Valve just wiped out $1B+ of market cap from the CS2 economy. Our analysis shows they also left $1.5B in revenue on the table over 4 years by refusing to adopt onchain royalties, and that this could have been totally avoided. Valve did this to force more of the game asset inventory back into the native marketplace as trading fees were being captured by 3rd party venues. In 2023 we produced a detailed case study looking specifically at this problem in the CS:GO economy, and explaining how building an onchain economy could fix this. Our conclusion: @valvesoftware left ~$1.5B of revenue on the table over 4 years by not baking enforced smart contract royalties into their economy. Check out @Delphi_Digital's full report: For over 5 years now our team have been strong proponents of onchain economies, investing over $50M of our own money into trying to bring this future to life. Put simply, an onchain economy unlocks: • Programmable royalties that create substantial long-term value capture for both players and developers • A lower cost, higher transparency marketplace technology • Provable digital scarcity (item histories, battlepass grind, unique game assets) • Residual value for all purchases giving players true economic agency • Significantly higher spend ceiling from onchain whales far larger than their web2 peers • Enhanced analytics via onchain data (active users, marketplace revenue, economic insights) • Evangelical forces as players can share in the success of the game ecosystem Over $100B is spent annually on video game items and cosmetics, yet players are still treated with utter disdain from developers who take them for fools and sell them the same skins in new titles year-on-year. Even in Counter Strike—one of the most open economies in gaming—Valve presided over a $6B market cap only to obliterate player trust by decimating user inventories that had been built over years investing in something they believed to be a durable asset class. Because the maximum trade value in Steam is capped at $2000, the high-end skins trade had been forced to move off the native marketplace. With an onchain economy, users could have seamlessly exchanged either $1 or $1B in a given transaction. As we become an increasingly digital species, it is imperative that we recognise virtual economies as legitimate forms of value. I firmly believe that the surest path for them to reach their fullest potential is to tap into crypto—a monster pool of capital that is native to the web—and lean into the very robust assurances that can be unlocked by onchain economies (royalty enforcement, asset uniqueness, digital item histories, etc). As it stands, there is no incentive for developers to do this. For them, they want to resell you the same skin year on year with each game release and ensure there is no way for you to unlock residual value through selling items or accounts on external marketplaces. The great challenge is proving that by building onchain and having game items live in the same economic environment, not only do developers capture more value, but the sum of all game economies can be greater than the parts. The single greatest proponent of this is the video game industry titan @TimSweeneyEpic, who has acknowledged that this future of interconnected virtual economies could well prove to be an optimal economic model ( Given that Epic Games already forced consoles out of digital isolationism by pushing for cross-play, it’s my great hope that they manage to do the same with game economies. Whilst he has expressed doubts about whether this needs to be onchain or via shared industry standards, he sees the value in unleashing economic agency for players and breaking down the imposed economic walls that have become the status quo in gaming. The destruction of the CS2 economy should serve as a wake-up call to both players and developers. Game publishers can keep extracting value at the expense of their users, or they can build onchain economies that create alignment and trust. The first path erodes player confidence, and the latter could unlock the greatest era of wealth creation and player agency in gaming history.

Over $3B of value destroyed now* Skin market cap sliced in half, nice…