But where does the money come from? - Explained with World of Warcraft.

mattclarke (70)in #steemit • 7 years ago (edited)

My good mate and proud new father, Hayden, introduced himself yesterday.
He's been lurking a while, but had some questions before jumping in.

The big one, as always... 'Where does the money come from?'

It's easy to assume, as I first did, that steemit started with a lot of investment from the founders/developers, and that they're essentially giving away money to authors, hand over fist, while hoping new investors will keep topping up the account until the place gets big enough to support itself through advertising, or some other source of revenue.

This is not the case at all.

I used an analogy to explain it to Hayden, and I'd like to expand on it here.

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Blizzard Entertainment has a hugely popular PC game, World of Warcraft.

Players go on missions, and earn gold for playing well.
They can then use this gold to buy gear to make themselves more effective players of the game, and earn more gold, faster.

Their gold earning capacity is affected by;

Their gear (armour, weapons, spells, amulets)
Their skill
Their perserverance

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Not all players have the patience or competence to succeed, so some offer to buy WoW gold from other players in exchange for real money.
The buyer then uses this gold to buy expensive swords, boots and rings, making him a more effective player in the virtual world.
The seller pays his electricity bill in the real world.

It's important to note that Blizzard aren't giving their WoW gold value, any more than Nintendo backs the value of Super Mario coins.

It's the environment that Blizzard created which gives WoW gold it's value.
People who want to be effective in that environment value the internal currency which makes them so, and are therefore willing to pay regular money to acquire it.

Now if all players were in one instance of the game, all playing on the same server, and the amount of gold to be won was finite; then having better gear than most others would give a player a better chance at getting a bigger slice of that fixed pie.
We can also assume that any gold he sells will fetch a higher price as the number of willing buyers (people who want to be effective in that place) increases.
Finding the game early, anticipating it's success, and hoarding gold would be a smart move for an insightful speculator.

He might do this by playing the game directly and keeping all the gold he finds.
He might invest the gold he finds into top-end gear, with which to win more gold to re-invest or hoard; or
He might just see an investment opportunity and buy it from other players, perhaps without even playing the game.

Those selling their WoW gold for real money may assume that the whole thing is a pyramid scheme, and that Blizzard will run out of money soon; but they misunderstand the nature of the transaction.

They're not being paid for playing well, by Blizzard; they're being compensated by a speculator, for handing over a chunk of their future effectiveness.
This cycle can feed on itself, with more speculators driving up the price and encouraging more speculation, but that is true of anything; and it's certainly not a problem for outstanding players with outstanding electricity bills.

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There's only so much a person will pay to be good at a video game; but steem is far more than a game.

You can keep steem, just like keeping WoW gold, or you can power it up into steem power, just like buying gear to make you more effective.
Effectiveness on steem doesn't just give a steemer the chance to make more steem (although it certainly does that through increased curation rewards), it also gives him influence.

He gets to put a soapbox under arguments he likes, and kick it out from under arguments he doesn't.

Just like expensive armour and weapons allow a player increased scope to dictate the outcome of battles and the allocation of gold in WoW, a high steem power balance lets a steemer push a friend toward the top of the trending page, drive his own observations into the top of the comments section of a post, or substantially reduce the payout on a post he believes undeserving.

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We often use a fire hose analogy to talk about the way steem power lets us direct that day's finite rewards at those we feel most deserving, but the fire hose is also a spotlight; and as millions and millions of fresh eyeballs arrive on this platform, the ability to illuminate content will be ardently sought by people with deep pockets.

I don't know how much the big brands pay for reach on Facebook, but when they follow their customer base over to steem, I want to be the guy selling or leasing it to them.

Ned isn't giving you money.
He and Dan built an environment which gives popular contributors influence over that environment.
People like myself, (who believe that more people are coming, quickly followed by those who want to reach them); are buying influence over this place from those contributors who've earned it.

...and that's where the money comes from.

As always, have a fantastic day

#economics #money #writing #teamaustralia

7 years ago in #steemit by mattclarke (70)

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necromortis (51) 7 years ago

I cannot upvote this enough. Your explanation resounds with me utterly and completely, a resounding thumbs up. Thank you @mattclarke for not only taking the time to explain "where the money comes from", but to explain it to me in a way you knew I would get it. This is a quality post and should be read by anyone who has recently done their first #introduceyourself. Thanks again!