🐍 Razer’s edge

Hey frens! It’s Monday. ETH SF is over, but the Game Developer’s Conference is starting to ramp up in San Francisco today. 

The vibes are optimistic in the city here so far among crypto builders. I even met a guy with a spoon for a business card. Yes, an actual metal spoon with the firm’s name engraved on it.

Hey, gotta stand out somehow, right?

— Kate Irwin

P.S. Let me know how you’re liking The Drop! Send me an email at drop.newsletter@blockworks.co.

🪪 Razer ID checks for real gamers

Gaming tech firm Razer has teamed up with OpenAI founder Sam Altman’s crypto venture Tools for Humanity to prevent unauthorized bots in video games.

They’re calling their solution Razer ID Verified by World ID. Once you have a verified Razer ID, you’ll be a verified human and games opting into the program will check that status. 

It becomes part of your Razer account, and the gaming-focused brand will first offer verified Razer ID logins on the upcoming Immutable battler game Tokyo Beast, a game I wrote about last month. The game will offer pooled NFTs and use the Immutable zkEVM blockchain.

I asked Razer whether this might be used at some point to also prevent shopping bots from sniping products from their site or other sites (meaning, you’d have to have a verified Razer ID to buy something from them online). 

Instead, they’re “hyper-focused” on providing in-game identity verification. Tokyo Beast is the only game they’ve announced that will use this tech so far, but they’re hoping to add more games to this program in the future.

Here’s how the verified Razer ID works: You can use your existing Razer ID account, when logged in, to get the World App. From there, you create a World ID account, and then verify yourself as human and not an AI bot. You can do this by either going to an IRL shiny Orb or by adding your NFC-enabled passport to your account.

Does this process remind you of anything else we have to do in crypto? Yeah, it’s like KYC, or Know Your Customer, that’s happening here. 

Tools for Humanity, the for-profit company building on the World Network, says ZK proofs are used to keep your data safe. In simple terms, a ZK proof is a cryptographic way to verify that information is true without revealing the information itself. And VPN users, don’t worry — Tools for Humanity Chief Product Officer Tiago Sada tells me the new feature has been designed to work even if your VPN is on. Human VPN users are sometimes flagged across the internet as potential bots and can be asked to complete CAPTCHAs, so this is an important part of the conversation if you’re trying to protect your digital privacy while also proving you’re human.

For some, it may still feel like too much to have to hand over your passport or get your eyeballs scanned just to play a video game, though. 

For others, it might feel like a necessary step into an AI-filled future. Bots are indeed a challenge for both traditional non-crypto games as well as blockchain games, where financial rewards can be at stake. 

“We get a lot of feedback from gamers that in gameplay, gamers don’t want to be playing against bots,” Razer Chief Corporate Officer Wei-Pin Choo tells me. 

World also conducted a survey that found that 59% of gamers who participated in the survey said they “regularly encounter” unauthorized bots in the games they play. 71% of those surveyed said they feel bots are wrecking the competitive gaming experience.

World Network, formerly known as Worldcoin, is a blockchain that’s intended to “verify humans.” There’s a corresponding native token, Worldcoin, which is given out to those who get their eyeballs scanned. Those in Kenya were paid 25 Worldcoin at the time, or $50 at the time, to get their irises scanned (today, 25 Worldcoin are worth about $21).

World has faced some controversy over biometric data privacy concerns and has been accused of exploiting users in developing countries. 

Regulators in Hong Kong, Brazil, Spain, Kenya, France, and other countries have taken issue with World’s practices. Spain, Kenya, and Hong Kong chose to shut down World’s operations, at least temporarily, in their respective countries.

While it could help verify gamers aren’t bots, World ID isn’t a bulletproof solution to ensure all of its users are actually who they say they are, though. 

Last year, Singapore Deputy Prime Minister Gan Kim Yong confirmed that police were investigating seven people suspected of buying or selling World ID accounts and warned that the accounts could “then be misused for criminal activities such as money laundering and terrorism financing.”

Ultimately, though, I’m glad tech firms are recognizing that bots can be genuinely disruptive in video games — and are willing to try something, even if very experimental, to see if it could combat the problem.

🧊 The tip of the gaming token iceberg 

Crypto venture firm Andreessen Horowitz (a16z) wants the US to separate crypto tokens into seven different, new categories, including three categories relevant to us here at The Drop: Arcade tokens, Collectible tokens, and Memecoins. They outlined their ideas in a 49-page document shared with the US Securities and Exchange Commission (SEC).

If the SEC adopted their definitions, game tokens that don’t have capped supplies (and are therefore inflationary) would fall under the “Arcade token” category, as would in-game tokens that can only be traded in-game. Tokenized loyalty points and “soulbound” game tokens would also fall under this category, but the main piece here is that arcade tokens are not supposed to be seen as currencies bought and sold for investment purposes.

Collectible tokens, under a16z’s proposed definition, would include most digital art, souvenirs and access passes like concert tickets on the blockchain, as well as other tokenized pieces of art, merchandise, or in-game assets. Primarily, it’s talking about NFTs here. 

It defines a memecoin as “a crypto asset without intrinsic utility or value, often tied to an internet meme or community-driven movement, and not fundamentally tied to a network, company, or application,” which I agree with.

Essentially, they want these categories to be exempt from federal securities laws. 

The only problem here is that most game-related tokens have already been heavily speculated upon. While some game studios using such tokens may try to resist or ignore that reality, the reality nonetheless is that most NFTs and gaming tokens can be traded on exchanges and have fluctuating prices due to speculation from retail investors. 

It only takes a quick web search to see how retail investors view many gaming-related tokens: They want to know if it’s a good investment. 

“Some gaming tokens and NFTs don’t fit neatly into these definitions,” Daryl Xu, CEO and co-founder of NPC Labs, tells me, adding: “It’s important to make proper disclosures to ensure the public fully understands what they’re purchasing. The real issue with arcade tokens is making it clear to the SEC that just because degens speculate on them doesn’t mean they should be classified as securities.”

While I don’t think any of these token categories should face insurmountable regulatory restrictions, I do think we should call a spade a spade and recognize that most gaming-affiliated tokens today are not “soulbound,” can be traded, and can fluctuate wildly in price because of speculative activity. 

Therefore, many game tokens that exist today may not actually fall into the “arcade token” category because they have fixed supplies, like AXS, and can be traded outside of the game itself. 

Other gaming-related tokens act as native network tokens, a category a16z addresses separately, like GALA, SUI, or RON. Ultimately, a16z wants the SEC to exempt network tokens, too, from federal securities laws. But some network tokens could also potentially be classified as company tokens, which a16z admits are speculative in nature.

We could go further into the weeds here, but here’s my ultimate takeaway: I do think there should be protections for traders from scammers or projects that make big promises with the intention of rugging. The SEC should always put the interests of everyday Americans first — before the financial interests of crypto companies.

Here’s an interesting take from Florida-based crypto tax attorney and CPA Chad Cummings: “Gaming-related tokens generally should not be subject to federal securities regulation if their primary function remains consumptive or collectible. Applying securities laws broadly risks stifling innovation and pushing crypto innovation offshore. Industry-driven self-regulation offers a more appropriate, innovation-friendly solution,” he said, calling a16z’s proposal “sound.” 

He argues that if retail investors still see arcade tokens or collectible tokens as investment vehicles, more public education — as opposed to stricter securities laws — is needed.

Saw yet another crypto racing game on the timeline.

This one’s called Pixel Race Club, and IDK, man: