Valve’s Counter-Strike: Global Offensive (CSGO), the latest game in the 20-year-old series, has had a hot start to 2023. Counter-Strike 2 (CS2) was announced on 22nd March, which sent the CSGO player base and the in-game cosmetics (aka skins) market into a frenzy.

Despite the game being over 10 years old, the concurrent player count hit 1.8 million as gamers jumped online following the CS2 announcement and in the run-up to the Blast Paris Major

Although a game over 10 years old, the concurrent player count hit 1.8 million gamers jumping online following the announcement of CS2 and in the run-up to the Blast Paris Major—the last major event to be played on CSGO.

At the same time, skin prices and trade volumes spiked as everyone’s skins would be refreshed in all the glory that the shiny Source 2 engine brings. With this boom, we’ve seen some historically large skin trades, including a +$500k trade for the #1 AK-47 661 ST MW with 4x Titan (Holo) & a Karambit Blue gem.

Not only are skins seeing huge pumps in trade volume but the amount of cases opened continues to increase, with 219 million cases opened in 2023 so far, a 59% increase on YTD openings compared to 2022.

Newest Ban Wave

Although the launch of CS2 is just around the corner, Valve has been in the news for a completely different reason. Ban waves starting from 28th June have resulted in a loss of over $7 million in in-game items, including rare skins, crafts, and gloves.

There has been a lot of speculation as to why Valve banned these accounts, but the common thread appears to be connections to a number of gambling sites. Some skin traders have been accused of using these trading venues to launder cryptocurrency, provoking instigation by Valve.

In response, many traders have started liquidating their inventories to avoid market risk and potential VAC bans, which would lock all assets and prevent them from ever being traded again.

Crypto Twitter has been in full force discussing the latest news regarding the ban waves, stating that this would’ve never happened if the assets were on-chain. The sentiment is largely similar to the reactions toward Activision for sunsetting Warzone 1 and consequently, all the in-game skins that its players had purchased.

These actions imposed by centralized entities have resulted in millions of dollars being lost by gamers worldwide. With the rise of NFTs and the adoption of blockchain technology, gamers and degens have begun discussing the possibility of blockchain-based gaming assets.

We are, quite obviously, bullish on Web3 gaming. However, simply stating that NFTs or blockchain technology will fix this doesn’t give confidence to non-believers or traditional gamers. We need to do better to educate and help onboard the next billion, so we’ll try to explore some ideas.

CSGO Ecosystem

People love to tear apart the application of digital game assets on-chain, but the CSGO ecosystem isn’t far from what we see in a blockchain ecosystem.

Base game = network

Gamertag/Username & account = Alias & wallet

Skins = Assets/tokens

Third-party sites = dApps

Skin exchanges = DEXs and CEXs

Matchmaking Services = Social Graphs

Leetify = Network Analytics

Skin tools (CSGO float) = NFT Tooling

Interacting within the wider range of third party sites will have players connecting through Steam as a single sign-on, a behavior not too far from Web3 users using a “Connect” button on their favorite dApp.

This piece will skip many key parts of the migration to Web3, including the minting of the skins on-chain, how users will onboard, wallet connectivity, and asset management. These are massive hurdles that need to be addressed, and we will cover them in the future.

For the sake of continuity, we will jump to the part of the timeline where CSGO items are now on blockchain and users have true ownership of their assets.

Value Still Requires Demand

The price of assets is determined by their demand, which is normally tied to skin rarity or, in other games, the current gameplay meta. With CSGO this is the former, with items purely for in-game flexing with your loadout (because we all know that more skins = more skill).

If we look back to the leaders of the NFT space last year, whose promises of utility and roadmaps may or may not have been achieved, we can see that many of these collections’ floor prices have fallen significantly. With CSGO we have already seen item volumes simmer as the CS2 hype has died down and collectors have started selling off inventories to reduce risk. We’ll probably see another resurgence with the public launch of CS2 which is expected this summer.

Value Accrues Outside of Gameplay

What happens now if we control our precious pixels and Valve bans our account from playing?

At the very base of NFT PFP collections, you can use them as a social identity but with a banned account, you may be able to sell the assets to another player or transfer them to another account. If we relate this back to on-chain, what’s to say that Valve doesn’t blacklist your wallet address at a contract level, as this plays a part in token transfers. Of course, this isn’t in line with appropriate smart contract development cycles, but immutable contracts would mitigate Valve from ruling with an iron fist on-chain and in-game.

Demand Accrues Through Interoperability

Additional value may also be created through interoperability. Interoperability allows a single asset (in this case, in-game cosmetics) to have utility in ecosystems outside of their origin. In crypto, this relates to the ability of networks to communicate with each other. For CSGO, interoperability can broadly expand asset usage across games, creating new opportunities for demand and new ways to value assets.

Even if a ban results in you losing access to CSGO the game, interoperability can nonetheless maintain immediate value for the holder. CSGO in-game asset interoperability could be something like letting me use my AWP Dragonlore as Jet to watch C Long on Haven. Although this may seem far-fetched, collaborations between games have occurred in the past, like Marvel Vs. Capcom, Mario & Sonic Crossovers, and the many Fortnite collaborations, to name a few.

Some quick-moving game studios may be able to attempt to take the player base by incorporating utility for CSGO assets in their game. However, this brings in a whole new list of legal, copyright, and art style compatibility issues.

(Also, much love to Ben for fighting the good fight)

Alternatively, interoperability could be in the form of save file overlap with different games within a series. We’ve recently seen this with The Legend of Zelda: TotK, with players who have BotW save files being able to access their horses from the previous game. This same mechanic was used from early on in the Gears of War franchise with certain playable characters and skins only available to those who have completed previous achievements from earlier games in the franchise.

Fixing the Issue with Blockchain Technology

A host of things need to happen to move these traditional assets onto the blockchain. Blockchain technology just doesn’t fix an issue alone, but developing the user experience alongside the technology can make significant advancements. To address the issue with blockchain technology, we must also address the issues gamers would also face as a result of its implementation.

Risk Awareness

As blockchain technology enables equal access to all and full responsibility over your assets, there is an abundance of rug pulls, phishing scams, and drainer contracts that have been successful and will continue to steal from unsuspecting victims.

There is a lot to be done education-wise on crypto security and hygiene, but this is a wider crypto adoption point, not just one for games. However, many gamers will have built security principles in their time in Web2 that will apply just as much in Web3.

Remember: verify, then trust.

Scam Protection

But what happens if someone gets hacked, phished, or scammed? Reckt. Git gud kid.

I joke, but there is the thought that there is no help or restoration of assets if someone falls victim. While I do sympathize and understand this issue, this highlights some security hygiene improvements that come with further control and responsibility over your in-game assets.

Could some of this be abstracted away for certain users depending on how secure they want to be? Sure, but players should have the choice.

Onboarding

One of the biggest hurdles I hear to get gamers to onboard into Web3 is that no one wants to faff with a wallet. While I agree that introducing wallets introduces a new level of information (and security) that needs to be considered, if we take the CSGO experience, I feel that a lot of us internet native people have been through the struggles of spinning up an account and locking it down with the steam authenticator app. Then to make sure we don’t get hit by a hacker, we need a trust-enabled queue system where 2FA is required by default.

Some gamers will go above and beyond to access rarer skins and liquidity, so saying it will take more work at a high level is lazy. I agree that most users will not know how to create a wallet, but a lot of work in the crypto space is based on onboarding new users into the ecosystem.

ImmutableX has allowed users to email onboard a self-custody solution in under 30 seconds with their Immutable Passport. This is not a new exercise either, with Polygon leading the charge in bridging Web2 users to Web3 with Reddit Avatars, Starbucks loyalty, and Nike calling the network their home.

Why should Gaben care?

If we can get to a place where blockchain does fix this, and gamers are ready and willing to take web2 into web3, will we finally get CSGO items on-chain? Unfortunately not. Ultimately, this will come down to one man—Gaben Newell. We must not ask what on-chain assets would do for you, but what on-chain assets would do for Valve’s president.

Honestly, in the current state, I’m not sure he cares at all. As mentioned previously, Gaben is churning money from case degens and steam market sales. Of course, integrating could lead to the opportunity of collecting royalties on secondary sales—a currently inaccessible revenue stream for CSGO.

More importantly, Gaben should care more about the harder-to-quantify aspect of value gained from being a leader in the development of the Web3 gamer. Another big argument in the space is that currently, Web3 games aren’t as engaging as Web2 franchises, so gamers won’t want to make the jump. There is a need for Web2 studios and crypto-native projects alike. “Traditional” video game titles will play a vital role with large established player bases who look to the developers as the temperature check on new tech.