As you may know, I love video games, and I hate bitcoin and the whole crypto grift. So you can imagine I’m not a fan of combining the two. Let’s talk pay-to-earn mechanics, gambling, and why those things in games are a bad idea.
Let me start with positing three questions. Think about them while you read, and I’ll come back to them at the end.
Question one: would you mind it if you had a job where you had to pay a fee to enter a workplace where your job was to sell things you bought there to other people also present?
Question two, would you mind paying a fee for an amusement park, only to learn inside that the rides had been placed extra far apart and if you wanted a cart travel the distance, you’d have to rent it?
And finally, question three: would you mind it if both of the above things were marketed specifically to (your) children, and vulnerable people?
If you think these questions are pretty insane, hold that thought. Because you’re in for a bit of an eye-opener.
So, with those questions in mind, let’s look at video games.
Pay to earn
Pay-to-what? The idea behind the pay-to-earn mechanic is that you can earn real money in a video game by performing in-game chores, the results of which you sell to other players. An early example of this from 2013 is the Diablo 3 auction house. The idea was that players could sell items they had unlocked in the game to other players in auctions. The public backlash was enormous, and the feature was abandoned. But, like most money-making schemes, it came back.
The crypto world loves this idea of putting money into stuff in a virtual world, then selling that stuff to others. In the case of bitcoin the ‘stuff’ you buy is fake currency. In the case of NFTs, the ‘stuff’ is copies of images and hyperlinks. By marrying crypto to video games, that stuff becomes video game assets. You get to do chores in a video game to improve the virtual assets, so earning crypto coins, or NFTs, that you can then cash out. I’ve already written about NFTs before, so I’ll leave the details out.
A famous game like this is Axie infinity. In this game you buy ‘axies’, virtual creatures in the game, that you then level up with grinding chore-like gameplay, and then sell to other players. The idea is that this can earn you money. In the Philippines, this has led to large groups of poor people trying to earn money with the game.
The economics of pay-to-earn
Simple economics tells you that the connections to the real world exist in two places: money going in from people buying virtual stuff, and real-world things or money being bought with the virtual stuff. The number of places in the real world that accept virtual stuff is pretty limited, so mostly, the money going in is equal to the money going out, minus the fees.
For crypto this equation is virtually identical, except there are a very limited number of places where you can pay for real-world things with crypto. Also, the exchange rates for crypto are more akin to gambling than actually stable. So, really, crypto is something you buy and sell, not something you pay with.
The result of this is that pay-to-earn games are just complicated ponzi schemes. The only money that comes out is the money that new players put in. And since the entertainment value of games Axie Infinity is really nearly zero. Well…
There is one party that makes money, of course. Remember the ‘minus the fee’ I added in the equation. The makers of the game take a cut, of course. Given Axie Infinity had a revenue of 4 billion, you can imagine that even a small cut is an enormous amount of money.
And then… hackers!
Like I said above, the money going in to these games is roughly what comes out. The creator of a game makes money of course, but there is another way to make money: stealing.
By adding an economy to games that allows virtual assets to be exchanged for real money, you inherently make the virtual assets valuable… and a target for theft. One of ‘advantages’ of blockchain is that it’s all distributed, anonymous, and permanent.
So, that happened to Axie Infinity. Hackers managed to hack the company and change the owner of some Ethereum (the currency indirectly behind Axie Infinity) on the blockchain and poof: $600 million in digital assets gone.
Yes, you did not misread. That was a 600 million dollar hack. By making games virtual economies, the game industry has managed to turn themselves into juicy bank-sized targets. And the vaunted anonymity and distributed nature of blockchain, combined with zero oversight, or possibilities for oversight, means this is a very lucrative approach. As an aside, this is exactly what Charles Stross predicted in 2007 would happen with digital assets.
NFTs and cryptos are one thing, but gambling mechanics and the assorted psychological tricks are another painful staple of modern video games.
I’ve recently played a lot of Vermintide 2 with my friends. A fun Left-for-Dead style co-op game. A game I bought, which then started to try and sell me more stuff the moment I logged in. At the center of the starting area is a market stall where you can buy customizations for your characters. New helmets, or armor, or swords are all on sale. You can buy them with virtual currency, or real money. You also get random items from loot boxes after finishing missions.
Vermintide isn’t as bad as other games, but the mechanic is annoying. You buy a video game, then are urged at every turn to buy more. Those games will often use virtual currencies (often more than one), free starters to get you hooked (like drugs), sunken cost tricks, and social pressure, to sell you more stuff.
Ever wonder where the “You’re basic” curse came from? Well, video games where you ‘only’ have the free basic skins. It’s all psychological tricks, trying to push you into spending money. The video game industry executives are laughing their asses off that they got that saying into circulation.
Now, using psychology to sell products isn’t illegal, but I do find it questionable. I think it’s good to pay money for entertainment (books, movies, games), but trying to trick me to spend more is not necessary, thank you very much. But even that is not the worst of it.
Now, these gambling mechanics are psychological tricks. Annoying for me. But… I am not the real target. They are for a very specific group of people. You see, all these tricks work best on certain people, namely people prone to gambling addiction. And, funnily enough, that’s often the neurodivergent, children, and people who’re already suffering from gambling addiction. In other words, vulnerable people.
And this is not an accident. These mechanics are specifically aimed at exploiting those groups. There are stories of children emptying their parents’ bank accounts, or addicted people losing tens-of-thousands of dollars to these games.
On top of that, games are deliberately made less fun, to push players to spend money to skip the less fun parts. The games have a ‘grind’ built in, chores that people have to perform to get to the fun parts. Then you can pay to ‘skip the grind’. Don’t believe that’s happening? A prime example is that publishers ‘rebalance’ games after taking out the gambling mechanics. You don’t need to rebalance if there is no grind to rebalance, do you?
So, game publishers are making games less fun, and add gambling to try and milk money from vulnerable people. Oh, and they call these people ‘whales’ to dehumanize them, and make it seem less bad that they are exploiting them.
Back to the questions
So, still remember those questions?
Would you mind it if you had a job where you had to pay a fee to enter a workplace where your job was to sell things you bought there to other people also present? That’s really about games like Axie Infinity. A ponzi scheme, in other words. And as silly as this sounds translated to the real-world, that is what those actually games do. And to get a bit ahead of myself, that is what these games do to your children.
Would you mind paying a fee for an amusement park, only to learn inside that the rides had been placed extra far apart and if you wanted a cart travel the distance, you’d have to rent it? Well, that’s how video games work now. And many gamers cheer this on, because the game creators try to foster the idea that all that grinding is to create status for those that do it. The idea that only those partaking in this grind are worthy to be called ‘true gamers’. Hint: that’s BS, it’s about people paying to skip the grind.
And finally, would you mind if both of the above things were marketed specifically to (your) children and vulnerable people? A harsh but unfortunately valid question. If the amusement park made rides inaccessible to wheel chairs, then charged extra to help handicapped people use the rides, would you like that?
If your answer to any of these questions was ‘no’, you should know: this is all happening, and it’s not going to stop by itself. It makes companies shitloads of money. If you make exploitation legal, exploitation is what is going to happen.
Government rules are the only way to stop this. Now, I’ve received hate mail calling me a communist, or a lefty snowflake, but really, what I’m saying is ‘no’ to these questions above. And governments are the way to stop this. The free market cannot and will not solve this. That’s not communism, that’s saying ‘no’ to the exploitation inherent to unbridled capitalism disguised as ‘freedom’.
So, please, say ‘no’ to this shit too.