As stated above, we generally agree with Ed’s predictions —specifically, that millions (and potentially billions) of people will soon earn their living solely from playing video games. I am going to expand further upon this idea and suggest that:

Enabling true ownership of game content may be a more viable business model than developers paying players directly (paid-to-play)

may be a more viable business model than developers paying players directly (paid-to-play) Providing gamers with true ownership has the potential to achieve a similar outcome as Universal Basic Income (UBI)

(UBI) Blockchain is the critical infrastructure required for this experiment to succeed

True Ownership

Definition

True ownership is enabled when players have full control of the content of their gaming experience, including their avatars, XP & skills, in-game items, maps, and other customizations. If a player has true ownership of these items, they are free to conduct all types of commerce with them — buy, sell, share, rent, trade, etc on both primary and secondary markets. Player should even be free to import their items from one game into another.

In Players for Hire, Ed predicts that real value will be introduced into gameplay via a paid-to-play model, whereby game designers, in an effort to attract big spenders, will pay players to participate in their virtual worlds via Player Retention Incentives (PRIs). This would effectively introduce a meta-economy to a game, in which players will have to decide: are they more concerned with consuming in-game content (playing) or earning PRIs (working).

Naturally, popular games would have a surplus supply of players. Low-skill workers — who are the most desperate to earn a living in virtual economies — would be driven to play the least popular games because designers of popular games would realize they no longer need to pay players.

If <0.25% of players make more than half of all in-game purchases, then designers would only be incentivized to pay a certain number of players to play until the number of players no longer significantly impacts how much revenue the game generates. If they pay too many players, they will lose money.

Designers would realize a point of diminishing returns in the paid-to-play model. It is, however, only a point of diminishing returns in the meta-economy; not the in-game economy, itself. Metcalfe’s Law would suggest that the in-game economy would actually continue to increase in value as more players participate.

The more players, the more possibilities exist for in-game industry and trade. With true ownership, players could earn a living without relying on the payment from a single centralized entity, like the game designers.

If designers aligned their business model so their profitability grew proportionate to the in-game economy, then they would never hit the point of diminishing returns with respect to user adoption — they could grow their user-base ad infinitum. And if they were able to align their model so players benefitted from the growth of the in-game economy, as well, then users could play their favorite game and earn a living at the same time.

One method of achieving alignment through growth is by enabling true ownership within a game. If a player purchased an in-game item, such as a sword, the studio would immediately generate revenue. But if that player truly owned his or her sword, and if the game grew in popularity over time, then that player would be able to sell their sword at a later date — possibly for a profit. This would be comparable to buying a home in a thriving city.

Players could engage in endless types of exchange. The sword owner, for example, could rent the sword to other players while on vacation or at work to earn passive income. Publishers could leverage these exchanges, as well, to unlock countless mechanisms to generate revenue. Every time the sword is traded — even on secondary markets — they could extract a minimal fee. Alternatively, they could choose to only extract a fee if the player generates a profit on the trade; if the sword sells for less than it was bought, the exchange is cleared pro bono. Before the game is launch, designers could even set aside a large, personal reserve of loot to hodl, which would only become valuable if players began trading with it. The alignment of true ownership ensures both players and designers generate a profit together when a game increases in popularity.

Universal Basic Income

Definition

There are various suggestions for how Universal Basic Income (UBI) could be implemented, but in theory UBI is a type of welfare program in which all participants of a particular economy or society are granted a minimum, unconditional wage.

If low-skilled workers are going to depend upon video games as a primary source of income, then it is worth considering the option of installing something like a UBI within a game’s virtual economy as a mechanism of securing players’ futures.

Unfortunately, it’s difficult to identify any current, functional examples of UBI because they are nearly all conditional in some way. The Alaska Permanent Fund is probably the most famous example of a guaranteed income, whereby all residents of Alaska are ensured a regular annual payout, which has been between $1,000 and $2,000 per year for the last decade. The money used to guarantee the fund comes from a 25% tax on the state’s oil production. In other words, residents earn a dividend based on a scarce resource.

It’s not exactly a livable wage for someone in a developed nation, but it is an example of guaranteed income, nonetheless. The fund has been in place since 1982.

It is tempting, then, to say that UBI is perhaps a bit of a misnomer. Alaska’s Permanent Fund is arguably the most successful and longest running program that simulates something like a UBI, and it still requires some kind of economic exchange. With this in mind, economic exchanges of all kinds should, therefore, be considered in the pursuit of achieving a similar outcome to UBI (if, in fact, you subscribe to the school of thought that UBI produces a net positive benefit for society and is worth pursuing).

In his book, Virtual Economies: Design and Analysis, Ed states that there are three naturally scarce resources when it comes to video games: content, computation, and attention. Any or all of these could be leveraged to produce an economic exchange that would subsidize something like a UBI for a game’s player-base. Examples:

Content — there could be a tax on the purchase of custom items, which gets distributed to all non-spending players.

Computation — games might require spare, unused computations from a player’s hardware get sold on a marketplace like Golem, where profits are shared throughout the game.

Attention — bounties or surge-loot could be awarded based on gamer demand. Instead of paying for power-ups, spenders could pay to attract large hordes of players to join him or her in battle.

With true ownership, the net worth of players could be readily audited to determine which players are in need of subsidies the most. Strong privacy guarantees, like zkSTARK, could be adopted to ensure anonymity, and players could qualify for subsidies based on their resource profile.

Video games are designed to be fun for every type of player, regardless of their skill level, time dedication, and ability to make in-game purchases. As described in Players for Hire, games currently profile players based on these three metrics.

A player who spends a lot of time in the game might be considered more of a citizen of the virtual world and, therefore, be more deserving of a payout. There are various, creative mechanisms for how such a system could be implemented, but the fundamental objective of a virtual UBI (with real value) is to ensure that any player could choose to commit themselves to a particular game and live a minimally comfortable life as a consequence.

Blockchain

Definition

A blockchain is an immutable ledger, which is public and easily audited. It can track and prove ownership of virtual items, such as currencies and digital assets. It is also capable of enforcing contractual agreements between individuals and groups. No central authority is required.

There are probably more nuances to unpack in blockchain than we have time for, but if we’re going to understand why it’s required for true ownership and UBI (or even minimum wage employment), then we need to touch on the following topics:

Property

Social Contracts

Unbanked Players

Property

Satoshi’s single greatest contribution to humanity was the innovation to property rights. Consider this: without blockchain, how can a person prove they own something?

The expression “possession is 9/10th of the law” — while not to be taken literally — eludes to the reality that ownership is a social construct. When married couples divorce, they hire lawyers to negotiate the distribution of their assets. Ownership is not tracked in real time during the relationship because overhead costs would be too great.

Even when property is legally defined — say in the case of a business or contract — it is usually defined in terms of rights, not ownership. That is to say, legal documents are written to describe how and when a defined set of people can consume, alter, share, redefine, rent, mortgage, pawn, sell, exchange, transfer, give away or destroy a piece of property. If a person truly owned something, they would not need a legal document to define the terms of their ownership.

We interact with these types of documents daily — most of the time without even realizing it. Consider our online identities. When we use Facebook or Twitter, we agree to their terms and conditions, which state we have particular rights to our profiles, but we do not actually own them. The same is currently true in video games.

“The following components of the Platform… are owned or licensed by Blizzard: All virtual content…” Source.

If gamers are expected to commit themselves fully to a virtual world, they need to be guaranteed that their livelihoods are secure. One option, as Professor Castronova suggests, is for the game studios to hire players directly, negotiating contracts with each individual. However, as Ed immediately points out, there is a body of regulatory burdens and costs involved which might prevent such an arrangement from feasibly working.

In the free-to-play model, the value game designers gain from players should be more than the cost to acquire them and run the operations. Simple!

Hiring players directly would come as a major operating expense for a gaming studio. Similarly, granting players property rights (DRM) to the individual contents of games would be costly, as well. An optimal solution, then, may be to let blockchain do the heavy lifting, which would give players in-game property ownership. Game designers could focus on creating the virtual world for players to exist in, while players would be free to operate within those worlds as freely as they like.

Social Contracts

Ed predicts that within twenty years critical social dynamics will migrate entirely into video games, including political uprisings, strikes, and boycotts. He is effectively making the point that meaningful virtual worlds will need to include mechanisms which enable individuals to organize with one another and make negotiations with their overlords — designers, juggernauts, et al — or otherwise.

A visualized summary of Ed Castronova’s five, ten, and twenty year predictions, starting in 2016.

Blockchains are an unbounded protocol for negotiating social arrangements. Let’s imagine, for example, Cindy discovers a rare plot of land, rich with minerals. This plot is valuable — too valuable — and there is simply no way Cindy can defend it from her enemies alone. She wants to invite other players to join a clan to defend it together and share the treasure, but the game does not support this functionality in a secure way as to prevent backstabbing.

Instead of making a request to the publisher to implement said feature, Cindy could simply spin up a smart contract on her own. She could submit the proposal to her most loyal allies, and upon achieving quorum, the location of the land would be revealed. The clan would be formed, and they would take equal ownership in the plot with an extra finders fee allocated to Cindy.

“…Designers need to be considered gods, not governments” — Richard Bartle, PhD, Game Design Pioneer

Designers could participate equally in the contract generation process, as well. Each time they introduce a new item into a game, they would publish a transparent contract that would define the characteristics of the item, including its unique attributes, distribution model, and degree of scarcity. This information could be used by players to accurately assess the fair market value of the item, or to rebel against the designers if the introduction of the item is deemed unfair in some way.

“Strange women lying in ponds, distributing swords is no basis for a system of government.”

A player’s identity and profile could be used in negotiating the terms of any contract, as well. Based on the historical record of gameplay, individuals’ profiles could be leveraged to accurately identify the most qualified candidates for a particular proposal. This would be fundamental in implementing something like a virtual UBI. Players could apply for subsidies and their profiles would inform how funds would be allocated.

Activity on-chain can be tracked to accurately construct player profiles. The owner of the physical cryptokitty (left) didn’t leverage much time or skill, but they did spend a lot of money ($140,000 to be exact)! A player breeding cryptokitties (right) might not have much capital, but they do need plenty of time and skill in their ability to pick out desirable cattributes 😻

The key value proposition of integrating smart contracts into gameplay is that it enables peer-to-peer (P2P) organization. Games can become as complex and creative as its community wants without requiring third party permission.

Unbanked Players

🏆 Achievement unlocked! You read to the end… you’ve earned a short section!

If we’re in the business of developing virtual economies that are suitable for employing the unskilled-workers who will soon be displaced by automation and artificial intelligence, then we should also recognize individuals who are already in a similar situation: the unbanked and impoverished.

Approximately 22% of the world’s population, or 1.7 billion people, currently do not have access to a bank account. Additionally, the most recent data reveals that 71%, or nearly 5.5 billion people, live on less than $10 per day, while 15% live on less than $2 per day.

One fantastic benefit of blockchain is that anyone can create a wallet. Banking infrastructure is not required. And because anyone can participate, there is good reason to believe we may see developing nations of the world adopt virtual economies with true ownership at a faster rate than developed ones.

Consider the arbitrage opportunity for someone living on $2 per day. A basic mobile device would already be enough to begin participating in a majority of the world’s gaming economy. It is estimated that 51% of gaming revenue will be generated by mobile games in 2018. Individuals in developing nations could start their own businesses mining gold and earning virtual loot.

“In total, mobile revenues will grow +25.5% year on year to reach $70.3 billion. This means that for the first time, more than half of all game revenues will come from the mobile segment.” Source.

For individuals who cannot afford their own hardware, entrepreneurs may leverage the arbitrage opportunity on their behalf. There is a possibility that gaming farms will emerge in countries with low labor in a similar fashion to how we saw mining farms open shop in countries with cheap electricity.

15% of the world lives on less than $2 per day. A $750 mining rig nets between $5 to $6 per day. How much loot could a gamer earn in a few hours? And how many investors would open gaming farms?

Entrepreneurs would surely seize the opportunity to invest in gaming farms if they proved profitable. Smart contracts could mitigate against exploitation to ensure players are given their fair share of profits. With market pressures like these already in place — and true ownership just around the corner — we may not necessarily have to wait for automation or AI to usher in the age of full virtual economy immersion.