Virtual Economies Are Exploding: Here’s What Is Next
Digital goods and services will flourish on the right VR platform.
Some of the largest economies in the world today are digital:
- World of Warcraft’s virtual gold mining industry has previously crossed $2 billion in value.
- FarmVille’s total in-game revenue exceeds $1 billion.
While digital economies don’t exist in physical form, they have real impacts.
For example, frequent space battles in EVE Online result in the destruction of virtual ships and weaponry. In 2014, one battle alone ended in the loss of $300,000 to $500,000 in virtual goods.
Sometimes, the transfer of value is less serious. Virtual horse dung in the game Ultima Online has sold for several hundred dollars, driven by its scarcity. (There were only a few of them on each server.)
Why Virtual Economies Are Exploding
The rise of virtual economies has largely been driven by the gaming industry, with users purchasing avatars, power-ups, and other in-game items. The growth in massive gaming universes has driven increased demand for items that demonstrate prestige, rarity, or usefulness.
According to Vili Lehdonvirta, an Associate Professor at Oxford University:
“People pay real money for virtual items for the same reason they pay real money for any consumer commodity, namely status, identity, membership, class, and performance.”
Because the virtual goods market has been driven by gaming, the array of items traded today is not surprising: weapons used in Call Of Duty, furniture for life simulation games like the Sims, lightsabers for Star Wars Battlefront, and gems used in Clash of Clans.
But while the biggest virtual economies have involved gaming platforms, everyday activities are increasingly conducted in virtual worlds. The impact on daily life will be huge.
The Future of Virtual Economies
With the virtual goods market now exceeding $52 billion annually, up from $15 billion in 2012, developers and entrepreneurs are looking for more ways to provide digital goods and services. Immersive virtual reality worlds will empower users to buy and sell far more than just gaming items. Soon, these ecosystems will function as centers of commerce, trade, business, and much more.
According to IDC, the augmented-reality and virtual-reality market is projected to grow from from $5.2 billion in 2016 to $162 billion in 2020, more than twice the size of the current global gaming market. Importantly, more than half of this growth will be driven by the services VR enables, not hardware:
“For many years augmented and virtual reality were the stuff of science fiction. Now with powerful smartphones powering inexpensive VR headsets, the consumer market is primed for new paid and user generated content-driven experiences.” — IDC VR Market Report
Here’s What to Expect
These new experiences will impact every aspect of daily life. Here’s only a handful of the potential applications:
- Medical schools can offer virtual surgeries for immersive training.
- Businesses can offer the virtual testing of products (such as a car, smartphone, or laptop) to a limitless user base without risk.
- Companies can efficiently tap a global workforce, enabling collaboration regardless of location.
- Providers can offer thrilling experiences like skydiving, mountain climbing, and roller coasters, without the expense or liability.
As the first and only completely decentralized virtual reality world, Decentraland is positioned to be a major player in the growth of these new and exciting applications. The growth of virtual economies will continue to accelerate, and Decentraland offers users, developers, and publishers the opportunity to capture the full value of their contributions.
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