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> In theory, I actually like the idea of games connected to the blockchain. The issue is, now your little funtime activity has serious tax implications.

> Imagine this, there's a neat little space pirates game. You buy an NFT ship, you buy some space missles, some fuel, contract a crew, and you go out. Maybe the dollar cost of all this was $60. Cool.

More likely is you go out and encounter someone with a $600 ship and you lose $60. This is so much more insidious than pay to win games. This is paying to steal other people's money, and is going to be quickly optimized by anyone if there's actual profit volume to be captured.

What's actually happening is ecosystems with minor trades, not really any stealing, and everyone just banking on the pyramid growing larger with new base layers at the bottom so the older players earn more

>More likely is you go out and encounter someone with a $600 ship and you lose $60. This is so much more insidious than pay to win games. This is paying to steal other people's money, and is going to be quickly optimized by anyone if there's actual profit volume to be captured.

EVE Online already sort of worked like this a decade ago. It wasn't blockchain, but in-game currency was heavily laundered for RMT (real-money trading) purposes, and eventually became real money—largely via way of sales to casual players looking for a leg up.

What you'd end up with is these elaborate power structures, with elite players at the top who would fly ships worth thousands each (supercapitals). These ships would typically comprise their own fleet elements, with separate comms, intel and command structure. A single Titan used to be worth about $10,000 USD, but by the time B-R5RB happened, that was no longer the case.

"Total forces involved 7,548 participants. Damages amounted to an approximate real-currency value of $300,000-330,000 USD." [0]

All of this was for control of territory called soverign nullsec space or 0.0, which would reap massive amounts of profit for whoever controlled it. These profits owed to the mining of rare elements on planetary moons that were later sold, which in turn drove a large portion of the game's economy.

Leaders of these power blocs had crazy opportunities laid before them to turn their in-game wealth into real wealth. External gambling sites using in-game currency were huge for a while, and were probably central to some laundering operations.

[0] https://en.wikipedia.org/wiki/Battle_of_B-R5RB

EVE is a bit different as the RMT side of things isn't intentional and combatted by CCP. Taking part can and does get people banned from the game.

The dollar to ISK conversion comes from the sale of PLEX (https://secure.eveonline.com/plex) which was initially just a way to let people buy ISK by selling game time vouchers to in-game wealthy people. Essentially people were buying money from time rich players who then didn't have to pay to play the game. Now it's a bit more complex and MTX based as CCP have tried a few things to reinvigorate the player base.

But the key difference is that you can put real money in and get ISK but there is no legitimate way to take it back out again. So there is no capital gain and so on and the money you "lose" was already intentionally spent in that knowledge rather than being an investment it would be possible to recoup on and taking part in that eco-system is voluntary rather than mandatory.

(Disclaimer: I worked on EVE for four years quite a while ago.)

Yeah I'll just stick to my one time purchase space pirate game on steam

Every time a company comes around mentioning buying NFT's in games it sounds more dystopic than innovative, and games in general which require you to spend actual money on every little thing in game.

Taxes are the least soul-sucking aspect of this. I've spent an unreasonable amount of my life playing MMOs, especially the Korean ones, where most of the time the goal is to make (in game) money to get strong enough to take on the next piece of content. This is fun because it works like a version of capitalism without, well, everything else. Seeing numbers go up is fun, be it my character's Critical Damage or the funny number at the bottom of my inventory, and having a safe environment where that can be done at my leisure is fun.

But here's the catch: it doesn't stop there. Any of these games where progression is only gated by in-game money and player trading is enabled, will eventually grow an underground market of RMT (real-money trading). The second you're aware of this, it becomes impossible to think of the in-game money in a vacuum. Suddenly you go from playing for 8 hours to make 10 Million Mesos / Zenny / Alz / Whatever to working for 8 hours to make less than half you would working at McDonalds and trading that money for in-game money. This absolutely destroys any enjoyment you could possibly get out of the game, as it is no longer a game.

This isn't even to mention the people who literally automate the game to play itself to make passive income through hacks / bots, though admittedly that can be fun if you're the type of person who's drawn to breaking computers.

Tangent: my latest discovery solves this by just completely axing trading between players. You can collaborate in bosses for loot that gets split between everyone, but you can't just give anyone money directly. It's great!

Hah, did you happen to play Lost Ark at any point this year?

I played it for a bit but the combat felt like it was optimizing for spectacle rather than depth or satisfaction. Diablo III delivered the top-down grindfest fantasy better for me, so all throughout I kept asking myself why I wasn't playing that instead :p

But why do you ask? Did it go this route too? With Amazon money behind it I figured they'd be ruthless in stopping RMT.

I like Path of Exile for having an explicit Solo Self Found mode. Unfortunately they seem to be on a path of making top-end gear pretty much required, which just pushes out the casuals. Good chance I'll be sitting the next league out.

Oldschool Runescape has ironman mode as well

People smelt copper scrap into ingots. For a scrap yard this is completely pointless because they know how to inspect unprocessed copper waste and then have to cut the ingots up, you are spending money and time on your copper ingots and get less money in the end. Why do people insist on doing it? Because it is a hobby, because doing something yourself can be fun.

By your logic nobody should go on a vacation because the ROI is negative.

I'm not entirely sure I understand your comment, but I'm advocating for the opposite.

The ROI for a vacation isn't negative, because you're usually paid during those. In the situation that you're not, it just strengthens the point I'm trying to make. I personally took a 1 month sabbatical between jobs and it was one of the hardest decisions I've had to make. I knew I needed a vacation, but the thought of skipping an entire month's paycheck for that ate me up inside for the first week or so. And from what I've gathered, including talking about it on therapy, it's a common sentiment.

The point being that once money gets involved in a hobby activity, it infects every other aspect. It's no longer about having fun, it's about maximizing what you get out of it.

Note that I'm not saying this is a universal experience, but I've observed it in the situations I described in my original comment.

> There's some capital gains!

Are you really certain of this? Grinding and acquiring valuable inventory in a game is not necessarily the same kind of taxable event as buying/selling/trading.

If so, why would this not be equally true for any digital game (see: any currently active MMO) with currency or items which can be sold between players in the exact same way? See Kaze404's sibling comment.

I'm skeptic that it having blockchain/NFT components really changes anything at all wrt the legal tax situation.

I'd think that in most jurisdictions you could technically incur capital gains through any kind of online game with a secondary market for in-game items but also have minimum thresholds under which reporting is not required ($60 in a year would generally fall under such limits).

It's true for the blockchain game because all blockchain transactions are taxable events. If you purchase crypto from an American exchange and transfer it to your wallet, the IRS will know your address. Even if all you do is play games, the IRS will know your address and validate you reported it on your taxes. The chain is public.

> all blockchain transactions are taxable events

Far from it, actually.

> the IRS will know your address

How easy it is to get caught if you neglect it is orthogonal to if it's required or not.

> If so, why would this not be equally true for any digital game (see: any currently active MMO) with currency or items which can be sold between players in the exact same way?

It is already kind of true in non-blockchain games, but most of the accounting complexity is on the game company's end. This is described quite entertainingly in "Accounting for SaaS and swords" https://bam.kalzumeus.com/archive/accounting-for-saas-and-sw...

But it probably helps if trading in-game items for real money is not an officialy supported feature of the game, so only items you actually bought come with an extra service contract attached that the company needs to honor.

> You spent 3 missles at a cost of $10 each, but you got a whole ships worth of minerals worth $60, and some more missles.

Okay, but where does this money come from? Obviously, the $60 ultimately comes from your bank account, but how does the game stay in business if you can spend $30 (you said only three missiles were fired) and get $60 worth of in-game resources, which you can then sell and convert back into real currency?

If the answer is "other players", then what happens when the player base stops growing, or begins to shrink?

None of this stuff works without a continuous stream of new marks^H^H^H^Husers.

True, they live from selling the equipment to first timers. The thing is, most games work like that. They need new players otherwise they don't make more money, as players just pay to buy the game.

Every MMO in existence has external markets for RMT. There are stories of players in elite WoW guilds making 5-6 figures for helping noobs clear content.

Some people don’t mind spending $2000 to build an endgame character that’s only worth $1000 by the time they’re done with it.

We don’t call automotive hobbyists “marks” if they pay a mechanic to tune their car and devalue its resale price. Professionals/careerists exist in every hobby industry.

In the early days, when gold wasn't worthless, we used the carry players for gold, it was the equivalent to maybe $50-100/h?

Same for arena titles.

It also funded the guilds raiding expenses and external costs.

I feel like a lot of people that have opinions about blockchain and gaming, just weren't exposed or never got involved in these underground economies.

Wow, bravo. That is by far the strongest argument against NFTing games I've heard yet. It feels like it should be obvious and yet I've never seen it before.

Imagination has no borders.

His does sadly.

Sound more like an argument against tax system in US

You could do this whole thing with regular currency, so if you treat it like that the tax implications are no different to regular income. The government doesn't (yet) care how many apples you bought, or that you found some extra apples in the forest on your way home, they just care how much money you end up with when you sell those apples you found at the market.

Nobody is going to register a business to pay VAT in an MMO.

If you were paying taxes, wouldn't this count as income, not capital gains? A programmer doesn't have to deal with capital gains if they buy a laptop and then use it to earn money.

Yep. This isn’t some harmless thing you can just not report either. If the current administration has shown anything, it’s that they’re fully bought into finding every single tax dollar they can, even if it means hiring 100s of thousands of IRS workers.

Your only hope in this situation is some tax software add on for the game. I’ve used current crypto tax software, and it’s a complete joke. You might as well just assume you’re going to be audited if you do anything with crypto.

I'm a crypto guy, I like what it enables. But after using defi for a while, and dealing with the huge tax headaches it has caused me, this was the first thing that came to my mind.

If you're building a web3 game, and you don't offer a tool to export your in-game transactions to an easily importable turbotax format. US players can't play it.

But the problem is more complicated, everything in crypto is composable. So I could build a business off in-game assets, and the tool creator might have no clue that exists. So for example, in my space game example.... I might be able to use my minerals as collateral for a loan to buy another space ship. That loan might exist on a platform not developed by the game developers, and if it was the game devs that built the tax tool you're using... it might not properly capture that event. Maybe another platform offers insurance on that ship, and I need to pay a premium. The tool might not caputre THAT. The posssibilities for building a really cool space game are infinite, but these in-game events have real-world tax implications.

This all sounds ... horrific. I can't understand why anyone would want to play the game you describe, because as soon as you're hooking in actual finance ... what you have now is a job.

And much like with Axie infinity, it's a job that can only keep paying as long as there is either VC capital to burn or an influx of new people willing to pay your salary.

I've played a few play 2 earn games. In my opinion the fun is not in playing the game as intended. Crypto is a highly open and composable ecosystem. The real fun is trying to figure out how to game the game. If you're the type of guy who goes to Dave and busters and tries to figure out how the machines work so you can maximize your extracted value... you might like play 2 earn games.

In my opinion, the sort of person who is into this kind of idea is the sort of person for whom finance is a game. These people want to be the ones gaming the system and making money off of other people who are playing. They don't want to just be puttering around in a fake spaceship, they want to be the ones loaning out money and etc.

It's why I think every p2e game idea I've ever seen get proposed has had completely asinine sounding game play but plenty of opportunities to (in theory) make money off of taking advantage of lower sophistication players. The game play itself is secondary. What no one seems to recognize is that if the game itself isn't fun, there won't be any "normal" players around for them to fleece.

This makes me wonder if these games could be designed to DDoS the tax collection agencies of specific countries and force them to adopt a simpler tax code once millions of players suddenly have intractable tax return forms.

From my experience, these play-to-earn games (like Axie Infinity) are mostly played by people in poor 3rd-world countries like Vietnam[1] or Cambodia. Where if they can earn $5/day that's enough to live off of and replace any type of local job they could get. I highly doubt they care about nor pay taxes.

1 - https://fortune.com/2022/05/04/axie-infinity-sky-mavis-vietn...

I'm not sure we still call them 3rd-world, especially on the new world order. Do they still 3rd-world or now upgraded some levels ?

Even there, Axie was effectively a sophisticated Ponzi scheme. Players were lured into the system with the promise that they could make big money by playing the game -- except that the money was all coming from new players who had to buy items to get started. No value was created by playing the game, and the vast majority of participants ended up losing money to pay the small number of players who did make a profit.

It would be wrong to describe it as a game. More like "ponzi scheme with an interactive component"

It is a multi level marketing scheme with a useless product.

> Maybe the dollar cost of all this was $60. Cool.

Minting fees for NFTs range from $70 to $300. I'd expect to pay $1000 minimum for a ship that's actually good.

In what way this game should sound appealing?

It's like a normal space game, but now you have to pay 10 dollar to shoot a missile. Doesn't seem very cool

Hearing it this way reminds me of parallels to the real world.

Each modern military war is also an economic war between the belligerents economies to sustain the fighting.

So in a way spending 10$ to shoot a missile and going on "war economy" (aka reducing other activities in your life to fund the game) to keep the war going is quite realistic.

Also that some of your opponents will simply outspend you without breaking a sweat is accurate (see the US support of Ukraine as an example)

If I'm really paying $60 for a fake space ship and $10 to fire a fake missle... fireworks are cheaper and real. HumbleBundle probably has multiple better spaceship games in the next $100 worth of bundles. I could probably buy 5-10 better space ship games on steam or itch.io right now for for $100.

I find it a little hard to believe that they're going to go after all the $10 transactions. But I suppose if you can do a $10 transaction as many times as you like, you can launder as much money as you want.

That's more a of a problem with your country than the game or the technology.

thats +1 realism and -1 kiddie friendliness