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Virtual horses in a race. Courtesy of Virtually Human

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Play-to-earn gaming sounds too good to be true. It probably is.

The video game industry’s clumsy flirtation with Web3 doesn’t feel like it has actual players in mind.

Jared Galloway, a 22-year-old in Seattle, makes his living with a virtual horse. There’s this browser-based PC game called Zed Run, developed by the Australian studio Virtually Human, that takes place in a sinister cyberpunk dystopia where computerized racehorses compete for the podium on a purple, Tron-like grid. Players can buy and breed those “stallions” with the institutional guarantee that their ownership rights are encoded on the blockchain (all exchanges are done in cryptocurrency). The goal is to acquire a powerful horse that can win races and collect stud fees from those who want access to their precious digital genetics. Think of it as the entire equine industry pared down into a phantom, online-only economy.

This all might sound inscrutable — most tendrils of the Web3 revolution are — but all you really need to know is that Galloway was scraping by as a pool boy before he was tempted to try Zed Run, and purchased a promising horse off the open market. His life hasn’t been the same since.

“I started playing the game and bought [a horse] that was unnamed and unraced for 1.1 ethereum, which was about $4,000 at the time,” said Galloway. “Then I got an offer [from someone to buy it] for three Ethereum, and three days later [the offer] went up to five, and then eight. I looked at who was making these offers, and it was the biggest racer in Zed Run.”

Galloway made the decision to hold onto the horse for himself so he could race it and breed it. “I thought, ‘If the best racer in the game wants my horse, then there must be something to it,’” he added.

Galloway said he made $4,000 last month from Zed Run, which means he has lapped his initial investment. In total, his horse, named Diamondz, has netted him a profit of 6.4 ethereum, equivalent to about $20,000 at the current conversion rate. Today, he plays the game full time and streams out his daily progress to a small collection of fans on YouTube. That makes Galloway one of the runaway success stories of the burgeoning “play-to-earn” movement: a new philosophy gripping the video game industry that aims to reinvent the hobby with decentralized bartering systems.

The premise is simple. In the future, maybe the spoils to be found in a video game will hold appreciable, uncapped real-world value. That rare sword you uncovered at the top of the mountain in Skyrim or World of Warcraft? That could be imprinted as an NFT; totally unique, staunchly unreplicable, and worth a bounty of bitcoin to any interested buyers.

Already, major publishers in the business, like Ubisoft, Epic, and Electronic Arts, are drumming up their own blockchain platforms, creating a tide of pioneering early adopters who are eager to alter the fundamental rules of recreation. The idea is to create video games that function more like open-ended, laissez-faire social spaces, rather than a sequence of challenges leading to a grand finale. In the future, the argument goes, games will mirror the tenets of real life. Video games are unfairly extractive; they ask for too much of our time without returning the favor. If instead a night with Assassin’s Creed could reward us with some tangible capital, then the relationship between players and publishers wouldn’t be so fraught.

Galloway tells me that Zed Run doesn’t really feel like a video game to him anymore. There’s no wonder or joy here; no Elden Ring-sized mysteries to uncover. No, Diamondz is simply a way to get by.

“I approach it like a business now. I do breeding deals with people, I study what kind of horses might give you the best offspring. There are people who play to support their households,” said Galloway. “It took a while for my mom to understand Zed Run. She thought it was a Ponzi scheme. But now she knows that other people look at this like a viable business. The horse is a part of the family.”

Zed Run is far from an outlier. Play-to-earn games have yet to fully dominate the Twitch charts, but that has not deterred a swath of Web3 startups from cashing in on the concept while it’s hot. Generally, new players are asked to synchronize their crypto wallet with the platform and purchase some sort of blockchain-encoded NFT (in Zed Run’s case, a horse), which gives them access to the core gameplay. In other words, you cannot participate in Zed Run if you do not already own one of Virtually Human’s minted tokens. This strategy is mirrored across the industry.

Consider the Pokémon-like mobile game Axie Infinity, where players collect and raise a brood of chibi animals that are all bonded to the blockchain and can be efficiently resold. (Axie Infinity is huge among citizens of Venezuela and the Philippines because the cryptocurrency players can earn from the game often eclipses their regular wages.) In another game, Alien Worlds, players join expedition teams to explore the deep reaches of space, where they may mine for an in-game ore called Trilium — a crypto token that can be converted into dollars and cents. (Dedicated Alien Worlds patrons have developed automated mining bots so they can play the game without actually playing the game.) Splinterlands is a digital collectible card game where all the paperboard is ethereal and non-fungible. Obtain a particularly powerful card? Feel free to flip it like a T206 Honus Wagner.

The developers of play-to-earn games believe that they’re correcting an ancient wrong. That, apparently, all of the time we’ve previously spent in front of our consoles was heedlessly exploitative.

“We started with a very simple thesis, which was to bring property rights to gamers. The idea behind that was that gamers are a little bit like slave labor. You play a game, you spend money in a game, you buy virtual items, but at the end of the day, you don’t actually own anything. You just have a license to use it in the game. You’re not really getting what you pay for,” said Robby Yung, CEO of Animoca, a blockchain gaming developer that has raised over $350 million in funding. “There must be a better way to do that, and now that we have blockchain, there is a better way to do that.”

What Yung fails to mention is if customers are even remotely interested in the heightened financialization of their hobby. Play-to-earn integration has been met with shockingly uniform resistance from the gaming community. It is difficult to quantify the pushback with holistic metrics, but when Ubisoft announced its crypto venture in December (called “Ubisoft Quartz”), the announcement trailer was downvoted thousands of times before the publisher eventually delisted the video. Ubisoft wasn’t pitching a gambit equal to Zed Run, where the entire game functions as a monetization scheme, but even comparatively benign mentions of Web3, NFTs, or cryptocurrency have evoked some powerful backlash. There is a fear that the blockchain influence will deplete good design tenets, creating an environment where video game experiences are increasingly tiered by financial thresholds, creating a negative experience for consumers. So far, publishers haven’t been able to assuage those anxieties.

Yosuke Matsuda — president of Square Enix, the Japanese firm responsible for the Final Fantasy series — posted an open letter defending his pursuit of play-to-earn schemes after a borderline player revolt, and GSC Game World, the Ukrainian studio behind the hotly anticipated S.T.A.L.K.E.R. 2, rolled back their crypto plan after it left fans feeling alienated. The anger isn’t limited to consumers, either. Bloomberg’s Jason Schreier reported Ubisoft employees sparked an internal fracas over the company’s NFT plans. As the dust clears, it becomes increasingly apparent that the decentralized finance pivot is most stridently endorsed by the CEO class. Everyone else is either ambivalent or hostile.

In an interview with The Goods, Schreier said he didn’t find this consumer rejection all that surprising. Gamers were always going to be suspicious of the utopia pitched by the most powerful corporations in the games business because gamers have long been cognizant of the cold, pecuniary drift of the industry’s monetization model.

At the beginning of the 2010s, game-makers started adding minor, purchasable boons to their product. For a fee, gamers could skip over the in-game grind it might take to obtain the suit of armor they were already eyeing. We dubbed them “microtransactions,” and they’ve become pervasive enough that nearly every release from a triple-A studio is bundled with a virtual storefront to keep the money flowing long after you make the initial $60 retail investment. The NFT sea change appears to be an evolution of that predation. Previously, a company like Ubisoft wanted to sell us an item; now they want to sell us participation in an ersatz economy where an unseen brain trust pulls all the levers. As a gamer, it’s easy to think that you’re getting a raw deal.

“Companies have been looking for new monetization schemes for as long as the industry has been around. There are a lot of complex reasons for that. Graphical fidelity is going up, and games are getting more expensive to make. And publishers are desperate for ways to make back their money,” said Schreier. “Gamers are skeptical about that because they’ve watched game-makers try to eke out their money for years and years. ... People just absolutely hate this stuff. I’m actually surprised that these game publishers that have billions of dollars and have teams dedicated to market research and focus tests didn’t figure out sooner that this would cause a huge backlash.”

The dystopia that Schreier predicts is already coming to be. Last month, Vice’s Edward Ongwesu Jr. investigated Axie Infinity, which remains the most prominent play-to-earn game on the market. To play Axie, you need to purchase three of the platform’s NFTs, which fluctuate with the market. (Today, the cost is about $300 total.) Not everyone can afford that investment, so top-level Axie players will rent those NFTs out to other players. Those players will play the game using that borrowed digital property, and the boss will scope a portion of the generated revenue, effectively creating a sharecropper-like social system. Ongwesu comes to the conclusion that all of the bootstrap financial fantasies of the play-to-earn movement fade away with a closer look. In any decentralized economy, the rich will still dominate the poor.

“The players and investors who thrive seem ultimately to be those who understand this is a business like any other financial venture,” writes Ongwesu. “The ones who have made out like bandits, after all, are the ones who have attracted VC funding, who’ve hoarded Axies and loaned them, who’ve traded NFTs like Pokémon cards, and so on.”

It is also questionable whether the primary selling point of the play-to-earn spiel — that the blockchain ensures permanent, perpetual ownership of digital goods — holds much water. Sure, a player might be able to flip an NFT they find in-game for a time, but James O’Donnell, a 29-year-old who writes a blog about crypto games, doesn’t believe any company can guarantee indefinite proprietorship over an internet-bound asset. After all, what happens to all my accumulated digital capital if I wake up one day to find that the servers of my favorite play-to-earn game have been taken down for good?

“You don’t literally own an item. You own a pointer to an image on a game company’s servers. They can alter it or delete it. If they go out of business, it’s gone. It’s purely a marketing term,” O’Donnell said. “If you don’t believe a blockchain game company is viable, you shouldn’t be investing in it.”

O’Donnell tells me his favorite crypto platform is called Skyweaver, a card game modeled after Blizzard’s Hearthstone. He enjoys the gameplay and relishes the financial upside of a series of hard-fought victories. (O’Donnell said he banks a few hundred dollars a month from his gameplay.)

In its most basic incarnation, nobody believes that the chance to earn money playing video games is a retrograde concept, particularly in an era of millionaire Twitch streamers and esports pros. The distrust, I think, has more to do with how quickly publishers have made the perceived financial impetus among their players the ultimate catalyst; as if the many other reasons people play games are irrelevant.

It reminds me of something Yung mentioned toward the end of our conversation. He was speaking about Axie Infinity, the aforementioned blockchain game known for its brutal grind and avaricious business practices. In any other context — artistically, ethically, mechanically — Axie Infinity is a bad video game. But if you nudge the parameters toward capital, suddenly it becomes a massive success story, for better or worse.

“The most common criticism I hear about Axie Infinity is that it’s not fun, as if ‘fun’ is the only thing about games,” said Yung. “It’s one component, but it’s a part of the game experience, not all of it.”

Is the community prepared for a world where “fun” is no longer the reason we play video games? Will the invasive factors introduced by the play-to-earn crusade — subsistence, side hustle, the rare opportunity to strike it big — eat into our priorities? Will labor continue to meld with leisure? It is hard to say for sure, but I do know that Galloway will keep milking Diamondz for everything it’s worth. “It feels like a dream, but it makes sense as well,” he said when I ask what it’s like to work a job that is completely divorced from tangible notions of supply and demand.

“They say traditional horse racing is a game of kings,” added Galloway. “But this game breeds kings. I can attest to that. I didn’t have an asset that would make me this much money [before playing]. I didn’t need to come in with a million-dollar investment.”

That’s the goal, of course. Zed Run raises the question of whether video games could empower a legion of part-time contractors — nose to the grindstone, scrambling for any edge — all while juicing the stocks of those collecting the residuals. The more pertinent question is left permanently unanswered: Isn’t this depressing?


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