Running out of Steam

Valve's decision is good for blockchain incumbents

“First they ignore you, then they laugh at you, then they fight you, then you win,” so the meme goes.

That’s actually not the case when it comes to Steam, the behemoth PC game distribution platform, which before December 2017 actually accepted Bitcoin as a payment option before it become too volatile.

That sentiment hardened today with the news that it’s banned…

Applications built on blockchain technology that issue or allow exchange of cryptocurrencies or NFTs.

Of course, there is the loophole that PC games could use NFTs without issuing or allowing the exchange of NFTs or crypto.

But much like the blockchain games we currently see on the App Store or Google Play Store, why would you bother?

The point of using an open blockchain is to tap into all the other apps, projects, liquidity, community — the general ecosystem — available on that blockchain.

Putting your beautifully open project into a walled garden just doesn’t make any sense. You lose all the upside and at best gain the potential of better distribution that likely will be swiftly removed when Apple realises what you’re up to.

(We await to see if Google will be more open to this sort of stuff. Its recent deal to host the Flow blockchain on its cloud infrastructure suggests it might but don’t hold your breath when it comes to that 30% margin.)

Of course, it goes without saying that the vast majority of Axie Infinity’s +2 million DAUs are on mobile devices, but they’ve sideloaded the APK on their Android phones because it’s not available on Google Play Store.

I repeat: the most successful mobile blockchain game isn’t available on official app stores. Finally a business in which the phrase Build It And They Will Come has been fulfilled!

In contrast, the most popular mobile game available through official app stores is Upland, with about 40,000 DAUs.

That’s an order of magnitude difference, in part because Upland has had to design around a bunch of issues, notably the requirement for Apple and Google to get their 30% of any payments. Effectively Upland - an interesting Monopoly-style ownership game - has been hobbled because it’s really hard to cash out anything you earn in-game; a basic feature for any blockchain game and the driving force for Axie’s success.

Just hot air

Which brings us back to Steam — really what have we lost?

In this case, I think the surprise isn’t that Valve has taken this stance, it’s that it took so long.

Perhaps that’s easy for me to say because there are a surprising number of games using blockchain currently available (or listed) on Steam. There’s Age of Dust, CSC, Project Genesis, Beyond the Void, Dissolution, Light Trail Rush, Decimated, Neon District etc.

Presumably their developers are now looking for alternatives but thankfully there are some. Indeed the news is great for Ultra, which for the past three years has exactly been building out a fully-featured Steam-on-the-blockchain alternative.

It’s been a slow process and even now it’s not clear how quickly Ultra would be able to step into the situation with a fully functionally platform. As my recent video shows, it’s a nice product but really only a wallet for the UOS token at the moment.

Maybe Epic will step up to the plate but my gut feeling is that even the competitive advantage such a move would give it over Valve would clash with internal sentiment.

Brutally, I don’t think Epic is any more a fan of NFTs and blockchain than Valve.

[P.S. I’ve been proven wrong on this. Tim Sweeney is taking the competitive advantage albeit in an unprincipled manner as Epic isn’t integrating NFTs or blockchain into its games.]

Which makes the opportunity even more significant. Any successful PC game using the blockchain now has an open goal to shoot at. If you already have audience and some sort of proprietary distribution platform for your own game, why not expand?

Specifically this plays into the path of companies such as Immutable with its Immutable X Ethereum L2, as well as more centralized options such as Mythical Games and Forte.

Interestingly that little-known company Sky Mavis has over 400,000 DAUs for the PC version of its game Axie Infinity.

Suddenly those multi-multi-billion-dollar valuations don’t seem so ridiculous.

“First they reject you, then you eat their business for breakfast.”