Blockchain Games as Player-creator Economies
This is the second article in a series about blockchain, NFT marketplaces and the metaverse. For the first, on blockchain games and “play to earn,” see here.
Something that I’ve found fundamentally compelling about blockchain games is how they’ve opened up their platforms for players to actually own, trade and monetise in-game assets, shifting the in-game economy from “developer-owned” to “player-owned.” Taken a step further, these games now intersect with what we’ve come to know as the “creator economy” (YouTubers, Twitch livestreamers, Soundcloud musicians, Substack writers) and one way to view these games is that they’re essentially what I’d call “player-creator economies.” Like YouTube and Twitch, these game worlds have the flavour of platforms populated with player-created and/or player-owned assets (in-game items, avatar skins, activities, mini-games, levels, real estate, etc.) which players can monetise through in-game and external Non-Fungible Token (NFT) marketplaces linked to real cash, while also playing and enjoying the game themselves.
In a sense, this isn’t new. The phenomenon has its roots in modding (players creating levels and add-ons for traditionally PC games, out of self-expression or niche fandom, for the community to enjoy), with examples such as Doom, Half-life, CS:GO, Team Fortress 2, DOTA 2 and Fallout 4. Roblox and Minecraft are probably the most popular examples of non-blockchain games with player-creators who create in-game assets for sale to other players.
So what does blockchain bring to the table for player-creator economies? In the non-blockchain examples of Roblox and Minecraft, player-created assets can only be sold for in-game currency, which only “qualified developers” can cash out for real cash. The game developer ultimately owns all the assets (even the player-created ones) and controls the in-game currency, thereby controlling the means by which the assets can be monetised and their real-world value (if cashing out at the developer-defined exchange rate is even allowed). This has led to some dissatisfaction at Roblox’s treatment of its player-creators. The fact that workarounds exist to sell player-created assets on Discord and other channels outside of the game suggests there is latent demand, but these workarounds are subject to fraud and scams.
This is where blockchain is well-suited to provide a trustless solution for trading of assets without the developer’s intervention, through the ability to verify and assign ownership of assets trustlessly between players. But that’s not where it ends. In blockchain games, control over the game economy is ceded by the developer. Players are free to create not only new desirable assets, but also new monetisation mechanics and business models, such as in Axie Infinity, where, when Axie (the primary “creature” NFT asset required to play and earn rewards in the game) prices became too high for less well-off new players to purchase, longer-tenured players with spare Axies rented their Axies to new players in exchange for a share of their in-game earnings, in informal arrangements called “scholarships” organised on Discord or Reddit (which can separately be automated and enforced trustlessly through smart contracts). Let’s take a moment to absorb that. Not only were players creating assets in the game, they created a new monetisation mechanic from renting Axies, essentially creating new rules for the game economy. Are traditional game developers ready for this?
But does this make better games? We’ve seen successful cases of games with builder modes that allow players to create content, levels, etc. Would a blockchain version of Roblox (made just as rich, playable and enjoyable for a majority of player) be as (or more) popular if players could monetise their creations freely and independently of the developer? The Sandbox is such a game to watch, as a blockchain version of Roblox that may spawn a new wave of player-creators, player-created assets, and new monetisation mechanics.
So if we take the lens of blockchain games as player-creator economies, what would I look out for to build conviction around a player-creator economy proposition?
The potential for new ways to use and monetise player-created assets to emerge in the game world. Given that we’re looking for emergent value-creating behaviour among player-creators that the developer didn’t explicitly plan for, relevant signals could include the lack of guardrails for asset monetisation,1 the ease with which player-creators can include, implement and deploy blockchain-related tools such as smart contracts to enable these new monetisation mechanics and secondary market revenue shares, and the game world’s ability to inspire and encourage such emergence based on its storyline and setting.
Metrics to prove that allowing players to contribute to and share in the profits of a game can be a competitive advantage for the game while alleviating the pressure to constantly renew content to keep the game fresh, retain players and lower churn. I wouldn’t assume that any player-creator economy will be successful just because. We’d want to observe the level of engagement of player-creators and how much they’re encouraged or incentivised to create new value that simultaneously adds to the enjoyment of the game for other players.
A focus beyond speculative price appreciation of assets as the key incentive for player-creators to create in-game, and a balance between player-creators and player-consumers (players who play for fun, which should be the majority player population, or otherwise the majority incentive for most players). To belabour this point, what we don’t want to see is catastrophic churn based on speculative bubble economics (tulip mania, or see previous article on the balance between “play to earn” and “play for fun”).
And what is the long game, and what are the broader implications, if we view blockchain games as player-creator economies, and player-creator economies as a subset of the broader concept of creator economies? I think there are two concurrent and interesting threads to follow.
This could mirror the transition we’ve seen in other areas of User-Generated Content, e.g. video, where some users became content creators and new ways and tools for creators to monetise their content beyond advertising revenue share granted by the platform emerged. Could all games become like this (or support this to some degree)? If a non-blockchain game developer allowed users to convert their in-game currency and rewards into cash, would the game be as or more popular? This is what blockchain game technology platforms like Immutable X, Polygon and Blockade are betting on.2
Can we expect to see a similar evolution in the broader set of creator economies enabled and catalysed by blockchain through blockchain-enabled ownership of NFTs and secondary or derivative revenue streams and revenue shares built into creators’ products? (More on this in the next deep dive.)
I think we’re already starting to see experiments along the lines of the latter (such as in the music industry and other creator economies), and the evolution, experimentation and behaviour adoption that we typically see in the games industry may help to catalyse and accelerate this evolution across the broader creator economy space.
I appreciate that this might frighten developers, app store platforms and regulators alike.
The non-naive question to ask here is, if we’re bolting on blockchain-enabled features to existing games, how much does this affect game balance (how fun will the game be to play if a player-creator can create an ultimate in-game weapon that significantly increases chances of winning if you pay for it) and the developer’s ability to control the game economy, assuming that “bolting on” doesn’t mean complete secession of control?