Crypto, FOMO, And The Crypto Blackhole

I don’t think there will be much progress on this front until developers are asking “How can cryptocurrency make my game more fun, if at all?” rather than “How can I add cryptocurrency into my game?”

- Tyler Cloutier, co-founder Clockwork Labs

Sometimes I travel down a rabbit hole and find some potentially surprising things. One of those rabbit holes involved Clockwork Labs. I wrote briefly about the company last week, as CCP Games was involved in a $22 million round of investment in Clockwork Labs in June 2022. Besides discovering CCP Games CEO Hilmar Veigar Pétursson was involved in an initial $4.3 million round of investment in August 2021, I found the BitCraft website hosts a blog. What I found kind of surprised me.

A month after the June 2022 round of funding, co-founder of Clockwork Labs, Tyler Cloutier, wrote a blog post titled "Thoughts on Cryptocurrencies and Games".  He had this to say about adding crypto-currencies to the company's game in development, BitCraft.

I actually don’t personally have a problem with using any technology that would help us achieve it. Fun is not about technology, it’s about game design and how players feel. My issue with cryptocurrency, I suppose, is not with cryptocurrency itself (energy usage notwithstanding), it’s that it’s used almost exclusively for high stakes FOMO. Using FOMO to drive players to our game or to bid up the prices on our hypothetical NFTs makes everything about money, rather than building a good game. It *doesn’t* increase the longevity of our game. It *doesn’t* make our community any healthier. And it *doesn’t* make the game more fun. In fact, so far in the places it’s been tried it has basically done the opposite in the long-term. For those reasons, we’re currently of the opinion that adding cryptocurrency to BitCraft isn’t going to help us towards our goal.

FOMO, or fear of missing out, is a practice found in a lot of MMORPGs. Cloutier goes on to quote Warren Buffet:

“People start being interested in something because it’s going up [in value], not because they understand it or anything else. But the guy next door, who they know is dumber than they are, is getting rich and they aren’t, and their spouse is saying can’t you figure it out too? It is so contagious. So that’s a permanent part of the system.”

But according to Cloutier, players are not the only ones enticed by FOMO. Game companies also do not want to miss out on the potential piles of cash web3 and cryptocurrencies can ultimately pile up.

In August of 2021, the crypto collectibles game Axie Infinity made $364,000,000 in revenue. I have relatively deep connections in the game industry and let me tell you that got the attention of every game developer I know, both huge conglomerates and small startups. The interest was 0% motivated by wanting to make a better game and 100% motivated by FOMO. By now the wave of fear has largely subsided and a lot of companies have stopped or slowed pursuing it, but rest assured it will be back.

When the potential revenue reaches 9 digits, a lot of game companies will ignore the wishes of players and play to the investors. So despite the negative consequences we've seen, game executives still want to grab for the brass ring.

Cloutier also indentified a pattern in the development of games using cryptocurrencies he calls "The Crypto Blackhole"

1. Developer states that they’re going to sell crypto assets to fund development of a game
   
   
2. Developer releases exclusive crypto in-game assets (land, cloths, creatures, energy, whatever)
   
   
3. Crypto speculators buy up all of the in-game assets hoping to make money on them
   
   
4. Crypto speculators aren’t interested in playing the game, because they prefer speculating
   
   
5. Gamers are not interested in playing the game, and can’t afford to buy the in-game resources even if they were
   
   
6. The game has no players
   
   
7. Crypto speculators encourage the game developers to make more speculative assets, rather than make the game better

The effects of the process result in what most gamers would consider unsuccessful games. While enticing due to the amounts of money made on the way down, the game's community becomes deadlocked and the game developers cannot get out of the hole they've dug for themselves.

I knew I had to write a short post on this topic after I saw the date on the blog post. The co-founder of a company writing something like this a month after some people involved in a $22 million round of venture capital funding thought they were buying into a crypto-game might have been shocking to say the least. But perhaps more importantly, I have reasons to dislike these types of game that go beyond "everyone knows those types of games are bad."