Chapter 5: Okay, so maybe web3 enhanced games and NFTs aren’t dead!
5.6 Ownership of the Game
59
60
in any case, getting paid a small percentage of creator fees is quite different from being an owner and having the opportunity to generate wealth. It doesn’t seem fair that the FNITE Gamers in my example or the real-life Roblox creators who helped make Epic Games and Roblox valuable in the first place and understand the ins / outs of Epic Games and Roblox better than most sophisticated, “accredited
investors”, aren’t invited to the wealth generation party until the valuation of the games they love, understand deeply, and contribute so significantly to are in the 10s of billions.
So, why is crypto a fundamentally more fair and inclusive system? Let’s say that FNITE Gamer was similarly an early user or UGC contributor to web3
Fortnite.
• Under web3 Fortnite’s incentive mechanism, FNITE Gamer will receive FNITE tokens proportional to the time FNITE Gamer spent playing the game versus others and/or is rewarded FNITE tokens for early gameplay, UGC contributions (including based on other gamers engaging with FNITE Gamer’s UGC assets), and/or curation.
• FNITE Gamer is allocated these tokens to reward her for the time she spent making web3 Fortnite valuable in its infancy, which helped drive the
network effects necessary to make a social game like web3 Fortnite go viral.
• Owning FNITE tokens will entitle FNITE Gamer to participate in the
direction of certain aspects of the game and FNITE Gamer may also share in a portion of any NFT and/or UGC fees collected by the web3 Fortnite
treasury.
• Additionally, with web3 Fortnite, FNITE Gamer owns all skins and emotes that she purchases in the game and is free to sell them on any secondary marketplace.
• Receiving all these incentives from web3 Fortnite certainly motivates FNITE Gamer to keep playing and contributing to the game; most likely FNITE Gamer feels a sense of loyalty, community, and economic alignment.
With the above being the ideal state, there are many game design / economy, security / identity, and legal / regulatory / tax issues that need to be sorted out to make this more inclusive web3 state a reality.232 As noted, crypto is trying very hard to change this system of “only the wealthy participate” and gamers should be
232 And, as noted above, game companies sharing economics with gamers for UGC and other activities related to the game comes at a cost / is not free. It is therefore important to design game economies so that the gaming company is still making at least the same amount of money – and ideally more – due to achieving greater scale through sharing ownership with gamers.
61
beneficiaries of this change. While we’re still in the early stages of figuring out web3 game token economies, allowing gamers to have ownership in games they’re
spending their most valuable asset — time — on is simply the better path forward that will inevitably come to be over time. Given the current regulatory environment, especially in the United States, it’s important to note that “ownership” doesn’t
necessarily need to come through fungible tokens and may instead come through ownership of in-game assets233, which I’ve described above. If United States regulators and policymakers fail to provide clarity as to proper classification of cryptoassets (among other matters), there is a significant opportunity for other jurisdictions to step in and do so, which will perhaps provide a path to ownership of games through fungible tokens for the 93%+ of gamers who do not reside in the United States.234
233 Which isn’t free from regulatory risk in the United States either, although some regulators have a more sensible view. The SEC just announced another NFT enforcement action with SEC
Commissioners, Hester M. Peirce and Mark T. Uyeda, dissenting. I intend to write more about this later, but I do think it’s interesting to note that Roblox recently added a scarcity mechanism called
"Limiteds" to its Creator Marketplace. Creators receive a 10% royalty each time an item is resold and 80% of resold items sell for more than their original cost. It should be noted also that Roblox creators have the ability to “cash out” their earnings in Robux to fiat. From a legal standpoint, it’s not clear to me how Limiteds differ from NFTs except that one is issued on a centralized database (not a security?) and the other on a blockchain (a security?). For example, does this sound like a web3 or web2 experience: 3D artist Youri Hoek is popular for creating exquisitely detailed items and he has found even more success with Limiteds. As of late June, Youri’s rare golden helmet was
reselling at 7.4 times its original price. Many other creators are seeing similar results and nearly 80%
of resold items sell for more than their original cost. By giving creators the ability to specify the quantity of their items and allowing them to be resold, we’ve introduced market dynamics that are benefitting creators, buyers, and sellers alike. It’s directly from Roblox’s July 2023 “Vision for the Roblox Economy.”
234 7% of gamers reside in North America and some unknown percentage of them are our gaming friends in Canada, which means that US gamers make up less than 7% of total global gamers.
62