Dialogue with a16z partner: What is the impact of Steam suspending Web3 games?

Original Title: 《 Buidler DAO Translation: Steam Suspends Web3 Games》

Compiled by: Buidler DAO

Recently, Valve Software, the operator of the world's largest gaming platform Steam, announced a new rule regarding games that use blockchain technology or allow users to exchange cryptocurrencies or NFTs. This rule can be found in the introductory guide for developers on what content should not be published on Steam. We take a perspective beyond that of players, focusing more on the trends here. These restrictions not only affect game developers and players on the platform but also impact the business models of the gaming industry and innovation in the Web3 gaming space. Our invited guests are Jonathan Lai and Eddy Lazzarin, partners at a16Z.

Dialogue

Host: John, let's start with the importance of Steam, and Eddy, please introduce the significance of the Web3 movement, then we can delve into the specific details and impacts.

Jonathan Lai: Steam is a digital distribution platform with a desktop client that users download to their computers to play games. At the same time, you can click into the store to purchase games from around the world. Steam has over 120 million monthly active users and popular games like "Counter-Strike," "Team Fortress," and "Dota 2."

Steam is very friendly to game developers because they no longer need to go through publishers to release their games. They just need to create a developer account on Steam, upload an executable file, and with a few clicks, the game can be sold to people worldwide. You can think of Steam as an app store or PC game store.

Host: Steam is the leader in the gaming field; why is it in the news now? What does this mean?

Jonathan Lai: This is a significant signal for the market; Steam has a great reputation in the game developer community. It was the first company to be open-source and the most developer-friendly. Many software products are built around Steam, and if your game is a popular title with high transaction volumes, the most significant impact of this news is that it announces Steam's rejection of blockchain games. This has raised concerns among many Web3 game developers about whether they can still release games on Steam.

Host: So what impact does this decision by Steam have on Web3 games?

Eddy Lazzarin: From a player's perspective, my view of Steam is that it allows us to eliminate an important intermediary, which is the game store. In the past, games were purchased as physical game discs or cartridges. Steam replaced this model by allowing game publishers to distribute games directly to everyone's gaming devices, significantly reducing resource waste. Now, Steam acts as an intermediary between game publishers and players, controlling the gaming economy and even the types of technologies you can use. It forces game developers and publishers to rethink their distribution channels, just like other types of media.

Host: We have heard a lot about NFTs, blockchain games, and Web3 games in the gaming context; what is going on? What are Web3 games, and how do they differ from traditional games we are used to?

Eddy Lazzarin: We are in the early stages of Web3 gaming, but it has financial and composable attributes, and we may see more of its financial aspects. At its most basic level, it involves using blockchain or cryptocurrencies as a medium to pay for games or in-game items.

But interestingly, Web3 allows players to truly own the items within these games, going deeper into the experience. To some extent, even game developers cannot confiscate assets. This also provides players with the opportunity to trade these items in a legitimate way that is very difficult to evade or disrupt in the secondary market. And because of blockchain technology, these game assets or money can completely exit the Steam platform.

I worry that Steam's one-size-fits-all approach will throw out both the good and bad aspects of Web3. Because they limit the composability offered by non-financial applications in Web3, blockchain and Web3 allow developers to recombine different elements within games, such as items, land, skins, and all different types of entities, which others can build or expand upon; this process is somewhat like modernization.

Web3 offers some very interesting ways for truly high-quality users to improve the modeling that expands the remixing process. By restricting any games built using blockchain technology, Steam also limits this recombination. This is an extension of the modern culture that Web3 will bring.

Host: Setting aside the hype, what are the practical impacts of Steam's decision on Web3 game developers and their users?

Jonathan Lai: Certainly, some project owners and NFT holders will have doubts about the gameplay of blockchain games; they will have to shift their games and find ways to build communities elsewhere, which I think is always challenging. But this is not an insurmountable challenge; in fact, most Web3 games are doing very well in community building. Look at most mainstream projects now; they all serve thousands of people discussing games through Discord, and in a sense, they should be able to make money by directly issuing to players.

Host: Given this, do you think Steam would want to find a way to coexist, but they seem to see all these fundamentals, so why did they set this restriction?

Jonathan Lai: I think there are two potential perspectives to explain Steam's actions. There are two viewpoints: one is friendly, and the other is harsh. The friendly perspective sees this as Steam trying to avoid financial reporting and related legal requirements regarding cryptocurrency asset trading.

The other viewpoint is that Steam wants to fundamentally maintain control over the market. This includes everything—game content, game types, and pricing. It criticizes Steam for taking a cut from the games distributed on its platform. The economic activities related to Web3 games and trading NFTs are difficult to control, although Steam is well aware that these are happening on the platform.

Host: What do you both think is the most important aspect?

Eddy Lazzarin: For me, the most important thing is that Web2 companies, including game companies, must reconsider how Web3 will affect their fundamental business models, including tax distribution, which is a major source of revenue for these types of application platforms.

Jonathan Lai: Web3 fundamentally disrupts app stores like Steam because this method of game distribution threatens the distribution power held by publishers. Steam blocks and monitors components on its platform, and I think this is a defensive measure on their part.

For me, the key point is that if you are a blockchain-based game or NFT developer, you have unfortunately lost the largest digital distribution platform or PC game distribution platform today. I hope to see new Web3-native distribution platforms where buyers diverted from Steam, Apple, Google, and other platforms can all use one platform.