The Ownership Paradox: Why Blockchain Games Have Betrayed Digital Property Rights

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As a researcher who has been observing and analyzing the blockchain gaming industry for several years now, I find myself constantly questioning the true essence of digital asset ownership in Web3 games. While the concept is fascinating and holds immense potential, the reality often seems to fall short of the promised utopia.

Year after year, my company Emfarsis collaborates with the Blockchain Game Alliance (BGA) to carry out a comprehensive survey among blockchain gaming experts. Consistently, the vast majority of participants affirm that the primary advantage blockchain can offer games lies in digital asset ownership; this trend persisted in the latest survey, with 71.1% listing it as their top choice. Despite an increase in industry participation – we saw three times more respondents in 2024 than in our initial survey of 2021 – digital asset ownership remains the uncontested guiding principle for the blockchain gaming industry.

Although we often praise digital asset ownership as a key characteristic of blockchain gaming, many blockchain games currently available are free-to-play and do not necessitate ownership of assets at all. Furthermore, expectations built around digital asset ownership in these games have largely gone unfulfilled. It seems that those working in the field of blockchain gaming find themselves in an ironic situation where their primary selling point to gamers is something they are simultaneously trying to justify.

In blockchain gaming, ownership of digital assets has always been crucial, granting players the ability to own, swap, and generate income from in-game items as tokens and NFTs (Non-Fungible Tokens). During the peak of play-to-earn games in 2020-21, this asset ownership was what distinguished blockchain games from traditional ones. Early versions demanded players to purchase one or more NFTs initially, which posed a challenge for newcomers since not everyone could afford these NFTs or weren’t excited about buying assets for a game they hadn’t yet discovered their preference for.

Absolutely, these NFTs weren’t your typical in-game items; they were yield-producing. Purchasing an NFT in a blockchain game was essentially investing in a tool necessary for a task – a task that rewarded you in cryptocurrency. Some forward-thinking NFT owners even started leasing out their assets to potential players, receiving a portion of their earnings in return. This was a stunning example of the type of decentralized, permissionless innovation that blockchain enables – a player-driven solution created by the community, not the game creators.

Initially, systems like those in Axie Infinity, Pegaxy, CyBall, and others, used in early blockchain games, were impressive but failed to address the issue of user onboarding effectively. The scarcity of assets and high initial costs created a barrier, leading to an unmet demand for rentals. This situation continued, causing a persistent challenge with attracting new users from the top end of the funnel due to the friction it presented.

By 2022, in an attempt to make these games more accessible and appealing to a wider range of people, blockchain games have begun adopting the “free-to-play” model. This means that while players can still buy assets or invest time and effort to earn them, they are not required to do so. Instead, the blockchain elements of the game serve as optional features or enhancements that players can choose to utilize if they wish.

The action took place when blockchain games were urged to shift their focus from financialization towards making games more enjoyable. This was considered crucial if they aimed to capture a piece of the huge, attractive $220B conventional gaming market, which consists of billions of gamers who are unlikely to set up a cryptocurrency wallet and even less likely to invest money in NFTs.

The conundrum of digital asset ownership – being both a key characteristic and an obstacle – showcases the intricacies involved in the development of blockchain games. While ownership is what sets these games apart, it can also discourage players due to its requirement. To draw in traditional gamers who are not well-versed in Web3, developers have emphasized user-friendliness.

According to the 2024 BGA Industry Report, over half of respondents identified difficulties in onboarding and suboptimal user experience as the industry’s main challenges, with another third stating that they struggle to grasp blockchain concepts. Since there is a lack of evident advantages, investing time and resources into acquiring digital assets appears unnecessary for many people. This highlights a significant issue developers face when trying to persuade beginners to adopt a complex technology stack that feels more like an obligation than an option, which explains their reluctance to push it forward.

This brings up an intriguing point: To what extent can a blockchain-based game discard blockchain elements without losing its identity as a game built on blockchain technology?

Taking a lukewarm stance towards integrating on-chain experiences has left many groundbreaking Web3 innovations, like the concept of interoperability where characters could share items across different games, largely theoretical and unexplored. While there have been some advancements, such as turning NFT profile picture (PFP) collections into playable avatars, these developments primarily serve existing web3 communities without providing a compelling reason for Web2 gamers to switch over.

Achieving true interoperability necessitates collective effort across the industry, not just technically but also economically. Unfortunately, this cooperation is currently scattered among different blockchains and ecosystems. Meanwhile, developers often overlook Web3, viewing it more as a technology layer rather than a distinct feature. As a result, for most participants, the “Web3” aspect is usually concealed, optional, and carries about as much significance as a novelty spoon in a breakfast cereal box.

In a straightforward manner, it can be said that the concept of “ownership” in Web3 is significantly exaggerated and lacks solid evidence of successful product-market alignment. The idea of ownership in Web3, as commonly presented, appears more like an illusion than reality. It’s essential to understand that even if you possess an NFT, its worth and functionality are largely contingent upon the developers’ centralized infrastructure and continuous operations. While Web3 does provide more control over your assets, enabling smoother, hassle-free transactions, genuine ownership is not as prevalent.

In reality, there’s scant proof that owning in Web3 has fostered lasting interest. However, it’s clear that having greater command over one’s digital possessions holds significant value, though it may not be the “true ownership” frequently touted.

It’s worth noting that there have been some exciting trials involving games and creative stimuli, like the Loot NFT collection, which operate entirely on the blockchain. The modular design of these creations enables developers to develop related projects, games, and economies without requiring consent or input from the initial creators.

Some recent advancements in the field of digital asset ownership include Ethereum standards such as ERC-6551, ERC-4337, ERC-404, and soulbound tokens (SBTs). ERC-6551 introduced tokenbound accounts, which allow NFTs to function as their own wallets. ERC-4337 provides account abstraction, creating customizable wallets that boost security and usability without relying on centralized custodians. ERC-404 combines the characteristics of both fungible and non-fungible tokens, offering flexible ownership for a variety of digital assets, including unique and divisible ones. SBTs offer non-transferable, identity-linked assets that serve as proof of trust and reputation.

As these advancements are just beginning to take hold, they’re providing gamers with unprecedented opportunities for unique experiences that would have been unattainable without the concept of digital property rights. Moreover, data from the annual BGA survey indicates that the allure of owning digital assets persists, as it offers players autonomy, control, and worth.

The task at hand is to allow players to enjoy the fun initially and learn about the value of ownership naturally. However, it’s important not to shy away from expressing our strong convictions. To encourage others to join us in our vision, we must create experiences that clearly showcase the advantages of owning digital assets right from the beginning.

Otherwise, we’re not doing anything very special at all. Are we?

Thanks to Nathan Smale, Duncan Matthes and Owl of Moistness for their review of this article.

In this article, it’s important to highlight that the opinions presented belong solely to the writer, and they may differ from the perspectives held by CoinDesk, Inc., its proprietors, and associated entities.

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2024-12-19 22:37