How NFTs can change Steam Community Market?

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Almost all people share the same dream: to make money from a hobby they love. Marketers know about this dream, and they strive to make money from it. That is why one of the primary expressions of 2021 has become “play to earn”.

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The revival of the play-to-earn concept is associated with the boom of non-fungible tokens (NFT) in the cryptocurrency market. The French corporation Ubisoft was the loudest in this field: the company introduced the so-called Digits linked to tokens into game ecosystems. This has led to scandals and excuses from the management, saying it is done for the benefit of gamers.

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However, a legitimate question arises: how does trading tokens with pegged assets differ from the usual speculation on the Steam Community Market, the most popular platform for exchanging game items today?

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I answer this question by looking at how the economic community created by Valve works, what weaknesses it has, and what preceded its emergence.

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World of Warcraft is the reason for the emergence of the Steam Community Market

At some point, Valve began to think that video games are not only entertainment but also an environment in which players can engage in creativity and even make money. To prove or disprove this point of view, the head of the corporation, Gabe Newell, went to World of Warcraft. He was engaged in the farming of in-game gold. According to Newell, he began to earn about $20 a day at some point. And the developer also noted that he is not the only one dedicated to entrepreneurship in the game.

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So the company realized that every gamer could create content for the game, and there was a demand among players to develop a trading ecosystem. This was the starting point for the emergence of the Steam Community Market.

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The first and the primary date in the history of the Steam Community Market was May 21, 2009. The Sniper vs. Spy add-on for the Team Fortress 2 shooter was released on this day. Valve added the customization of characters with hats and other headgear to the game. Initially, there were nine of them in the game, and you could only get hats while you were in the game.

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Gradually the insanity around hats grew. Players sought to get all the hats on their characters, and participating in matches was the only way to unlock them all. Some Team Fortress 2 skins were weird: you could even put a chessboard on your character’s head. Interest was fueled by the constantly renewing pool of game items and total randomness: the player could get any item.

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Examples of headgear in Team Fortress 2

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However, so far, there has been no functionality for trading. When Team Fortress 2 was filled with content, on August 9, 2011, the Steam Community Market started in beta mode. Here players could exchange and trade hats. The website users set the price of skin, and Valve took a commission for each transaction.

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Players were also able to add their content to Team Fortress 2. Steam Workshop allowed those who wished to publish a unique content they created, which Valve could later add to the game. In this case, the creator of the hat was paid a dividend from each transaction in which their item was used. Items were added to the game along with updates, and as of 2019, there were a total of 1,671 hats in Team Fortress 2.

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Then other Valve games joined the skin trading ecosystem: Counter-Strike: Global Offensive and Dota 2. The next notable player on the trading floor was PUBG.

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Today, in addition to skins, the Steam Community Market sells collectable cards based on various games. In this case, the income is distributed as follows: part of the paid amount goes into the developer’s pocket and part as a commission to Valve.

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It is almost impossible to make money on Steam Community Market. Most players use third-party services

In practice, the Steam Community Market resembles a commodity exchange. Some players put up in-game assets for sale and name their price. Others name the amount they are willing to pay for the item. Also, before buying or bidding on an item, the player can read the price dynamics. This way, he can adjust his initial offer.

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Selling in-game assets on Valve’s site is pure speculation. The market participants value the goods themselves, and their value can change dramatically in a short period.

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In-game items sold on the Steam Community Market usually do not affect gameplay. They are merely external attributes designed to demonstrate the player’s wealth, skill level, or passion for collecting.

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One of the vital pricing parameters is product rarity. Some in-game items are initially produced in a limited amount or have a low drop rate. For example, the Glock-18 Fade pistol skin no longer falls out of the CS:GO shooter cases and is now only available to traders.

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Glock-18 Fade

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The absolute record among such deals was set in June 2021. Two collectors from China purchased skins for the AK-47 and AWP. The skins for the AK-47 were equipped with StatTrak, a counter for kills committed. The total amount of the deal was $775 000. China remains one of the most active countries in the skin trading market. Chinese users are more willing to pay for skins.

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But when we talk about transactions on the Steam Community Market, we must understand that Valve has made the one-way movement of funds in the market. This means that the player can earn as much money as he wants on the internal exchange, but withdrawing them in a real way can only the author of the sold skin. Gabe Newell’s company offers to spend the money earned in games exclusively inside Steam, and this is where third-party websites and platforms come into play. A lot of record-breaking deals are made there. But there are nuances.

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Valve does not approve the trading of in-game items on third-party platforms. Such platforms are almost not regulated by law, and the user entering them is not protected from cheaters.

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The principle of operation of such services is simple: the player enters the site through his Steam account. All the existing items in his inventory are pulled into the created account. This is due to an open API Steam Market. Valve specifically made it available to all developers so that anyone can create additional software for the platform. However, there is a restriction on skins trading: in 2018, the company introduced a ban on the resale of CS:GO game items within 7 days after the transaction.

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It’s not easy to make serious money trading in-game items. Successful work in this market requires a deep level of immersion in the informational field, forecasting skills, and the ability to recognize fraud on time.

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One of the rarest skins in CS:GO - Dragon Lore for AWP

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The most popular items in the Steam Community Market are directly related to cybersports. Therefore, speculators closely monitor the events, know the most popular cyber athletes and compete for the most valuable gaming items marked Autographed. These are goods on which a particular cybersport athlete left the mark. Also, during the most significant events, the developers of the game release special packages of stickers on weapons. At this point, it is crucial to actively purchase cases and play yourself to get the desired items because, at the end of the event, they will be removed from the cases.

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The concept of play to earn performed by Steam has some limitations and dangers for the average user:

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  • Limited use of funds. As soon as a user signs an agreement with Steam, he admits that his money can be used only on the internal game platform.
  • High commissions. Every transaction inside Steam is concluded with a commission of at least 15%.
  • Fraud on third-party resources. Searching for reliable sellers and sites to work with in-game assets for real currency involves serious risks, both from the counterparty and the intermediary service.

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Counter Strike: Global Offensive

Can NFT technology develop the concept of play-to-earn in Steam?

The short answer is yes. But there are a few nuances. Using blockchain technology in in-game item trading is akin to trying to blow smoke with a sledgehammer.

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The point is that non-fungible tokens are used in conjunction with the concept of a metauniverse. A large digital ecosystem combines more miniature ecosystems and individual products. In it, NFT should theoretically be used as digital documents proving a particular user’s exclusive ownership of a specific asset within the digital space.

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In practice, there is no need to use tokens for this purpose. An NFT is an online certificate that contains metadata about a file and includes a link to it. Nothing more. Proponents of introducing tokens into everyday life point out that they can be used to keep a decentralized record of all concluded transactions, which no one will ever be able to fake. However, there are doubts about the necessity of such a tool. For example, there are no proven cases of falsification of transaction data by Valve. So why fix something that already works?

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Here crypto-enthusiasts can point to the existence of a permanent commission on the Steam and the threat of creating a market monopoly. However, NFT trading has not been able to offer anything competitive in this aspect. The need to pay a gas fee for a transaction forces the user to give up significant large and often unpredictable amounts of money. And on token trading platforms, every action results in the payment of a commission. This money is charged for calculating the transaction and registering the change of data in the blockchain. The size of the gas fee kills an entire segment of small transactions: most in-game items on Steam are cheaper than the transaction fee on the blockchain.

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Gas fees for NFT manipulation: example of the Foundation website. Blockchain transaction fees are constantly changing

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The actual location of the source file does not change with each transaction. Token trading, in this case, is reduced to the transfer between users of access rights to a specific digital object. Since we are talking about in-game assets, the real owners of the conditional skins remain the platform owners or the video game publishers. This is no different from the distribution of assets on the internal Steam Comunity Market, where players can freely exchange items from different games through the marketplace.

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The use of NFT is inseparable from the mutual trust between the owner of the token and the possessor of the item itself. A digital certificate can contain a link to a file and a listing of its unique properties. But if we are talking about in-game items, it does not restrict the publisher from limiting access to the item via the token.

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Screenshot of Ubisoft Quartz presentation

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Ubisoft Quartz developers, talking about the release of game items tied to the NFT, put particular emphasis on the fact that their items can be sold on internal services and third-party exchanges. It would seem that here it is a play-to-earn concept without the restrictions imposed by Valve.

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On the one hand, it’s a definite plus: the higher the number of exchanges where skin can be officially sold, the higher the token’s liquidity. And the very possibility of legally withdrawing money after the sale of the skin simplifies the life of gamers. However, some questions remain: what prevents opening an ordinary website for trading game goods without being linked to NFT? What prevents game companies from creating a single website for everyone?

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The answer lies in the realm of conspiracy. Here’s one way: tying game items to tokens opens up a lot more room for speculation. A publisher that ties NFTs to games can make much larger profits from each transaction. Also, issuing cryptocurrencies is a great way to avoid responsibility to investors in case a particular project fails.

Conclusion

NFT is not necessary to create an ecosystem where users can freely trade game items. Tokens can only be a PR tool for publishers and a way to avoid investor claims in unforeseen situations. It remains a mystery why Valve does not allow full-fledged trading on its website. It would attract significantly more capital and stop numerous speculative and fraudulent sites.

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NFT may well be used in video game-related trading ecosystems, but their presence makes no sense at the current stage of crypto market development and involves apparent risks.

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