2022 is almost over! It feels like only yesterday that we were drowning in the fervor of the blockchain industry. Remember the giant booths at Game Developers Conference? All the talk of players selling off their digital items when they're done with a game? " Axie Infinity's supposed deliverance of the "play to earn" model? Good times, good times.

In a year where I was much happier writing about Marvel Snap, Beacon Pines, and the unionization wins at Activision Blizzard, I found myself cursed with being Game Developer's semi-regular blockchain columnist. It was I who wandered into the panel at DICE, who quizzed developers and execs about it at GDC, and whose inbox was drowning in pitches from breathless PR reps from the world of web3.

How's web3 going by the way? Great? Oh, not great. Boy that's a lot of lawsuits and lost cash.

If I were the charitable sort, I'd pen something like this closer to next GDC, having given the blockchain developer crowd a full year to make good on their promises. I'll be fair here—even a year is not enough time to make a good game. There are quite possibly developers making some neat blockchain-adjacent projects still operating in stealth mode.

But this technology is controversial for a reason, and its proponents have pushed back on criticism by constantly touting the "potential" of true ownership, play-to-earn, renting digital land, etc. etc. And if you took some like Andreessen Horowitz general partner Jonathan Lai at their word, critics were "misinformed" by polarization on Reddit and Twitter.

Well Twitter is now owned by a billionaire who tweets out "my pronouns are Prosecute/Fauci" and I've personally tuned my Reddit feed mostly toward how great Star Wars: Andor is—and the crypto world is still on fire. Major exchanges like FTX are crumbling from within. Stablecoins meant to back up other blockchain projects are now worthless. The Ronin hack of Axie Infinity seems to have decimated that game's prospects.

After all of that mess, checking back on the big arguments for blockchain tech in games seems particularly relevant.

Do any of them still hold water? Is there any hope for using decentralized computing technology in video game development? Let's discuss.

Are concerns about blockchain just "misconceptions?"

At DICE 2022, Bonfire Studios' Min Kim invited a group of blockchain game experts onstage to discuss the technology. One repeated point they made was that concerns about blockchain implementation were just "misconceptions."

2022 has absolutely shown that is not true. If you were worried about the environmental impact of blockchain technology, you watched as Bitcoin blew out an estimated 48.35 million metric tons of carbon dioxide into the atmosphere.

The Ethereum blockchain—most commonly used to mint non-fungible tokens—did complete its transition from proof-of-work computing to proof-of-stake, dropping its emissions from 11 million metric tons each year to 870 metric tons. That's legitimately good news, but that process only ended in September. That's nine months of standard blockchain emissions in the interim.

Though plenty of game developers working in the space are still using more energy-efficient blockchains, there are still bridges and connections that tie them to this high-energy output.

If you were worried about blockchain's close affiliation with a new class of scam artists, you got to watch rug pull after rug pull play out, with entire game pitches abandoned as the founders ran off with the money.

And if you were worried about the instability of blockchain as an investment (my personal top concern), boy we had a year. Not only did the value of Bitcoin and ETH go on a roller coaster ride (that admittedly paid off for some investors), the bankruptcy of several major blockchain exchanges and firms decimated the portfolios of retail investors.

Some reporting has noted that this devastation has hit Black investors particularly hard, since they'd been heavily pitched on these unregulated securities after years of denied access to the real estate or conventional investment markets.

Few of these major losses had a dramatic impact onto the world of games (the name "Sam Bankman-Fried" has not entered our CMS as of yet), but they still cast a shadow on the idea of in-game assets being used as speculative goods. If multi-billion dollar investments that attracted the attention of Wall Street sharks could take such a pummeling, is the value of an in-game sword any safer?

No. Whatever solutions can be found to these challenges, it's definitely worth noting that blockchain critics did not just have "misconceptions." They were proven right over, and over, and over again.

Can blockchain games empower low-income communities?

At the aforementioned DICE panel, Yield Guild Games' Beryl Li praised Axie Infinity's impact on low-income Filipinos. If you only heard her version of the story, you'd think the country's economy was bailed out by legions of "scholars" grinding away for smooth love potions, getting their aunties and uncles in on the business and turning scholars into managers.

It's a nice story. But reality has proven to be more bitter. By the time Li was onstage in Vegas, Axie Infinity's SLP was already tanking in value, and soon a well-executed hack of the Ronin Bridge sent the game's tokens flying off a cliff.

Reporters from different outlets have spoken to people from these communities, and what they found should have been obvious to someone in Li's position: this was a bubble, and some incredibly savvy folks crushed by the long arm of capitalism turned a quick buck by grinding through it.

Some made money that turned their lives around, others signed up to pyramid scheme-adjacent organizations and were caught holding the bag. They're now in more financial peril than before.

What this story should teach us is that the growing world of digital economies—blockchain-based or otherwise—is a robust field for exploitative actors to take advantage of low-income users with access to the internet. Just a month ago, we heard from the developers at Yager about how some hackers are earning a living by killing players in The Cycle: Frontier, stealing their loot, and selling it on illicit websites.

You don't need a blockchain for that kind of system to thrive in your game. Yager's fortunate that its in-game goods are easy enough to replace and yank off the market. Roblox Corp. and Valve have to deal with the fact that high-value items sitting in a players' inventories make their entire account a nice juicy target.

A recurring trend I've seen from parents on Twitter lately is that their kids are upset because someone stole their Roblox account to get a valuable item that can be sold for Robux. No blockchain on display here, and plenty of illicit activity all around.

So no, I don't think blockchain games will empower low-income communities. It seems very obvious that the more financial entanglements are wound up in game economies, the more opportunities there will be for bad actors to exploit impoverished players and non-players alike.

Are DAOs the future of game development?

Andreessen Horowitz general partner Jonathan Lai proclaimed at DICE that decentralized autonomous organizations could shape the development of games like Apex Legends.

(He also went on Twitter recently to sing the praises of how AI tech will replace rank-and-file developers. I think his job is to sound like a prophet and that his clients' products will define the future. His follow-up thread where he scales back some of his big pitches is also worth reading.)

His pitch was that if a large developer like Respawn Entertainment needed to move on from Apex or another live service title, a decentralized autonomous organization (DAO) could take over development, seamlessly taking control of the game's assets and using tokens to drive development decisions in the organization.

Instead of having a dev team making design and balance decisions, holders of blockchain tokens could vote on updates to the game. He seemed to imply at the time that players financially invested in a game could make better decisions than professional designers.

Oy vei. Where do we even start with that one.

Still, I can respect more anarchist version of what Lai described. A game or online world developed by a community could use decentralized consensus principles to shape a world that works for all users.

Do DAOs embody those principles? Mostly, no. Not at all. In fact, Yield Guild Games found itself ousted from one such DAO it had invested in earlier this year, an almost comical example of being hoisted by its own petard.

I'm comfortable predicting that DAOs will only find success if they're organized as truly decentralized collectives—and I feel that the values of such an organization would run counter to the capitalist principles that have defined the field so far. And if you're going to build a capitalist game-making organization...why reinvent the wheel when a game studio will do just fine?

Is "real ownership" a viable revenue stream for developers?

The magic 8-ball says: "ask again later."

This more pragmatic pitch came at DICE from Mythical Games co-founder John Linden. He sold the crowd on a vision of ownership that prioritized smaller-dollar purchases. Less "players make millions off of NFTs," more, "players are given widely distributed NFTs, and they organically assume a $10-$20 value over time."

Fair enough. I'm in the world of miniature wargaming. I've seen how scarcely available models can spike to the sky-high value of a few hundred dollars. Buying and selling those models in a digital space means companies like Mythical can get a cut of each transaction. Linden noted that the business "win" with giving away NFTs in Blankos Block Party was the cut of each transaction it got. (Though again, Roblox Corp. runs a system like his right now without using blockchain).

If Mythical's model is meant to be a sustainable one for other developers, 2022 isn't the year to show it. The company just laid off 10 percent of its workforce in November, blaming a slow-down in the crypto market for driving losses.

That's not great, but also not enough to completely undercut the business model. I personally don't find Mythical's core product—the "metaverse platform" Blanko's Block Party—to be remotely appealing. It's a game where you collect weird little guys and play with friends in games hosted in open world environments. If I wanted to play goofy games as a weird little guy, Fall Guys is right there.

I have a worrying suspicion that if a company like Respawn were to turn on such a system in a game like Apex Legends—even without a blockchain—it would be able to pull in revenue as players buy and sell weapon and character skins to each other. Skins from older seasons would already have artificial scarcity, and given how some skins convey social status or bragging rights, I've no doubt that the trading would be furious.

Mirage heard you wanted to sell his skin.

Do I think Apex should have such a system? Absolutely not. The value of those skins already drives the risk of account hacking, and if players become literally invested in a multiplayer game, financialization would start too overtake the fun of a romp through Respawn's sci-fi battle royale world.

The Apex Legends developer seems to have no intent of going in on blockchain-backed skins, but we already saw Ubisoft try to work these into Tom Clancy's Ghost Recon: Breakpoint. Surely someone will make a more ambitious swing soon.

Will blockchain tech bring in new players?

A panelist of blockchain devs (and friend of Game Developer Lars Doucet) took the stage at GDC to discuss the ups and downs of blockchain tech, and one of the big, big "pros" for the technology was supposedly its ability to bring in new kinds of players.

If you take the blockchain crowd at their word, there is an untapped pool of players out in the world who are not interested in playing video games just for fun. There are players who want to earn money—either for idle side cash or as a primary source of income.

PKO Investments' Holly Liu again sung the praises of "aunties and uncles in The Philippines" (boy it was weird to hear that phrase over and over again this year), and speculated that they represent this possible playerbase who could boost the video game market. "Maybe these new gamers are investors and for them, that's what 'fun' is," she mused.

We already discussed the fate of Axie Infinity's low-income scholars, but Liu's pitch rings hollow even if you think of these players as middle-class investors. Doucet likened those players to workers you pay to dig holes, then fill them back up. "Just because some people how to efficiently dig and fill those holes doesn't mean it's sustainable," he quipped.

At the time, I found the pitch ridiculous because "work" in blockchain games doesn't produce anything of real value. Sure, the tokens tied to in-game assets have value in a bubble, but the second that bubble pops, you've got nothing. At least after the gold rush, people still needed gold for electronics.

A few months later, I'm forced to grapple with the reality that Liu may have been onto something—but not in a positive way. Her "class" of earning players may exist—but only if capitalism disenfranchises more and more communities round the globe, creating a need for digital-first income.

If you can't get work in your home country, why wouldn't you log on to Grand Theft Auto Online and role-play a bank teller that high-rolling players from richer regions could stick up in exchange for some much-needed cash?

The risk of that behavior is so high that Rockstar Games took the unusual step of giving its blessing to roleplaying GTAO servers, but also banning the financialization of them. Mojang did something similar. Neither studio wanted their virtual worlds to be turned sweatshops (If you want to get cynical about it, it's probably because neither developer could quickly earn a share of those payments).

Yes, companies of all sizes are desperately looking for new audiences because the cost of user acquisition has ballooned alongside the budgets of notable games, but those blockchain-based users are not a massive audience in waiting. It's a prospective class of indentured servants—something that has no place in an industry dedicated to recreation.

And if we want to keep it simple, just look at the player counts of big-ticket blockchain games like Decentraland or The Sandbox. They're low! If any non-blockchain live service game posted numbers like that, we'd be writing about their shutdown here on Game Developer.

Will blockchain games fade away in 2023?

I don't think so. There are still some key indicators showing this financialized technology will be a contentious topic for at least a couple of years.

First, while blockchain developers have taken a reputational pounding in The West, Japanese, Korean, and other Asian developers are all in on the technology. Nexon, Com2Us, Square Enix, and many more have just kept investing and announcing efforts tied to the technology.

Given how today's live game business models partly originated in those countries, I'm left here wondering "what do they know that I don't?"

If I judged Square Enix just on the last few years of it's business, I'd be flabbergasted by the management team that couldn't do anything with the great North American studios behind Marvel's Guardians of the Galaxy, Hitman Go, and Tomb Raider thought they could do anything with NFTs.

And yet here we are. Square Enix has prioritized blockchain tech over a number of beloved game franchises. Have they cracked a model that we just haven't seen yet? Or are they just a few months behind Immutable, Mythical, and other major blockchain devs executing layoffs?

I'll believe this game is fun the day I can remember its name.

Looking back to the Western market, I'm worried about the boosterism of blockchain that got us in 2022's big financial messes in the first place: blockchain's big bubbles have meant big profits for some investors, and the sunk cost fallacy is absolutely driving some to still chase the market.

I'm left with this portrait of an industry that has made peace with the fact that blockchain tech is unpopular, but will soldier on because there's gold in them' thar hills.

I don't know yet if the FTX crash will be a great reckoning for the blockchain world, but I'm only convinced of this: blockchain technology is a financialization tool that comes with huge, huge costs. People can lose years of savings and have none of the protections offered by regulation of conventional speculative markets.

It is wild that I am writing that on a video game website. Our business does not make products for aspiring investors—it makes recreational software. Sure, some of that recreation takes the form of economic simulation. I'm loving Bear & Breakfast, and Eve Online is still charging along after over a decade—in-game economies are one of the many ways that games can be fun or compelling.

But when real money that people need to live, to eat, to stay housed enters the equation, everything changes. Then we are not in the business of fun. All of our logic about player behavior becomes exploitable, everything we know about incentives can be used to swindle customers.

And even if the blockchain industry achieves legitimacy, it would do so on the backs of scam artists who got in, got the bag, and got out. I don't think that's a great future for us or our players.