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Why we're still passing on blockchain pitches

Update: We're coming up on two years of not covering blockchain start-ups, and nothing we've seen has made us question that decision

Update, December 12, 2022: We are highlighting this editorial once more in light of continued blockchain gaming pitches from PR people, some of whom told us they assumed that the stance originally expressed in this piece had changed in what has been almost two years since it was first published.

Our stance has not changed.

All of the concerns stated below remain in place, with the exception of our skepticism around Ethereum moving to proof-of-stake, which it finally did in September of this year.

However, we are not swayed by this and other supposedly eco-friendly blockchains. The price movements of such chains have often mirrored that of Bitcoin, the proof-of-work heart and soul of the cryptocurrency market that will not be switching to a less energy-intensive form anytime soon. They are riding the same wave of hype and speculation; any promotion of one cannot help but boost the others as well.

"Most of our concerns have only been vindicated and amplified in the time since this was originally posted"

Beyond that, our other concerns have only been vindicated and amplified in the time since this was originally posted.

Above and beyond the plentiful scams and schemes that still define the blockchain world, we have repeatedly seen that immutable and permanent digital ownership – the crucial thing advocates tout as the key innovation that NFTs offer people – is an illusion.

NFT game F1 Delta Time shut down earlier this year when Animoca failed to renew the F1 license, leaving the owners of NFTs that players had spent as much as $300,000 on, essentially worthless.

And when the cryptocurrency exchange FTX collapsed and its website redirected traffic to a page on bankruptcy proceedings, it broke NFTs that had been minted on the platform, such as those offered by music festival Coachella that entitled owners to lifetime passes to the show, among other perks.

Since this editorial was originally published, we have seen staggering amounts of money invested in the blockchain gaming space, but we have yet to see that investment pay off with even an inkling of a game that offers something new or worthwhile that can only be done with blockchain technology.

We have had Ubisoft's years of investment and hype around NFTs build to a crescendo with Wolf Enhanced Pants before the publisher returned its blockchain efforts to "research mode".

We have had players rebel at the suggestion of NFT efforts, and we have seen them backed by rank-and-file developers.

And beyond that, we have had fun staying poor with games that don't sell us a fantasy of getting rich.

Original story: Gaming is a constantly evolving, tech-driven industry awash in entrepreneurs, disruptors, and innovators, often with loads of venture capital willing to support them. And while that particular concoction can produce immense successes, it far more frequently leads to millions of dollars wasted by people swinging for the fences and striking out badly.

Baseball is actually too kind an analogy. The apocryphal stat we often hear is that nine out of ten startups fail, which works out to a truly miserable batting average of .100. Major League Baseball's league-wide batting average has hovered around .250, with the worst full season batting average of the modern era being Chris Davis' unfortunate .168 in 2018.

The point is, there's never a shortage of people in gaming promising to usher in the next big thing and then failing to deliver. So when it comes to coverage decisions, we try to keep an open mind about whether the people pitching us can follow through on their promises.

Our personal assessment may be that a given idea is brilliant or doomed, but that assessment isn't the determining factor about whether something gets covered. What's more important is whether we think the startup or trend in question is something significant to the industry, or something our readership would care to know about.

In most cases, that's the end of the discussion. If it serves our audience -- people within the games industry -- to cover a subject, then we do.

But there are some exceptions.

"What we haven't seen is a compelling argument that blockchain will contribute anything to the industry beyond a new way for people to throw money into speculative pursuits"

Lately we've seen a spike in gaming blockchain treatments, specifically for using non-fungible tokens (NFTs) in games, from people creating marketplaces where in-game items can be traded to developers selling virtual "one-of-a-kind" assets from their games. What we haven't seen is a compelling argument that any of these treatments will contribute anything to the industry beyond a new way for people to throw money into speculative pursuits.

Game publishers can already create in-game marketplaces to transfer player items. And for the ones who choose not to, if they allow any way to transfer items from one player to another, those marketplaces tend to spring up on their own outside of the game, regardless of what the terms of service actually permit. Even if publishers don't allow in-game trading, well, people will just sell entire user accounts.

And when it comes to the games themselves, any notion of players having actual ownership of these items is illusory. In the standard games-as-a-service model, there's nothing to stop the company running the game from blocking the use of any such item in a game, nerfing the stats for game balance, or any of the other numerous things that make publishers refer to these things as "entitlements" rather than "property of the player."

As for one-of-a-kind collectibles, I suppose this industry has seen sillier offerings than one-of-a-kind certificates of authenticity vaguely related to another thing that give the purchaser ownership of nothing save the certificate of authenticity. But not many. (It's like the PS5 eBay photo scam, but thanks to blockchain technology, the purchaser will have the comfort of knowing the seller will have to take an entirely new photo each time they run the scam.)

That might have been reason enough for us to overlook most of these pitches anyway, but even if it weren't, the environmental impact of blockchain tech as it currently exists is already alarming. It takes electricity to mine cryptocurrencies, and electricity to validate transactions. Best guesses are that Bitcoin already uses as much electricity every year as Argentina -- every computer, every appliance, every light bulb, everything that uses electricity in a country of 45 million people. That's not even including the impact of Etherium or other cryptocurrencies.

The more widespread this technology becomes, the more demand there is for mining it, the higher the price gets, the more that electricity use increases.

It's a staggering price to pay for the ability to create a new Beanie Baby craze out of nothing at all. And the virtues of blockchain we do hear -- for example, how it could be easier for migrant workers to send money back home without foreign currency exchange rates, or how it protects assets from being seized by authoritarian governments -- are a) largely unconvincing in the face of the drawbacks, and b) not what people in the games industry are proposing to do.

"It appears we may be at an inflection point for NFTs breaking through into the mainstream"

Up to this point, cryptocurrency and blockchain technology has been a fringe interest, as new technologies often are. But we've recently seen the NBA roll out its own NFT product NBA Top Shot, while in baseball the Oakland A's are accepting Bitcoin as payment for full-season suites. Kings of Leon released its new album with an NFT promotion. It appears we may be at an inflection point for NFTs breaking through into the mainstream, and actions such as these could legitimize them in a hurry, particularly if they prove profitable for the companies involved.

But if they are to be legitimized, it cannot be in their current forms, which have numerous drawbacks and at best a promise from the people involved to address those drawbacks at some point down the road. But these drawbacks are not negligible, and proposed remedies like "proof of stake" validation may not be implemented for years -- Ethereum estimates it will have moved away from the current energy intensive "proof of work" model by the end of 2022 -- and have too short a track record to show they will effectively replace the current model of the industry.

"We've drawn a distinction between the games industry proper and the gambling industry. We intend to do the same thing with the vast majority of blockchain"

As anyone in games knows, deadlines get pushed and projects don't always come together as promised. And since exacerbating climate change with an Argentina's worth of electrical consumption has a more significant downside than being misled about the release date for a AAA blockbuster, we're not going to take people at their word on this one.

If we wait until these efforts are profitable and entrenched to push back on them, then the big players in the space will be that much better funded to fight change, to drag their heels, to halt any possible legislative or regulatory action. And just like fossil fuel and tobacco companies that understood the damage of what they were doing for decades yet fought the smallest of concessions tooth and nail because their bottom lines were at stake, we will find successful cryptocurrency companies no doubt equally resistant to changing the way they do business if it costs them anything.

Obviously, the games industry already consumes plenty of electricity as is, and we have particular concerns about how trends like on-demand streaming are contributing to that. But ultimately, games offer people entertainment, stress relief, social connections, creative outlets, possibly even education and edification. And those are far better justifications than indulging get-rich-quick fantasies. If people want to gamble, there is no shortage of other, more environmentally responsible ways to do so at their disposal.

But we generally don't cover gambling here, even though plenty of casino games clearly meet any definition of video games we've ever heard. We've drawn a distinction between the games industry proper and its stigmatized sister industry. We intend to do the same thing with the vast majority of blockchain, cryptocurrency, and NFT news that comes our way.

This isn't a promise to never cover these subjects. If cryptocurrencies manage to address our energy consumption concerns, we might reconsider our stance. If a major player in the gaming industry -- Ubisoft, for example -- embraces these technologies despite their drawbacks, it serves our audience to know that and we'll cover it. If blockchain really does reshape the industry the way previously promised disruptions like digital distribution and free-to-play games did, obviously we would have no choice but to cover it.

But given the blockchain pitches we've seen to date, we are hoping that doesn't happen. And we will not extend to blockchain businesses the same benefit of the doubt we offer others, regardless of whether we personally think the pitch will lead to a towering home run or an embarrassing strike out.

Author
Brendan Sinclair avatar

Brendan Sinclair

Managing Editor

Brendan joined GamesIndustry.biz in 2012. Based in Toronto, Ontario, he was previously senior news editor at GameSpot in the US.

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