Do I Truly Own My Game Items?
Disclosure: This content is for general informational purposes only that expresses our opinion, and it should not be construed as legal, tax, investment, financial, or other advice. Nothing contained here constitutes a solicitation, recommendation, endorsement, or offer by Hashed to buy or sell any digital assets or other financial instruments.
We spend much of our time in a virtual world of the internet or games. In this virtual world, we exchange values with others through various economic activities. Items from ‘World of Warcraft’(WoW) or ‘Lineage’, the most lucrative online game franchise, sometimes could cost tens of thousands of dollars. But, it is difficult to claim these expensive items belong to users even after the purchase due to the data ownership. Indeed, the data regarding user items are all stored on the game company servers. So, these items may vanish into thin air if a rollback happens or the server disappears.
Strictly speaking, the items that we use within the game are indeed the company’s possessions, and users are temporarily ‘borrowing’ these items. Due to this ownership structure, users have had no other options than abiding by the company rules even when those users encountered issues inside the game. And, we cannot exchange or utilize our items outside the game for we do not completely own the data. For instance, we may not use the game items to gain the real-world benefits by renting them to others or by using them as collateral. Instead, users are only allowed to use the items within the world built by the game company. When in Rome, do as the Romans do.
Although the items that users have acquired from WoW and Lineage are valuable, it is still unfeasible for users to freely utilize these items as means of economic activities like mortgage, interest payment, or transaction. In fact, it is exactly the intention of the game architects to have everything — law, economy, ecosystem — under their control, so that they can manipulate these variables for higher user retention rate and revenue making. This centralized structure is commonly found among the successful games.
The new chapter of gaming has started; games that are open to contributions, like an open-source platform, are seeing more success than the heavily centralized ones. For example, sandbox games like Minecraft and Roblox allow more colorful gameplay elements that were physically impossible for a single game publisher to create them all. And, even the most beloved game in the world at the moment, League of Legends by Riot Games, has originated from a user map editor of the World of Warcraft III. Fortnite and PUBG(PlayerUnknown’s Battlegrounds) also started from Mod of Arma 3. By allowing third-party devs to contribute to the ecosystem, publishers are giving rooms for those creative devs to find what users really want.
There’s an interesting anecdote from the aforementioned Korean game, Lineage. At a dog racecourse in Lineage, dogs, or slimes race against each other for winning; users can bet game money on their choice of a dog or slime and make profits. As the dog race became popular, people, who provide pawnshop service, started to appear near the race track. These people took other users’ expensive items temporarily in exchange for the game money(Adena) and returned the items only when the owners paid back the principal with interest. This somewhat primitive system relied solely on the integrity of the pawnshop owner, which puts users to face transaction risks such as fraud or fleeing. If the game company were to build a system like a pawnshop, it requires the board approval for it is inevitable for the company to put many resources.
What if the game items were built on top of the blockchain? And, what if the smart contract allows more utility of these items? For the data on the blockchain is open to all, the third-party developers may utilize this data on blockchain freely. If the system unshackles devs from all the restraints, many derivatives or transactions that people could not have imagined will come to life.
There are obvious advantages of having game items or assets on the blockchain. Fundamentally, the mere fact that game users have the complete ownership of the tokens, away from the shadows of the game company, is meaningful. Because the tokens no longer belong to the company, but to the users, there arises much freedom in transactions. In other words, users are able to source a deal for their items outside the game world, not conforming to the rules of the game. There is no role the game company can play when individuals sell their own digital items.
Moreover, games with NFT(Non-Fungible Token) and FT(Fungible Tokens), built on top of the blockchain, have unlimited potential in terms of the ‘expansion of possibility’. The pawnshop in Lineage is just one of the examples; it is possible to design diverse derivatives using blockchain digital assets and prediction markets. For instance, users can create a smart contract, rewarding the arrest of an infamous PK(Player Killer), and also make a derivative, betting on the possibility of catching the PK in time or not. With the emergence of UGC(User-Generated Contents) combined with NFT or tokens, the virtual world may expand endlessly.
One of Hashed’s recent investment portfolios, NOD Games/NPLUS Entertainment is preparing to take a big leap for a new kind of entertainment, providing complete digital ownership to its users and blockchain governance infrastructure in the game world.
Planning to launch this June, ‘League of Kingdoms’ is an MMOG(Massively Multiplayer Online Game), where users battle over limited resources. It is equipped with not only the aforementioned blockchain advantages but also a unique fun factor as an online game. Seamlessly fusing blockchain-based functionalities and possibilities into the realm of an online game, League of Kingdoms, will be able to satisfy traditional gamers. For detailed information regarding the game, please refer to the posts on NPLUS Entertainment Medium blog. Here, we would like to further discuss blockchain game concepts in League of Kingdoms, and why this game is fun to play.
First, let’s talk about the lands, built with the basic concept of NFT. The ownership of the lands in the game is claimed with Ethereum-based NFT(ERC-721). By turning lands into true digital assets, the game is designed to give the owners various economic benefits. As the ownership is recorded directly on the blockchain, the user becomes the ultimate proprietor of the asset. And, naturally, it is up to the individual’s freedom to trade, discard, and utilize that property.
Lands in League of Kingdoms use the blockchain, not for the sake of uniqueness. The game separates the owners of the lands from the entities that run the kingdoms so that the development level(D-level) increases with more activities happening on specific lands, and the owners receive more rewards in return. Just as the price of a real estate goes up as it gets closer to the center of a city, rewards from high D-level lands are designed to slowly spread out to areas nearby. This requires the owners to think strategically about which property to buy. Furthermore, as blockchain documents all previous data points, two similar spots may end up with drastically different prices depending on their land history. Also, because lands are made with NFT, third-party developers could freely construct derivatives or pawnshops, combining these data with smart contracts.
With the right setting, owners of the lands could utilize their future cash flow from the game in advance for other necessary purposes, and they could even make an alliance or union with other users in order to enhance their land value. Thus, as a first step to further stimulate the virtual economy, League of Kingdoms is starting the pre-sale of the lands starting from May 25th. At Hashed, we truly hope that League of Kingdoms could become a new base for decentralization and creativity, complementing the shortcomings of centralized game models and bringing the best of the open-source environment.
Another notable aspect of League of Kingdoms is that it is planning to build its governance system on the blockchain; at its initial phase, the game will rely on a centralized database for governance and voting systems, but with further updates, those systems will be all changed to the blockchain.
At the League of Kingdoms, lands are built with the blockchain infrastructure; on these lands are the kingdoms, operated by individual users. Kingdoms make up an alliance, and alliances form a congress; both alliance and congress also use the blockchain infrastructure. By design, alliance and congress activities are essential for strengthening lands and kingdoms, and important decisions — such as, the tax rate for alliance/congress, rewards ratio, details for upcoming updates, and so on — will be made through voting, which will be documented on the blockchain. At first, users will vote on a few simple parameters, but as the game evolves, they will be able to build the ecosystem together by voting on more complex topics.
The most fascinating aspect of an open-ended online game is that the game could unfold in an unexpectedly interesting way through the synergy between game makers and users, and we are extremely curious about how this aspect could be intensified when combined with radical decentralization of the blockchain. We believe that the unpredictability — how landowners, alliance, and congress will interact and check each other — is one of the biggest appeals. Moreover, every activity will be recorded on the blockchain as history so that users can use this knowledge for their future strategy.
League of Kingdoms well embodies the aforementioned characteristics of the blockchain games and goes even further by transcending them into pure entertainment. There is already an on-going demand for converting game items into digital assets through blockchain technology. Also, both Millennials and Generation Z invest a considerable amount of their time in games or virtual worlds. As people spend more time in front of a monitor, it now has become quite difficult to ignore the sizable economy within the virtual world.
Considering newly emerging maps or game logic in Minecraft, it can be said that the production in the virtual world is moving to a meaningful level. Nevertheless, digital assets in the virtual world are still undervalued and regarded as toys. We believe that the blockchain will function as the backbone of the economic system in games and virtual worlds; this could be the very beginning of the mass conversion of assets into digital. And, as always, games will be the leading force.
