DejaVu Sans The NFT Games Dream – is it yet another tulip mania or path to our future?

Are NFTs for now or for the future?

Constraints can become stepping stones to innovation. The disproportionate market attention towards integrating blockchain technology into games is perhaps stemming from people’s desire to overcome the current constraints. Here, the idea of combining blockchains and games can be examined from two perspectives: First, exploring the intention behind advocating for this change, and second, discussing why such a change is deemed necessary at this time. Combining the findings from these two would allow us to acquire a comprehensive view of this matter and thus enable critical reflections on what the innovation could bring to our future.

Notably, a significant portion of the ongoing discourse about integrating a blockchain into games is concentrating on optimistic views toward the future. Discussions about related topics like Play-to-Earn (P2E) and Non-Fungible Tokens (NFTs) are also revolving around on the view towards the future rather than present; on what could happen, and should happen according to the previous attempts. Here, we cannot get away from the feeling that something is not right – something is off. Of course, one could still argue that these messy attempts and discourse are stepping stones towards the next paradigm shift and that we must first prioritise broader and newer attempts rather than hindering innovation with over-verification.

Coming from this context, this article aims to delve into the issue of NFTs in games, exploring both the social and technical contexts. First, we take a look at the context of non-fungibility and decentralisation and the game industry’s vision towards its future, along with its remaining technical challenges. From there we look more in-depth at where these endeavours might leave their mark on games.

Contexts of Non-Fungibility

In recent days in South Korea, the term Non-Fungible Tokens (NFTs) is most commonly used in discussions regarding virtual assets, emphasising their potential value deriving from unique ownership attribution over notions about their technological aspects. Meaning, rather than delving into the technical feasibility of obtaining this non-fungibility status, the discourse surrounding NFTs tends to focus more on how much value can be derived from those assets and how to leverage it.

Under current South Korean law, it is not possible to introduce NFTs into games, including its live operation services. There are many restrictions and thus a considerable amount of time would be needed before any NFT games can be fully in operation at a viable commercial level in this country. But the potential gain could be high: If NFT games can somehow reach the mainstream market, they could quickly become the most accessible medium for trading cryptocurrencies, using already existing in-game markets – without making much of an early investment in facilitating entirely new channels. Not to mention, South Korean game players are already accustomed to taking financial burden while playing games. Active players are more likely to become devoted fans of the game, and for them, paying to access the blockchain currency may be perceived as an acceptable range of costs.

Here it’s worth closely looking at the case of the game “CryptoKitties” (Dapper Labs, 2017) a prime example of games and blockchain integration. The in-game transactions of “CryptoKitties” occur through trading with the virtual currency Ethereum, providing opportunities to trade more exotic digitally-generated cats at higher monetary values. So, what makes this game ‘fun’? Do players find it ‘fun’ when they successfully create exotic digital cats, or does the enjoyment come from engaging in monetary trading as the prices of digital cats might increase? While the game’s primary game design mechanic revolves around collecting and breeding cute digital cats, “CryptoKitties” trade mechanisms combined with real-world monetary values (i.e., currency that can be used even outside the game) make it hard for us to articulate what the particular design elements are that truly resonate with a feeling of ‘fun’ of players.

Let’s consider a hypothetical situation where someone has successfully generated an exotic, high-valued cat in the game. If one considers acquiring a unique cat in the “CryptoKitties” through collecting and breeding as ‘fun’: Does that feeling stem from the self-satisfaction of acquiring a rare item (in this case, an exotic digital cat), or does that come from the optimistic expectations of being able to trade it for a higher amount of money? Perhaps it could be a bit of both. Even if the player has no intention of trading that digital cat, just having an expensive object may already give the person a prestigious and satisfying feeling. This somewhat resembles other game business models already common in some South Korean MMO games – and potentially online games from other regions. Then the question is, why NFTs? What makes incorporating NFTs into the game differerent from other conventional game design and business mechanics? In the next chapter, let’s examine the benefits of NFTs from the perspectives of game companies and gamers.

Contrasting views towards Non-Fungibility

At the current state, one of the primary issues is that game companies have yet to clearly define how the introduction of NFTs can make more ‘fun’ to the game, and what exact innovative changes they envision for their game’s live service. For example, the game “Nine Chronicles” (Planetarium, 2020) demonstrates the notion of decentralisation by going open-source as a blockchain game. But most blockchain game projects do not seem to provide a solid answer on why they need to choose blockchain technology in particular, and rather adopt blockchain first and then find its reasoning as they run. Furthermore, one of the most widely accepted business models among these blockchain-backed games is the pre-sales scheme, selling items early in advance, which is not entirely something new (from the consumer’s standpoint) but more of a replication of existing business models but with added blockchain hype.

This inconsistency leads to worrying public views on game companies’ intentions regarding NFTs, which question the corporate vision as the attempt to introduce cryptocurrency into game services while evading state regulations. From the consumer’s standpoint, the company seems to be attempting to profit from the player-to-player item trades through NFTs. (Translator’s note: South Korean game law prevents game companies from directly facilitating player-to-player item trades if it involves purchasing or selling virtual items with real-world money, KRW. Instead, various third-party currency exchange agencies, apart from the game service providers, can mediate the exchange of virtual items with real money, subject to a certain amount of transaction fees.) Many blockchain game proposals from some major South Korean game companies aim to gain control over direct real-world item trade; Proposing to install virtual item trade through company-issued cryptocurrencies, which is a clear indication of the corporation’s attempt to evade government’s regulations.

While game companies’ vision toward NFTs is still fixated on product value, for players, the future it presents has somewhat conflicting implications. Some players may view NFTs as a channel for game items as monetary investments, while others see them as collectibles that could last even after the termination of the game’s service. Considering that all online game services’ assets and efforts that gamers accumulate over time could vanish once the game service ends, without any reliable method to possess such intangible values made in games, NFTs can perhaps provide players a permanent ownership of the things that they have achieved in games.

Here, NFTs can be interpreted as a token through which players could feel personally connected with the games that they love. Perhaps the NFTs could be perceived as a medium through which players can express their attachment towards the game — a non-fungible token that signifies their devotion as a fan of the game. For these individuals, NFTs are no longer just about the technical wonder but rather a tool for the meaning-making journey of their gameplay.

For instance, online game players are aware that the online game service will eventually end. Despite knowing this potential future, they remain devoted to their current satisfactions with the game, accumulating virtual assets that may one day no longer be available. Perhaps NFTs can resolve this uncertainty (the risk) that players must endure, by becoming a proof of record of in-game items that can last indefinitely. A token with which they can enshrine their love towards the game that can safely be stored without the risk of losing it.

Contexts of decentralisation

What the blockchain currently guarantees in terms of non-fungibility is the data. While attempts to enhance technologies such as proof-of-work (PoW) and hardware storage capacities are in progress, uploading the entire game system to run on the blockchain is still challenging. Let’s consider a hypothetical scenario where the game system remains outside the blockchain, perhaps locally or internally within the game company’s server, while the game state (data) is kept on the blockchain. In this setup, even if the game company is no longer able to manage the game services — terminating its live operation — the records of the items still exist on the blockchain to prove who owns that particular item. However, without the game system to actually run or operate that specific item this is just a data record, which diminishes its non-fungibility – and thus, become basically worthless. While the game company could add more data, but this could significantly decrease the amount of data that can be stored in the blockchain, leading to higher costs. Higher production costs may result in slower updates , and keeping track of all gamers’ play data on the blockchain could burden computational power, potentially hindering seamless gameplay.

Recent new methods proposed to improve blockchain usage (e.g., power consumption, transaction costs, and transaction times) contradict the goal of decentralisation for efficiency in proof delegation. Furthermore, most current blockchain transactions are mediated through trading platforms, which deviates from decentralisation in the first place. Another important note here is that if the game company intends to establish a genuinely centralised way to control its game service and trades, a blockchain is perhaps, unnecessary. As even with the conventional techniques already in use in current game technologies, the company could still choose and guarantee the value of their gamers’ data (and their item’s value) – and perhaps be able to do so more efficiently in terms of speed and cost than using a blockchain. Therefore, game corporations must truthfully reveal their intentions and reasoning for adding blockchains in games despite the corresponding complexity and cost risks. Without such justification, their proposals can only be seen, from the players’ standpoint, as a deceptive corporate manoeuvre – promising non-valuable values in an attempt to evade the law.

What we find fascinating in attempts to decentralise games is not to facilitate a central server to operate and manage the game but rather to have it open by envisioning a pivotal shift in the relationship between game companies and users – a relationship that has historically been one-sided and hierarchical. In decentralised games, the relationship between game companies and gamers can take on a more flat and open structure. This collective relationship could also influence how in-game interactions and business models are designed, potentially addressing or altering the stress on gameplay (as recently highlighted in South Korean gaming culture) caused by game designs that favour competition and a win-or-lose mentality.

Finding somewhere in between

What NFTs could bring to games? In this chapter, we explore intriguing attempts to mediate, compromise, negotiate, and introduce new models that could inspire further innovations.

Technical enhancements could one day be able to solve blockchain-related issues. In particular, blockchain has been a significant concern because of its high power consumption due to proof-of-work (PoW). Therefore, newer technologies that do not rely on PoW are being introduced. While it is unlikely that existing blockchains already in operation will alter or adopt these new methods, it could potentially offer further future technical alternatives to issues related to non-fungibility and decentralisation that may arise.

In contrast, the game corporations’ attempts to leverage blockchain technology to free themselves from laws and social responsibilities cannot be achieved solely through technical solutions. First, let’s acknowledge that the idea (or attempt) of connecting in-game currency with real-world currency without violating the law is not particularly new; perhaps there’s a good reason for that. The issue is more fundamentally interconnected with the world, and thus, no particular technology—let alone blockchain—can be a magic wand. We believe that even if the use of blockchain becomes more common than ever before, for instance in the banking system, the practices are likely to be somewhere between convention and innovation – a fusion of blockchain technology with the existing banking system. As such, the compatibility between virtual assets and real currency should be mediated, perhaps within the scope that satisfies the existing laws of our society.

Implications could also involve using blockchain technology to enhance communication between game companies and players. One such inspiration is the game “EVE Online” and its annual event, ‘Eve Fan Fest,’ which any EVE Online player can sign up for and participate in. Among the many side events in Eve Fan Fest, one we would like to point out is the ‘Player Presentation,’ which offers a 40-minute presentation or a roundtable discussion to pre-registered players. The game operates a single shared universe (global region server) for players worldwide, eliciting user participation both in and outside gameplay: At the event, EVE Online players from various factions gather for discussions and negotiations regarding faction relationships and agreements.

Perhaps we could use the blockchain to create and enable various forums like Eve Fan Fest, where South Korean game devs and players can join and engage together. Company representatives can listen to players’ opinions and reflect those ideas into the game’s service, enabling a feedback loop with real in-game implications. Such attempts can perhaps prevent potential conflicts or issues that may stagnate if the company solely dictates decision-making by dismissing the power of collecting intelligence from players. Instead, the blockchain could contribute to recording and tracing player’s ideas and opinions efficiently, supporting the enhancement of fairness and transparency in player communication and game company service decisions. In addition, if the game service continues for a long time, it can serve as an archive of accumulated communication between game developers and players.

The blockchain may help regain the trust between South Korean players and game developers, which has reached a dangerously precarious state in recent years. Perhaps loot box probability disclosure, mandated by law in Korea from March 2024, can be verifiably realised by archiving all records of randomised items created in the game on the blockchain. Players may be able to further verify whether the game’s system is operating as the game company intends. At the time of writing, it seems evident that many in South Korean game companies and developers are concerned about what this new law could bring to the industry and how to even comply with this upcoming regulation. Perhaps with blockchain’s potential for transparency and decentralisation, the disclosure of loot box probabilities in South Korea is not far from reality. Of course, we cannot emphasise enough how a careful implementation of new technology, like blockchain, should be based on a comprehensive understanding of the real world and our real problems.

Lastly, we again ask: So what do game companies hope to achieve through NFTs? Is the phenomenon of NFT games a futuristic indicator towards our near future, or are they just a mere reflection of the pending issues of our current reality? Attempts are being made to identify the nature of this phenomenon and clarify our understanding of the blockchain game discourse. Finding the right pathway cannot be achieved unless one can figure out one’s location, calculated based on observing the terrain relative to the starting point where one began one’s journey. As such, we must concentrate on navigating through our future discourse while carefully traversing our current and upcoming terrain of topics and never stop asking the very fundamental starting question: “What is fun in games—and can a game still be called a game when its purpose is something other than the pursuit of fun?”