Valve vs Blockchain Games: What has happened so far?

Valve's decision to ban games that use blockchain technology or promote non-fungible tokens (NFTs) has baffled and upset many in the gaming and Blockchain community. It has now drawn the ire of a coalition of blockchain groups and game companies that want Valve to reverse its decision. In an open letter to the company, Fight for the Future, Enjin, and The Blockchain Game Alliance, along with 26 other blockchain game companies have asked Valve to reconsider the ban on web3 technologies such as blockchain games and NFTs.

"Games that utilize blockchain technology and web3 token-based technologies like DAOs (decentralized autonomous organization) and NFTs can positively enhance the user experience of games, and create new economic opportunities for users and creators. Tokens, in particular, open up vast possibilities for users to interact, collaborate, and create tangible digital worlds and items that were previously impossible. These enhancements make games more ​​decentralized, democratic, interactive, player focused systems," the open letter said.

In October, Valve notified game publishers including the developer of a game called Age of Rust — SpacePirate Games — that the Steam store will not entertain any games that are built on blockchains and support exchange of cryptocurrencies and NFTs. 

Epic Games, the makers of Fortnite and also Valve's key rival in PC game distribution, have already extended support for blockchain games and use of NFTs in gaming. Valve announced the decision to ban blockchain games on October 16 through an update to its guidelines. Epic Games announced its support on the same day.

“Epic Games Store will welcome games that make use of blockchain tech provided they follow the relevant laws, disclose their terms, and are age-rated by an appropriate group. Though Epic's not using crypto in our games, we welcome innovation in the areas of technology and finance," Tim Sweeney, Epic's CEO, said on Twitter.

Valve is the biggest game distributor in PC gaming. According to industry estimates, the company's PC game store, Steam, has over 50,000 games and close to 120 million monthly active users. Needless to say, a ban on blockchain games on Steam would be a major setback for game creators who want to leverage blockchain and NFTs to build new gaming experiences, but at the same time depend heavily on Steam's wide distribution and reach.

“Blockchain games are pioneering a number of new concepts that will invigorate the gaming industry for players and publishers alike. To cut-off this burgeoning sector at such a crucial stage of development is to ignore the remarkable progress we have achieved this year, while creating unfair access to market for incumbents," Sebastien Borget, President, Blockchain Game Alliance (BGA) said in the open letter.

The gaming industry has always been at the forefront of embracing new technologies that can enhance the gaming experiences, be it the adoption of cloud gaming to stream games on any device or leveraging virtual reality (VR) to create and offer immersive gaming experiences.

Valve's decision to ban games that support NFTs is driven by its policy, which doesn't allow game items that could have real-world value. NFTs are digital assets that signify ownership of other digital items, like a piece of art or an in-game item like a gun. Anything from artwork, songs, moments from history or assets in game such as weapons or skins can be converted into NFTs. Players can sell these NFT assets to others for real money.

The argument to ban cryptocurrencies in any industry often hinges on their validity as legal tender, which is still not clear in many countries. However, the ban on blockchain is a bit surprising. Valve's stance on blockchain games is likely to have been influenced by the fact that it also goes against the existing model of controlling games. In blockchain gaming, the data assets are not stored in one centralized server. The core logic and assets are distributed among players and are governed by smart contracts, which allows entities other than the creator to recycle the game or even make another version of it.

Chris LoVerme, CEO of SpacePirate Games rues, "Decentralization with cryptocurrency is often misunderstood and viewed as a threat to the status quo. In the case of players owning NFT gaming assets, closed platforms see it as competition. The narrative from those walled gardens regarding blockchain technologies is similar—it’s either not in line with their core model, or the technology is simply labelled to be a larger risk."

In the open letter, BGA's Borget invited Valve and the broader mainstream gaming industry for an open dialogue "to better understand their perspectives on the challenges ahead, and to determine how we can collaborate more effectively in future."