Why Valve’s Stance On NFTs Will Probably Change, And Soon

Why Valve’s Stance On NFTs Will Probably Change, And Soon

Over the weekend, Steam banned blockchain and NFT games. The crypto gaming world has responded, and it will live on. But it’s undeniably a blow to not be able to publish on PC’s main storefront for the foreseeable future – a blow that will perhaps convince some developers to pivot towards mobile, console and HTML5.

On the front line of this kerfuffle, and in close communication with Valve, was Enjin-backed puzzle game Age of Rust, which was able to shed light on Valve’s reasoning:

Valve’s stance has nothing to do with the environment, and is likely a combination of marketplace control and legal compliance.

Of course as a private company, it could simply say “Valve doesn’t like crypto” and post a GIF of Gabe Newell burning a Dogecoin while blowing a raspberry to the internet en masse, and it’d be within its rights. But Valve didn’t do that. It put forward an argument, and now we get to point out that it’s fundamentally flawed.

You Wanna Go There, Valve?

A golden AK-47 appears on a third-party skins trading website for CSGO
A golden AK-47 skin purchasable on the DMarket trading site

For years, Valve has been the primary example of in-items having value.

Steam has a “soft” cashout system in which you can sell items for in-store credit to buy other items or Steam games. Then there’s a “hard” cashout in which you use a third-party, external website to sell the item for real-world cash.

Because the soft cashout technically uses “Steam bucks” instead of money, Valve gets to deny it’s a true cashout. Because the third-party websites aren’t Valve-affiliated, it gets to pretend it doesn’t know much about it.

One of the most popular of these third-party websites is DMarket. I was able to speak to its CEO Vlad Panchenko, who walked me through how they communicate with Valve as much as possible, ensuring compliance and security. Valve are fully aware this exists. To add an extra helping of irony, DMarket’s items are now based on a new blockchain/NFT system.

Over time, Valve has introduced limitations to curtail some of the dodgier practices around this system, such as imposing a wait before you can resell an item to slow down fraudulent activity and money laundering, or outright banning the gambling scene that flourished around item value. But you can still buy, sell and trade items, and ultimately cash out.

Publishers and industry lobby groups pleading the case of loot boxes are fond of saying there’s no cash out system in in-game stores. If you believe them – and you shouldn’t – that means these items have no value, therefor loot boxes don’t constitute gambling. Except, of course, there’s that one company. There’s Valve. The one that does let you cash out.

So by a commonly-used industry definition of item value, Valve’s skin economy is quite valuable indeed. But even this is too generous, as the definition of value doesn’t depend on cashing out.

In-game items have “value” because people are willing to pay for them. Riot’s ludicrous price tags on Valorant skins are what people will pay, so they’re worth that. The Steam marketplace just makes this easier for us because its value is collectively agreed – instead of a retailer pricing an item, we can say a particular knife is worth X because the market decided it. Combined with drop rates, even the value of Valve’s loot boxes can be calculated.

With NFT economies knocking at the door, it’d probably be better for Valve to honestly say “This sidesteps our marketplace and we don’t know how to deal with it yet”. Or even perhaps “The lack of intermediary currency ruins the legal loopholes we’ve enjoyed and now we need to figure out a plan”.

But it’s the height of hypocrisy for Valve to disallow crypto games for proposing to do the very same thing that Valve was doing all along, albeit with some semi-intermediary funny-money that didn’t fool anyone.

Valve lacks an endgame in the NFT war

A FAMAS gun in a dark new skin with red, green, and white stripes
CSGO’s new FAMAS skin from Operation Riptide

Neither of these scenes needs the other. Steam will do just fine, and so will the flowering crypto gaming scene. NFT games would rather be able to rely on PC’s dominant digital storefront, but one can see how NFTs might cut Valve out of potential Workshop revenue.

That’s the irony of this whole fiasco – just how similar Steam is to the thing it just banned. As if it highlights its own unrealised potential with the Steam marketplace and Steam inventory.

Steam’s features are the closest thing gaming has had to NFTs. It tolerates internal and external trades on its items, taking a cut when it can. Its inventory could be used for some basic level of interoperability, but hasn’t.

Heck, it’s even technically play-to-earn, if you count the bottom-of-the-barrel drops you get mid-match – it’s just that in order to make its economy work, it maintains a ridiculous policy of implementing hundreds of “ugly” skins to flesh out the bottom of the pyramid of value, drowning out the truckloads of beautiful community-made skins.

No one serious would propose that Valve is threatened by NFTs, but comparing the two is more like apples to apples than Valve would like. And the newer of these apples looks tastier.

It wouldn’t surprise me if Valve changed its messaging around the issue quite soon, perhaps even within the next six months. The “your items have value but ours don’t” line is garnering the appropriate ridicule. I believe it’ll eventually change its policy as well – though first it needs to decide how, if possible, it can capitalise on a technology that fundamentally wrests control from middle-men.

Comments

  • Then answer me this, games that are always online, have user accounts, microtransactions, limited time items with rarities… what dies an NFT actually add to the game? That can’t be already achieved, a game can add a one of a kind item without needing an NFT.

    Games already have 0.0001% drops in FOMO seasons, so what does an NFT actually do? That hasn’t been done on a Chinese gatcha MMO in the last decade.

    The NFT is a gimmick, and a considerable risk considering they are minting ownership for an item that doesn’t exist, in a game that doesn’t exist.

    • You seem to be conflating NFTs with loot boxes/gacha? Granted many NFT games have loot boxes (which I’m no fan of, and it’s something I plan to cover later) but they aren’t the same thing and I expect them to diverge as time goes on.

      • But the NFT = Ingame object owned by a user account.

        So why does a unique object in a game need to be an NFT?

        The NFT is a gimmick, cause it’s not necessary to achieve the result of unique or limited content (has lootbox fomo has demonstrated)

        • NFT does not necessarily = in-game object owned by a user account. That’s not quite right.

          You seem to be asking-but-not-really-asking for more info while steadfastly declaring it’s a gimmick, and that’s cool, because I’m not the Self-Appointed Defender of NFTs or anything and the proper reply would be too large. But if you really want answers to those questions, they’re highly searchable. Just FYI it’s more than an afternoon’s research. As with many new ideas/platforms, some are silly wastes of space and some actually have legs.

          • Except I can’t find an example of a single game where NFT is NOT an object/item.

            Therefore if NFT is a object, why does it have to be an NFT? Any reason?

            What innovation does NFT actually deliver that is unique and only achievable with blockchain code?

          • But you are acting as the Self-Appointed Defender of NFTs. Boxhead is asking why anyone would use NFTs in a game in an article that you, Junglist, decided to write about why Valve will allow NFT games on its storefront. Your story is literally begging the question of what purpose do NFTs serve in games. We’re not asking you to exhaustively defend every proposed use-case of NFTs, but you could name even one that you think ‘has legs’.

          • I don’t know what to tell you boxhead, I said it would take longer than an afternoon and you come back 34 mins later with the same checkmate question. The honest answer is this is too large for the comment section, and I feel like laying out a multi-week education course for one or two people who are already quite clearly anti-NFT might be a waste of time and energy. Is that being unfair? Perhaps all this could work as multiple articles — I’ll consider that, but there’s other stuff to cover too. If you want a starting point, check out the link to Enjin’s piece at the top of the article — I think they’ve routinely had the right ideas in this space.

          • You say that proper replies would be too large, and if people want answers they should google… and then you spend hours writing large content-free replies while still refusing to articulate an actual position.

            I mean, for all the words you’ve dedicated to non-engagement with this issue, what exactly is it that you think you’re achieving?

            And talking about straw men, your entire contribution is so vague and milquetoast that we’ve been left with nothing more than having to guess at what your real purpose in writing here is in the first place. And then you have the gall to call people out for allegedly constructing straw men in a fruitless effort to tie you down?

            But if we’re going to play the game of fallacies here let’s start with shifting the goalposts, or indeed, not having any goalposts at all eh? Not to mention reversing the burden of proof, although I suspect that the real fallacy here is little more than straight up trolling.

  • NFTs are scum, I’d rather not kill the planet so douche bag crypto bros can get paid.

    But seriously.

    Give me the numbers on how your NFT game is offsetting the massive waste of resources, then we’ll talk.

    • I can’t tell if your last sentence is serious or not, but if so you should probably look up the Crypto Climate Accords, ERC-1155, ETH2.0’s move to Proof of Stake and sharding, ImmutableX’s carbon-neutral NFTs, and Enjin JumpNet’s carbon-negative NFTs.

      Some NFTs are dumb, some are not, etc etc

      • As the kids say, this ain’t it chief.
        Almost every NFT runs on ethereum, with a single transaction on that chain consuming as much energy as an average household does in a week. And moving to proof-of-stake is literally paying money to people with the most money, further concentrating wealth in the hands of the very few.
        You also haven’t actually made a case for NFTs in games, what do they actually accomplish that can’t be done safer, faster, greener and more securely through a in game database? The only use-case ever given by coiners is to transfer items from one game to another, but why would developers ever allow that? what’s in it for them> They’d have to go to all the trouble of modelling and coding items from other games in the off chance that you might bring it over to theirs? Why would they do that when it makes them no money, and actually costs them a lot of time and effort instead?

        • Ah yes, that old straw man. Literally no one is saying the in-game model will be ported from game to game. That’s a fundamental misunderstanding of interoperability. It’s more about metadata, and the different possible interpretations of it. Why do it? Perhaps some developers feel that if they tell players all the hours/stories/achievements they spent in Game X would mean something in Game Y, that might be an attraction to those players. As well as just being neat.
          (also, I never really set out to “make a case for NFTs in games”, that’s not the purpose of the article)

          As for ETH’s energy usage, asked and answered. You’re the horse, there’s the water. If you’re thirsty, drink.

          • Then why are you defending them in every comment?
            It’s no strawman to ask why anyone would want a game with NFTs, it’s simply asking for supporting evidence. You say that Valve will likely change it’s stance on NFTs, but why? What’s in it for them? What is the use case for NFTs in games? You have to establish that, and comments asking you to back up your claims aren’t starwmanning, but critiquing and engaging, the whole point of you writing the article, right?

            As for energy usage, a few proposals don’t cut it. Blockchain has been around for over a decade and is more energy intensive than entire countries, and as yet the largest networks still rely on proof of work. a fat lot of good proposing to be carbon neutral does when ever time someone trades a jpeg you’re burning tonnes of coal. and, as I said previously, proof of stake is a similarly flawed model, serving to benefit a tiny minority and enable even more pump and dump scams than already exist in crypto.

            If you’re going to write articles extolling the benefits of NFTs and crypto, then you have to do the hard work and back them up. anything else is just lazy and poor journalism.

          • Oof, I want to frame this comment. It’s amazing.

            Quite clearly, the straw man was your assertion that people want to magically port 3D models from game to game. I said that no one was arguing this.

            And now you’re pointing to a different line as if THAT’s what I called the straw man, and attacking it. You, my friend, have managed to meta-straw man the original straw man, creating some kind of Abominable Straw Beast. Strawception. It’s straw men, all the way down.

            *chefs kiss*

          • If you read my original comment I explicitly didn’t say that an item would be ported from game to game. I said a developer wouldn’t go to the trouble of taking data for an item from one game, the metadata you describe, and develop a model and code for it to work in their game.
            You keep on using the word strawman without engaging with the substance of the comment, which is the closest thing to anyone strawmanning around here.
            You wrote the article. When people ask you to back up your claims you take the time and effort to reply individually, but don’t engage with the substance, claiming that you’re not advocating for NFTs, in clear contrast to the article you wrote.
            SO once again, very clearly:
            What benefits do NFTs bring to games?
            Why would developers go to the trouble of enabling in any manner you to use an NFT from one game in another?
            How do NFTs solve the horrendous carbon footprint they create, noting that none of the proposed solutions have been implemented after over a decade?
            How does proof of stake present a good outcome when it provides enormous advantages to the creators and early adopters at the expense of everyone else?
            Why would Valve want to allow NFTs into their store given the enormous environmental damage done by NFTs and the long history of scams and fraud in both cryptocoins and NFTs?
            asking you to support your argument is not strawmanning.
            If it feels that by asking you to support you arguments I’m attacking a strawman, it might be because NFTs and crypto in general are made of nothing but straw.

      • Appreciate the back and forth but I’ll leave it there as I know our positions aren’t likely to change.

        We all believe our current reality or the dream.

  • “It would’ve been hypocritical for Epic to ban external marketplaces after its Apple suit. ”
    Ah, you mean the company that creates exclusive contracts on games so they can’t be sold on other marketplaces. Totally non-hypocritical.

    • Hmmm I dunno… Exclusivity deals and allowing external marketplaces to exist within your own ecosystem seem like two different things.

  • From a quick read of Valve’s review guidelines, they require that microtransaction payments be made through the Steam Wallet it is not surprising that NFT games would be banned:

    https://partner.steamgames.com/doc/store/review_process

    They also provide support for tradeable in-game items through their Inventory Service:

    https://partner.steamgames.com/doc/features/inventory

    So it looks like Valve already provides most of what people say NFTs will bring to games. The main differences are that they give Valve a cut of revenue, and don’t let players cash out.

    I suspect the lack of an ability to cash out has less to do with the appearance of gambling than anti-money laundering laws. Anything using an open blockchain to manage ownership of items is unlikely to comply with “know your customer” type laws, and the closed blockchains promising KYC compliance are basically just using buzzword language for what may as well be a traditional database.

    • Exactly, an NFT is not required to make a unique element in a game and to profit of it, or allow other players to trade it.

      A unique sword in a Chinese MMORPG sold for $16,000 dollars in 2012 and the RPG item market in china is huge.

      Professional model makers in Second Life were making money selling unique layouts with one selling “Amsterdam” in Second Life for 50,000 dollars in 2007
      Even today, VR model makers are selling assets for VR Chat.

      Eve Online has been wowing players for years on their expensive battles with one costing $378,000

      The game Entropia Universe (from 2003) was based around real-money transactions and had in-game virtual land being trading in 6 figure sums.

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