The native package from Arch's multilib repository launches as intended. However, I'm still keeping this issue open as it seems to be a problem with the Flatpak version of Steam rather than Steam itself.

EDIT: Games crash when trying to run them with NVIDIA PRIME.

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An acquaintance found out the issue: I was trying to run the whole client with NVIDIA through the use of PRIME (which I've now detailed in the original post). Removing these variables allows Steam to launch, albeit with integrated graphics.

In addition to that, trying to add said variables to a game's launch options crashes the game, so it's most likely an issue with NVIDIA in general. Here is an excerpt of the error:
x86_64-linux-gnu-capsule-capture-libs: warning: Dependencies of libnvidia-pkcs11.so.545.29.06 not found, ignoring: Missing dependencies: Could not find "libcrypto.so.1.1" in LD_LIBRARY_PATH "/app/lib/i386-linux-gnu/GL/default/lib:/app/lib/i386-linux-gnu/GL/nvidia-545-29-06/lib:/app/lib32:/app/lib/i386-linux-gnu:/lib64:/app/lib:/usr/lib/x86_64-linux-gnu/GL/default/lib:/usr/lib/x86_64-linux-gnu/GL/nvidia-545-29-06/lib:/usr/lib/x86_64-linux-gnu/dri/intel-vaapi-driver/lib:/usr/lib/x86_64-linux-gnu/openh264/extra:/usr/lib/x86_64-linux-gnu:/mnt/hdd/SteamLibrary/steamapps/common/The Binding of Isaac Rebirth", ld.so.cache, DT_RUNPATH or fallback /lib:/usr/lib

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Further testing: Games installed in Heroic Games (Flatpak) crash like Steam too. However, weirdly enough, RPCS3 Flatpak runs its games perfectly fine on NVIDIA GPU.

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@amsyarzero Any luck? I am facing the same issue, I t was working fine before, but now i can't run any game on steam, While Lutris works fine.

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Any luck? I am facing the same issue, I t was working fine before, but now i can't run any game on steam, While Lutris works fine.

@Syntist Unfortunately, no. I'll try reinstalling the NVIDIA drivers first (along with the Flatpak NVIDIA installations). If that doesn't work, then I'll try reinstalling Arch next.

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@amsyarzero I got it fixed, you using Wayland?
You might have to update the nvidia_drm.modeset=1 to modeset=1, now it's working for me. I don't know a silent change by nvidia driver, 545 was causing the issue.

To enable DRM (Direct Rendering Manager) kernel mode setting, set modeset=1 and fbdev=1 kernel module parameters for the nvidia_drm module. The latter is required to tell the nvidia driver to provide its own framebuffer device instead of relying on efifb or vesafb, which don't work under simpledrm. For nvidia driver version < 545, the nvidia_drm.modeset=1 option must be set through kernel parameters, in order to disable simpledrm

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@Syntist changing nvidia_drm.modeset=1 to modeset=1 doesn't work for me. Where did you change it? Mine is located in GRUB's config line.

Also, yes, I'm using Wayland.

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I dont know it was working yesterday, today it's stop working again.
I reinstall the steam, and change that modeset. Though I notice one thing, before I was getting Shader Compiling and i skip it, game was working, now game is not working but am not getting shader Compiling dialog, it just straight up crashes.
Game i am trying is Dota 2

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Update: I found a similar issue on Reddit. Apparently, it's due to upgrading to version 545, and the solution is to downgrade to 535. I'll update here if it works.

UPDATE:

It works

Steps

(skip the first two steps if you're already using the DKMS version of NVIDIA drivers)

1. Remove current NVIDIA drivers
2. Install nvidia-dkms or nvidia-open-dkms (whichever you prefer)
3. Downgrade nvidia-dkms (or nvidia-open-dkms), nvidia-utils, and lib32-nvidia-utils + any other NVIDIA packages (such as opencl-nvidia) to the latest 535 version (should be 535.113.01)
4. Regenerate initramfs by running mkinitcpio -P as root
5. If you use GRUB, make sure to add nvidia_drm.modeset=1 to the launch options
6. If you use Flatpak, uninstall any NVIDIA 545 runtimes and install the 535.113.01 versions (including its corresponding 32 bit)
7. Restart

Disadvantages

Games run abysmally. The performance is even worse than running on iGPU.

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Any update regarding this, I tried 535 and it was slow.
Sometimes game run but that's only once in a while

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