed-source game + NFTs = centralized closed-source game + additional monetization

NFTs can't work because traditional gaming publishers have nothing to do with web3. The experiments we've seen so far seem to embrace the financial parts of web3 without acknowledging its culture. It's backward. Publishers attempting to integrate NFTs aren't exempt from web3 principles, and they're learning that the hard way. Successful NFT projects resonate with people because they prioritize community above all else. The top-down initiatives from publishers come off as quick cash grabs --- attempts to profit from the latest trends and fill earnings reports with buzzwords --- and won't resonate with traditional gamers or crypto-natives alike.

Welcome to web3, a place where value follows when projects prioritize their communities above all else. Tokens (fungible & NFTs) work by activating a value-aligned network of networks. Rigid corporate structures like big game publishers are not what people imagine when they think of web3 networks, and their web3 initiatives prove my point.

The gaming community shouldn't equate publishers' attempts with how things should work. Tokens excel at removing middlemen and closing the gap between creator and fan. Game publishers are essentially middlemen who connect designers with players. There's usually a struggle between the creative and business visions for gaming titles where publishers usually have the upper hand, and web3 is here to fix that relationship.

The gaming community doesn't like change, but gamers love influencing design decisions. Web3 enables game designers to co-create and iterate with players. Like I wrote in Great Web3 Game, "... mods decouple the longevity of games from the original creators and allow communities to live on beyond the initial idea," but taken literally this time around. We've all had experiences where loved titles had to be shut down. Now, the gaming community can come together to keep those titles alive and thriving legally because they own them.

I know publishers are trying to sell "owning your in-game items," but web3 lets you own more. Tokens give gamers a seat at the table -- the ability to vote on design decisions, and exposure to the game's financial performance upon release. Why settle for owning in-game items or even DRM-free game copies when you can own and influence the business and IP? That's the web3 way.

The web3 push we expected from the traditional game industry is not what we received last year. I'm not surprised that the "trading" side of NFTs took hold in gaming before the actual use cases that exist today. Value creation and distribution must be prioritized above everything, but unfortunately for publishers, this happens bottoms up and needs to be community-led.