Gabe Newell is one of the few people in the gaming industry who deserves the “legendary” title applied to them. He has been invaluable to the sector through his founding of Valve and Steam, creating games such as Half Life and Portal, and giving gaming the distribution it needed. Steam has empowered indie developers which has, in turn, boosted the growth of the industry exponentially. I wanted to start with this sentiment as Gabe Newell’s opinions on crypto are a footnote on his profoundly positive impact on gaming so far.
The Good, the Bad, and the Incorrect
Steam experienced some strong backlash (and undoubtedly, some strong support) for their decision to ban all NFTs and crypto games from their platform. To me, it felt like a betrayal of the indie developers they had cultivated for years, and you can read my explanation here.
Now, in an interview with the brilliant Rock, Paper, Shotgun, Newell answers a direct question about Steam and blockchain. The question put to him was:
His answer is a real mixture. He highlights some of blockchain’s strengths, fairly criticizes its flaws, and then makes a wild and demonstrably false claim. Let’s start with the good.
Newell does see the good in NFTs despite Steam outright banning them. He draws a strange analogy between blockchain and chemistry, but I see his point. However, he does plainly support the concept of blockchain technology in the gaming industry. Newell says, “…the underlying technology of distributed ledgers, and the notion of digital ownership, and shared universes, are all pretty reasonable.”
“Reasonable” is an understatement, but I appreciate crypto within gaming is controversial currently (which is another, far larger article in itself) and he might be playing it safe here.
Newell does make a fair point about the negatives of cryptocurrencies within the industry in particular. The chief concern Newell has over crypto payments for games, for instance, is volatility. Steam did allow cryptocurrencies as payments for a while, but it was fraught with difficulties. Newell said,
While I agree, volatility within crypto makes it tremendously difficult for anything steady that relies on payments to be built upon it, there are plenty of stable coins that could solve that issue.
Now comes the points which are simply indefensible. Newell said:
“The people in the space, though, tend to be involved in a lot of criminal activity and a lot of sketchy behaviours.”
“Another thing was that the vast majority of those transactions, for whatever reason, were fraudulent, where people were repudiating transactions or using illegal sources of funds and things like that.
“the actors that are currently in this NFT space, they’re just not people you really are wanting to be doing business with.”
“That doesn’t say anything about the underlying technology, it’s just a reflection of the people right now who are viewing it as an opportunity to rip customers off, or engage in money laundering, or other things like that.”
I’ll start by saying, there are undoubtedly scams and illegal activity within crypto. It’s a new sector and there’s a lot of money floating around. It also has a history that mainstream media clings to in the form of Silk Road. There is also the new problem of wash trading when it comes to NFT collections. Crypto is far from perfect, however, Newell’s comments are patently incorrect.
Even if I water down Newell’s words to mean “there’s a lot of criminal activity in crypto,” it’s still not correct. Chainalysis does great research and reports on this topic and they found that in 2020 crime involving Bitcoin transactions was estimated to be 0.34%. They also highlighted that laundered money is under 1% of Bitcoin’s volume, whereas global GDP is around 2.5-5% laundered money.
Newell’s point about fraudulent transactions of illegally sourced funds being prevalent when Steam accepted crypto payment is a difficult one. I cannot disprove what he is saying, nor can I verify it. All I will say is that it would heavily buck the averages elsewhere in crypto, which raises a number of questions as to why it was the case, if it indeed was much higher than a few percent as he suggests.
With regards to doing business with people in crypto, this is perhaps something you could have said in 2018, but in 2022 we have major banks, financial institutions, FTSE 100 and NASDAQ companies, entire sovereign nations, and so on, all doing business in and around crypto.
I want to reiterate one more time that Gabe Newell is of staggering importance to the gaming industry and I hold him in high regard. He also made several fair points about crypto within gaming, though all of them are solvable.
I dislike two things involving Newell and crypto. The first I’ve covered, which is Steam flat-out banning NFTs and crypto from their platform and all games that use them. I said the moment they did this that they’re abandoning indie developers who are pioneering in the space, but will return to them when the infrastructure is nice and comfy. Newell stating the value of blockchain technology in this interview simply adds credence to that claim.
The second thing is the unsubstantiated slandering of blockchain in gaming. We are seeing mainstream media leaning on tired and false stereotypes about the young industry on a daily basis and it’s damaging; “crypto is a hotbed for the illegal,” “crypto destroys the environment,” “crypto is a Ponzi scheme.” Newell stating that people in crypto “tend to be involved in a lot of criminal activity and a lot of sketchy behaviours” is an abhorrent falsehood.
Gabe Newell, Valve, and Steam stand to gain an inordinate amount from blockchain technology and as leaders in the gaming space, I want to see them investing in improving the areas they find lacking, rather than hiding until someone else has fixed it for them.
Lead image by Official GDC, via Wikimedia, used under CC BY 2.0