Cryptocurrencies and NFTs

Technology
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I finally read this article, and he touches on something about NFT’s that still, for the life of me, does not make sense:

NFTs differ in two respects from digital assets like the hats in TF2: The blockchain cuts out the company (e.g. Valve). And it allows the digital asset to emigrate from the game/realm that spawned it to any other digital realm.

Emphasis mine.

How exactly is this pipe dream supposed to work? I understand that the token itself is not the asset it purports to be, so the token can be moved around - but the thing that I see NFT stans tout is that you’ll be able to buy some specific digital asset, and port it all around into different games or whatever. And…how? How is that supposed to happen? How can I buy a digital asset that can be readily used in both Minecraft and Battlefield?

I know the answer is “it won’t,” but this dude is repeating the idea (in an otherwise excellent article) and I’m left wondering.

Or is he talking about something else that I’m not getting?

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It is of course bullshit. It is a hypothetical use case, that nobody is actually going to implement because it doesn’t make sense to utilize an asset in your closed system that was created by another company. You could for example already theoretically make use of Yu-Gi-Oh cards in Magic the Gathering in one form or another, but why would WotC (the company that makes MtG) want to do that?

Of course, if you actually ask for a concrete example from people who purport this use case, you won’t be given an answer.

There is the possibility to use assets within your own company as it is a closed system and ads value for loyal customers, but that is already possible and doesn’t require a useless blockchain. Similar, MtG has joke-cards that require you to use other Hasbro products like Nerf Guns and Transformer toys.

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It actually can work.

Let’s say for instance that you have a particular mount in World of Warcraft. As far as I’m aware, World of Warcraft does not have an API. That means no other software can check what mounts you have in WoW. If I wanted to make a plugin for this forum that showed your WoW mount next to your avatar, I don’t think that would be possible even if you linked your forum account to your Battle.net account.

Now let’s say you have a hat in TF2. I think that Valve/Steam does have an inventory API. It should be possible for me to make a plugin for this forum whereby you would attach your Steam account to your forum account, and then I could display your current TF2 hat next to your avatar. The problem here is that the hats, the database, the API, are still all controlled by Valve. If they change that API, if they take the hats, if they shut down, there’s nothing our forum can do about it.

Now let’s say that I make a game with hats, and we put all the hats on NFTs in the ETH blockchain. ETH blockchain is publicly visible. Everyone can see which wallet has every hat. Even if the game I made dies and our company goes out of business, the records of who had which hat live on “forever” as long as ETH is still a thing. And nobody can mess with it any more than they can mess with any blockchain biz.

Even though my company went out of business and my game shut down, there is still a forum of former players that lives on. And that forum software looks at the blockchain to see who has which hat. And some forum accounts have linked their wallets, so the forum knows which hat goes with which account. And players can still trade/sell hat ownership.

Any new or existing software can choose to voluntarily recognize ownership of NFTs and build features around it. I could make a plugin for this forum to show racist apes next to anyone who can prove they own one. I can make it show hex shaped avatars next to anyone who bought those Twitter NFTs. Even if Twitter shuts down, those features will continue to work as long as ETH is a thing.

The thing is, this only works as long as software developers voluntarily build these NFT-recognizing features into their software. That doesn’t seem to be happening. What incentive does Counter-Strike have to let you use skins from Call of Duty? That said, Call of Duty has a big incentive to get other people to build features that recognize Call of Duty NFTs, as it increases the market for them.

Imagine if everyone on all of Twitter could only have an egg avatar unless they had a particular NFT. That’s certainly something Twitter could do. Oddly enough, that would be a case where Twitter’s power of centralization would be used to enhance the “value” of something decentralized.

Zooming out on this issue, there’s a more fundamental explanation.

There are databases in computers around the world. Most databases, the data is meaningless. I could make a database on my computer right now, and put whatever I want into it. Completely meaningless.

Other databases have great meaning because there is power behind them. The IRS has databases. Law enforcement has databases. DMV has databases. Banks have databases. The data in those databases matters. Just a few bits of data in those databases changing could have huge real world consequences.

Why is this? It’s the same reason money has value. Because people value it. It’s self-fulfilling. If enough people decide and agree that there is meaning behind a thing, then the meaning and value comes into existence. The conch in Lord of the Flies is just a big seashell. But because they agree it has a meaning and value, it suddenly actually does.

And that’s the strategy not just of cryptocurrency, but of many (most) digital businesses.

  1. Create a database, nobody cares what’s in it.
  2. Make people care what data is in that database.
  3. Profit because you have control or influence over that database.

The idea of having more games implement NFT-recognition is in service of step 2. It’s a somewhat feasible pathway towards making more people care what is in the database. Therefore they keep repeating the idea (since they don’t have any better ones) in the hopes that it will become reality. It’s not like coin people can force game publishers to do it, but they can certainly keep suggesting it in hopes that they are heard.

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Functionally, yes this elucidates a scenario in which a game could rely on the blockchain to utilize 3rd party assets.

But because NFTs are only addressing ‘ownership’ amongst the NFT crowd and not with real-world legal copyright ownership, the first time an asset is used in a game and made visible to other players where that artwork is actually legally owned by another entity they sue the game studio or production company for illegal use of copyrighted material and then the game stops using stuff from the blockchain in their game.

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This is an excellent point, and there’s a lot of weird lines here.

Consider a very copyright aggressive company, say Nintendo. To my knowledge they have never gone after someone for having a Mario Twitter avatar. That’s technically copyright infringement. They could go after Twitter and/or the user depending on the laws and territories and whatnot. But they haven’t.

Letting people set avatars from whatever image, such as sprays in Counter-Strike, is basically the same thing. See also customizing all kinds of things in Animal Crossing. Don’t even get me started on all the stuff available in Roblox or Minecraft. Doesn’t matter if there’s NFT/coins or not. Player generated content in games that uses copyrighted material has largely been permitted, even when technically illegal.

The question is really what if Call of Duty lets people use Counter-Strike skins. Artists employed at Valve made those skins, presumably. This might be a situation where you do see the copyright lawyers come out.

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It could probably be argued that when a game simply allows users to upload content for use in the game, that the fault lies with the user if they use copyright material without permission (I think games have some disclaimer to this effect) but that if the game implements blockchain integration to pull NFT content into the game then they are taking a more active role in the copyright infringement.

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I kinda see where you are going with this, but not really.

If I make a web site and I let users set their own avatar. I give two options for users to set their avatar. Option 1, they paste a URL to a jpg. Option 2, they upload a jpg. Either way, my software is going to be acquiring a copy of that jpg, storing it in some places, and redistributing it. As far as copyright law goes, I don’t see any huge material difference. NFT is option 1.

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For sure, IANAL. I get your point, it probably depends whether it is simply following the URL the user provides from their own NFT or if they somehow tie into the blockchain network and authenticate that the user is indeed the owner of the NFT and then do whatever that NFT says. It depends on what the game is actually doing when it “uses NFTs”, how deeply integrated it is. Anyway, I’m not saying I’m right, I just think there are lawyerly arguments that can split these hairs even if they can’t ultimately get a court to agree.

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I do think you are correct in that part of the reason they don’t care about things like Mario Twitter avatars now is because there is no money in it. There is money in NFTs (for now). And the presence of money might draw attention to where there currently is none.

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OK, so indeed, I’m not actually missing anything. This was how it seemed to me to be - in principle, a software developer could incorporate blockchain tracking of digital assets, but it’s entirely up to them to do it or not. It won’t actually become a thing unless other people make it a thing, so NFT people are out here talking about it as if it were a reality in the hopes that it becomes reality.

It’s a tactic I use when doing social negotiation - frame the conversation in such a way that we’re talking about a thing in a way that only makes sense if I already got what I want. The NFT people are just trying to brute force this nonsense into being.

There was some Tweet the other week I saw, where a guy was specifically talking about how blockchain would let him take his racist ape and put it any game, and a software developer straight up said “how exactly would this work unless every game developer decided to work with a unified system to allow it?” No real response, just more NFT magic.

Great post, thanks for the breakdown.

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As I understand it, ultimately there’s the core of NFTs as a scam. People who know how to play the game, just want to ultimately cash out, sell their NFTs as high price as possible, but that requires buyers and those can be made by creating use cases for NFTs that sound believable enough for people dumb enough.

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What a lot of the NFT supporters are supposing here is a unified API for all( some?) game assets.

But, as has been pointed out, everyone needs to code support for this magical API. But it does go beyond just support for the API.

Let’s use skins for an example. I buy a skin in CoD, I now have an NFT of it. Now I go to WoW and I link my wallet and boom my CoD skin is on my warlock!

Well, somehow the skin file needs to get from the CoD servers to the WoW servers, because the skin itself isn’t in the NFT (it could be!), currently all NFTs are just receipts.

Let’s give them that the NFT actually does contain the Skin, great, now WoW can download it and use it right?

Well, WoW doesn’t run the same game engine as CoD, so the formats are completely different. Blizz would have to implement a conversion algo for the file format for all the games out there into their skin format.

It’s a pipe dream, even trying to steel man the whole idea. Sure, it’s possible. It’s also possible to walk right through a wall in such a way that all the sub atomic particles in your body just pass right through with 0 interference. It’s just never going to happen.

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Yeah, this was the exact response I saw in the aforementioned Twitter thread, and my non-coder non-software-developer self was like “I mean obviously that would be the case, different games use different engines, how would you implement this?”

I figured there must be something I was missing because it seemed like an obvious problem that a child could understand - but apparently not.

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Yeah, I imagine that for anything that isn’t just a simple flat jpg file or whatnot, that the implementation would be based on receipts instead of assets. The non-originating side would have to create identical assets to match up with each NFT. It doesn’t even need to be identical to the original. It could just be somewhat related to the original. For example, owning the official Marvel Spider-Man NFT could get you a bunch of Spider-Man themed biz in whatever game.

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On one hand the NFT code could contain data that was built to some commonly agreed format or standard templates that multiple games agree to be able to read from. (The fact that we could just have companies agree to this without the NFT aspect notwithstanding)

On the other, game devs could absolutely troll the fuck out of NFT holders. Oh you have the NFT for some cool mask in your Tom Clancy game? Sure go ahead and link it to my new game. Congrats! Your account is now permanently flagged so that your avatar is a slow, always-bleeding zombie, that farts with every footstep. Have fun!

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As long as having the coins gets you something that coin not-havers don’t have, then people will want it.

Imagine you tried to penalize coin-havers by say, lowering their XP gain rate by 50% or 75%. Someone would still want that so they could say they did it on hard mode or whatever.

And without some way to verify that a particular account owner is the person who controls a particular coin wallet short of them voluntarily proving it to you, there’s no way to reliably punish coin-havers that don’t identify themselves.

Therefore, simply not building any coin feature whatsoever is the way to go, as any recognition whatsoever, no matter how negative, will add meaning and value to the blockchain, which is their goal.

The only better thing that can be done is to simply build these exact features without involvement from the block chain. A lot of this already exists with systems like Steam inventory. Imagine if several game companies combined their efforts into create a single centralized database that could be shared across games and platforms to track digital things players “owned”, both fungible and non-fungible. Leave it open so anyone can build a new game upon it.

Quite a few attempts have been made along these lines. I know there are a few non-crypto currencies you can tie your game into. Most of the ones I’ve seen are basically just fungible currencies. The idea being that several games allow the use of the same currency in their in-game shops. This lets players earn the currency in their choice of game, and spend it in their choice of game. A developer has an incentive to build a game that uses that currency in order to tap into existing player base. And if it’s easier to earn the currency in your game, or more desirable to spend it in your game, you have a mutual boosting effect with the other games. Sort of like different slot machines all taking and dispensing the same tokens.

The reason none of these have taken off is because none of the really huge games have taken part in them. Also because involvement in something like that takes control of the economy out of the hands of the publisher. It would obviously break everything if someone could earn WoW gold in some crappy game that had huge low effort payouts and then spend it in actual WoW.

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Non fungible but totally variable.

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The core concept isn’t really anything bad. Sell a ticket. The ticket is perfectly unique in the world, and is freely transferable. Whosoever owns the ticket is granted some set of privileges.

Nothing wrong with any of that!

The problem is

  1. Implementing the ticket using a harmful blockchain when many other vastly superior and less harmful ways of implementing it exist. You could implement it as a physical object.
  2. Treating the ticket as a financial instrument or investment instead of what it actually is. See also people treating real estate as an investment instead of, or in addition to, the human right of shelter.

Fun fact, DNS domains are basically NFTs. You register a domain. It’s yours to control. Only one registrant per domain. They have somehow managed this system for decades without any blockchain biz.

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Yubikey x Amiibo.

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It would be pretty funny to build some “apply for coin” feature that just terminates the account.