Ifrah Law on Web3: Web3 Gaming

By: Jake Gray

What We’ve Covered

In the initial two blog posts of this series, we explored the fundamentals of the World Wide Web, focusing on its iterative issues and solutions as the technology evolved. We charted the history of the Web briefly, from its early stages of relatively isolated, static, and read-based websites to today’s rather centralized, interconnected, write-based websites, highlighting the underlying reasons and innovations behind the transitions. Moreover, we investigated the present-day challenges of the Web, such as data privacy concerns and lack of user autonomy, analyzing how Web 3.0 technologies aim to overcome them.

Specifically, in the series’ second post, we explored how Web3 innovations were conceived around the ideals of decentralization, non-discrimination, openness, and transparency in named opposition to the Web’s present structure, which is often characterized as controlled by “Big Tech” companies and their internal practices. To this end, we discussed how blockchain technology and its implementations were foundational in this new approach to the Web. Indeed, blockchains serve as the foundation for a variety of Web3 technologies, including cryptocurrencies, non-fungible tokens (NFTs), and decentralized applications (dApps), which collectively offer extensive opportunities for innovation across various Internet-based sectors.

One illustrative example of this potential is found in the burgeoning Web3 gaming industry, which is what we will cover in this installment of the series.

Web3 Gaming At Its Core

At its most basic, Web3 gaming entails permissionless, player-centric control of video-game assets and items, by means of blockchain technology. Because video game assets reside within the player’s wallets, players retain absolute control over the items acquired through their efforts while interacting with the game and its ecosystem. This means that players enjoy outright ownership of purchased or earned assets rather than a mere license to use them in the game as is typical in the video game industry.

In the conventional Web2 gaming experience, there are generally two major restrictions delimiting players’ autonomy over their assets. First, items may be tied to a player’s account permanently. This means that the item may only be bought and sold along with the account itself, which is typically against most, if not all Web2 games’ terms of service. Second, items are typically tied to the in-game ecosystem, which necessitates that they may only be bought and sold through the in-game economy, and never by means of fiat currency or other secondary marketplace. These options are also generally against games’ terms of service. So, if players wish to extract all the time and effort put into the game through a sale of their account and/or its items, players risk a permanent ban and a loss of all items. Players thus are generally incapable of retrieving any time or money that they put into the game in the case that they have no need for their items anymore. Web3 enthusiasts consider this a waste of potential.

The Web3 gaming framework fosters robust, player-driven secondary markets and in-game economies, so users can freely buy, sell, or trade their assets, independent of the game’s developing company. Some Web3 game developers have even further capitalized on this framework by introducing the “play-to-earn” monetization model, wherein games are specially structured to incentivize users to seek a return on purchases through a variety of game mechanics and an eventual re-sale. The model was popularized by the game Axie Infinity, a Pokémon-like battle-collectible game, which has since changed its marketing of the model to “play-and-earn.”

Rhetoric inside of the Web3 gaming industry characterizes this development as rewarding players for the time and energy that they’ve put into the game, which has the concomitant effect of growing the game for developers, ensuring that what users put into the game can always be made liquid  in some capacity and can never be taken away from them. As we saw at NFT.NYC, by instilling a sense of ownership and control in their players, Web3 gaming companies are incentivized to work alongside their players to build a product their community wants. Such a dynamic creates a sense of trust, camaraderie, and long-term partnership between players and developers, ensuring that the players are as devoted to the game and its community as the developers. This way, the game thrives, and so does each party.

Interoperability Between Gaming Platforms

The introduction of blockchain technology into the gaming industry has also introduced greater potential for “interoperability” between games and platforms in use of digital assets. Interoperability is a literal term, defined to mean that something is able to be used between different systems. But in the context of Web3 gaming, interoperability is the capacity for digital assets, or items, to maintain their identity, value, and characteristics as they move between platforms, so that an item obtained in one game could be used in another, bringing continuity and cross-platform engagement to users’ experiences. [1]

Interoperability is possible when games operate on a shared blockchain network or backend tying networks together, which is quite common. But the extent of interoperability is constrained by the design of each game and the company’s readiness to embrace it with other platforms, given that it requires coordination amongst participating companies and high-degree of complexity to implement. However, blockchain technology is a well-suited facilitator of this process, reducing much of the complexity in a number of ways compared to how it would work in the mainstream gaming industry.

With respect to the mainstream gaming industry, interoperability was more of a conceptual possibility than a concrete realization, with very limited cross-platform character promotional events in which companies create new assets to resemble those in other games. Fortnite, for instance, is a popular mainstream game with limited interoperability, as it creates its own assets using the IP of other companies like Marvel.

But with blockchain technology, the potential for interoperability is enhanced because much of the logistical complications—such as verifying, tracking, and sharing item data —is easily accounted for by the nature of the blockchain. There’s no need for companies to independently coordinate the track and storage of player or item data. Such standardization enables game developers to create, for instance, shared in-game experiences and economies seamlessly by using the same assets as held on the blockchain. While a bit of technical work may be required to specifically tailor the asset to a game environment, the process requires much less development than it would have without blockchain technology.

Blockchain’s decentralized structure further eliminates the need for a central authority to validate transactions involving digital assets, as smart contracts—which are autonomous contract protocols built into the blockchain—facilitate the secure transfer of assets without need of a third-party overseer. In essence, interoperability entails a standardized approach to game development that can be used to make gaming more interconnected.

A paradigmatic example of Web3 interoperability is the “Loot” project, which creates digital assets specifically tailored to be used by other platforms in whatever way they see fit. On the Loot website, the following statement appears:

Loot is randomized adventurer gear generated and stored on chain. Stats, images, and other functionality are intentionally omitted for others to interpret. Feel free to use Loot in any way you want.

A wealth of games, derivative projects, tools, NFT collections, and communities have already been built using Loot.

An earlier example of interoperability within Web3 was a 2019 collaboration between the games “CryptoKitties” and “Gods Unchained,” which allowed CryptoKitty owners to purchase a limited edition card pack that granted the owner a unique and tradable “talisman” to represent their Kitty as a statue in Gods Unchained.

Game Interminability

Interoperability and player-ownership of digital assets are not the only boons to the gaming industry blockchain presents. Previously, we’ve written on the uses and abuses of decentralization in gambling by means of blockchain technology, where we described the nature of autonomous, open-source, and decentralized gaming platforms. Additionally, we touched upon how such platforms often advertise that they operate without a “house,” (and so have no need for a house cut) since they use smart contracts to automate transactions. While we’ve already explored the drawbacks and benefits of such an approach to gambling, the use-case highlights an important benefit of the blockchain more broadly in the context of the general gaming industry: no dependency on a centralized developer for the game’s continued existence.

In other words, Web3 games cannot be turned off so long as they are true blockchain games, since their underlying data will never be lost.

Since all game procedures and activities are (generally) recorded and preserved on-chain, there’s no requirement for a centralized game server or database on the backend that must be centrally maintained and controlled. This structure allows games, or at least the data on which they are built, to exist indefinitely, even if the initial developers cease to maintain the project. Players are no longer left out to dry if or when their favorite game dwindles in popularity and servers are shut down by the developing company. Because all data is expressly open to the public, it’s open to being used in whatever manner by the public. Indeed, the open and permissionless nature of the blockchain enables anyone to launch smart contracts that enhance the game’s systems, so gameplay can be iterated upon by further developers even if not necessarily tied to the game’s creators. Players no longer rely on one entity to play their games, but instead, only on each other.

Mainstream Gaming’s Relation to Web3 Gaming

As the Web3 gaming industry continues to mature, traditional gaming companies have been forced to reckon with whether their future endeavors will use blockchain technology or Web3 game development frameworks. The results have varied by company, as each responds to the opinions of their fanbases.

Square Enix and Ubisoft have been the main AAA gaming studios to support Web3, in spite of staunch protest from a large camp of traditional gamers. Square Enix has been at the forefront of traditional gaming companies leading in Web3 developments. An important step Square Enix took was joining Epic Games in partnering with Elixir, a PC Game launcher that includes web3 games alongside normal games to onboard traditional gamers. [2] Additionally, at the beginning of 2023, then-President of Square Enix, Yosuke Matsuda, announced an aggressive investment into blockchain technology. Despite his resignation in March, there has been no apparent change in plans, as the company released Final Fantasy VII NFTs on the Enjin blockchain and showed off a trailer for its new NFT game, “Symbiogenesis,” that same month. [3]

Ubisoft has also leveraged their intellectual property to release a set of NFTs based on their most well-known title, Assassin’s Creed. [4] Other Ubisoft Web3 ventures include in-game NFT items for Tom Clancy and an NFT-powered soccer game spinoff called “One Shot League.” [5] And in February, Ubisoft launched “Rabbids” NFT avatars for the Ethereum metaverse game “The Sandbox.” [6]

On the other side, Valve Corporation has banned games using cryptocurrency and NFTs from its digital storefront, Steam, citing company policy which bans games that offer in-game items with real world value in light of its controversy over CSGO-skin gambling. [7] Likewise, Mojang Studios, the company behind Minecraft, announced that NFTs would not be integrated into or permitted in the game, which the company described as antithetical to the design of the game. [8] And while Epic Games is partnered with Elixir, the company has not announced any public plans to develop its own games using blockchain technology.

Conclusion

In general, traditional gamer sentiments have been less than positive toward blockchain technology and its potential introduction into blockchain technology, generally citing concerns about the potential for over-monetization, scams, or needless barriers-to-entry. However, as we discerned at NFT.NYC 2023, Web3 gaming companies are working harder than ever to appeal to traditional gamers. At the tail-end of a crypto winter, gaming companies in the Web3 ecosystem have evidently refined their approach to make Web3 more palatable—namely, by taking intermediary steps in the introduction of blockchain technology into games, in the hopes that its benefits are made apparent by means of excellent gameplay. The potential benefits are numerous, and how effectively companies capitalize on those benefits will determine the prosperity of Web3 gaming in the long run.

[1] It should be noted that a broader definition of “interoperability” is likely to include instances of cross-platform gaming, such as when the same game can be played on a PS5, an XBOX, or computer, and players from different consoles can play with each other.

[2] https://www.ign.com/articles/square-enix-nft-blockchain-web3-elixir

[3] https://www.videogameschronicle.com/news/square-enix-shows-a-trailer-for-symbiogenesis-nft-game-says-itll-have-10000-characters/

[4] https://www.nftculture.com/nft-news/ubisoft-brings-assassins-creed-nfts-to-web3-the-perfect-blend-of-physical-and-digital-collectibles/

[5] Id.

[6] https://decrypt.co/121872/ubisoft-rabbids-nfts-sandbox

[7] https://www.theverge.com/2021/10/15/22728425/valve-steam-blockchain-nft-crypto-ban-games-age-of-rust

[8] https://www.minecraft.net/en-us/article/minecraft-and-nfts