Owning in-game assets, and the status quo.
An in-game asset is really anything that goes into a video game. This can include characters, animations, environments, loading screens, and weapons. One way that gaming companies monetize video games and keep their players engaged is to sell, randomly give, or allow players to earn more visually striking or “cooler” in-game assets. This is not always done by gaming companies. However, it is increasingly popular in free-to-play games, where gaming companies rely on a percentage of the player base to spend.
Let’s say you buy a $100 Batman outfit to make your character look really cool (at least to you). That Batman outfit isn’t actually owned by you. You actually just bought the right to use the outfit on your character. It is actually owned by the video game developer and publisher. If you sell this outfit to someone else, you are actually selling the right to use it. It is comparable to renting an apartment and subletting it to someone else.
Enter Blockchain and NFTs, which you don’t really need to understand. Simply, they provide an opportunity to change the status quo of ownership of in-game assets, decentralizing the ownership of in-game assets away gaming companies. In this paradigm, your ownership of your Batman outfit isn’t tied to the developer or publisher. Now the apartment is yours, you aren’t renting or subletting.
Why would anyone want to own an in-game asset
It may be hard to understand why anyone would want to own or buy something (often called skins) for their virtual in-game character(s). Skins are not tangible, sometimes “skins” are given to players for free, and often they don’t give you a competitive advantage. So why?
If it “sparks joy” you might want to protect an in-game asset.
Firstly, it’s just about looking good and owning your outfit. Some people could reasonably want to also look good in the virtual world, they spend a lot of time in. Imagine a physical piece of clothing that Mario Kondo style “sparks joy”, but isn’t actually owned by you. You wouldn’t want to lose it. Someone in a virtual world likely wants the same thing and ownership protects that. Otherwise, lost passwords, hacks, and theft could lead you to lose that treasured item with little recourse. For example, 1.6 million pounds worth of gaming skins has been lost in hacks this year!
Security over an investment, much like stocks or Bitcoin.
Secondly, money, money, money. If you don’t care. You should as you could make a ton of money by owning the right in-game assets and trading them much. These can be exceptionally lucrative. Two skins were sold in a popular game, CS:GO, for $780,000. This eclipses some of the most lucrative items sold by high-street fashion brands. The market for skins has been estimated at a whopping $40bn dollars a year, highlighting how lucrative it is. There are various exchanges (see Dmarket and Gamerpay) where you can buy skins, purely to hold as an investment.
Assigning ownership rights to in-game assets, independently from the control of the gaming, gives investors greater security over their assets. Imagine owning $780,000 worth of in-game assets and then the company goes bust or is hacked and you own nothing? This is because a right of ownership is a stronger right than mere possession of a physical or digital asset.
Independent ownership – it is still yours even if that game goes “bust”
As mentioned before, currently, you have a right to use an in-game asset and you don’t own the asset itself. This means that a gaming company has the power to revoke this right to use its asset. Whether it is by shutting down the game, revoking your access to the game, or removing certain in-game assets. Arguably, gaming companies have no incentive to do this, if they are making money. However, it does depend on how much the gaming company values the current and future value of any particular game. For example, see these 7 games that were ended while still having an active online player base.
Using NFTs and blockchain, technically, you could own an in-game asset, for a game you can no longer play. This is equivalent to owning an awesome array of old-school video tapes. However, you later realise but there is no longer a VCR to play them on so you can’t use them. There are still some benefits to this. You could create your own VCR player. Alternatively, perhaps there is demand from nostalgic hipsters who you could sell these videotapes (for a hefty profit at that). Perhaps you just still feel cool you own an asset.
Despite these benefits, a core problem of owning an in-game asset is that you have no control over the environment that ensures it exists, is useful, and may determine its value. It is better than the current status quo, but not much better.Enter owning the gaming company itself…
Imagine owning the whole thing – the game and the in-game assets.
Conversations around decentralization in gaming and web3 are often focused on owning in-game assets but these assets are only a smart part of a game that is developed, maintained, and controlled by a gaming company. However, it is possible to decentralize the whole thing – the game and the assets. Removing all control from a central party over the game.
Develop and sell it off to the players.
This could take different forms. A gaming company could develop a popular game, and then sell it to the players at a profit via the blockchain. This would be similar to a company selling itself to its employees via a share scheme. This means all employees own the company and can control decisions based on the % of shares they own. Have you ever heard of this happening in the real world? Probably not because it doesn’t make a lot of sense for entrepreneurs to sell a profitable company to employees when it’s making them (and their shareholders) rich. Also, they took a lot of risks starting the company. So it makes sense they want to hold onto a profitable company. On the other side, employees wouldn’t really want to buy a company that isn’t doing well to keep it going (for the sake of it).
Arguably, this might work somewhat better in a gaming environment. Gamers might want to own a game, for the sake of keeping it going. Together, perhaps communities of gamers might want to keep a game going to keep the community going after playing it for years. Perhaps that might even enhance it (and mod it) to make it better. On the flip side, game developers can also be compensated for a game they no longer find profitable or care about. A win-win, if we can call it that.
Player ownership from the start.
A second scenario is where a game starts-out completely owned by people interested in playing the game. Think of crowdfunding a game, except now you can own the game with your funding instead of getting “perks”. You can also control the direction it is going. This is a compelling use case. Think of all the games that have been crowdfunded but disappointed the funders because of delays or false promises. It may also support the creation of games from tiny companies that lack the funding to get a game started. This individuals may have interesting concepts or ideas that may revolutionize or really take gaming forward.
Own the game and its assets in the future.
In either scenario, the advantages are apparent. Owning the whole game, and in-game assets allow investors, and passionate gamers to protect their assets and the environment in which they exist. If we loosely focus on only owning in-game assets that is half the story and half the protection that investors and gamers want. Still, it is a move in the right direction as a right to use becomes a right to own. Want to read more about gaming? Check out my other article on character skins here.
Matthew Hendricks is a Ph.D. researcher at the University of Cape Town, currently focusing on Blockchain technologies and their intersection with marketing. Matt loves writing about tech. and how it might impact the world we live in.