If I paid for it, it’s mine.
This would appear to be a given in today’s consumer-centric market, wouldn’t it? Yet under particular legal circumstances, this adage may not always work out, even in the digital age.
The Western idea of ownership has its roots in Roman law that defined it as the legal relationship between an individual and an object. A notion almost as old as humanity provides the owner of an object with the legal rights to possess it, use it, and give it away.
As a metaverse/blockchain gaming company, we see first hand how technology is infiltrating all parts of our livelihoods, including the things that we buy. And, in the case of modern gaming where player purchases are fast becoming the norm, there comes a question of whether ownership and property rights need to be reassessed.
When gamers pay for game items or services, is it theirs?
When a player purchases and installs a video game, he or she is required to agree to the terms of the End User License Agreement (EULA) which gives in most cases property rights to the developer of any in-game assets. Then, using the notion that virtual assets mirror features of real-world property, a bunch of legal scholars suggested creating property rights suitable for gamers.
While we should talk about passing new legislation aimed to protect digital in-game assets or limiting the powers of EULAs, courts in the EU have already recognised that virtual items are more than real. Correspondingly, a court in Finland held that a defendant may be guilty of theft due to hacking an MMORPG account and stealing virtual items that belonged to the victim. Moreover, a French court decided that players have the right to resell digital games bought through Steam.
These decisions may seem to be mould-breaking, yet they should be seen as examples of ad hoc regulation responding to emerging digital ownership matters in countries with robust consumer protection regimes. The courts merely stepped out to protect, with available legal tools, the rights of consumers. The emergence of tokens and peer-to-peer commerce are said to give back power to the consumers and equalise the market position of small retailers with e-commerce giants so what’s not to love?
The industry fights back
However, not all participants in the gaming industry sit comfortably with this seeming shift in the powerplay to the consumer. Those giant gaming houses, benefitting from the status quo, stand to lose if players chip away at ownership, and resistance is demonstrated by a major player’s distancing from the use of blockchain technology to enforce ownership rights.
Non-fungible tokens (NFTs) rapidly became all the talk in the digital waters. While the tokens have been praised as the future of digital ownership and a huge breakthrough tech, not everyone was eager to welcome such novelties.
Around the middle of October, Steam quietly banned the use of NFTs and blockchain games. The world’s largest gaming platform took an opposing view that didn’t seem to have roots in particular fraud and environmental drawbacks concerning NFTs, but in the fact that these tokens have real-world value. The formal ban didn’t happen out of the blue as NFT game developer Satoshis Games claimed that Valve refused to release its game on Steam in September.
The decision might not have met with such controversy had it been because of concerns regarding possible fraud and environmental issues in relation to NFTs; blockchain maintenance being an energy-intensive activity. Detractors of blockchain point to the huge amounts of computing power needed to secure networks but proponents suggest that an environmentally friendlier future is on the horizon for NFTs owing to more efficient Proof-of-Stake blockchain networks, alternative energy, and carbon offsetting.
Another understandable reason behind the ban would have been Washington’s state law that entered into force in 2018 and the subsequent decision by the Ninth Circuit in Kater v. Churchill Downs Inc. that held that a free-to-play virtual casino app offering in-app purchases of virtual chips may constitute illegal gambling under the new state law.
Still, this can’t legally explain the ban of all NFT-based games on Steam, so users were stuck to contend with the singular reasoning of token-based games being banned simply for their implications of having ‘real-world’ value. From a purely commercial perspective, this makes sense as Steam doesn’t want to be stripped of potential revenue from the platform since NFTs directly contravene the platform’s profit rationale.
Only time can tell if this was a smart decision, taking into account that Epic Games Store, Steam’s competitor in the gaming market, openly welcomed blockchain tech and innovations in the fields of financial technology.
NFTs: The new kid on the virtual block
There is growing evidence that blockchain technology will continue to be a foundational part of digitally-secured ownership.
A few hours before the UEFA Euro 2020 final between Italy and England, the Italian captain released a number of NFTs designed to reveal “the spirit of the Italian team”. A one-off piece of digital art was sold for approximately $59,000. The anonymous buyer was willing to pay that amount of money for a piece of art they could never physically hang on the wall.
This year would see that trend amplify, with a watershed moment in 2021 when a work of art was sold as an NFT for $69 million at Christie’s Auction House. It’s a crazy but undeniable new reality.
Sajai Singh, the Chairman of the IBA Technology Law Committee, explained that the term ‘fungible’ in the name of the tokens highlights its main features, namely the fact that its identification code and metadata cannot be swapped with something else. Even though a single NFT has no tangible form, it is minted from digital objects that represent at the same time tangible and intangible items.
That being said, it is obvious that these tokens are reimagining the digital market. A number of major brands such as Disney, McDonald’s, NBA, Nike, and others have seized this opportunity and jumped on the NFT bandwagon to expand their reach and consumer interaction.
We at Cradles are also exploring further practical utility for NFTs, developing a new type of token (EIP3664) with mixed fungibility to enhance new gaming experiences for a modern breed of blockchain games.
While the industry should continue to globally conduct and ensure due diligence, weigh the benefits and drawbacks for consumer protection, and adapt laws to the new reality, Steam’s decision now seems to be even more peculiar.
One can only speculate if Steam, like Facebook, has different plans for the future, perhaps to make an entrance as a powerful stakeholder by developing a blockchain of its own or to implement a revenue-sharing policy on the platform.
But in the meantime, the gaming world will move on to take up blockchain and NFTs, with or without the blessing of the powers that be.
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