Square Enix signals major push into “blockchain gaming” mania

Square Enix President Yosuke Matsuda used a New Year's message this weekend to telegraph the company's interest in "blockchain gaming" and "decentralized games" as "a major strategic theme for us starting in 2022." Specifically, Matsuda sees the blockchain as a way to give players "explicit incentives" to create "major game-changing content" and profit from those "creative efforts."

While Matsuda puts the current majority of players in a "play to have fun" camp, he writes that he foresees "a certain number of people whose motivation is to 'play to contribute,' by which I mean to help make the game more exciting." Most traditional games rely on "personal feelings as goodwill and volunteer spirit" to motivate that kind of user-generated content, Matsuda writes, which is "one reason that there haven’t been as many major game-changing [pieces of] content that were user generated as one would expect."

But Matsuda sees "advances in token economies" giving players "explicit incentives" for creating in-game content, providing "a tangible upside to their creative efforts." This will lead to more content being created, in turn attracting more "play to have fun" players and resulting in "self-sustaining game growth," in Matsuda's vision.

It’s all been done before

While Matsuda writes that "it is blockchain-based tokens that will enable this," plenty of other game makers have shown that you can set up a marketplace for user-generated content without relying on blockchain-based solutions. Valve introduced its Steam Workshop marketplace for user-generated items way back in 2011 and by early 2015 announced it had paid creators over $57 million for items in just three Valve-produced games. Valve also let Skyrim players start selling entire mods in 2015 but canceled the program four days later, saying, "It's clear we didn't understand exactly what we were doing... even though we believe there's a useful feature somewhere here."

More recently, Roblox said that over 1.27 million player-developers earned in-game "Robux" from their creations in 2020, contributing to the company's $45 billion IPO. Only 4,300 of those players earned the $350 minimum required to convert their Robux back to real currency, however, helping contribute to criticism that Roblox's business model allegedly exploits its overwhelmingly young user base.

There are plenty of other examples—all of which predate the recent explosion of non-fungible tokens (NFTs)—of games allowing players to buy and sell their own in-game items.

Using a blockchain-based marketplace theoretically allows in-game item creators to sell their goods on third-party marketplaces, avoiding the hassles and fees associated with the centralized marketplaces controlled by the game's original publisher. In the end, though, the publisher still controls the game itself and what types of items and even item sales are allowed (as Ubisoft's tightly locked-down NFT offerings have recently made clear).

The value of all those in-game items also relies on the game remaining popular—if the game goes away, all those items become functionally useless, whether they're on the blockchain or not.

Chasing that buzz(word)

Tech needs aside, Matsuda is clearly enamored with the hype surrounding "decentralized gaming," which, he writes, "will be a major strategic theme for us starting in 2022," with initiatives including "potentially issuing our own tokens in the future." Matsuda adds that he's noticed "an increase in the societal literacy and acceptance of crypto assets in the past few years" and that he hopes NFTs will "become a major trend in gaming going forward." Trading in NFT-based digital goods, he writes, could "become as familiar as dealings in physical goods."

Centralized marketplaces for user-generated content in games are old news and still not much more than a lucrative niche. NFTs and "the blockchain," on the other hand, are the hot new buzzwords that instantly attract attention from investors and speculators at their mere mention (see the $54 million raised by Peter Molyneux's latest NFT-based game for just one recent example).

Still, we'd be wary of predictions that blockchain technology will revolutionize the way players interact with and create content for games. Paying players for user-generated content is nothing new, and adding "the blockchain" on top of a marketplace doesn't fundamentally change anything or obviate the challenges of creating a truly lucrative and self-sustaining market for such creations.