“Every time I open my LinkedIn feed, all I see is enthusiastic posts about NTF games.” Game maker Tomas Sala can get angry about it. “These kinds of projects take the addictive qualities of a game, you add the risk of speculating and add a dash of gambling.”
Play-to-earn – play to earn – is the latest buzzword in the gaming industry: a combination of game on the one hand and cryptocurrencies and non-fungible tokens (NFTs) on the other. In the most popular play-to-earn games, you earn special cryptocurrencies with real value while playing, which can help create new weapons, for example. These weapons are then credited as a saleable NFT, a kind of digital receipt, on an online ledger, the blockchain.
Axie Infinity, a game from 2018, is the big star of the genre. 2.5 million people play it every day – mostly in poorer countries. “Games like Axie Infinity give players the chance to make a living, pay off their debts, and even build savings for the first time in their lives,” Beryl Li, a fintech expert and founder of the play-to-earn players’ guild Yield Guild Games (YGG), wrote in an email. Venture capital firms poured millions of dollars into YGG last year, which has some 100,000 members in countries such as the Philippines, Indonesia and Brazil.
YGG’s goal, Li says, is to “turn gamers into entrepreneurs.” According to her, this is of great importance, “because many of our players have struggled to keep their heads above water since the pandemic”. Many player guilds like YGG use a kind of scholarship for gamers, where a poor player gets the resources to play, in exchange for a share of the proceeds. Pyramid schemes
Traditional game makers find the promises unrealistic, the revenue model unethical and even call the games pyramid schemes, where the deposits of newcomers are used to pay out existing participants. Sala: “There are certainly applications for this in the gambling sector, but you should not want to connect entertainment games with making money. Also because games are often played by young people.” There is still little regulation in the field of NFT games. Although parents in some countries can reverse their children’s transactions, they are not prohibited for minors.
Environmental issues also play a role: traditional blockchains consume an enormous amount of energy. “That is why we explicitly choose Solana. That blockchain consumes as much as your refrigerator,” says Herdjie Zhou, a Dutch game maker who is working with his mobile game company Lucky Kat on his own play-to-earn game, Panzerdogs. In the cheerful, fluid shooting game, you control tanks and compete with other gamers.
“It’s a leap of faith,” Zhou admits. “But as a game maker, you always have to keep innovating. I find it very interesting that there is no script for blockchain games yet.”
He thinks that technology can ‘democratise’ games. “You shift the balance of who makes money from a game.” The consumer can now share in the success. That’s why Zhou feels “a lot of responsibility,” he says. After all, it is about other people’s money. You even see games that put the management entirely in the hands of their players.” </svg>”>
In Panzerdogs, gamers can invest in NFT tank pilots. And they do: within 15 minutes of going online, the first 5,555 virtual characters were sold out.
But how much is a game NFT really from the buyer? “It’s usually a kind of tradable receipt with a promise behind it,” says lawyer Dewi Harkink, a specialist in blockchain games. “The object that people think they are buying is usually not on the blockchain itself.”
“Game makers must therefore explain as clearly as possible what their promise is exactly,” says lawyer René Otto, who leads the games team at Van Iersel Luchtman Advocaten, of which Harkink is also a part. He points to Ubisoft, which last year offered a number of items such as NFT for sale as an experiment. “At Ubisoft, their terms and conditions showed that they could stop at any time. Then you might still have the ‘receipt’, but you can’t do anything with that in a game.” Untrue
Many of the things that crypto game makers promise are also unfulfillable, says skeptic Tomas Sala. “The idea that you can sell clothes from one game like NFT, and wear those same clothes in another game, for example. Technically impossible to do.” The question also remains what happens to all those special cryptocurrencies when the game behind them stops.
Crypto game makers underestimate their legal obligations, say Otto and Harkink, who got a flood of such creators at the door last year. Harkink: “Some do not realize that they all have to comply with financial legislation that normally does not apply to game makers.”
Is it gambling or speculation? “If the way you can win an NFT or cryptocurrency depends mainly on luck, then it can legally be seen as gambling. But not if it depends on your skills as a player,” says Otto.
“It’s speculative, but you usually don’t get shares or anything like that, so that’s a financial product,” Harkink adds. “The Netherlands Authority for the Financial Markets does not yet supervise it. Most game makers have good intentions, but there are also cases where the creators could not or did not want to deliver on the promises.”
A version of this article also appeared inNRC Handelsblad of 24 January 2022
