By Samantha Radocchia, Co-Founder at Chronicled (2015-present). Originally published on Quora.
Back when I was in undergrad, I did my anthropology thesis on a video game called Second Life. Except it wasn’t just a video game. It was a virtual world where people’s avatars lived, played, and worked.
And just like in the real world, people needed a way to exchange value with each other. If someone sewed a virtual shirt, they wanted to be compensated for doing so.
The solution? Linden Labs, the company behind the game, came up with a virtual currency that players could use within the game — and even exchange for real currency outside of the game.
Today, we call that cryptocurrency. At the time, it was simply a way to compensate people or pay for goods and services within the game. At one point, Fatboy Slim even did a concert on one of the virtual islands and charged people to watch it.
Now, there’s a new virtual world project from Linden Labs called High Fidelity. And this time, they’re using blockchain to underpin their internal network currency. That really isn’t too surprising, given that the gaming industry was one of the first places we saw the peer-to-peer behavior that makes up our current cryptocurrencies.
While the gaming industry led the way in many respects, it might be revolutionized by the very technology it helped create. Here’s how:
A Growing Industry
The gaming industry has a long history of helping players exchange real value in a virtual world. Digital assets are nothing new, but our ability to exchange these various assets is growing.
For instance, the CryptoKitties craze on Ethereum’s network is based around collecting and trading digital cats that hold real value. It’s relatively new, yet Ethereum is already having problems with the volume of transactions. This volume will only increase as the next stages of the game roll out.
The exciting part is we now have a blockchain-based game engine that can be used for trading and collecting digital assets. It’s laying the groundwork for more extensive blockchain-based games and forcing the network to expand its volume capacity.
Changing Business Models
In addition to upgrading game engines, blockchain is also changing the industry business models. Right now, the eSports model is related to streaming, sponsorship, and standard sports compensation. As blockchain becomes more prevalent, we might see a shift to a more decentralized model of compensation and sponsorship. We could see a direct link between players and the companies that sponsor them, where new revenue models favor players.
But the changes could extend to developers as well. Instead of only having the centralized studios creating games, independent developers could be incentivized to enhance games — in exchange for small transactional fees.
There are plenty of enthusiasts and developers who want to contribute but simply can’t with the current models in place. They want to work in game development, but because they can’t get a job with a major studio, they’re basically ousted from the industry.
Blockchain offers an open source mentality that would allow independent game developers to build on common frameworks — and be compensated for their work.
Compensation For Developers
But for value to be exchanged virtually, there needs to be a marketplace or some sort of ecosystem within the game. That leads to interesting opportunities for developers and players who want to control and participate in the games they’re playing.
Say a developer wants to build something within a game. They could be incentivized to help build it through token payments. In turn, this opens up possibilities for skilled gamers to build and take ownership over the game.
Or imagine you want something built within your favorite game, but you don’t have the technical know-how to do it. So, you pay a developer in tokens to do it for you, providing them with real compensation for bringing your idea to life.
The problem is, games operate similarly to movies and TV shows. They are very one-sided. The consumer gets what’s presented to them and passively follows along. Blockchain represents an opportunity to put some of that power back into the hands of the players. We may soon have games that are partly designed or developed by the people actually playing them.
The exchange of value that began with virtual worlds like Second Life hasn’t reached its full potential yet. We’re still can’t seamlessly exchange value from a game to a bitcoin wallet to a Paypal account — or cash in hand. But blockchain technology is emerging, and the gaming industry is both driving that technology and being shaped by it as we move forward.
By Samantha Radocchia, Co-Founder at Chronicled (2015-present). Originally published on Quora.
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