How Minecraft’s NFT Ban Gutted A Crypto Empire - Rest Of World

How Minecraft’s NFT Ban Gutted A Crypto Empire – Rest Of World

One day in February, Wiktor Daniec stood in a medieval town of his own creation. Daniec, who lives in Warsaw, Poland, owned the land, on which he’d built a terrace of houses. He used the pastures behind them to farm commodities like wool, which he sold to invest in new plots of land and increase the scale of his medieval-themed kingdom, which had earned him more than $1,000 in just over a month. Daniec’s property is part of a virtual gaming world known as Critterz, and exists within Minecraft, the blocky sandbox game popular with children and adults worldwide.

Created in late 2021, Critterz incorporates nonfungible tokens (NFTs) and cryptocurrency into the Minecraft universe, bringing a “play to earn” model to the best-selling video game of all time. Players need to own an NFT to enter the Critterz server; once inside, they can earn an in-game cryptocurrency that can be traded for real money. They can buy plots of land in the Critterz world, also represented as NFTs, and sell the constructions they build on them, like Daniec’s medieval houses, to other players.

It was a new experiment in play-to-earn gaming, hot on the heels of Axie Infinity, the figurehead Web3 game from developer Sky Mavis that had attracted thousands of players, especially from low-income countries such as the Philippines. After interest in Axie Infinity collapsed, following a plummeting in-game economy and a $620 million hack, many players moved to other play-to-earn games, including Critterz. 

Critterz hoped to address one of the primary criticisms Axie Infinity faced: that players were motivated much more by profit than by a desire to play the game itself, as the game alone simply wasn’t compelling enough. “We just had an idea, what if you can make an existing game play-to-earn?” Emerson Hsieh, a co-founder of Critterz, told Rest of World. “Minecraft is an established game that we know people want to play.” 

For a while, it worked. Some Critterz players told Rest of World that, at one point, they were earning more than $100 a day playing the game. At its peak, it had around 2,000 daily players, some of whom enlisted other players to help build their in-game empires for a cut of the crypto they earned. One U.S. player, who goes by “Big Chief,” described how his team, composed largely of young people in the Philippines, gathered building materials for him. He then paid professional Minecraft builders around $10,000 in crypto to turn those materials into a lavish casino.

“I have a lot of kids that play for me, and they play because they want to make extra money in a country that’s really just locking them down,” he said.

But, as with Axie Infinity, once the game became more popular, the value of its crypto token began to drop. Worth 85 cents at its peak in January, it had decreased to around 3 cents by May. But the depreciation was gradual, and many players continued playing and building.

Then, on July 20, 2022, in a post on the Minecraft website, developer Mojang Studios dropped a bombshell: Minecraft would not support integrations with NFTs. The company laid out its position and stated in bold text that “blockchain technologies are not permitted to be integrated inside our Minecraft client and server applications nor may they be utilized to create NFTs associated with any in-game content, including worlds, skins, personal items, or other mods.”

For Critterz, the implication was existential. Although Mojang’s announcement did not detail how its new policy would be implemented, it seemed likely that a failure to comply with the new rules could lead to the end of the Critterz Minecraft server and the collapse of its in-game economy. Players who had paid thousands of dollars’ worth of cryptocurrency for Critterz NFTs saw their investments plummet in value, and those who had been making money playing the game had their incomes vanish.

As he read the announcement on his phone in July, Daniec rushed from the living room of his parents’ house to his bedroom upstairs in a state of panic. Over six months, he’d climbed the game’s complex hierarchies, starting as a basic player and going on to manage thousands of dollars worth of NFTs. He’d even thought about developing his own Minecraft NFT game. “I love two things, Minecraft and NFTs, but the former rejected the latter,” he told Rest of World. “It crushed me.”


The idea for Critterz emerged in October 2021. At the time, Hsieh, then 22, ran a startup in California with his brother, Morris, supported by the accelerator Y Combinator. Their company, called Palifer, produced AI software to sift through various reports and identify failure-prone components in heavy industry. The company’s clients included a division of Germany’s national railway company, Deutsche Bahn. 

Towards the second half of 2021, as the company hit a lull, Hsieh began shifting his focus to the booming NFT space. He found inspiration in NFT projects like Anonymice, EtherOrcs, and Furballs, as well as Axie Infinity, which had 2.7 million players at its peak. Although Axie Infinity was popular and had a busy economy, critics complained that the game itself wasn’t very fun. Hsieh had the idea to start with a fun game and add NFT elements onto it.

“Axie Infinity was essentially building its own game from scratch,” he told Rest of World. “Minecraft is the most popular game of all time, and we wanted to see whether it was possible to integrate it with Web3.”

“I love two things, Minecraft and NFTs, but the former rejected the latter. It crushed me.”

Minecraft allows players to create their own versions of the game and host them on individual servers. Server operators govern these Minecraft worlds and can alter their properties, including the time of day, where players spawn, and what the environment looks like. It’s how you end up with Minecraft worlds that emulate the Pokemon universe, or that allow players to build pirate ships and sail the oceans.

But Hsieh and his two co-founders had something else in mind: a Minecraft “metaverse” where players could be remunerated for their time. Land and buildings could be bought and sold as NFTs on the Ethereum blockchain.

“That was really interesting to me, that people could just make a living by creating things on the server,” Hsieh said. “We’re able to give creators complete ownership of what they create.”

Hsieh and his fellow co-founders started a Critterz Discord channel and posted a link to it in a tweet on October 31, 2021. The Discord channel attracted almost 4,000 people overnight. “That’s when we knew we had an idea,” he said. 

In late 2021, the team created a Minecraft server to host Critterz. About a month before launching it, they reached out to Mojang Studios to inform them of their plans and ask about blockchain integration. In emails reviewed by Rest of World, the company’s intellectual property enforcement team told Critterz that it had “no specific guidance at this time.” But the co-founders knew there was a degree of risk that Minecraft might go on to make rules around NFTs. “We knew that it was always a possibility,” said Hsieh.

In the last week of December 2021, the Critterz team created 2,650 NFTs: pixelated skins that wrap around Minecraft characters to make them look like cats, frogs, mice, and other creatures. While the tokens were collectible in themselves, they also enabled the holder to enter the Critterz Minecraft server.

The NFTs were free to “mint,” meaning that when they were initially created, anyone could claim one and would only have to pay the Ethereum transaction fee, known as “gas,” to do so. But, within two hours, they were all snapped up, and soon, in high demand. Within weeks, they went from being worth almost nothing to thousands of dollars; by January 10, 2022, they were being sold for more than $7,000 each on a secondhand market, which was hosted on the popular NFT marketplace OpenSea. Critterz was soon hiring engineers and moderators to work on the project. According to Hsieh, it would go on to have as many as 18 full-time staff members.

Intrigued by the game, in early January, I purchased a Critterz NFT for 1.5 ETH (more than $5,000 at the time). After linking the NFT to a Minecraft account, I could access the Critterz world.

On entering, I found myself in the center of a large, palatial forum, surrounded by four gateways, with different colored towers signaling north, east, south, and west.

Unlike the most basic Minecraft servers, where players are free to delete and place blocks, in this world, every attempt to destroy a block was met by a note: “Sorry, but you can’t break that block here.” In the Critterz server, only the owner of a plot of land — the person who has the associated NFT — can modify it.

By spending time in the Critterz world, players automatically earn an in-game cryptocurrency, called $BLOCK. That’s partly why the NFTs providing access had become so valuable. $BLOCK is a type of token on the Ethereum blockchain and can be exchanged for traditional “fiat” currencies, like US dollars, or used to acquire plots of land in the Critterz world. $BLOCK can also be used to purchase in-game items, enabling players to farm their land and sell or trade the commodities they produce.

When I spoke to Daniec, the Polish player, in February 2022, he estimated that people were making between $60 and $130 a day in $BLOCKs. The exact amount would depend on the number of hours they were playing. He claimed to have recently helped his parents out with a small loan repayment, thanks to his Critterz gains, and said that he shared some of his earnings with his younger cousins to incentivize them to play too. “Now their moms can’t tell them to stop playing [be]cause it’s unproductive, they can tell back that they’re earning money,” he said.

https://www.minecraft.net/

Naturally, the cost of buying a Critterz NFT made the game inaccessible to many. But, as with Axie Infinity, aspiring players worked around this barrier. Players who owned Critterz NFTs would loan them out using a secure rental mechanism built into the game, temporarily transferring them to players who couldn’t afford one. Those individuals would then use the NFT in their place, for a cut of the $BLOCKs they earned while playing.

On the Critterz Discord server, hopeful renters competed for attention,  advertising their commitment to the game. Some even attached testimonials from the owners of the Critterz NFTs they had borrowed in the past, and posted links to a website that tracked how many hours they spent playing each day. A Canadian renter said that he and his brother had a process, whereby one played while the other slept, and vice versa, enabling them to play for an unrivaled number of hours. “I play all day and only stop to sleep,” wrote another.

But, just as in Axie Infinity, some took the renting model further, creating whole “guilds” of players to work around the clock, earning $BLOCKs. A guild owner would buy or rent an NFT, then lend it out to teams of players, often in low-income countries, splitting the profits.

“I have a Guild of players that will play extensive hours on your Critterz each day,” wrote one guild owner in a Discord channel. “My guild plays in 8-hour shifts. We average 16-20 hours, sometimes 22-23 hours per day.”

It was clear from the languages used in the Critterz chat log that almost all guild members, also known as “scholars,” came from low-income countries, and, overwhelmingly, the Philippines. Many were also former players of Axie Infinity, and worked for guild owners that ran Axie guilds too.

Charles Franzis, a 19-year-old student at Bulacan State University, just north of Manila, got into Axie Infinity last October. He joined a guild called Big Chief Academy and enrolled as a scholar, hoping to earn some extra money that would support him through his studies.

“At first we are earning good money, but the Axie market started to go down,” Franzis told Rest of World

The owner of his guild, Big Chief, suggested Critterz as an alternative. It was an ideal situation for Franzis, who had played and enjoyed Minecraft before. He described Critterz as the best NFT game he had ever played, and said that he would average eight hours of play time a day, if not longer. When busy studying for exams, he would have his cousin step in to play for him.

Web3

A nebulous term that refers to an imagined next iteration of the web in which cryptocurrency, blockchain technology, and decentralized finance prominently feature

Blockchain

A way to record information in a decentralized fashion, like a digital public ledger. Cryptocurrency transactions, for example, can be tracked on a blockchain

NFTs

Nonfungible tokens (NFTs) are digital assets whose ownership is recorded on the blockchain – so even if they’re copied, you can see who holds the “original”

Play-to-earn

A genre of game in which players can earn in-game rewards that have real-world value, such as cryptocurrency tokens

$BLOCK

A cryptocurrency token developed by Critterz. Players earn $BLOCK by spending time in the game and can use it to buy in-game items