Ubisoft’s first NFT plans make no sense

Ubisoft became the first big-name game publisher to jump on the non-fungible token bandwagon Tuesday. After teasing its interest in the space last month, the company is officially rolling out Quartz, a system of in-game cosmetic items powered by a new kind of NFT, called "Digits."

By using a decentralized NFT blockchain, Ubisoft promises its Quartz system will "grant players more control than ever" and "more autonomy and agency" in order to "genuinely make players stakeholders of our games." But as currently described, Ubisoft's Quartz system seems like an overcomplicated repackaging of a run-of-the-mill system of DLC cosmetics—but now with extra buzzwords and artificial scarcity layered on top.

And despite all the bold talk of "decentralization," the Quartz system is still so deeply controlled by Ubisoft that we wonder whether a simple internal database managed directly by the company would be a better fit.

Quartz, explained

Quartz—which rolls out later this month—is simply a system that provides access to cosmetic items for a single game, Ghost Recon Breakpoint. The first three such cosmetics—representing a specific gun, a face mask, and "enhanced pants" in the game—will be available for free on three days in the coming weeks.

Unlike traditional DLC, where supply is unlimited and every purchased copy is identical, Ubisoft stresses three ways in which Quartz cosmetics are unique:

• Limited editions: Each Quartz NFT "edition" will be limited to a set number, ranging from "a few units to a few thousands," Ubisoft says. It's not clear how many will be available for each of these first three "free" editions.
• Serial Numbers: Each individual NFT in a single edition has a unique serial number that "is displayed on the collectible and on the in-game item."
• Player names: A Digit's metadata will contain "the history of its previous owners," represented by their Ubisoft player names.

The first three "editions" of Quartz NFTs will be available at specific times later this month.

Credit: Ubisoft

So in practice, your "Wolf Enhanced Helmet A" will look and function a lot like mine. But if you look closely, you'll see a different number etched into the virtual forehead of that helmet. And if you dig into the NFT's metadata, you'll be able to see who used to own that particular copy of the helmet.

Ubisoft seems to foresee a chase-the-collectible metagame forming around these minor differences. "Owning a Digit will make you an actual part of its history," the company says in its FAQ. Elsewhere, Ubisoft encourages players to "be the first owner of a particular Digit or chase the one of your favorite streamer."

OK, sure. Maybe some people will get really excited about "owning" the only digital pair of Wolf Enhanced Pants numbered "69420" and once owned by Ninja. We can't say that we're excited about it, but there may be some market for such a thing.

But marketing rare or unique in-game items—and letting players resell them—isn't a new thing. Ubisoft doesn't need NFTs or "the blockchain" to enable this kind of artificially scarce digital collectible; a basic centrally controlled database could do the same thing much more simply.

Anyone who has sold a special-edition ship in Eve Online's strictly regulated economy knows how this can work. The same goes for anyone who bought and sold Artifact cards on the Steam marketplace or those who remember the ill-fated Diablo III real-money auction house.

All these examples and more predated the widespread adoption of NFTs and didn't need the technology for any of the features Ubisoft is touting here.

Who’s really in control?

"But wait," I can almost hear the NFT boosters crying. "The whole point of NFTs is that they're decentralized. Digits exist outside of Ubisoft's direct control and can live on separately from the corporate parent that created them."

Marketing rare or unique in-game items—and letting players resell them—isn't a new thing.

Ubisoft leans into this "feature" in its Quartz FAQ, writing that "a blockchain is a database that is shared across a network of computers. In other words, it is decentralized and has no 'master.'"

It's an interesting concept, but when you dig into the way Quartz works, it's plainly not true in practice. Quartz, as currently constructed, has a very clear "master"—Ubisoft.

For a supposedly decentralized and "open" technology, Ubisoft places a lot of restrictions on who can own and use Digits. Quartz users have to be 18 years old, reside in one of a handful of countries ("USA, Canada, Spain, France, Germany, Italy, Belgium, Australia, or Brazil" for now), and use two-factor authentication on their Ubisoft Connect accounts.

Quartz owners also have to reach "XP Level 5" in Ghost Recon Breakpoint before they can collect or use the NFTs, a system seemingly designed to discourage pure speculators and to ensure "the Ubisoft Quartz platform is made for players, and for players only," the company says. That XP level status is confirmed by linking Quartz to your Ubisoft account, which is, of course, centrally controlled and subject to its own terms of use above and beyond the detailed Quartz terms of use.

And if you later get banned from the game, your Ubisoft account, or the Ubisoft Quartz platform itself, you can no longer own Digits, according to those terms of use. Players who don't meet any of Ubisoft's requirements "will not be able to acquire Digits whether on the Ubisoft Quartz platform or an authorized third-party marketplace, nor have another player transfer their Digits to you... If you are not eligible, the transaction will fail." So much for "decentralization."

A centralized market

If you manage to qualify to own a Digit, the restrictions continue. A single player, for instance, can only have one copy of each distinct Digit "edition." So if I own Wolf Enhanced Pants #69420 and try to buy Wolf Enhanced Pants #1337 from someone else, the transaction will simply fail.

NFT proponents also often promote your "right" to sell the tokens directly, without having to go through any centralized middlemen. But that's not the case with Digit NFTs. Ubisoft makes it clear that you have to use "the only third-party marketplaces authorized by [Ubisoft]": Rarible and Objkt.

While those marketplaces are technically out of Ubisoft's control, the publisher can still profit from forcing users into these two marketplaces. In its FAQ, Ubisoft notes that "on both authorized marketplaces for Digits, a fee will be charged by the secondary market platform operator on each transaction, and in some cases, by Ubisoft as well [emphasis added]."

Meanwhile, because it is using an NFT marketplace, Ubisoft says it doesn't have the ability "to reverse or cancel transactions." So if you get scammed out of your item somehow, the company can't help you. Ubisoft even warns in the terms of use that "the Tezos blockchain network may be subject to specific weaknesses, which make them possibly targets for certain cybersecurity threats. Ubisoft has no liability in the risks implied by the use of this new technology, and you are solely responsible for secure storage of private keys for your crypto-wallet." At least with a Ubisoft-controlled database, the publisher would have some motivation to provide strong security for its own users.

Owning an NFT doesn't give you any more "ownership" than buying a regular DLC microtransaction, either. The terms of use are clear that the NFT only represents a very limited license to the "visual representation" of the item whose IP is still controlled by—you guessed it—Ubisoft. "Owning" that NFT doesn't give you the right to create derivative works, to use the item in videos, to sell merchandise that includes the item in it, or even to sell "fractionalized interests" in the associated NFT.

None of these restrictions on Quartz ownership or use seem ridiculous on their face. Taken together, in fact, they seem like a good way to prevent whales or speculators from dominating the market and bidding the price of individual Digits up to a ridiculous degree.

But the strict eligibility requirements also counter the idea that Quartz NFTs are separate from Ubisoft's direct control. The data might be stored on a "decentralized" blockchain, but make no mistake; Ubisoft is definitely the controller of Quartz in every way that matters.

Imagine there’s no Ubisoft...

So Ubisoft is in control of Quartz for now. But what about the far future, when Ubisoft goes out of business or stops supporting Ghost Recon Breakpoint (or Quartz itself)? Surely that's when the value of decentralized NFTs will become apparent, right?

Ubisoft seems to almost revel in the possibility of Quartz's obsolescence in its FAQ, writing that "your Digits will live on beyond the Ubisoft Quartz platform or the Tom Clancy's Ghost Recon Breakpoint game, and you will still be able to put them on sale on third-party marketplaces."

What will become of my NFT when Ubisoft goes out of business and this Ubisoft campus is converted into a Starbucks?

In its Quartz terms of use, Ubisoft says that even if it stops supporting Quartz or Ghost Recon, transfers of Digits will still have to be "in accordance with these Ubisoft Quartz Terms." For a second, though, let's assume the smart contracts powering Digits can be rewritten to avoid all of those current eligibility requirements.

Here's the real question: who is going to be in the market for your unique "Wolf Enhanced Pants" NFT in a world where the only game in which those pants work is no longer playable?

To the extent that Digits have any value at all, it's in their compatibility with a popular game (which is run completely at the whims of Ubisoft, of course). If that game (or Ubisoft) goes away, the "unique" NFTs amount to little more than a receipt saying, "I once bought an item for this defunct game." We can't imagine there will be a huge market for those receipts, even if some end up as cute digital curios for devoted legacy fans.

Who is going to be in the market for your unique “Wolf Enhanced Pants” NFT in a world where the only game in which those pants work is no longer playable?

In this brave, post-Ubisoft world, some other game maker could theoretically come along and decide to build a game on top of the still-extant Digit NFTs owned by previous players. But this isn't as simple as it seems. First off, that new developer would have to recreate all the in-game models, animations, etc. originally created by Ubisoft for those NFTs and ensure they're compatible with the new game. None of this data is stored in the blockchain metadata; only a "video collectible of the playable in-game item" will continue to exist on Aleph's decentralized infrastructure.

What's more, the developer doing all this work wouldn't even receive any direct revenue from its decision to support Quartz NFTs; Ubisoft already made that money in the original sale (and will presumably retain the ability to charge fees on future sales if the company still exists). Supporting "defunct" NFTs could work as a way to market to the disaffected player-base abandoned by the original game's creator. But that costly marketing move only becomes valuable if the player base is so large and so committed to its sunk investment in Ghost Recon items that ignoring them would be suicide. That seems unlikely to happen.

A solution in search of a problem

These same types of complaints apply generally to the idea that players will be able to take their Quartz NFT items into other games in the near future (i.e., while Ubisoft is still supporting Quartz). For one thing, Ubisoft is taking a cautious approach to the new technology and isn't even letting Quartz NFTs work in other Ubisoft games at the moment. Even if the company wanted to turn Quartz into some sort of cross-Ubisoft microtransaction system (i.e., "buy once, use in every Ubisoft game"), there would still be no need to use NFTs; a simple Ubisoft-controlled database would suffice and be much simpler, as discussed above.

Things get even more complicated if you want to make Quartz NFTs compatible with non-Ubisoft games. Again, the question of incentives comes into play. Why would another developer go to the significant trouble of coding compatibility with Ubisoft's proprietary in-game item format just so Ubisoft could make more money selling those items? Maybe the other publisher could work out some sort of revenue-sharing system to make this relationship mutually worthwhile, but that's far from a simple plug-and-play process (to say nothing of the IP issues Ubisoft may have with its items appearing in brands it doesn't directly control).

In its FAQ, Ubisoft writes that "blockchain’s decentralized technology enables us to move beyond current limitations and set the foundations of an ambitious ecosystem." As it currently exists, though, there's nothing ambitious or even very novel about Quartz, a "decentralized" system that is still very much under the control of a single international conglomerate. The system needlessly complicates and reinvents the wheel established through years of microtransaction systems that, whatever their flaws, worked just fine as a business without NFTs.