First published Apr 23, 2018. Updated Sept 19, 2022.

A Chip Off the Old Block

A short history of videogames and why they might take over the Internet, or rather, the blockchain.

Decentralised videogames! But why?

More than a decade ago, Satoshi Nakamoto released a paramount document that blueprinted a strange new concept and currency called Bitcoin. Unlike traditional currencies, Bitcoin has no physical form, but is entirely digital, decentralized, and relies upon the mathematical principles of cryptography. The nine-page report evaluates and critiques orthodox systems of finance and goes on to lay a framework for a system of trust-less digital transactions.

Satoshi theorised a world without banks, and Bitcoin was his proof that this was possible. However, what many failed to predict at the time was that this whitepaper would soon serve as the foundation for the emergence and proliferation of online services utilizing and combining cryptographic and decentralized technologies under the banner of blockchain protocol or decentralized ledger technology.

The public debate as to whether blockchain technology is mere hype or possesses genuine productive merit is a distinction that will ultimately be settled through the emerging possibilities and solutions emanating from the all sides of the industry — this newfound, burgeoning tech has introduced many new concepts and words to the technological lexicon, pushing new and potentially disruptive ideas to the verge of global significance. Perhaps we are at the horizon of a swift and necessary evolution of the archaic arms of industry all the way from finance, real-estate and healthcare, to transportation and government.

Here we focus on one such possibility surrounding the implications of decentralization: videogames. To understand the future, we’ll have to take a look at the past. For the best view, we’ll be standing on the shoulders of giants...

Pacman & Pong

Video games created the world’s most profitable entertainment industry. With the ever-increasing supply of video game titles released each year reaching the tens of thousands, we’ve certainly come a long way from the days of Pong, Pacman, and Tetris, but it’s easy to forget that those times were hardly a few decades ago. That was a time when the flicker of cathode rays bouncing across the screen were embraced as the cultural icons of a burgeoning digital era. It was a time before Atari and Apple when the world was drenched in the stimulations and vibrancy of counterculture.

Table Tennis on the Magnavox Odyssey, the monochromatic inspiration behind Atari’s Pong. Courtesy of Ralph Baer.

The first video games, or electronic computer games, as they were called in the 60’s and 70’s, were the brainchildren of hobbyists who emerged out of the psychedelic landscape and found a source of discovery and joy in a novel, electronic medium. These were the first steps of an aspiring industry. A nostalgic Allan Alcorn, the engineer behind one the earliest hits in video game history, describes his experience developing Pong, “It had to be fun! It was just obvious. There was no market testing, there was no research, there was no business plan, none of that crap.”

Videogames were once uncharted territory. From there on things began to change. With the realization of the commercial potential of these products, bigger players targeted the nascent market and a certain status quo was molded into existence through the ambitious aims of industry giants. Over the next three decades, Sega, Nintendo, Sony, Ubisoft, Electronic Arts, and so on, all sought to dominate the leaderboard in an increasingly competitive arena. It wasn’t long before enthusiasts like Alcorn were replaced by the steady influx of compartmentalized, in-house talents: graphic designers, online marketers, software architects, hardware engineers, sound specialists.

To make things worse, tiny, independent studios were gradually being bought out by large corporations in an effort to kill competition and consolidate market share. The industry had gingerly upped the level of difficulty, attempting to close all doors to lone talent seeking to make a mark without the prerequisite industry presence and access to capital.

“I will point out the sad truth. We have pretty much passed the period where hobbyists could put together a game that would have commercial prospect. It’s much more difficult to break in, much less stay in. Right now, in November 1984, I would discourage anyone. If you want to do a game, do it for fun, but don’t try to do game designs to make any money. The odds are so much against the individual that I would hate to wish that heartbreak on anyone.” — Chris Crawford, Compute! Issue 57, 1985

Almost out of hearts

Through the 80’s and 90’s, the indie community relied heavily upon large publishers to successfully monetize and distribute their work. With the turn of the century came a sharp increase in production costs, forcing risk-averse distributors to drop smaller studios altogether. The only other viable option was to take the murky route of shareware distribution which severely restricted distribution, and ultimately, the capacity to reach a fruitful audience.

Thankfully, a dwindling species of independent developers escaped sudden death as the Internet came online, giving voice to a community that stood more for passionate endeavors rather than mere profit. The Internet helped revive dormant talent: would-be game designers who had never considered video games as a career option were now part of a communal pursuit to deliver the next virtual paradise and digital work of art.

Hobbyists who sharpened their blades creating custom maps and mods for cult classics such as Quake and Doom, were soon carving new territory, formulating new genres, and taking risks their larger counterparts found unwieldy.

Never Alone, an acclaimed indie title, finds its origins in indigenous mythology, poetry, and story-telling. Courtesy of Upper One Games.

The community flourished through the self-reliance and autonomy garnered through crowdsourcing. Digital distributors such as Valve’s Steam empowered the soloist cowboy to capture a stage once dominated by billionaire behemoths. It was the only chance titles like Minecraft, Super Meat Boy, Hotline Miami, and Cuphead had against the stampeding popularity of Grand Theft Auto and Call of Duty.

“Retail has a kind of filter function: people hate to send boxes back, and if the boxes go back you’re wasting all this money. If someone doesn’t download something on Steam, we don’t lose any money. If someone sends back a box, you’re throwing money away. In this new world we can do things that weren’t previously possible.” — Gabe Newell, 2007

Leveling up

There are enormous possibilities that emerge each time a new technology is unveiled. New innovations have always paved the way to new types of games and subsequently found new audiences and birthed new markets. The Internet gave us the first virtual communities — World of Warcraft, Second Life, Everquest — and inspired the first in-game marketplaces and virtual currencies.

Likewise, smartphones brought us Angry Birds, Pokemon Go, and Candy Crush, resulting in the mushrooming of a $40 billion economy driven solely through the implementation of in-app purchases. But this was only made possible due the ease of access given to downloading and installing mobile applications. Distributors such as the App Store and Play Store were responsible for the rapid expansion of the smartphone market only because they envisioned the fostering and growth of a community of users by encouraging developers to create applications for their respective operating environments.

In short, the Internet enabled global collaborations, reduced the costs of production, marketing, and distribution, and provided developers with an ever-expanding circle of consumers. Ultimately, the digital medium lead to a near-equal playing field for AAA-studios and their independent counterparts alike. In the virtual world, online distributors might seem like they have little to fear, however, as we shall see, there are plenty of reasons to wonder if centralized markets may actually be on their way out.

Ever since the world began to take notice of the emerging possibilities offered by the blockchain, we’ve seen its implementations across many established industries but to understand why this is the case, we have to understand the fundamental characteristics of the blockchain.

Blockchains are a decentralized ledger — a record of transactions stored by all computers on the specific network. Once a new transaction occurs, it must be verified by a group known as miners. This is what prevents cryptocurrencies from being double-spent. Thus, data stored on a blockchain is incorruptible. Paired with smart-contracts - programs that automatically execute on the blockchain when certain criteria are met - it’s easy to fathom how the transparency and utility of decentralization may someday lead to its ubiquity. But could it actually alter the way we play video games? 

Similar to how Bitcoin made banks inessential for exchanging or storing currency, online distributors may become completely unnecessary as peer-to-peer networks enable developers to sell directly to consumers through virtual, instant, and direct payments furnished without the need for an intermediary.

Moreover, blockchains reduce the bureaucracy inherent in many centralized online communities. Publisher policies and regulations may prohibit in-game currencies from being converted into paper money. Further, credits achieved in a particular game might become completely useless outside of it. This is where the blockchain changes everything.

Decentralization makes life far more practical for players looking for better monetization of their gameplay. Through cryptocurrency or tokens, users are rewarded for completing quests, unlocking achievements, winning tournaments, finding virtual treasure, or simply trading. Users can send each other gifts, receive loans, offer someone payment in return for joining their team, or receive payment for offering their services. These in-game earnings are easily traded over the platform for dollars and cents, making life as a gamer far more lucrative.

In the same way Starcraft and World of Warcraft created professionals out of top players, virtual communities hosted over the blockchain may enable many more to thrive online.

CryptoKitties, widely credited with introducing and popularising gameplay over the blockchain. Courtesy of CryptoKitties.

Decentralization may offers more efficiency and better online gameplay. Moreover, the integrity of blockchain provides users with greater control over their identity and assets. Players are able to record their entire gameplays and save playthroughs to the blockchain to be scored against leaderboards that cannot be manipulated. Players’ assets may be turned into NFTs - tokens that represent a unique value. These are regarded as highly valuable collectibles that have made some millionaires overnight. 

While the blockchain offers great potential for the gaming industry, there are quite a few hurdles to overcome.

The myth of 'retaining value'

Video games are increasingly adopting the use of “digital assets” such as NFTs. While new games are being developed specifically for the blockchain, older games are being rewritten to incorporate blockchain technology. In 2021, DappRadar reported games as having "accounted for over half of blockchain wallet activity". This trend is not surprising as crypto-crusaders have repeatedly portrayed the blockchain as the be-all and end-all of the future of the Internet, rather than seeing blockchains for what they are - useful, but only for very specific purposes. So is gaming on the blockchain really worth all the attention it’s getting? I'd argue that it is important to see that the blockchain has a lot of potential worth exploring; it is more important to understand that not all may be good with the future of decentralised gaming.

In 'Motivations of Play in MMORPGs', Nick Yee analyses a study on reasons why people chose to play video games. Making money figured as a tiny fraction of motivations respondents gave. Meanwhile, blockchain proponents such Alexis Ohanian (of Reddit fame) foresee a future where people would not identify "wasting time" with the idea of playing video games because they will be able to "actually earn value". P2E ("play to earn"), as it is commonly called, is one of the leading philosophies driving corporations such as Ubisoft and Epic Games to  invest millions of dollars into developing their own platforms for hosting blockchain-based games.

But Nick Yee is not wrong, videogames do offer vastly different motivations to different people, however, the problem with thinking of games as being able to "retain value" is that they puts the player on an endless quest for finding tokens - speculative assets - part and parcel of the crypto world increasingly inching closer to the "microtransaction" model of an exploitative mobile gaming market. Blockchain gaming has all the potential to lure people into constantly having to monetise their every activity, however, there is never any guarantee that tokens players earn from their gameplay will always be worth something. In many cases, such as Axie Infinity, users ended up losing $625 million because of a hack.

Many developers have continued to push back against the idea of gaming on the blockchain. NFTs, in particular, are still a controvertial topic and their adoption has sometimes left many fans extremely upset.

So where do we go from here?

Whatever the future holds for videogames, it is clear that the blockchain will play a critical step in the development of next generation games. The technology may provide the stepping stone towards inter-operable gaming environments (think Geralt of Rivia taking a trip through the depths of Everspace). The key here is to provide better opportunities and services to developers and consumers alike.  Better experiences,  greater accessibility, and rewarding gameplay - all of these act as powerful incentives to drive people towards creating better games. As we’ve seen with the development of technologies in the past, new frontiers bring new insights, generate new possibilities, and forge new paths for the human imagination. Taking the next step has always necessitated a brave endeavour. Hopefully, we will keep our eyes open and take the right step.

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