MacCaseSensitiveConversion
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Another workaround
An additional alternative working solution is to go to add an additional APFS volume to your boot drive. Since APFS is a container system, it doesn't have rigid 'partition-walls' in terms of their size, you can add another volume and it will grow and shrink with usage, so it's no different functionally for space than a directory or folder on your / root volume. Add a second APFS volume that is case insensitive and move your steam app and install directories there and it should work. You'll then also need to move and place a symbolic link to the ~/Library/Application Support/Steam/Steam.AppBundle/Steam/Contents/MacOS or some directory lower than that to make it work. But this way you don't need a second storage device and you don't need to reformat the Mac or use timeMachine which could be quite time consuming.
BUT. THIS IS SUPER DUMB AND VALVE SHOULD FIX IT. THIS OS HAS BEEN OUT FOR A WHILE NOW AND CASE-SENSITIVE APFS IS THE DEFAULT VOLUME TYPE FOR NEW INSTALLATIONS AND MACS. /rant
Oh, that sounds like a smart approach for a workaround. When you say "should work", have you actually tested this? It would be nice if we could be more specific with instructions for setting this up and then point people to this (AFAICS) new workaround. Unfortunately I can't work this out myself, for all my Mac file systems are converted to case-insensitive by now and I don't fancy the back-and-forth too much.
THIS IS SUPER DUMB AND VALVE SHOULD FIX IT.
I'm not sure that Valve is the right party to blame here. Steam itself most likely runs perfectly on a case-sensitive file system as their Linux version requires this. The problem is much more with the game publishers who tend throw-in Mac ports of their Windows games as afterthought under minimum effort policy. Most Windows devs don't care at all about their file name capitalization being all over the place (and it truly is), resulting in hundreds of Mac ports that break on case-sensitive file systems.
What should Valve do? Maintain lists of "works / works not on case-sensitive" and warn on install? Or let affected games just crash? Either way, imagine the resulting support nightmare not just for Valve, but also for the publishers! If Valve were to force this down their throats, you can bet that many would stop producing Mac ports altogether in a heartbeat. In that light, I think that Valve's decision really makes sense. For the most part it's not even up to them.
I followed @cr's README and it works very well!
I agreed with @cr, the issue is the whole industry of software developers that still operating in a world where case-sensitivity does not exist when they program.
@zeroluck - I think this solution won't work for adobe related product, they require your boot drive to be case insensitive. But it sounds good for apps that doesn't need that
@cr - thank you very much for this, process went as smooth as ... saved my day!