“This white paper describes the concept of an in-game crypto-economy with economically incentivised social behaviours. However, it does not describe the technical blockchain architecture and it is not a game design document. The point of this white paper is to open a discussion and present the project to people interested in it.”
Before you begin reading I’d like to point out some concepts that I find useful in order to understand what is presented herein and avoid unnecessary questions.
- You need to be aware of the difference between money and currency. Money has intrinsic value and this intrinsic value is what is being exchanged against. The currency has no or near to zero intrinsic value, it can be produced in any amount and its value is fictitious, 100 dollar bill does not have more value than a 1 dollar bill. All government “money” is currency and thus intrinsically worthless. The dollar, the euro, the pound or the ruble are social and economic constructs backed by governments and central banks. In reality, this means that they are not backed by anything, governments fall and change, banks manipulate s.l. the markets. The history of currencies is crystal clear, among thousands of them none has survived. Materials like gold and silver can be considered as money because they have intrinsic value and are not used as a reference. Bitcoin is thus crypto-money and not cryptocurrency since it is limited in supply, has an intrinsic value (trustful transactions) and can’t be replicated or diluted. That being said all cryptocurrencies are not crypto-money.
- Even If I use the words “real economy” and “virtual economy” as opposites, be aware that our economy is not less virtual than the one in the video games. Around 90% of currency worldwide does not exist because of the fractional reserve banking. Banks are lending money they don’t have, creating it out of thin air, in order to make profits. We live in a world of debt and promises with built-in scarcity and a constant yearly 5% inflation, if we are lucky.
- Economic ideology is literally the only thing that can change societies and people. There are a lot of organisations that want to do good and “change things” and that are in fact accomplishing a lot but unless they fight for designing a new economy their efforts are worthless in the grand scheme of things. An economy based on slavery can’t give freedom, if you want freedom you need to destroy the old paradigm and build the new one.
Introduction
Among all the exciting subjects, one of them definitely caught my attention for several years: Virtual Game Economies.
I am not talking about small in-game purchases and micro-transactions inside games like candy crush. No, what I mean are massive, organic, fully breathing player-driven economies in games like Eve Online, Entropia Universe, Diablo 3, Second Life, World of Warcraft...etc. As a matter of fact, the economy of Eve Online is so impressive that it is studied and managed by economists, in fact the whole Eve market is worth more than 55 millions of dollars and this number is constantly rising.
The aim of this white paper is to propose a blockchain powered game economy as a social experiment in order to breach the wall that exists between real world economies and virtual world economies.
After the rise of Bitcoin, blockchains became a game changer since they allow the creation of new economic paradigms. It goes far beyond the creation of new businesses and markets because blockchains can touch to the mere essence of the economic ideology we live in. (mainly mass consumerism with a mix of socialism and capitalism to some extent depending on countries.) Nowadays, cryptocurrencies and ico crowdfundings seem to be the blockchain “killer apps” but in reality they provide new ways of wealth investment, accumulation and transfer while remaining in the same economic paradigm. Blockchains are capable of more than that since they can use an economic incentive to reshape human behaviours.
However, trying to reshape society is a very difficult and dangerous thing to do because it’s a direct attack against its identity and the people who live by its standards.
“...You have to understand, most of these people are not ready to be unplugged. And many of them are so inured, so hopelessly dependent on the system, that they will fight to protect it.” Morpheus, The Matrix.”
What I want to propose instead is the creation of an economically viable virtual reality that people can choose instead of the system we live in. It fact, video games are an excellent candidate for that. At best, a blockchain based economic system can define new social values and reward those who do respect them, effectively creating a better “virtual” society which can be an inspiration for the real one. At worse, it can help people, who can’t find a purpose, acquiring a sense of fulfilment and contribute to the real and the virtual world. Thanks to the economic incentive.
Why Blockchain
Why indeed can’t we have something like what Bitcoin does without Blockchain? Let’s think about it. Bitcoin changed everything because it created an economic incentive to secure the network’s transactions. That raises two questions:
Why not asking a company to keep track of the transaction and issue alternative currency?
The reasons are simple: centralisation and manipulation.
Nothing stops that said company from manipulating the data since it is centralised. If the company is shut down, the economy goes down. If the company is declared illegal because it competes with a state’s dogma, the economy goes down as well.
Why not using an existing fiat currency, why do we need cryptocurrency?
Because the whole purpose of cryptocurrency is to incentivise based on certain rules. If a company uses fiat for incentivisation it will be broke very quickly since fiat has be to paid out if its own pocket.
The proposition
I propose several use cases of the blockchain technology in video games:
- Realistic in-game economy using cryptocurrency for all transactions.
- Economic incentive for actors maintaining a healthy and liquid economy.
- Economically incentivised standards of behaviour.
The problems to solve
In 2007 an interesting paper was published by Harvard about the Risks and Threats of Virtual Economies. This Harvard paper points out that virtual economies create new problems and transpose already existing ones in these virtual worlds. While it is true, all the issues raised can be easily solved by the blockchain technology and if they can’t, they are inherently bound to our societal values and are worth trying to fix in a universe much more flexible than our own.
Those issues are market manipulations, racketeering, scams and harassment. Racketeering and harassment can easily be prevented with influence points, automatic report systems, artificial governments and stake based system. Performing any of those action results in an economic loss. Scams can be easily solved with reversible escrow contracts and by economically incentivised behaviour systems, while market manipulations are so deeply inherent to our own economy that in order to get rid of them you need to get rid of government controlled currency. A quick view on quantitative easings, the logic behind mass consumerism and the fractional reserve banking is more than enough to be concerned.
Automation and AI will be enormous catalysts that will show the limitations of the current “snake biting it’s own head” and inflation-export economy.
1. Monetary incentivisation of “healthy” social and economic behaviours
Nowadays, virtual game economies exist in 3 flavours, sometimes mixed together:
- Closed economies: Interaction with the real world economy is very limited and unidirectional. Sometimes you can buy in-game currency with fiat but there is no other way around. (Eve Online, World of Warcraft…)
- Casino type economy: The player can theoretically make profits off the game but the odds are heavily stacked against him. (Entropia Universe, Casinos..)
- Service type economy: The player can make profits off other players by proposing various services. It goes far beyond than having a marketplace or a trading system, it is more over-the-counter. (Second Life, Entropia Universe...)
A blockchain system can bypass the first and second limitations in order to incentivise certain types of behaviours (in-game economy's integrity, player to player collaboration, help to new players, respect, non-harassment…). Such systems exist in social Blockchains using “social consensus algorithms” such as STEEM blockchain that rewards good blogging.
2. Bridging real and virtual economies
Since every cryptocurrency can be traded for main cryptocurrencies like Bitcoin or Ether, which can be exchanged for fiat currency, this provides a bridge between virtual and real economy. Trying to separate them is unproductive because players and will bypass the limitations (illegal markets), sometimes for money laundering. Most of the time developers need to compensate by breaking the game with micro-transactions and pay-to-win logic. Separating virtual and real economies makes no sense, they are tightly bound together and a lot of value goes inside them, gravitating within the virtual space. Virtual economies can create jobs, they can create life purpose and a better society by reshaping it externally. Eventually, in the next 10 to 20 years computer graphics will be indistinguishable from reality and the development of neural interfaces will give a whole new meaning to the virtual.
The problems that will be encountered
Creating a video game with a blockchain based crypto-economy is a challenging task.
- Creation of the game: The ideal candidate is a video game that gives a lot of freedom to the players, allows the creation of virtual governments and encourages player created functionalities and objects. That means that players will be able to extend game functionalities by modding and scripting using a specially created framework for them. Those kind of alterations will have to be approved by the governments (the government is elected by people who have the most stake in the video game). The goal is to create a social structure that will be able to govern itself without the interference of the original developers.
- Support for development: In order to support the development two solutions can be proposed in parallel. The first one is to reward people who contribute to the development of the game in any way with in-game currency. The second way is to allow donations in fiat and crypto in exchange of the in-game crypto-currency. Those donations, however can’t go over a specific amount, it is not an ICO. The in-game economy is deflationary, similar to bitcoin, but will use a variation of delegated proof of stake with various social proofs on top. Social proofs will be decided by governments and since we are in a video game, all the events performed inside can be monitored. That means that the blockchain will need no oracles.
- Reaching critical economic mass: In order to reach the critical amount of in-game currency in circulation you can do an ico, you can pre-mine, pre-mint or distribute the currency for free based on an existing one. Nowadays the ICO industry has a huge problem, people buy them to gamble and to make a profit irrespective of the project. The vast majority of buyers doesn't read the white paper and the people who read it very often don’t fully understand it. During the development phase, the distribution of cryptocurrency in exchange for the contribution to the project is the best way to involve people. Once the game is released, critical mass will be reached by rewarding people for contribution within the game.
Philosophical justifications
The applications are numerous, I will try to provide a non exhaustive list:
- Virtual economically consistent societies can act like a mirror of our own and help us experimenting and fixing our own problems. It’s difficult to acknowledge the problems and the solutions of the system if you are a part of the system. “If I had asked people what they wanted, they would have said faster horses.” Henry Ford.
- Virtual economies allow the creation and development of new economic and sociological patterns.
- They can provide a new life, people can be what they want and make it for a living.
- Virtual economies can enforce better equality.
- Virtual economies can help people finding a purpose.
Some notes
If you are interested by the idea feel free to contact me. I will be happy to iterate over it and seek feedback from different people.
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