Large Businesses: The Growth of Virtual Economies

As the popularity of online video games continues to grow, all eyes are on the virtual economies emerging around them.

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The financial power of virtual worlds has grown by leaps and bounds.

Consider The sandbox, a community gaming platform that allows players to create and monetize gaming assets and experiences using blockchain. The platform’s first in-game digital property token sale, known as LAND, took place in December 2019.

The first release of the deliberately rare “real estate” sold in the first four hours of the planned 15-day event. Subsequent releases of LANDs proved to be equally popular, bringing in game owner Animoca Brands over US $ 5.5 million (AU $ 7 million), and that’s before the game even launched.

Every day, millions of people around the world are discovering virtual worlds, and the way they interact with these worlds and other players can often take unexpected turns.

For example, global COVID-19 lockdowns steered Nintendo’s best-selling game, Animal Crossing, down the fashion path, with players spending real money buying outfits for their in-game avatars. other extremely popular games, such as Fortnite, Minecraft and Roblox, have become social networks for millions of active users every month.

Timmu Tõke, co-founder and CEO of the Estonian company Wolf3D, who creates in-game avatars, says that just as previous generations hung out in malls, parks, and basketball courts to catch up with their friends, they now use games as a social platform where they can interact. and compete. .

“It’s a very natural way to make friendships, and that’s how it works in games,” says T sayske.

Real money to earn

The virtual economy, L’Atelier, a subsidiary of the French bank BNP Paribas, notes that modern video games offer new ways of making money and offer new and real job opportunities.

Potentially large payouts are available for those who become, for example, professional esports players or digital farmers.

In 2005, former actor Jon Jacobs remortgage his actual home to buy the Neverdie Club in the Entropia Universe game for US $ 100,000 (A $ 128,000). Five years later, and thanks to a virtual decoration, he sold the Neverdie Club for US $ 635,000 (A $ 814,000).

“If we are talking about virtual currencies, then Bitcoin is the best example of virtual resources with significant real value.” Dr Kim Barker, Open University Law School

Dr Kim Barker, senior lecturer at the Open University Law School in the UK, says virtual resources can have real value, depending on the circumstances.

“If we are talking about virtual currencies, then Bitcoin is the best example of virtual resources with significant real value,” she says.

Likewise, if we are talking about elements originating from or developed in online games by completing challenges and mission-type activities, these also have value – not just in terms of in-game value given the time, effort and skill involved, but also in terms of business ability and potential value in gaming markets, where they can be sold for “real currency” or other virtual assets. “

Barker says users become very attached to their game accounts, characters, items, and skills – and they often spend a lot of time and effort on game activities. “So it’s understandable that there is notions of financial value attached to them. “

Technological developments and ever-improving augmented and virtual reality experiences are likely to add more sophistication and investment potential to the market, adds Barker.

Virtual savings

Dr. Michaela MacDonald’s fascination with virtual worlds and economies began 15 years ago, when she wrote an academic essay on virtual property. It was around the time when Second life – a world where avatars could travel, socialize and interact – entered public consciousness for the first time.

Now an expert in video game law at Queen Mary’s University in the UK, MacDonald says the interactive entertainment industry has come to dominate the creative sector.

“The video game industry is the most successful of all the creative industries and generates more profit than the music and film industry combined,” says MacDonald.

For example, the August 2020 version of fall guys – a whimsical battle between candy-like creatures – raised US $ 185 million (AU $ 237 million), making it the highest grossing launch of all computer games to date.

In the space of the virtual economy, the game Battle Royale Fortnite is the benchmark, having generated record revenue of US $ 1.2 billion (AU $ 1.5 billion) in its first 10 months after launch in 2017.

With V-Bucks, the virtual currency, used by gamers to purchase avatar skins, gear, emojis, and other perks, gambling has become a cultural and financial phenomenon.

“We always think of games as this virtual world, but that will change over time. It will simply become ‘the world’ and be an extension of the real world.” Timmu Tõke, Wolf3D

Tõke says that as a game developer he is always aware of contributing to virtual economies through his work. “Our goal is to build an economy around avatars,” he says. “You have an avatar that you like, and you can put it in a lot of different virtual experiences, and then build an economy around avatars.”

Trading in virtual assets has long been a legal “gray area”. The license agreements of many software companies state that virtual property has no real value and that players have no legal rights to virtual property.

However, that doesn’t seem to deter the rapid – and mostly smuggling – trade in virtual items on online marketplaces like eBay and PlayerUp, all for real money.

Tõke says a change is needed but is slow in coming because the big game companies want to own and control all aspects of intellectual property. “It’s a big change of mind for them to start opening it up, and the big guys really don’t care about those things. They just want to play.

When the worlds collide

Tõke expects the next leap forward to be the rise of virtual ecosystems in which people will live, work, and potentially exchange assets. “We always think of games as this virtual world, but that will change over time. It will simply become “the world” and be an extension of the real world. “

MacDonald, who argues that “games can be a force for good,” agrees that virtual worlds will become an increasingly important part of our future. However, she hopes virtual worlds will avoid replicating some important real world failures.

“It’s about our values - the kind of digital world we want to have – because that’s where we’re going to live, communicate with each other and consume. It would be a shame to also reflect the kind of real world inequalities based on the unequal distribution of property in the digital world. “