ARTICLE
19 October 2022

N(o) F(reaking) T(hanks): The Backlash Against NFTs In Video Games

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Gamma Law

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Gamma Law is a specialty law firm providing premium support to select clients in cutting-edge media/tech industry sectors. We have deep expertise in video games and esports, VR/AR/XR, digital media and entertainment, cryptocurrencies and blockchain. Our clients range from founders of emerging businesses to multinational enterprises.
Video games are historically a driving factor in the development of new technologies. When the crypto-based assets known as non-fungible tokens (NFTs) first arrived, video game developers embraced them with lightning speed.
United States Technology
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Video games are historically a driving factor in the development of new technologies. When the crypto-based assets known as non-fungible tokens (NFTs) first arrived, video game developers embraced them with lightning speed. In what seemed like overnight, many PC and console-based video games announced they would incorporate NFTs into their platforms to expand the gaming universe and increase revenues. At first blush, it was an interesting and novel idea. Unique active wallets in blockchain gaming grew by 2,000 percent and won $2.5 billion in investment over the 12 months ending in March 2022. Gamers seemed intrigued by the opportunity to purchase NFTs to improve their in-game characters with skins, tools, and other items, but opposition arose shortly after NFTs began appearing in games. This increasingly vocal opposition continues to push back against gaming companies for even announcing plans to plug NFTs into games.

So, What Happened?

Some gamers became incensed at the idea that NFTs would force them to pay to unlock features they believe should be included with the price of the game purchase. Others maintained that grinding for the resources required to obtain in-game NFTs would rob many games of their fun. Many players view the incorporation of NFTs into video games as yet another predatory attempt by gaming companies to squeeze more money out of players. They clashed with Ubisoft, Square Enix, Zynga, and other major game developers over the introduction of NFTs and crypto into their favorite titles.

Many gaming companies, on the other hand, view NFTs as a means for verifying digital assets on the blockchain, conveying proof of ownership that players can sell for a profit in online marketplaces. Gaming companies claim that incorporating NFTs into the games helps build community and "play to earn" opportunities and take the position that NFTs support game players and NFT artists. Many gamers remain unconvinced, especially those still smarting from bad experiences with downloadable content (DLC) or loot boxes. Despite game companies' attempts to draw distinctions by citing blockchain benefits and resale values, an extremely vocal contingent of gamers remains steadfast (this is very much reminiscent of the situation surrounding World of Warcraft in the early 2000s).

NFTs can offer exclusive in-game assets or highly sought-after items, making them potentially worth thousands of dollars and well out of reach of the average gamer. Far from democratizing and making gaming more inclusive, NFTs might reward players who can afford to "pay-to-win," making the playing field more unequal than ever before. Further, some game enthusiasts fear the introduction of valuable NFTs could cause the price of games to increase dramatically, excluding even more potential players from the "community" and diluting the experience.

As if this weren't enough, gamers have expressed significant concerns over scams, thefts, and hacks targeting NFTs and their owners. Illegal activities surrounding NFT transactions, such as those that launder money. The gaming industry is already a breeding ground for scams, spam, and fraud, and many gamers believe NFTs will only further attract the worst elements of society. The NFT marketplace isn't regulated strictly, so the threat of gamers being cheated is real. The marketplace Itch.io gave voice to the anti-NFT contingent in a tweet slamming the NFT craze, calling it a "scam," "get rich quick" scheme, and an avenue for dubious parties to exploit gamers. Security issues abound, such as the hacking of the blockchain of Axie Infinity uses where hackers stole $625 million.

Gamers also decry the negative environmental impacts NFT minting and the blockchain inflict on the world. Ethereum, the main blockchain platform for NFTs, releases the same amount of carbon dioxide emissions into the atmosphere as the entire country of Libya. The enormous amount of energy consumption that occurs when minting, buying, and selling an NFT produces carbon dioxide emissions that cause climate change. NFTs' carbon footprint is significant—the sale of one crypto art consumed 8.7 megawatt-hours of energy, the equivalent to two years' use of energy in an artist's studio.

NFTs Still the Future of Gaming?

Some gaming companies have acquiesced to the anti-NFT crowd and a few even agree with their view. Electronic Arts (EA), Team17, and Epic Games, have pumped the brakes on their NFT initiatives. Discord, STALKER 2, and MetaWorms canceled their NFT projects after being subject to backlash from gamers. Steam has banned all cryptocurrencies and NFTs from its online gaming platforms. Mojang's July 2022 announcement that it would ban NFTs from its wildly popular Minecraft game sent shockwaves through the gaming and NFT communities. Citing a desire to foster a safe and inclusive experience for its players, Minecraft has prohibited the integration of blockchain servers.

Despite several gaming companies abandoning, or at least taking a step back from NFTs, others continue to embrace them.

Perhaps they are banking on attracting the "silent majority" of gamers who are intrigued by the potential of earning NFTs from their activities. A survey of 1,500 players earlier this year revealed that only 23 percent were "not interested" or "not very interested" in play-to-earn NFTs. In fact, the poll revealed that more than two-thirds are already doing so, including 4 percent who are using video games to build their NFT collection and another 12 percent who have already monetized their play by selling NFTs they have earned. According to Interpret, the firm distributing the survey, "NFTs could play a major role in retention (of critical importance to live-service games), as over 45 percent indicated that being able to earn NFTs through gaming would increase their current engagement levels with games. Ultimately, Interpret expects gamer sentiment to continue to warm towards "play-to-earn" as the industry unpacks how best to position this new model. NFTs represent a shift in power to the players and provide a greater sense of true ownership from the items they earn both in and out-of-game. "

Conclusion

Gaming companies will have to figure out the balance of using NFTs to enhance gaming experiences while compromising the experience for gamers who can't or refuse to utilize them. Due consideration of players' security and support needs as well as minimizing environmental impact will certainly help improve the outlook for NFT in gaming. Significantly, GameStop is moving ahead with its NFT marketplace. Others, like NFT World, which sold NFTs that fit into the Minecraft world, have committed to exploring other options, including developing a Minecraft competitor. But for now, a reckoning has arrived for the otherwise burgeoning crypto-based gaming market. While the gaming and NFT worlds are still evolving, game companies' romance with NFTs may have cooled for the foreseeable future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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