The Metaverse Casino That Wasn’t

I’m at the blackjack table. My dealer is a humanoid frog who wears a bow-tie. He doesn’t speak much. The frog deals me a 17 and himself a 16. I stay. The frog deals himself another card. He busts.

I win!

Immediately after I win the hand, chips fall from the sky like confetti. I “make it rain” by flicking money from my stack.

This feature is part of CoinDesk's Sin Week.

Then I win again. And again. This frog can’t beat me! Then I win five times in a row. Except I’m not winning money in the traditional sense of U.S. dollars, and I’m not even winning in the crypto sense of bitcoin (BTC) or some alternative cryptocurrency. I’m playing a free, no-stakes game in the metaverse of Decentraland, which doesn’t really feel like gambling at all.

And this is the paradox of ICE Poker, the casino-that’s-not-a-casino in the heart of Decentraland. The casino has a simple hook: You can’t lose money. It’s not gambling. You can play poker all day and you earn free crypto but you won’t lose a nickel. “We officially pivoted away from gambling,” says Miles Anthony, the founder of Decentral Games, which created ICE Poker. It turns out that people like free money. With their initial model of casino games, Anthony saw around 200 daily active users. When they flipped to a model of play-to-earn, the daily users exploded to 12,000. ICE Poker is now the most highly-visited site in Decentraland, accounting for 60% of the metaverse’s total traffic.

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None of this is what Anthony expected. I first spoke with him in the summer of 2020, back in my early reporting on Decentraland. At the time he was a 25-year-old kid who, after graduating from UCLA in 2017, became a digital nomad who ran an e-commerce company while living in Portugal. He made some money during the 2017 initial coin offering (ICO) boom, he scooped up early real estate in Decentraland, and he thought that a metaverse casino was a no-brainer. “It just makes sense to be able to wager your crypto assets,” Anthony told me in 2020.

Then it seemed to make less sense. Over the next year, as Anthony built out the business, he had to grapple with the tricky questions of gambling regulations. What if gambling is legal in some states but not others? Or barred in certain nations? What if the laws change at the next election? “To be free-to-play and non-gambling, you can scale it and market it in any jurisdiction,” says Anthony now. So scale it he has. He now leads a team of 50 and has raised $11 million, with investors that include Digital Currency Group. (DCG is the parent company of CoinDesk.)

I tried playing ICE Poker myself, and I quickly learned that saying the game is “free to play” is only sort of true. You don’t wager money in the traditional sense – Anthony repeats many times that this is not gambling – but you need to own a “wearable” non-fungible token (NFT) to play at the table, such as sunglasses or a hat for your Decentraland avatar. As of this writing, it costs 0.39 ether (ETH), or roughly $720, to buy the cheapest wearable, which I did not do for obvious reasons.

But there is a workaround that makes it truly free. Thanks to a clever system that leverages the smart contracts of NFTs, wearables can be “delegated” from one user to another. It’s a form of borrowing. Alice can buy a wearable, then delegate it (loan it) to Bob, who uses it to play poker. There’s no fee. Instead they split the winnings. The NFT’s owner pockets 40% of the payday; the player gets the remaining 60%. In theory this is a win-win: the owner gets the benefit of passive income, the player gets to play poker – for free – with zero chance of losing her own money.

So, in an example of “only in crypto,” a mini-economy has sprouted: delegators who earn passive income through loaning out their NFTs, and players who eke out crypto while enjoying poker. I thought about becoming someone’s delegate and playing a 24-hour tournament of poker, but I restrained myself for two reasons: 1) I’m lousy at poker and I’d feel guilty for costing the NFT owner any lost revenue (some are counting on this revenue); 2) I tried to do it, but the process was too damn confusing.

Here’s what’s supposed to happen: In the ICE Poker Discord, aspiring delegates (like me) can connect with wearable-owners who are looking to loan out their NFTs. Sounds simple enough. But the Discord teems with desperate and spammy-sounding messages, such as: “I’m a noob to Ice Poker and decentraland, looking to try it. Anyone wanna delegate?” Who could pass up an offer like that? Or, “Legit player with good history here. Just in case someone is looking.” OK, but how do you vet this? Or another tempting offer: “Have history but not really good.”

Many aspiring delegates send direct messages to veteran players like the pseudonymous “Empress Raeon,” a woman in her late 20s who lives in LA. “In the beginning I was getting 30 messages a day,” says Raeon. “It was insane. I was like, I have to close my DMs.” The system of delegates appears held together by DMs and duct tape, and it’s a minor miracle it works at all. Even Anthony agrees. “Obviously it’s not very user-friendly,” says the game’s creator. “It’s been amazing that people actually do it.” (He plans on rolling out a marketplace soon to make it easier for delegates and delegators to connect.)

So to get a sense of the actual in-game poker action, I turn to a prolific player who goes by “Iceyyy,” a 33-year-old guy from Boston who left his marketing job to go full-time crypto. He spends a few hours each day playing ICE Poker and streaming it on Twitch. (He clarifies that he makes most of his money from crypto consulting; the poker is for fun.) Over Zoom, Iceyyy shares his screen and I watch him enter the metaverse of Decentraland.

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Iceyyy’s avatar, like most avatars, is weird. He’s a mash-up of a dude in a Vikings helmet, beach sunglasses and what appears to be a Scottish kilt. He “teleports” to one of ICE Poker’s several casinos and is automatically assigned to a table. “There’s assigned seating, which protects the integrity of the game,” he explains. “It prevents people from cheating and colluding.”

Iceyyy settles into a table. “Hey everybody!” He types in the chatbox. “Good luck today!”

“Hey Iceyyy, same to you!”

There are two players at the table: a woman in a white tank top with a rainbow flag, and a guy with a crisp beard and black sunglasses.

After the flop, Iceyyy has a pair of eights and he raises the pot and gets the others to fold. “I’m pretty aggressive, because that’s typically a winning poker strategy,” he says.

Then Iceyyy tells me to look at something – the eyes of the other players at the table. You can see when the eyes are moving. “You can see people looking around and moving their mouse,” explains Iceyyy. If an avatar moves his or her eyes, that could be evidence that the player is moving their mouse – hovering over a betting option, and contemplating a raise. It’s a potential tell. It’s the metaverse expression of a real-life poker dynamic that you don’t have in “normal” online poker. While this is not something that Iceyyy regularly uses for an edge, it gives a glimpse of what the metaverse could offer in the future.

Once Iceyyy wins that first hand, he increased his share of chips and he boosted – ever so slightly – his odds of winning the day’s tournament, or finishing near the top. And that’s the daily goal. Every 24 hours, a new “tournament” starts across the casinos of ICE Poker. The better you do in the tournament, the more ICE you win. If you finish in the top 5% of chip winnings, for example, you’ll get a double bonus of ICE. “If you lose all your chips and go broke and finish in the bottom, it deducts from the ICE,” Iceyyy explains. (If you lose every hand you won’t lose any actual money – you simply won’t earn any ICE.)

Then the wearables come into play. When Iceyyy’s avatar wears his goofy Viking helmet, he’s granted an extra multiplier to win more ICE. Paying to upgrade the wearables (from Level 1 to Level 5) yields higher multiples and the potential for winning more ICE. (These upgrades also help replenish the coffers of ICE.) Players can spend hours doing the math to optimize the “stack” of their wearables. “There’s so much depth to the game,” says Iceyyy. “It sucks you in like any good game will do.”

Part of this depth is a system of “challenges,” where players earn more ICE by hitting certain poker objectives, such as “get a two-pair five times,” or “see the flop 15 times.” Not everyone loved the challenges, at least not at first. How much skill is involved to “see the flop”? The challenges seemed to reward luck and the monotony of grinding – not true skill at poker. Worse, the challenges almost perverted and distorted the game. “Players were incentivized to play bad hands, or to call in situations where normal poker strategy would say you shouldn’t,” says Iceyyy.

So Anthony and the team evolved. They tweaked the challenges to focus more on skill, such as winning a certain number of hands. “It plays much like real poker,” says Iceyyy.

This focus on skill might help ICE Poker from a legal perspective. “We were really strategic in the way we set this up,” says Anthony, adding that several legal firms had reviewed their framework and said he’s in the clear, and that it’s “a pretty open and shut case.” Maybe. But this is new territory for everyone, including the lawyers. “The distinction between 'play to earn' and 'gambling' can be a fine line,” says Sasha Hodder, a crypto-focused attorney unaffiliated with ICE Poker, via email.

Hodder explains that because ICE Poker is a peer-to-peer game, where there is no “house” that always wins, “the decentralized nature moves the legal issues away from the appearance of gambling.” And the focus on skill matters. “If the ability to win depends on chance or luck, it's more likely to be considered gambling,” says Hodder, “whereas if the outcome depends entirely on the user's skill and abilities as a player, it's less likely to be considered as gambling.” (The counter-argument, I imagine, is that buying the wearable itself counts as a kind of “ante,” and the real gamble is that you’ll earn enough from the game to recoup the cost of the NFT. Then again, the extent of my legal background is watching “She Hulk.”)

Lawyers aside, it doesn’t feel like gambling when you’re not bleeding out cash and bellying-up to the ATM. (I’ve been there.) Iceyyy loves playing poker but he hates the heartburn of losing money, and he likes that ICE Poker removes that from the equation.

On the other hand, playing poker for free isn’t fun. There are no stakes. People don’t take it seriously. Just as I couldn’t get excited about winning blackjack against the frog, completely “free poker” is boring. (I played blackjack in one of ICE Poker’s many random free casino parties.) But thanks to the tournament structure that aligns skillful play with higher rewards, ICE Poker doesn’t feel empty or frivolous. “ICE Poker has created something new. It’s in the middle of those two categories,” says Iceyyy. “You have the potential to earn real money, but you’re not risking anything out of pocket.”

Perhaps it shouldn’t be surprising that poker and the metaverse are linked, as poker has been part of crypto’s history since its inception. “Is it possible Satoshi was building his own decentralized poker application to run on top of bitcoin?” Morgen Peck wrote in Breaker Magazine’s 2018’s “All In: The Hidden History of Poker and Crypto.” Peck noted that bitcoin’s original code contained references to poker, and that some of the luminaries of traditional online poker, such as Dan Goldman, were now pivoting to a peer-to-peer, blockchain-based poker. Goldman at the time was the chief marketing officer of a company called “Virtue Poker,” which was working to launch a poker app on Ethereum.

That was in 2018. Where is Virtue Poker today? The game launches later this year and it made the same pivot as Anthony, framing itself as a “free-to-play, play-to-earn no loss poker game.”

The irony is almost absurd, as many of us think of crypto as gambling. But Anthony makes the case that play-to-earn is simply a better, more positive vibe than traditional casino gambling. “If you just look at it from a mathematical perspective, gambling games suck money out of the community,” says Anthony. “It goes into the company’s hands over time because the house has an edge. Eventually people lose all their money.” (One of his mottos is “Be the House,” paralleling bitcoin’s mantra of “Be your own bank.”)

And the community “vibes” are part of what draw people like Raeon to the game. When she first poked around Decentraland, she didn’t really know what to do. The metaverse seemed empty. Then she discovered the casino. “ICE Poker is what kept me in Decentraland,” she says. “It’s what kept me engaged and kept me coming back.”

She met other players in the ICE Discord, at the poker tables and at poker events and parties. (Owning certain NFTs can grant access to a special “Diamond Hands City” casino, basically a VIP lounge.) She quickly found her tribe. This was tough to explain to her IRL friends, who would ask questions like, “The metaverse? What are you talking about, what are you doing?” She tried to explain that the metaverse was “like The Sims, but where you talk to people.”

Now Raeon attends metaverse parties like a Latino Music Festival or '90s-themed Throwback Thursdays. “Sometimes it gets a little wild,” she says. They drink (IRL) and talk about their beers and whiskey, and as everyone who’s been on a “Zoom happy hour” knows, it’s not the real thing but it’s better than a chat-box. “It’s getting closer and closer to just being at the bar,” says Raeon. Sometimes they even play the drinking game “Never Have I Ever,” knocking back drinks on the honor system. (The metaverse has yet to replicate Truth or Dare.)

The game begets culture, and the culture begets more ways to monetize. “I’ve always wanted to make an NFT,” says Raeon, perhaps using the word “always” a bit loosely. She adds, “I think everyone wants to make an NFT.” So Empress Raeon created ICE-themed NFTs called “Royal Babes,” and her avatar even wears a gold “Miles” necklace, as a nod to founder Miles Anthony.

If you want to view the glass as half full, this is an encouraging example of a virtuous cycle where NFT communities can spawn sub-communities, and creators inspire more creators. If inclined to view the glass as half empty … This all feels pretty far removed from reality.

Meanwhile, every day, Raeon rakes in passive income from her delegates. She now has 10 wearables that she loans to five players, all of whom give her a small but steady stream of revenue. “I’m a small fish,” she quickly clarifies. “There are people out there with 20 or 30 [wearables.] They’re kingpins.”

It’s unlikely, however, that these kingpins are getting filthy rich. Just look at Iceyyy. He’s one of the game’s most admired and prolific players. On Twitter, Iceyyy disclosed that in the past three months he played 152 hours of poker, earning him 95,000 ICE. This translates to $1,660. That works out to $10.89 per hour, or less than New York’s minimum wage.

This brings us to ICE Poker’s big catch, and in crypto there’s always a catch.

For most of 2022 the value of the casino’s native token, ICE, has plummeted. In December 2021, each ICE token was worth around 20 cents. It’s now worth about a penny. (At its peak value, Iceyyy would be earning over $200 per hour playing the game that he loves.) This means that players earn less and less from the ICE payouts, something you hear users grumble about on the Discord. One player asks, “Guys why the ICE price keeps dropping?” Another: “Game is going to survive I guess but we definitely going lower.”

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This gets to the fundamental question of play-to-earn games: Are they sustainable models? What was once the most celebrated play-to-earn game in crypto, Axie Infinity, is now viewed by some as a cautionary tale, and it’s not entirely clear how the “free” rewards can indefinitely gush to the players.

Anthony is all too aware of the concerns. “With any play-to-earn game, you have to understand that the token you’re earning is inflationary,” says Anthony. The more players play, the more ICE tokens flood into the ecosystem, which makes those very tokens less valuable.

That can’t go on forever, and if left unchecked the value of ICE could continue to drop and players like Iceyyy might decide it’s simply no longer worth their time. Raeon’s delegates would stop playing and they’d likely stop partying. The feel-good vibes only last when there’s easy money.

So Anthony and team are rolling out policies they view as “deflationary,” such as burning ICE (which reduces the supply) and launching new “Sit and Go” tournaments, which require 1,000 ICE to join ($10 at today’s prices) and effectively remove ICE from circulation. “It’s a constant battle between inflation and deflation,” says Anthony, who can sound less like a 20-something nomad and more like a policy wonk at the Federal Reserve.

He knows the price is a problem, he knows the game’s friction (like the Delegates chat) is a problem, and he knows that lack of access is a problem. You still need a desktop computer to enter Decentraland, so Anthony plans to launch a mobile version of the game. “We see this as more aligned with a Zygna poker type of product,” he says, then clarifies that he means free poker. If he could reach Zygna-level adoption? Anthony figures that would translate to 20 or 30 million active users, “and the amount of value you could generate for the community is much larger than a casino.”

Which brings us back to that curious positioning of ICE Poker: Not quite a casino! So much of crypto feels like a casino: Buying and trading bitcoin can feel like a casino. Buying packs of NBA Top Shot and hoping you get lucky can feel like a casino. Spending money on NFTs can feel like a casino. The only place in crypto that does not feel like a casino, ultimately, is the crypto casino.