One of the most enduring legends in the cryptocurrency industry is that Vitalik Buterin started Ethereum because his warlock got nerfed.

“I happily played World of Warcraft during 2007-2010,” Vitalik wrote in one version of the story. “But one day Blizzard removed the damage component from my beloved warlock's Siphon Life spell. I cried myself to sleep, and on that day I realized what horrors centralized services can bring. I soon decided to quit.”

The tale is a broad allegory for the power of decentralization. If a game skill or item was an immutable blockchain token – what we would now call a non-fungible token (NFT) – a company like Blizzard Entertainment couldn’t nerf, or weaken, your Siphon Life even if it wanted to. This suggests a further possibility: Because non-fungible tokens live on public blockchains, they can be read by any game’s software. If Siphon Life was an NFT that lived on a public blockchain, there was a possible future in which you could use it not just in World of Warcraft but in Assassin’s Creed or Uncharted or, who knows, Tetris.

Vitalik would have been about 16 at the time this happened, and the story is more of a winking goof (“I cried myself to sleep”?) than a serious design proposal. But it has been taken quite literally by some as a call for games built using immutable tokens to represent skills or equipment. Several rough World of Warcraft equivalents proposed to do exactly that during the 2017-2018 initial coin offering bubble, selling things like virtual swords and armor before even building the game.

But challenges to the “non-fungible item” framework are becoming increasingly apparent. Newer blockchain gaming projects, such as Ember Hearts and Mirandus, have dropped the idea. There’s generally muted enthusiasm for the concept among leaders in blockchain gaming, and little motive for traditional gaming studios to move toward interoperability. It seems less and less likely that you’ll be using a bow and arrow from Horizon: Zero Dawn in Counterstrike anytime soon.

But the rise of the “metaverse” concept has opened new possibilities. Rather than NFT interoperability across games, pioneers increasingly see a bottom-up model that will have games emerging from NFT ecosystems: think races between CryptoKitties or platform-jumping Bored Apes.

“A week or two after Elden Ring came out, I started getting YouTube ads for rune marketplaces,” said Carlos Perierra, an investor at Bitkraft Ventures. Runes are the currency of Elden Ring, a massive hit whose multiplayer features enable item trading or selling. But these are risky markets.

“You have to go into PVP [player versus player] mode, and the seller drops the runes for you,” Perierra explains of the current convoluted process for Elden Ring rune buyers. “These behaviors have existed for a very long time but you have to go into the gray market, and it can be scammy. So why don't we try and make it more scalable and efficient?”

That’s the most fundamental argument for the potential of using blockchains to track virtual items: Items are already being bought and sold at a furious pace, in ways that often leave players vulnerable. Transferring cosmetic items such as weapon “skins” between players is already a multibillion-dollar industry (yes, seriously), including a lot of active trading and speculation. The practice emerged without the support of game developers and only a few, such as Valve, have moved to legitimize and shape the markets.

NFTs could make buying and selling cosmetics or other items much easier and safer for players, while helping developers capture more of the value of their creations. Valve, which has authorized skin trading in games like Counterstrike: Global Offensive, generates tens of millions of dollars in revenue for itself and for independent skin designers.

But Valve can control and foster that market in large part because it owns the omnipresent digital games marketplace Steam. Items for other games are also sold through the portal, but Valve takes a hefty 30% cut from third-party sales. Such fees are one reason item sellers for games like Elden Ring or World of Warcraft often use awkward, unofficial workarounds – methods that also leave players vulnerable to getting scammed by dishonest sellers.

At the same time, there’s a pretty good reason these markets aren’t official: While many players clearly love them, others very vocally do not. In multiplayer games in particular, players often regard winning rare and powerful items as an achievement and see real-money item sales as essentially a form of cheating that devalues their in-game accomplishments.

This is particularly true of items that make a character more powerful or competitive: games that formalize real-money sales of powerful items are often derided as “pay to win.” That’s one reason making powerful game items into NFTs isn’t necessarily a slam dunk. It would make any game that adopted the model “pay to win.”

Making skills or items immutable even within a single game is probably a nonstarter for related design reasons. Many games now have multiplayer elements, and character abilities often have to be tweaked so that competition is fairer. While a teenaged Vitalik was frustrated by losing power, nerfing Siphon Life made the game more fun for other players – and World of Warcraft’s success after Vitalik quit suggests that Blizzard actually got this and similar tweaks more or less correct. (Sorry, Vitalik.)

Cross-platform transferability would also present balance and player-experience issues for designers. An NFT is little more than a marker of ownership, and wouldn’t define the actual utility of game items in any consistent way. For instance, there’s no reason an NFT of a sword that’s moderately powerful in one game couldn’t be made completely overpowering in another. “Even if we agree that we’re totally okay with interoperability, if I as the developer open the walled garden, it’s still very complicated,” says Pereira. “It starts getting a lot harder a lot faster.”

There are also challenges at the level of the graphical interface. 3D visual assets for games can be created with a variety of design tools such as Unreal or Unity. ​​“These things have proprietary data formats that are linked to particular rendering engines,” says Joel Dietz, CEO and founder of the MetaMetaverse platform. “ It’s not an easy thing to make them work together.” With MetaMetaverse, Dietz said, one goal is to enable that interoperability for assets across engines..

Much of this complexity could be moderated if there were enough industry coordination, for instance around developing standards for interoperability.

“That’s the Holy Grail, that’s the dream,” said Ahmed Al-Balaghi, CEO and co-founder of Biconomy, which builds infrastructure for blockchain games. “But who’s going to create those standards?” The player with the most potential to lead that effort may have squandered its position: “Meta can’t lead on standards,” Al-Balaghi says of the behemoth formerly known as Facebook, “given all the blowback they’ve gotten.”

But the biggest problem may be finding workable business models for NFT items, which completely upends the way many game publishers make money. “From a business perspective, [traditional developers] are selling in-game items right now that people are happy to buy, and they’re not expecting a reward.” That may be a disincentive to tokenizing items, and a big reason Al-Balaghi says widespread interoperability of game items is “very far in the future.”