A blockchain game (also known as a NFT game or a crypto game) is a video game that includes elements that use cryptography-based blockchain technologies. Blockchain elements in these games are most often based on the use of cryptocurrency or non-fungible tokens (NFTs) which players can buy, sell, or trade with other players, with the game publisher taking a fee from each transaction as a form of monetization. In some cases, players of blockchain games have earned enough to pay for costs of living, making these games also known as play-to-earn games. While blockchain games have been available since 2017, blockchain games have only gathered the attention of the video game industry starting in 2021, with several AAA publishers having expressed intent to explore their potential, as well as criticism from players, developers, and companies within the game industry.
Blockchain technology, such as cryptocurrencies and NFTs, are potential monetization routes for video games. Many live-service games offer in-game customization options, such as character skins or other in-game items, which the players can earn and trade with other players using in-game currency. Some games also allow for trading of virtual items using real-world currency, but this may be illegal in some countries where video games are seen as akin to gambling. This has led to gray market issues such as skin gambling, and so publishers typically have shied away from allowing players to earn real-world funds from games. Blockchain games typically allow players to trade in-game items for cryptocurrency, which can then be exchanged for money, which sidesteps problems associated with gray markets due to blockchain's accountability.
The first known game to use blockchain technologies was CryptoKitties, launched by Axiom Zen in November 2017 for personal computers. A player would purchase NFTs with Ethereum cryptocurrency, each NFT consisting of a virtual pet that the player could breed with others to create offspring with combined traits as new NFTs. The game made headlines in December 2017 when one virtual pet sold for more than US$100,000. CryptoKitties also exposed scalability problems for games on Ethereum when it created significant congestion on the Ethereum network shortly after its launch, with approximately 30% of all Ethereum transactions at the time being for the game, and with the congestion delaying players' transactions. Axiom Zen feared that Ethereum would further struggle after they launched the mobile version of the game, particularly with an influx of users from China.
Another early example is The Sandbox, launched by Animoca Brands in 2021. In the blockchain-supported game, players could make in-game items by using the game's toolbox and then sell them, using a game-specific cryptocurrency, to others who could display them in their virtual landscapes.
Axie Infinity, released in 2018, is an example of a "play-to-earn" game, where the game incentivizes players to purchase and then improve NFTs through in-game activities which are then resold to other players by the publisher, with the player receiving compensation for their work. In the Philippines, where the game was most popular, some players were able to earn enough to earn their cost of living by playing and participating in the game's financial structure. However, following an early 2022 hack which saw over $600 million stolen from Axie Infinity's publisher, the game saw a large drop in players and impacting the game's economy.
By the early 2020s there had not been a breakout success in video games using blockchain. Such games tended to focus on using blockchain for speculation instead of more traditional forms of gameplay, and this offers limited appeal to most players. Such games also represent a high risk to investors as their revenues can be difficult to predict. However, limited successes of some games, such as Axie Infinity during the COVID-19 pandemic, and increasing corporate interest in metaverse content, refueled interest in the area of GameFi—a term describing the intersection of video games and financing, typically backed by blockchain currency—in the second half of 2021. By the end of 2021, several major publishers, including Ubisoft, Electronic Arts, Take Two Interactive, and Square Enix stated that blockchain and NFT-based games are under serious consideration for their companies in the future.
In October 2021, Valve Corporation banned blockchain games, including those using cryptocurrency and NFTs, from being hosted on its Steam digital storefront service, which is widely used for personal computer gaming. The company claimed this was an extension of their policy banning games that offer in-game items with real-world value. Valve's prior history with gambling, specifically skin gambling, was speculated to be a factor in the decision to ban blockchain games. Valve's CEO Gabe Newell explained in a later interview that while he believed blockchain technology was legitimate, the company felt there were too many bad actors in the market at the time to allow cryptocurreny or NFTs onto Steam. Newell said, "The ways in which it has been utilised are currently all pretty sketchy. And you sort of want to stay away from that." Journalists and players responded positively to Valve's decision, as blockchain and NFT games have a reputation for scams and fraud among most PC gamers, while blockchain game publishers and developers urged Valve to reconsider their position. Epic Games, which runs the Epic Games Store in competition to Steam, said that they would be open to accepting blockchain games, in the wake of Valve's refusal.
Ubisoft announced its foray into blockchain gaming with its Ubisoft Quartz technology which is based on the Proof of stake Tezos cryptocurrency, which Ubisoft claimed was more energy efficient. Quartz allows players to purchase and sell Digits, which are special character customization items within the publisher's games, with this service first launching for Tom Clancy's Ghost Recon Breakpoint in December 2021. On the same day, Ars Technica stated that "Ubisoft's… plans make no sense" because Quartz system is so deeply controlled by Ubisoft that a simple conventional internal database might be a better fit. Users criticized the technology because Ubisoft terms of service state that the company has "no liability" for claims or damages and is aware that the blockchain "may be subject to specific weaknesses, which make them possibly targets for specific cybersecurity threats” and disclaim "liability in the risks implied by the use of this new technology." On December 9, Ubisoft de-listed the announcement video on YouTube, following viewer backlash and dislike bombing. French trade union Solidaires Informatique criticized Ubisoft's plan for Quartz, stating that blockchain technology is "harmful, worthless, and without future", and that it is "a useless, costly, ecologically mortifying tech which doesn't bring anything to videogames". On March 17, 2022, Ubisoft released the last Digit for Ghost Recon Breakpoint.
Peter Molyneux announced in December 2021 that his development studio 22cans was working to include blockchain and NFTs within their planned game Legacy, a business simulation game. Players of Legacy could create parts that could be sold and purchased from other players in order to complete assemblies of units, using LegacyCoin based on Ethereum cryptocurrecy. Prior to release, speculative buyers were able to purchase Land within the game on which players would establish their in-game factories, with LegacyCoin sales of this land reaching more than $50 million within a few days of Molyneux's announcement.
Xbox head executive Phil Spencer said in regards to blockchain games "that some of the creative that I see today feels more exploitative than about entertainment". When the gaming communication platform Discord suggested possible Ethereum integration into their client in November 2021, users criticized the inclusion of cryptocurrency and Discord backed off, affirming they had no set plans for its inclusion.
MMO developer Damion Schubert argued that most pitches for games for NFTs could also be achieved without the use of NFTs and that the non-NFT options would be easier to implement.
In November 2021 Rob Fahy wrote in Gameindustry.biz that the "play-to-earn" business model is similar to earlier systems that encouraged the rise of gold farming which later led developers to shift to selling "gold" to players directly in real currency. He argued that the business model could potentially reintroduce artificial scarcity of in-game currency and in-game items or characters, and that in-game marketplaces will likely have a payment system where a game developer takes a cut when players sell a marketplace item to each other.
In December 2021, GSC Game World had announced their intent to include NFTs as part of S.T.A.L.K.E.R. 2, but due to complaints from players, a day later they announced that they would no longer be pursuing NFTs within the game.
In December 2021, during The Game Awards, Josef Fares, director of It Takes Two, stated that he would rather get "shot in the knee" than include clarification needed] in any of his games. Games journalist Jason Schreier characterised the blockchain "play-to-earn" model as a pyramid scheme.[
The Game Developers Conference's 2022 annual report stated that 70% of developers surveyed said their studios had no interest in NFTs, while 28% said they were very or somewhat interested in them, and only 1% said they were integrating them into their games. In addition 72% of developers said they weren't interested in cryptocurrency as a payment tool for games, while 27% said they were very or somewhat interested, and only 1% saying they were already doing so.
Square Enix's new year letter, which expressed interest in NFTs in video games, received heavy backlash from fans, with many additionally expressing disdain at the letters comparison of "play to have fun" and "play to contribute" players.